Ameris Bancorp (ABCB) CEO Palmer Proctor on Q1 2022 Results - Earnings Call Transcript

Ameris Bancorp (NASDAQ:ABCB) Q1 2022 Earnings Conference Call April 27, 2022 9:00 AM ET

Company Participants

Nicole Stokes - Corporate Executive VP and CFO

Palmer Proctor - CEO and Director

Conference Call Participants

Brady Gailey - KBW

Casey Whitman - Piper Sandler

Kevin Fitzsimmons - D.A. Davidson

David Feaster - Raymond James

Jennifer Demba - Truist Securities

Christopher Marinac - Janney Montgomery Scott

Brody Preston - Stephens Inc

Operator

Hello, everyone, and welcome to the Ameris Bank First Quarter Earnings Conference Call. My name is Juan, and I will be coordinating your call today. [Operator Instructions]

Now, I would like to turn the call over to Nicole, Chief Financial Officer. Please, Nicole, go ahead.

Nicole Stokes

Great. Thank you, Jan, and thank you to all who have 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 today by Palmer Proctor, our CEO; and Jon Edwards, our Chief Credit Officer. Palmer will begin with some opening general comments, and then I'll discuss the details of our financial results before we open up for 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, and 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 of our presentation.

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

Palmer Proctor

Thank you, Nicole, and good morning, everyone. I appreciate everybody taking the time to join our call today. I am really pleased with the financial results we reported yesterday and excited to share some of the highlights with you from the quarter. Thinking back to some of our core fundamentals that I mentioned on last quarter's call, I constantly remind us the importance of discipline and ability to stay focused on strategies and execute on the things that we can control.

And our results this quarter are reflective of those high expectations. The first of those fundamentals was consistent earnings with an ROA we said in a range between 130 and 140 and ROTCE well above 15%. And this quarter, the adjusted results represent a 131 ROA and a 16.8% return on tangible equity. Both of those are within the high-performing range we had targeted. The second thing we talked about is in terms of fundamentals meeting the growth expectations and maintaining a strong pipeline, and we're fortunate to be positioned and well positioned in the Southeast with talented bankers in all of our markets.

In this quarter, we continue to deliver on this growth. We had strong organic growth in mind you, that's coming off of an incredibly strong fourth quarter of growth last quarter. Exclusive of CPP runoff, loans grew over $350 million or 8.9% annualized during the first quarter. It's encouraging that we're seeing such growth opportunities in our markets, especially as the Southeast gets back to business. But we continue to anticipate 2022 loan growth in the upper single digits, and we certainly have the liquidity to fund that growth. As expected, deposits did decline this quarter due to our cyclical muni deposits at year end, but we continue to grow more importantly low-cost deposits this quarter, and our non-interest-bearing deposits account for now 40% of total deposits.

And this low-cost deposit mix is certainly going to help us better control betas in a rising rate environment. The third fundamental is asset sensitivity and its impact on margin and NII, which ultimately affects capital. We continue to have an asset-sensitive balance sheet with 30% variable rate loans and then an additional 15% of short duration fixed rate loans that behave like a variable rate loan. So we're well positioned for a rising rate environment. This quarter, our margin actually expanded by 17 basis points and our NII increased by $5.7 million or just over 3% compared to last quarter.

And that sensitivity and balance sheet management certainly affects capital. We've consistently said we are focused on tangible book value, and we're extremely proud of that once again this quarter. So our team was well paid through when most banks are seeing or experiencing dilution due to unrealized losses in the security portfolio. Over the past year, from March '21 to March '22, we increased our tangible book value by over $1.57 or 6.2%, inclusive of the purchase of Balboa.

We've been good stewards of capital over the last five years and a very tangible book value by over 10% annualized. And remember that includes in that five years of five acquisitions, and we're very cognizant of dilution and earn-back periods. Since I mentioned Balboa, let me jump into the fourth fundamental from last quarter, and that was Balboa and the positive impact they would have on our core banking segment. The integration is going extremely well, and we're more than pleased with the leadership and the results.

Their net loan growth was $57 million for the quarter or over 33% annualized and their total production was just over $131 million. This growth was funded with existing liquidity in addition to paying off their remaining high-cost borrowings during the quarter. Credit in that portfolio remains solid and in line with our expectations. And while I'm on credit, I'll hit a few highlights. Overall credit quality remains strong. Our annualized net charge-off ratio was 9 basis points of total loans. Our non-performing assets as a percent of total assets was 47 basis points.

Jon Edwards, our Chief Credit Officer is with us today and will take any questions after our prepared remarks. But I want to conclude by reiterating that we remain focused on our core fundamentals, and we're disciplined in our actions. We've got strong momentum coming in on the first quarter, and we're excited about our future due to solid fundamentals of organic growth, balance sheet management and a rising rate environment and top-of-class financial results and of course, capital preservation.

I'll stop there and now turn it over to Nicole to discuss our financial results.

Nicole Stokes

Great. Thank you, Palmer. For the first quarter, we're reporting net income of $81.7 million or $1.17 per diluted share. On an adjusted basis, we earned $75 million or $1.08 per diluted share when we exclude our servicing asset recovery, merger and conversion charges and a gain on sale of bank premises. Our adjusted ROA was 1.31% and our adjusted return on tangible common equity was 16.38%. As Palmer mentioned, we grew tangible book value by $0.58 per share or 2.2% this quarter to end at $26.84. We had $1.02 from retained earnings that was offset by only $0.25 at AACR from the decline in unrealized gains on the bond portfolio and then $0.19 of deletion from other items, including the stock we bought back.

We've been disciplined with our investment portfolio and because of the strategy, we saw less than 1% dilution in our tangible book value from the decrease in AOCI. And we're now beginning to backfill that bond portfolio with purchases. Compared to this time last year, our tangible book value was at $1.57 or just over 6%. Our tangible common equity ratio was 8.32% at the end of the quarter compared to 8.05% at the end of the year. The approximate $3 billion of excess liquidity that remains on our balance sheet negatively impacted this ratio by 130 basis points. So we exploited cash and total assets and TCE ratios that have been about 9.62%, which is well above our stated target of 9%.

We continue to be well capitalized, and we feel comfortable with our capital and dividend levels. We did have a share repurchase program outstanding until October 31 of this year. We purchased $14.6 million during the first quarter that leads about $63 million less on the program. Moving on to net interest income and margins. Our net interest income for the quarter increased by $5.7 million. That was driven by $13.2 million in the bank segment, offset by a $5.3 million decline in PPP revenue and a $2.2 million decline in mortgage and warehouse included in the bank segment was the benefit of a full quarter of Balboa.

Our net interest margin increased by 17 basis points from 3.18% to 3.35% during the quarter. Our yield on earning assets increased by 17 basis points while our total funding cost decreased by 1%. We had 12 basis points of expansion due to the higher loan yields and average balances, 5 basis points due to reduction of use of some of our liquidity, 1 basis point of improvement in our pending costs, and that was offset by a 1 basis point decrease in the yield on the bond portfolio.

As we've stated, we have about $3 billion of excess liquidity to remain. We anticipate net loan growth this year in the high single digits, but 7% to 9%, which is about $1.1 billion to $1.4 billion of loan growth. And that leaves about $1.6 billion of excess cash to prepare for the cyclical deposit runoff and to begin purchasing investments in the bond portfolio as rates rise and yields are not quite for the munis. From an ALM modeling standpoint, we positioned ourselves to be asset sensitive with NII increasing approximately 6.5% in an up-100 environment. We've added quite a bit of interest rate sensitivity information to our presentation on slide 10 that I hope everybody finds useful.

Non-interest income increased $5.1 million for the quarter. We recorded a $9.7 million servicing rate recovery compared to $4.5 million last quarter. So excluding that MSR activity, our total non-interest income was relatively flat. Mortgage revenues decreased by $3.1 million and expenses in that division decreased by $3.5 million. Retail mortgage originations as a percentage of our pre-provision pretax income continued to decline, representing a balanced contribution of 12.3% this quarter.

Production in the retail mortgage rate was $1.5 billion. We were pleased to see the purchase businesses returning to normal levels, and our strong network of relationships has us well positioned for the slowdown in refinance activity. The average gain on sale normalized to 2.94% this quarter, and we believe it will continue to run between 2.75% and 3.25% going forward. Total non-interest expense increased quarter $5.5 million from $138.4 million last quarter to $143.8 million this quarter.

Excluding the long-funding premises and the merger charges, non-interest expense increased $8.4 million for the quarter. However, as we previously guided, the first quarter increase was attributable to three things. That was $7.1 million of additional Balboa expenses for having in the first quarter, $4 million of cyclical payroll taxes and 401(k) match. And then those two things were offset by the mortgage expense reduction of $3.5 million. So when you look at expenses, all other expenses increased less than 1% for the quarter.

Our adjusted efficiency ratio was 56.95%, so cyclical expenses affected that by 158 basis points. So we expect our efficiency ratio to return under 55% as these expenses normalize going forward. And grow quickly on the balance sheet, we ended the quarter with total assets of $23.6 billion, down slightly from the $23.9 billion at the end of the year. We were pleased with our organic loan growth of $269.5 million or 6.8% annualized for the quarter. We've had the detail that rose on slide 15 of the investor presentation. And you can see that excluding the PPP runoff, net loan growth was $350.7 million or 8.9% annualized for the quarter.

Our total deposits decreased $77 million due to the cyclical public funds that we anticipated running now, and we're really pleased with the continued growth in Worland no cost deposits. We continued the momentum on non-interest-bearing deposits and improved our mix as that they're now 40.18% of our total deposits. That certainly helps our deposit betas and an increasing weight scenario.

And with that, I'll wrap it up by reiterating how we've maintained remain disciplined and focused on our operating performance. We're really excited about the remainder of 2022. I appreciate everyone's time today, and I'm going to turn the call back over to Wallen for any questions from the group. Thank you, Wallen.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] The first question comes from the line of Brady Gailey from KBW. Please Brady, your line is now open.

Brady Gailey

So I just wanted to start with some of the moving pieces of Altea. I know they had an impact on the expense side and then on the fee income side. I think fees came a little higher than you were thinking. Is there any adjustments that should be made to your fusion expenses kind of related to Balboa that we should think about kind of from a forward ongoing run rate point of view?

Nicole Stokes

Yeah, Brady, I think is a solid quarter. We did have a little lag. We had a few acquisition expenses that came in this quarter were it from the acquisition. But other than that, we feel like they have a good run rate.

Brady Gailey

Okay. All right. Then it's great to see you all be active on the buyback here. The stock is notably inexpensive here. It's 1.5x tangible and about 8x earnings. And I think I heard you say you have about $63 million of authorization left and you can get -- you can get more of that, if you want, I'm sure. But how do you think about getting more aggressive on the buyback at this front just with the stock being so cheap?

Nicole Stokes

Sure. So when you look at the stock this past quarter, the big decline has been in the last couple of weeks really while we were in blackout. So we haven't been active kind of the last couple of weeks of March, will move it into blackout. So we definitely -- again, we're tangible, we're cognizant of the tangible book value that we could be when the prices are below prior to that by -- and quite far, I think buying our stock back is probably the -- one of the best investments we can make right now.

Brady Gailey

Yes. And then on the credit quality front, I know net charge-offs were still kind of close to 0, but NPAs were up a little bit. I think you called out some Ginnie Mae mortgages and maybe some portfolio mortgages that drove that up and the classified and criticized were up some, too. Just bigger picture, I know a lot of those loans are fairly low-risk loans. But is there anything that is worrisome on the credit quality front for you guys at this point?

Palmer Proctor

No, we're not seeing anything, Brady. And of course, everybody is keeping up a keen eye to it across the industry, but we're not seeing any cracks anywhere. And obviously, the Virginia May, that's just a process of working through the process and moving those loans out. But right now, we feel pretty -- all our verticals as it pertains to credit.

Brady Gailey

Okay. And congrats on the tangible book value per share. That's rare to see this quarter. So it's great to see for you guys. All right. Thanks for the color.

Operator

Our next question comes from Casey Whitman from Piper Sandler.

Casey Whitman

Maybe just thinking about wondering NII rates from rate hikes. Could we assume more what is 12% of PPL over the last two quarters. Can you assume that trends down from here on ultimately what is sort of your best guess as to what the range would be for that in like a higher rate environment, more normalized net sale margins?

Nicole Stokes

Yes. And you went in and out a little bit there, but I think your question was mortgage and the fact that it's been kind of that the retail mortgage is about 12%, 12.5% in the last two quarters and where do we kind of see that, especially as rates go up. So a couple of components to that one. We have always been more of a purchase shop than a refi shop.

And so we were up this quarter that historically we were going 85% to 90% purchase versus refi. So we still have some room to go. I do think that we started to see some cyclicality come back into the first quarter, which was a little bit more normal. But even taking the $1.5 billion of production and you take that even if it comes down just a little bit, we still could be looking at $6 billion to $7 billion of production for the year. So I feel like that 12% is probably a good spot for us.

Casey Whitman

Okay. Okay. Appreciate it's fine -- maybe just turning over to the overdraft. I know you guys recently announced some changes to the NFF overgrow policies. And I think last quarter, you sort of said that maybe a 25% reduction from some of the moves, is that still an appropriate level? Or has that changed?

Nicole Stokes

It is 25%, and I think that may have been misconstrued a little bit. So it's 25% of our -- not of our income, but just 25% of the overdue. And so last year, that was about $16 million. And so 25% of that would be about $4 million. And then I think everybody probably saw the announcement where we had publicly announced what we were doing. So that $4 million would be a full year, and those are really not going into effect until May. So we'll have a portion of that hit in '22 and then $23million will be the $4million $4 million. And again, that's going to go up or down based on customer behavior as well. But based on historical behavior, we're expecting that about $4 million of decline on an annual basis.

Casey Whitman

Okay. Last for me. Sorry to ask this, but the tax rate is a little higher this quarter. Where do you think that lands sort of over the next.

Nicole Stokes

Yes, I think it comes back in the '23 to '24, 22.5 probably, there was a nondiscrete items that hit this quarter that should be nonrecurring, and part of it was from acquisition costs of last quarter and some of it come through this quarter. So 22 or 23 to 24 close to that 23.5%.

Casey Whitman

Okay. Thank you, guys. Good quarter.

Operator

Our next question comes from the line of Kevin Fitzsimmons from DAD.

Kevin Fitzsimmons

Good morning, everyone -- just curious, it's come up a couple of times, the point about the focus on tangible book and that you actually expanded this quarter. Can you dig in a little deeper into how you did that? Did you -- was it a matter of holding back on securities purchases when rates were lower or shifting over to held to maturity just because we -- I just haven't seen a bank pull that off yet, taking its tangible book up this quarter. So if you can give a little more detail on what you guys proactively did for that.

Nicole Stokes

Absolutely I think. So we have let our bond portfolio decline as we received payoffs in this last cycle. We did not go out and buy bonds. We felt like the rates were fairly a unit. And I think I even guided, I think it was the third quarter that I was asked about on the earnings call, and I said that we really didn't want to go out and buy bonds at the anemic rates and that the amount that we would earn in over the -- before rates when we expected rates to go up, would be offset by the loss in the unrealized loss, and we would lose the capital. So any capital that we earned by buying these 1% bonds, we belove as soon as rates went up. So what we did over the last 2 years is really kind of looked at our mortgage loans held for sale in conjunction with our available for sale securities. And we use that to kind of offset the use of some of that cash that we were getting from the bond portfolio and using our mortgage.

We now expect that to go back to normal levels we're starting to buy on and getting much better rates than not having to go so far out. So we did manage kind of through that bond portfolio. When you look historically, we would have run probably 10% -- 9% to 10% of earning assets, and we were down to 3% of earning assets. Again, offsetting that was a more loans held for sale. But we do anticipate buying bonds and getting that back up to a more normal level now that rates are not quite so

Palmer Proctor

A couple of follow-up comments. Nicole will be modest, but she and her team did an excellent job on the busy I keep reaching discipline because we have received a lot of questions for people launch a and warrant you buying and being able to stick with those disciplines really paid off for us. And then furthermore, I think what it also exhibits is the fact that we have other places to put the money. A lot of people didn't have any opportunities for growth, and we did through that lot of sale portfolio. So we were happy to be able to lever that up as opposed to going out and getting stuff with a bunch of long-term low rate on. So kudos on the coal and her team for sticking with their disciplines.

Kevin Fitzsimmons

That's great. And -- as far as expansion, I'm assuming like it seems like in recent quarters, M&A has been less in the focus and with the stock pulled back, I would assume it's not a primary focus today. But with the organic growth with Balboa and maybe you can speak to if you anticipate any team lift-outs, opportunities that might come from in-market merger disruption of competitors? Just how you're feeling about that organic versus acquisition equation today?

Palmer Proctor

Sure. As we have consistently said year after year, our primary focus is organic -- and we've proven that, and we've not done any M&A, bank M&A over the last 3 years. I think there's clear evidence of that. And even without that bank M&A, you've seen the power of the organic engine here. And that's part of the reason we have held off on M&A is to prove to the market of the world and ourselves that we've got the ability to operate this company and generate some significant growth in an organic fashion. And if you look at our lines of business, that allows us to do that. We've got a great geography, so we don't feel any compulsion to have to move, like a lot of banks do into growth markets. We're already there. But more importantly, which is a good lead into your next question, we already have a lot of the bankers in place.

And as you'll recall, when a lot of people were retrenching, we were making the investment in talent. So we've already done a lot of the lift out 2 years ago, and we kept telling everybody that for us to hit our upper single-digit type of loan growth, we already have the people in place that wasn't based on a bet and a wish and a lift out and then all of a sudden, that letdown takes time to ramp up. We're already there. Now we do -- to that point, we do obviously continue to look for talent on a regular basis. And then one of the things we've done a very good job of is pulling out lower performers and replacing those with top performers. So I think when you look at going forward, yes, we will still continue to attract and hire talent, retain good talent. But at the same time, our organic growth initiatives or based on what we've already hired in the past. So a lot of what you're seeing today from some of our competitor banks out there, we had already made that investment in a year or 2 ago, and we're benefiting from the results of that investment.

Kevin Fitzsimmons

Okay. Great. And one last clarification. Nicole, when you were talking about the $3 billion of excess liquidity and then into loan growth and what was going to be used and what was left. Can you just repeat those numbers? I was not keeping up with you.

Nicole Stokes

Sure. It is about $1 billion to $1.4 billion, $1.5 billion of loan growth and then about $500 million to $1 billion in the bond purchases, $250 million is public fund cyclicality that we still -- we have a half run out in the first quarter. We expect a little bit more in the second quarter. And then $500 million to $1 billion of potential deposit runoff. Again, with loan growth being 1.4, that would bring to the post run up to 5, but some of those ranges.

Operator

Our next question comes from the line of David Feaster from Raymond James.

David Feaster

I just wanted to touch on the organic growth outlook. And I was hoping that you could walk through some of the puts and takes on that. What do you expect to be the primary drivers behind that high single-digit pace expectations for the contribution from Balboa. And then just any details you might be able to provide on put option expectations and payoff and paydown trends that are kind of embedded in that outlook?

Palmer Proctor

Yes, I'll start off by kind of breaking it down by each vertical. I will tell you on the commercial front, we remain very bullish. When I look at our pipeline there, it is just as strong as it was over the last quarter. And the opportunities are out there for what I call responsible growth. The competition and pressure across the board when it comes to pricing, primarily from some of the larger big banks out there is stronger than it's ever been. So I think pricing is certainly a challenge for everyone when you're going up against some of the larger banks. Payoffs will still be a headwind, but we still feel like with the production we have in place and the pipeline we have in place that we'll be able to offset that as it pertains to the commercial area. -- construction loans, we are benefiting from an elongated period there with the construction development because it's taking longer to ramp up projects just due to supply chain issues. So all banks are kind of benefiting from that.

So I think we'll continue to have that lift there. Mortgage is Nicole touch strong, we did about $1.5 billion this quarter. Right now, I'll tell you our apps and the production we've got going are very consistent right now. The biggest challenge there being just supply in terms of homes. But once again, as we reached consistently, our model is so different. So as long as we get and we will get more than our fair share of purchase activity, we feel very confident in our ability to maintain the production level there kind of at our current run rate. Balboa is a great addition for us because it provides not only diversification -- and then, of course, we remain focused on small business lending, which is what they do. But also, as we've stressed before, the importance of levering the technology they provide us throughout the entire company. So we're rolling that out as we speak through the retail land and through our small business banking initiative in the core bank. But the other benefit of that business is as it grows, we certainly always have as a governor luxury being able to package and sell that paper retain servicing or release servicing with that securitizer or to loan sales. So that's a great governor to have. It's the paper is in high demand, obviously. But right now, it's a small percentage of our balance sheet. So we'll continue to benefit from that addition. And I think that pretty much covers all the lines of business.

So I would tell you, in a nutshell, we feel very good about the pipelines as they stand right now. customer sentiment is still very positive. The only negative I hear from a lot of the clients that we call on is just main supply chain issues. There's not a PAN account there, like you hear from a lot of the pundits on TV in terms of the sky falling. It's more they see opportunity and growth at least in the markets we operate. So that's encouraging to hear and to see and our pipelines are reflective of that.

David Feaster

That's helpful. And then maybe just touching on expenses, that table with the breakdown of the increase is extremely helpful. I think if we take that, it looks like maybe adjusted for seasonal expenses and the negative credit resolution, maybe $140 million is kind of a good base rate. But just -- and obviously, look, mortgage production is going to impact expenses. But just given the inflationary environment, strong production trends and continued investments that you all are making, I guess, how do you think about the pace of expenses looking forward?

Nicole Stokes

So take more detail because, obviously, mortgage is going to be cyclical depending on how production goes up or down, to take some of the mortgage piece out and look at just everything else kind of the core.

And we're expecting to -- exactly right, take out some of those cyclical payroll costs. I think that is at a good run rate. I think that takeout the cyclical payroll and 401(k) matching. And I think we are going to do our best to hold that to very, very little increase, a flat to slight increase, but we really are focused on figuring out how to taper things through efficiency and through use of technology. So when we do spend money on technology, there's a case as to whether it's growing our revenue or whether it's saving some expense somewhere else and just continuing to look at that.

David Feaster

Okay. And then maybe shifting gears back to the liquidity. I mean you got a huge advantage here sitting with $3 billion in excess liquidity. We talked about deploying a large portion of that into the loan growth and then some potential for the deposit runoff. But how do you think about the pace of securities purchases? I mean, you've been extremely disciplined. My gut says that you're going to be investing in a pretty measured pace. But just any color on the pace of purchases, what you're looking to buy? And what kind of yields that you're seeing on new purchases?

Nicole Stokes

Sure. So we have started up to $500 million with our first kind of conversation in ALCO -- so this is not all on the balance sheet yet as of March 31. But through -- so far through yesterday, we purchased a little over $300 million, we're getting about a 3% yield, maybe a little bit better than that and about a 4-year duration. So we feel really good about that compared to the 120 that we could have gotten a year ago. So far, what we thought will add about $1 million, $1.4 million of interest income per quarter. That's about $0.01 a share going forward. So we put $500 million and that would make our portfolio 5% to 6% of our earning assets. And if we put $1 billion in, it would be 7% to 8%. So I feel like looking at that $500 million to $1 billion over the next few quarters could be realistic.

David Feaster

Okay. And are those going to the AFS bucket, I'm assuming?

Nicole Stokes

So we -- that is one thing I should have added on the question earlier. I don't think I addressed that, I think it was Kevin's question. We did buy some bonds during the last year, really kind of the last six months, but they were all kind of CRA investments, and they went to the held-to-maturity bucket.

So we did have a little bit of purchases prior to this quarter, but everything fit this quarter is filling available for sale.

Operator

[Operator Instructions] The next question comes from the line of Jennifer Demba from Truist Securities.

Jennifer Demba

Question on loan losses. As interest rates go up, Palmer, what do you feel like are the most vulnerable buckets? And can you talk about where you think Balboa net charge-offs will land as rates go up specifically?

Palmer Proctor

Yes, Jennifer, I'll look at it more from each vertical and then more specifically, each product type. And I think when you look at commercial, as we all are very well aware of the sensitivity around office we're limited in our office exposure. But I would tell you that that's one we're keeping a very close eye on, just as people are trying to figure out what they're going to do in terms of backdoor work in their needs or space. Most people -- I'm not worried about people defaulting on their leases. It's more along the lines of what amount of space they need at maturity. And then the -- so that's one area we're looking at. And then the other thing that we're keeping a close one when it comes to small business, those people are obviously ones that are going to in an environment that some stress that you keep a close eye on, whether it be through SBA. A lot of our loans there are obviously government bank guarantees. But the Balboa loans, I think there, the important thing to focus in on is the the FICO scores there and the type of credit we're listening to and I equated to our old indirect portfolio, which helps extremely well during the day.

And so I'm wondering what -- if you wonder what those are going to look like. I think that the FICO scores there are extremely strong. I think when you look at our charge-offs, we've got FICO scores there around 721 average FICO, which is extremely healthy. And the benefit of that now bol portfolio too is we had over 30 years of historical trends that we could look at in terms of charge-offs. And so I would think there you may be looking at peak 4 basis points at the most. But right now, we feel very good about that line of business. So all in all -- and keep in mind, too, that those loans are small loans, smaller loans and then they also -- the duration is very short. So we feel very comfortable there. But I think probably primarily office, I do look carefully at its construction to. I think the housing market is going to be less forward there because the inventory levels are so low. But those would probably be the 3 categories or keeping a close on. Keefer, let me kind of follow up on that on the a turned off number, just so you know, we had forecasted when we were doing diligence that it would add that 4 basis points to our total. So clearly, that kind of line of business or its own group will be more than that, but we didn't anticipate it would add any more than about 4 to the total bank given the size of that portfolio to the rest of it. And that's how it came in pretty much this quarter and how we expect it going forward.

Operator

Our next question comes from the line of Christopher Marinac from Janney Montgomery Scott.

Christopher Marinac

I just wanted to follow up on kind of new loan yields kind of beyond what we see in the disclosures last night. How are new yields acting? And how do you think they will kind of reflect as the Fed tightens in the next couple of quarters?

Palmer Proctor

Chris, obviously, as you know, we're experiencing stronger yields through the residential mortgage portfolio, but they're still low and not when you look at 30-year rates, but we're certainly going to get the lift for that in both the held-for-sale and the portfolio itself commercial is extremely competitive right now. So there will continue to be downward pressure there on the yields. -- as we go forward on the floating rate instruments. And we're also seeing -- when you look at some of the bigger banks out there, there's still some 10-year money out there that we're passing on has still got a 3 handle on it, which is -- I don't know how anybody makes money doing that. But -- so we have passed on several of those opportunities, if you will. Balboa is going to be a big contributor to us in terms of their coming on rate. It's in the double digits. And so that's going to be a big lift and improvement to the margin.

So I think when you look at the beauty of our balance sheet is the diversification across the board. So I feel better about our outlook on NIM, probably than most of our competitors do as a result of primarily Balboa and the mortgage operation. And then obviously, in a rising rate environment, we'll get the lift from the flote rate instruments. But at the same time, that's going to be a very competitive sector.

Christopher Marinac

Sure. So you'll probably still be more selective on C&I in some of those lower-margin deals as a result.

Palmer Proctor

Absolutely. Yes. And I mean we clearly look at the relationship component of the deposits and everything associated with that, but it's very competitive out there, especially when you start getting into long-term fixed rate, will all benefit because those people's for be exceeded and we'll all benefit from the rising tide of the Fed news. But -- and the other thing I think is going to be interesting on the flip side of that on the liability side is we'll find out very quickly what banks have done a good job on those who are not focusing on those sticky core deposits because you're going to see a real change in betas. And those who have focused heavily on that and the less rate-sensitive type of deposits are really going to fare well as we move forward. And I think with our bank with all the access liquidity we have, we're going to be able to probably hold off on EBITDA adjusted posit rates up as quickly as a lot of our peers as a result of that because we just got a stronger deposit base.

Christopher Marinac

Great. That's helpful. And then just a quick one on sort of the recovery of the servicing asset. Should we expect some more of that come as the next few quarters unfold?

Palmer Proctor

I would not, no.

Operator

Our next question comes from the line of Brody Preston from Stephens Inc.

Brody Preston

Nicole, I had to hop for a couple of minutes on is I think it was Brady and Casey's question. So if I ask anything it's redundant, just feel free to point me to the transcript. I wanted to ask just a more quick just following up on Chris' question. The bank division origination yields, Nicole, do you know what those were ex Babel?

Nicole Stokes

Sure -- we reported $57 with Balboa and ex, they were $3.82. And I think that's compared to $3.35 last quarter. So we sell a bump even without Balboa.

Brody Preston

Got it. And what was the ex-Balboa that drove that bump? I saw the linked quarter increase in the construction book was a bit higher than it had been recently. Was it that?

Nicole Stokes

It is. I mean it's just rates in general and the anticipation of rates going up and then as being, as Palmer mentioned, that we're not going to kind of cut a better base on rates. -- owing in this environment.

Brody Preston

Okay. And then just on the fee income. Thanks for putting the size of it in there. I just want to ask, is that all a gain on sale income? Or does it consist of anything else what's flowing through other income?

Nicole Stokes

It is the gain on sale on a piece of their portfolio or their production that maybe doesn't fit quite into our credit box. And so we will sell that. And that was our modeled in our acquisition that we would continue to have fee income or gain on sale income going forward with them.

Brody Preston

Got it. And do you happen to know what the dollar amount of loans you sold this quarter was? And what was it last quarter in the month that you all have them acquire.

Nicole Stokes

So, I do not have that in front of me, but I can get it.

Brody Preston

All right. Cool. I'll follow up with that. Maybe just on the mortgage portfolio. What is the size of the HFS portfolio looks like going forward, just considering I think the guidance was we think that origination is going to fall somewhere in that $5 billion to $7 billion range per year. Is this $900 million level a good level? Or does it shrink a little bit more from here as well?

Nicole Stokes

I think it could shrink a little bit, but not nearly the 1.3, 1.4 down to the 9%. I think that's the bulk of it. I think it could land somewhere between 7 and 9 75.9%.

Brody Preston

And do you happen to know with the unpaid principal balances of the servicing portfolio for quarter end?

Nicole Stokes

We'll get that for you.

Brody Preston

All right. Cool. And on Balboa, actually putting the origination yields in there, but do you have to know what the average yield on that portfolio is as of 1Q?

Nicole Stokes

The average yield on the Balboa portfolio?

Brody Preston

Okay. All right. And just could you remind me what -- how big you want to let that portfolio grow to as a percent of the total loan portfolio through time?

Nicole Stokes

Sure. So right now, we are using their technology as well in our -- in the core bank as well, which is not necessarily Balboa national vendor customers. So -- but we are comfortable with the credit that we're using in that and how we're doing that. So it can easily grow to 10%, which you figure right now, they're 3.5%. So that would be tripling. And I think it's tripling their volume. And if we got to that, we would look at it and by then, we would have some additional historical data, but I think it could easily get to at least that 10%, and then we would reanalyze it.

Palmer Proctor

The next thing is, yes, that paper, we can obviously package it up, securitize and sell it over some service and fee income of the it's just got a lot of versatility to which we appreciate.

Brody Preston

That's good to know. I just have a few more here quickly. The -- the CECL reserve waterfall, I wanted to ask what were the specific factors that went down? And right next if there's model changes. So what was the specific -- I guess, what were the specific portfolios where you increased your loss forecast for the kind of -- the Qpack went down 47%, like modeled losses went up 47%. So could you kind of walk through that a little bit?

Palmer Proctor

The Moody's forecast that we use, there are several scenarios, right, from the baseline to a fairly difficult scenario. And as we looked at the various options this quarter, we blended several that we felt like were representative of what kind of economic climate we were going into. And as we looked at that, it felt like that those were the key factors that we had used last quarter were basically picked up in the forecast models and therefore, would have been more the double dip to include both Q factor and kind of model weighting that we were using. So specific key factors, I don't necessarily have that in front of you, but in the overall scheme of it, why it looks that way is that we felt like the model was more representative in those key factors that we've been using were included in that model. So they were that were needed in this quarter.

Brody Preston

Okay. And then the call just on the interest rate sensitivity side. Thank you for the additional detail there. Can I just ask of that $4.7 billion or 29% it's variable rate. What percent of that is truly floating? Or is there any kind of variable rate loans that have a fixed portion within that $4.7 billion?

Nicole Stokes

That's all floating.

Brody Preston

Okay. Got it. And of the additional $2.4 billion repriced quickly, could you just remind me what the -- what the, I guess, average time period before those kind of reprice typically looks like?

Nicole Stokes

Sure. So those really are our construction loans that are typically in 90 to 120 days. And then also our premium finance or technically fixed rates, but that's a rolling balance and so there's a section about repricing every month. Those are typically about a 9- to 10-month duration. But again, those are rolling constantly, as the lowing portfolio. So those are the main 2.

Brody Preston

Got it. And then I just have one last one on the deposit data. I saw the 25% nonmaturity deposits assumption. Does that -- I guess, it's 2 questions. Does that include noninterest-bearing within that beta assumption? Or is that just the interest-bearing deposit date assumption? And then is it static throughout your forecast? Or does it kind of ramp to that 25% level?

Nicole Stokes

Yes. So the 25% includes the non-interest-bearing. Without the noninterest-bearing, we are modeling closer to a 50% of just kind of the -- now savings in money markets. And then it is a -- your question was a little bit static.

Brody Preston

Yes, kind of start yes, does it increase to that level over time?

Nicole Stokes

No. In our modeling, we do it static immediately is what we're using. So we feel that we kind of beat that data.

Brody Preston

Awesome. Thank you very much for taking my questions, everyone. I appreciate it.

Palmer Proctor

Operator, any further questions?

Operator

We have no further questions on the phone lines. I will hand over back to Palmer Proto for any final remarks.

Palmer Proctor

Great. Thank you very much, Juan. And once again, I'd like to thank everybody for listening to our first quarter call. We're obviously excited that momentum we have throughout the entire company and feel like we're extremely well positioned when you look out into 2022 and beyond. And that type of success, I'll tell you it doesn't just happen. It's based on, as I keep saying, the disciplined culture and the core fundamentals that our teammates continue to exhibit.

And as a result of that, we remain very diligent and well focused on delivering top financial results to drive shareholder value. So thank you all once again for your time and your interest in Ameris Bank. Have a great day.

Operator

This concludes today's call. Thank you so much for joining. You may now disconnect your lines.