Ameris Bancorp (ABCB) Q2 2021 Earnings Call Transcript

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Ameris Bancorp (ABCB 0.63%)
Q2 2021 Earnings Call
Jul 23, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Ameris Bank Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nicole Stokes, please go ahead.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Great, thank you, Vaish 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 will discuss the details of our financial results before we open it 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. The actual results could vary materially. We will 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 for opening comments.

H. Palmer Proctor -- Chief Executive Officer

Thank you, Nicole and thank you to everyone who's joined our call today. I'm excited to share with you our second quarter results. In fact, I was actually more impressed with our team's results this quarter and the record earnings we posted in the first quarter and here's why.

One of the big questions and a very legitimate question for many of our ABCB stockholders and stakeholders was what happens when mortgage revenue normalizes for the bank. And this quarter shows you exactly what happens when mortgage revenue moderates. This quarter reflects the purposeful and deliberate actions Ameris teammates have taken to reduce expenses associated with the decline in mortgage revenue.

It's also very reflective of the investments we made in top talent in many of our other core lending areas of the company and also reflects the meaningful pipeline and relationships we continue to build, which results in really strong second quarter results as we're reporting net income of $88 million or $1.25 per diluted share on an adjusted basis and this represents a 1.63% return on average assets and a 19.46% return on tangible equity.

Our adjusted efficiency ratio actually improved from the first [Phonetic] quarter to 54.62% reported in the first quarter to this quarter's 54.07%. As you may recall, we reversed $28.6 million of provision for loan loss expense last quarter. In this quarter, we had just a minimal provision expense due to the positive loan growth we'll talk about.

And speaking to loan growth, it was an incredible quarter that we had and when you look at our annualized net loan growth, it was right at 5% for the quarter, net of PPP and our indirect run-off and we still expect to deliver on mid-to-upper single digit loan growth for the year as we look at our pipelines and the opportunities in all of our growth markets.

The area I was most excited about was the $100 million of growth we had in C&I and you'll be able to see this on our slide deck on Page 16 and Nicole is going to discuss the excess liquidity and the impact to our margin in more details in a few minutes, but I did want to mention the continued deposit growth for this quarter too.

Our growth in non-interest bearing deposits continued to outpace the growth of total deposits and they are now approaching 40% of total deposits, which is very impressive and I emphasize this because when rates start moving back up and some of the excess liquidity runs off, I think that's the time you're going to find out from the real leaders or who the real leaders are in our industry in terms of who took the opportunity to grow core funding during this time and we'll certainly be a standout there.

On the capital side of the balance sheet, our capital position remains strong. We've consistently said we're focused on growing tangible book and that's exactly what we did this quarter. We saw growth in both TCE and tangible book value. We grew tangible book value by $1.18 per share or 4.7% during the second quarter. We've also grown tangible book value by $2.76 or over 11% for the year so far and this equates to over 20% annualized growth for tangible book value.

Our TCE ratio increased to 8.83%, which is very close to our 9% goal and if you exclude the $2.5 billion of excess liquidity on our balance sheet, the TCE ratio would have been over 10%. We clearly have the capital to support our growth initiatives and to consider opportunistic transactions as we go forward. Jon Edwards, our Chief Credit Officer, is with us today and he is available to take any questions after our prepared remarks, but I did want to hit a few highlights in terms of credit.

Our non-performing assets as a percent of total assets improved to 32 basis points compared to 40 basis points last quarter and 59 basis points last year. Loans that remain on deferral at the end of the quarter were approximately 1.2% of total loans, which is down from approximately 19% of total loans this time last year. Our allowance coverage ratio excluding unfunded commitments was 1.23%, net of our PPP loans at the end of the quarter.

In terms of COVID, a quick update here, July 6 was our official back to the office date. All of our branches are opened and all of our staff including support and administrative staff are back to the office. Some of that in a new hybrid approach, but we're adapting well and our teams are really excited to have a new sense of normalcy. As I mentioned last quarter, most business are back open, traffic jams are back to normal and restaurants and wait times and new restaurants are actually opening. So things are definitely getting back to normal in the Southeast and we certainly expect to benefit and capitalize from that.

A quick update on PPP, we continue to see forgiveness in round one during the quarter and we started receiving forgiveness funds on round two in June. We've got approximately $126 million left of the $1.1 billion that we loaned out in round one and we have about $362 million left of the $409 million from round two. There is about $22 million of deferred revenue remaining on PPP for us.

And one last comment I wanted to make. I'm very proud to announce that we published our first Corporate Social Responsibility Report in May, which was in accordance with the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures and a shout out to our entire team. There is a lot of thought and a lot of actions and hard work that went into this report and I'm really pleased and proud of the way it came out and I hope you all take a minute to look at it, but I'll stop there now and turn it over to Nicole to discuss our financial results in more detail.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Great, thank you, Palmer. As you stated, for the second quarter, we're reporting net income of $88.3 million or $1.27 per diluted share. On an adjusted basis, we earned $87.5 million or $1.25 per diluted share and that's really excluding the small recovery on the servicing asset impairment and a gain on sale of premises this quarter.

We're pleased with our operating ratios. Our adjusted ROA in the second quarter was 1.63% and for the year it's 1.94%. Our adjusted return on tangible common equity was 19.46% for the quarter and 23.41% for the year-to-date. As Palmer mentioned, our tangible book value increased by $1.18 or 4.7% from $25.27 to $26.45 during the quarter. For the year-over-year, tangible book value has increased $5.55 or 26.6% from $20.90 this time last year. In addition, our tangible common equity ratio increased 21 basis points this quarter to 8.83% from 8.62% at the end of the first quarter and it's increased 113 basis points over the past year from 7.70% this time last year.

The approximate $2.5 billion of excess liquidity on our balance sheet negatively impacted this ratio by 120 basis points. So excluding that cash from total assets, our TCE ratio would have been approximately 10.03% at quarter-end, which is well above our stated target of 9%. So we continue to be well capitalized and we feel comfortable with our capital and our dividend level.

Talking a little bit on margin, our net interest margin declined 23 basis points from 3.57% to 3.34% during the quarter. Our yield on earning assets declined by 27 basis points while our total funding cost decreased 4 basis points. We did a description of this on Slide 8, you can see the 27 basis point decline was attributable to several unusual factors.

We had 8 basis points of compression from the $4 million decline in PPP income. We had 5 basis points from the almost $2 million or $1.7 million of accretion income decline. We had 5 basis points kind of a bump last quarter that was a non-recurring revenue related to the sale of our consumer portfolio. We had 4 basis points due to the continued growth in excess liquidity and then we really came down to 5 final basis points due to true loan yield compression. That was 2 basis points in mortgage, 1 basis point in held for sale, and 2 basis points of true commercial bank loan yield compression.

So my point here is that true loan yield compression was really 5 basis points and we had the 4 basis points of funding costs during the quarter. Also added to Slide 8, you can see the impact that, that $2.5 billion of excess liquidity had on our margin and how it accounts for 36 basis points of the total negative margin compression from one year ago. We're focused on our deposit costs and we continue to grind them down. We still have some room for improvement in the CD portfolio, but the real driver to an improving margin going forward is putting that excess liquidity to work, which we anticipate occurring over the next three quarters.

As Palmer mentioned as well, we had a small provision for loan loss expense of about $142,000 compared to that $28.6 million reversal last quarter. The continued economic conditions specifically unemployment, GDP, and CRE index and our own improved credit quality this quarter helped offset the need for additional provisions on our loan growth.

Our ending allowance for loan loss of $175.1 million compared to just $178.6 million at the end of last quarter and $208.8 million at the end of second quarter last year, which was in the middle of the pandemic and our heightened deferral. So including the unfunded commitment reserve and allowance for credit losses for other credit losses, our total allowance was $197.8 million at quarter-end compared with $200.2 million at the end of last quarter.

Moving on to non-interest income. So, as expected, our non-interest income declined this quarter and it really was due to the decreases in mortgage banking. Excluding the $9.7 million recovery last quarter and the $749,000 recovery this quarter, our mortgage income declined about $19.3 million and there's really two factors contributing to the decline in revenue. It was both production and gain on sale margins.

As you can see, we put in a new Slide 11, which really has some information on mortgage, but as you can see on that slide, production in the retail mortgage group declined 9% to $2.4 billion this quarter from $2.6 billion last quarter and it's important to note here that total non-interest expense also declined 9% or $5.6 million in the retail mortgage division.

In addition to that production that's going to drive those reductions in variable costs, we also saw the average gain on sale decrease back to normal levels. It decreased to 2.77% compared to elevated 3.95% last quarter. We really don't anticipate further decline in the gain on sale margins. The open pipeline at the end of the second quarter was $1.7 billion compared to $2.3 billion at the end of last quarter and we do believe that there is further reductions in non-interest expense if production continues to decline.

As we previously stated, we stated we had a large amount of our expenses are variable costs and we designed that in our mortgage group. Total non-interest expense for the company declined by $13 million from $148.8 million last quarter to $135.8 million this quarter. As I just mentioned, mortgage expenses declined almost $6 million during the quarter and an additional $6.5 million reduction was seen in the banking division, which includes the enterprisewide service and support staff. We continue to look for ways to become more efficient and we continuously monitor the efficiency ratio by division.

On that note, our adjusted efficiency ratio improved slightly this quarter to 54.07% from 54.62% last quarter. I previously guided for the efficiency ratio to stabilize in the 53% to 55% range because we did not anticipate that previous level of mortgage revenue and efficiency to be sustainable. So I think a 54.07% is right in the middle of that range as we saw mortgage stabilize. And then also reminder this quarter we saw the gain on sale margin which doesn't affect the variable cost fell back to normal levels and we still saw that improvement in our efficiency ratio.

On the balance sheet side, we ended the quarter with assets of $21.9 billion compared to $21.4 billion at the end of last quarter. We were pleased with our organic loan growth of $181 million or 5% annualized for the second quarter. As you can see on Slide 16, we had about -- we had $473 million of headwind against the $655 million growth in CRE, C&I, premium finance, and residential. PPP loans declined $304 million and indirect loans declined $85 million. We have approximately $488 million of PPP loans left and we have $397 million of indirect loans left with us. We anticipate the headwinds from run-off in both of these portfolios to really subside early next year.

And a few extra details on PPP. We've received payments and forgiveness of approximately $975 million on round one leaving the outstanding balance at $126 million and we now have the new round two balance at $362 million. The average balance of PPP loans in the second quarter was $708.5 million compared to an average balance in the first quarter of $764.9 million. We have about $22.3 million left of deferred income on the PPP loans. That's $2.2 million on round one and $20.1 million on round two and again, we anticipate amortizing that into income over the next year, if not sooner.

We already discussed the excess liquidity you can see in other earning assets on the balance sheet due to our tremendous deposit growth that we've seen over the past few quarters, but again this quarter, we grew $382 million this quarter in deposits and 46% of that growth was in non-interest bearing. I sound like a broken record, but we really do anticipate some deposit run-off as lives get back to normal post pandemic and as rates potentially rise. We continue to anticipate net loan growth, net of PPP activity for the year in the mid-single digits, which is about $1 billion of loan growth. That leaves about $1.5 billion of excess cash to prepare for deposit run-off if rates start to increase and to begin buying investments in the bond portfolio.

We did purchase a $100 million of BOLI during the second quarter with a non-taxable yield of approximately 3.5% and we are considering other investment purchases although we would like the curve to steepen just a little bit before we really start doing that. And with that, I will wrap it up. I appreciate everyone's time today and I will turn the call over to Vaish for any questions from the group.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Brady Gailey with KBW. Please go ahead.

Brady Gailey -- KBW -- Analyst

Hey, thanks, good morning guys.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Good morning, Brady.

Brady Gailey -- KBW -- Analyst

So when I look at what happened on the expense side, basically your ability to reduce expenses to help offset the pressure of down revenue and mostly down mortgage, that was pretty impressive in the second quarter. I mean should that dynamic continue to play out like it did in 2Q going forward as mortgage continues to normalize.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

So Brady, I'm going to take that question and split it into two, if that's OK and talk about the mortgage side and then talk about the banking side because I think there's two different dynamics there. On the mortgage side, we do anticipate and again kind of looking at mortgage revenue driven by gain on sale and the other component is production and the gain margin really doesn't affect those variable costs and we feel like we've absorbed all of that into the second quarter. Then when you turn to the production side, the production side is where the variable costs really are affected. We have about an 80% structure there. So as production comes down, we expect additional cost saves on the expense side, that's mostly in salaries benefits, basically commissions incentive and then also on the IT side because as production comes down, your data processing per account comes down. So those are the two main categories on the build-out kind of 80% decline in expenses as the production revenue comes down. So, I do anticipate on the mortgage side.

On the banking side, part of the decrease this quarter had to do with deferred costs because of our very strong production. So I think some of that could come back. I don't think that we'll go back to the 83, 85 [Phonetic] that we were running, but I think the 76 [Phonetic] could easily up a little bit as that -- as production, again very robust and you think about third, fourth quarters if it is not quite as robust production, this deferred fees could impact that. So I think the 76 [Phonetic] could easily go closer to the 79 to 80 [Phonetic], but I don't anticipate it going as high as it was in that 85 [Phonetic] range a few quarters ago.

Brady Gailey -- KBW -- Analyst

Okay and then when I look at your capital base, I mean Nicole, you mentioned that adjusted TCE is 10%. That's a 100 basis points above your 9% target. Your stock has pulled back a little bit here. It's at 11 times earnings and only 1.7 times tangible, which is pretty attractive. Any thoughts on reengaging in the share buyback?

H. Palmer Proctor -- Chief Executive Officer

Yeah, Brady. This is Palmer, as you know, we've got the plan out there and authorized and we've got opportunities to do that and if we continue to see the pullback that we're seeing now, because the stock is at a very attractive price, that's certainly a consideration we'll take into consideration.

Brady Gailey -- KBW -- Analyst

Okay and then finally from me, maybe just an update on M&A. We saw SouthState enter your market in a big way this morning with the acquisition of Atlanta Capital. Would a target like that possibly have been of interest to you? And then just generally speaking, maybe update on how you guys are thinking about M&A now, Palmer?

H. Palmer Proctor -- Chief Executive Officer

Yeah, no, I think that's a nice transaction for SouthState. I think it's a good bolt-on for them. I think that it's -- whenever you can garner market share in a market like Atlanta, I think it's a good opportunity and I think that the opportunity for a lot of folks looking at Atlanta as they realize the opportunity here in terms of the growth prospects and that's what we'll continue to capitalize on and when you look at where we stand in the market in terms of market share and in the existing platform we have in place, we'll be able to lever that in a meaningful way.

In terms of our outlook, we're pretty consistent in terms of what we're looking for. We've got -- we're very disciplined and obviously very principled in what we want to do. So we take a lot of the social considerations into account in addition to the pricing and so we're going to remain opportunistic, which is where we are and it's nice to be in a position to be able to think that way, but aside from M&A, as you know, we've got incredible growth -- organic growth opportunities and we'll continue to pursue those either way.

Brady Gailey -- KBW -- Analyst

Okay, great. Thanks for the color, guys.

H. Palmer Proctor -- Chief Executive Officer

You bet.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Thanks, Brady.

Operator

Your next question comes from Casey Whitman with Piper Sandler. Please go ahead.

Casey Whitman -- Piper Sandler -- Analyst

Good morning.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Good morning, Casey.

Casey Whitman -- Piper Sandler -- Analyst

Nicole, maybe can you walk us through how you are thinking about your core margin over the back half of the year without PPP and accretion. And obviously, how liquidity is going to play into that?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Absolutely, so I was going to say excluding kind of just assuming flat PPP, flat accretion, and flat liquidity, we're guiding for another quarter of mid-single digit compression. That's a couple of basis points on the asset side offset. We do think we have a couple more basis points to squeeze out on the deposit side mostly in that CD portfolio. So again kind of mid-single digit compression for the next quarter until we start to stabilize.

Again, we have that $2.5 billion of excess liquidity. So as we can start deploying that, every $100 million is about 2 basis points on our margin. So as soon as we start deploying that, we will definitely see the pickup on -- have that added back in, but assuming the liquidity stays flat, accretion and PPP stay flat, we're mid-single digit compression for one more quarter.

Casey Whitman -- Piper Sandler -- Analyst

Okay, makes sense. That's all I had. Nice quarter.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Great, thank you, Casey.

Operator

The next question comes from Jennifer Demba with Truist Securities. Please go ahead. Is the line muted? We can't hear you.

Jennifer Demba -- Truist Securities -- Analyst

Hi, can you hear me now?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Yes, good morning, Jennifer.

Jennifer Demba -- Truist Securities -- Analyst

Hi, how are you? My question is on the mortgage business. Can you just talk about what kind of production trends you think you're going to see over the next couple of quarters and how much of an issue is the inventory shortage right now?

H. Palmer Proctor -- Chief Executive Officer

Yeah, I'll take that. I think when you look at our current production and you saw it this quarter, it's still very meaningful. Obviously, we're impacted by the margin, but in terms of the impact from a supply situation, what we're finding is that while supply is in short order, the demand is still there and typically in this business, you've got a lot of seasonality for the second half of the year and I don't think you're going to see that.

So I think what's going to happen is, it's actually going to be when you look at the run rate going forward over the next probably two to four quarters, I think it's going to be actually much more stable than what we have historically seen just because that constant demand for inventory and for absorption, which we normally see a pullback as we get into -- later into the year.

So I'm kind of contrarian in that view and think that in certain markets as we all know there is a very high shortage of supply, but the absorption is there and so I think it's going to continue to be a steady performer for those that are heavily focused on purchase type activity, which we are, with builder and realtors. So I think that's going to serve us well. We certainly all saw a little pickup in the refi activity just due to the drop in rates over the last quarter, but going forward, I think it's going to be a much more stable type of environment for mortgage quite frankly for those that are heavy purchase oriented.

Jennifer Demba -- Truist Securities -- Analyst

Okay and back on the merger interest topic, Palmer. Could you just give us a little more detail on what types of transactions Ameris might be interested in if they make sense?

H. Palmer Proctor -- Chief Executive Officer

Yeah, I would tell you, those are the kinds of transactions we're looking at, anything that makes sense to us. We're big on culture as you know here. So it has got to be a very good cultural fit and alignment there and it's got to be accretive. We're very disciplined in our pricing. We're not going to do anything that's overly dilutive to this company or to our shareholders, but first and foremost, it's got to be a good cultural fit and so we will remain like I said opportunistic and open to other opportunities that are out there both bank and non-bank type of transactions.

Jennifer Demba -- Truist Securities -- Analyst

Okay, thank you.

H. Palmer Proctor -- Chief Executive Officer

You bet.

Operator

Your next question comes from Brody Preston with Stephens Inc. Please go ahead.

Brody Preston -- Stephens Inc. -- Analyst

Hey, good morning everyone.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Good morning, Brody.

Brody Preston -- Stephens Inc. -- Analyst

Hey Nicole, could you just help me around the core expenses, so I hear you that you think you can bump back up to $79 million or $80 million with the production, but just when I look at the year-over-year sort of decline understanding that 1Q is a seasonally high, a seasonal high for you guys because of the payroll, but you know, you're down from $83 million year-over-year to $76 millino, right, so you know, you're effectively taken out $7 million out of the quarterly run rate on a year-over-year basis. And so just help me understand how you -- like what specifically has driven that level of the decline in the core bank expenses over the last year while you've been actively hiring people?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Sure, that's a great question. I appreciate it. And so this really comes back to what we've been saying for several quarters is that we feel like we've been ahead of the curve on a few things. We did our branch rationalization and then close branches there. We were looking at lease opportunities as leases were expiring to move out of those and kind of consolidate spaces and so that's -- it's been exactly what we had planned and we have been able to do hiring.

I will say that we have certainly used and I know people are heard me [Phonetic] saying there's a reallocation of resources, but finding ways to pay for things and so even though we have had new hires, we've also had some attrition or some retirements and maybe we've reallocated those funds to be able to move into some other growth markets and not fill those positions in some of our other markets.

And then we've also started using technology to help as well and so when you look at the expense down the line, it's just about every bucket. I mean you'll see data processing and telecommunications is about the only one that's been flat there, but some of the expenses that we spent there have been able to help us in some of the other non-interest expenses that are down. Occupancy is down as well as salaries and employee benefits. And you are exactly right, we had about a $1 million to $2 million payroll tax in the first quarter that we didn't have again and then we also had those deferred costs that could come back up into that salary category.

H. Palmer Proctor -- Chief Executive Officer

But Brody, this is Palmer. One thing in all companies, obviously, the largest expense item is the teammaters and the overhead and I think what I've been very pleased with the Ameris team here is the discipline in terms of accountability and expectations and being realistic about it obviously, but what you'll find a good example is even in our commercial banking group, year-to-date, we've hired 11 new individuals, but net that we were only up three FTEs and I think what that's reflective of is just holding people accountable for their roles and their performance and if you can do that throughout an entire company whether it's on the operational side or on the production side, what you end up with is a very meaningful group of high performing individuals and instead of just layering in additional expense to mask a deficiency and so I think that's one of the things that we've been very consequential about this year and last year and it's certainly paid dividends for us currently and going forward.

Operator

Brody, do you have any more questions? We can't hear you.

Brody Preston -- Stephens Inc. -- Analyst

Oh yes, sorry about that. So I guess on the mortgage side, Nicole, just one last question there. If 80% of the expense there is tied to variable comp, if production were down say 5% again next quarter, that means expenses in that business line should be down 4%. Is that how should I be thinking about that?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Exactly, yes.

Brody Preston -- Stephens Inc. -- Analyst

Okay, great. Great, thanks for that. And I guess maybe just on that, for the mortgage banking, is that tied to total production or is that, or are those expenses tied to sold production?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Total production.

Brody Preston -- Stephens Inc. -- Analyst

Okay, all right, great. Thanks for that clarification. Maybe just switching to core loan yields. I think backing out PPP and sort of calculating your core loan yield right around 4.25% this quarter, which is down about 10 basis points from last quarter. Just given that new production yields continue to head down by 5 bps to 6 bps per quarter here, should we expect a similar kind of decrease in that core loan yields over the next couple of quarters or I guess when do you sort of expect that to subside?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

No, you're exactly right. So with our current come on [Phonetic] rate, it is pushing our loan yields down and so we really need about a 50 basis point upswing for that to stabilize. So, if rates stay where they are for long periods, we could continue to see some of that compression. Again, we have the deposit side to help some of that for sure, but again, we kind of need a 50 basis point swing to really stop that margin decline and anything above that would start to be accretive.

Brody Preston -- Stephens Inc. -- Analyst

Okay and in the HFS portfolio 77 [Phonetic] yield. Is that a good normalized yield to use going forward. I know it can be pretty variable?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

It is pretty variable. I hate to say this, but I don't anticipate it going down. So I think you could probably use that and that was being conservative.

Brody Preston -- Stephens Inc. -- Analyst

Okay and on that HFS portfolio, Nicole, the pipelines being down this quarter and MBA forecast being what they are, I guess we should expect this HFS portfolio continue to leg down from here. And so would you kind of expect it to get back to that $800 million range by some point next year?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

I would say that that we've kind of guided to $900 million to $1 billion is kind of what we think will be the new norm. So it still has a couple of $100 million to come down, yes.

Brody Preston -- Stephens Inc. -- Analyst

Okay and then just on the mortgage banking division again, just could you help me understand some of the variability that you see on a quarter-to-quarter basis in the provision line item there. Sort of what drives that. Is it related to the average loans that you like are in the HFS portfolio or what are the specific components there that drive that?

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Sure, some of that is related to how we allocate the provision and so when we start looking at some internal credit metrics similar to -- such as deferrals or delinquencies and then also just when we look at overall general economic factors, we could have some shift between buckets. So you'll see I think what you're looking at is again, when you again look at last quarter, that $4.5 million, we had a $28 million release for the whole company. So some of that was allocated to mortgage and then this quarter, you'll see kind of the banking division got the credit and then retail mortgage got -- had the expense but it all kind of net out. So some of the modeling economic factors as well as some individual internal credit metrics.

Brody Preston -- Stephens Inc. -- Analyst

Okay and then just on the C&I portfolio, it was nice to see some strength there in the core C&I portfolio. I think it was up about 12.5% linked quarter. Can you maybe help me understand, is that new kind of commitments? Is that increased line utilization? Is that some of the folks that you hired over the last year starting to hit their stride? So help me kind of understand what happened there?

H. Palmer Proctor -- Chief Executive Officer

Yes, it's a bit of all of the above, which is exciting to see and a lot of it, Brody, has come out of some of our investments we've made in many of the growth markets including the Charlotte area. North Florida had a great quarter as did Atlanta, so it has been very consistent and the pipeline has remained full and most of this was incremental new business. And the other part of it is some of this incremental from new markets, which I like seeing. So the investments we made last year are paying off and we are very excited about the outlook there.

Brody Preston -- Stephens Inc. -- Analyst

Okay, great. And then just one last one if I may. Nicole, do you happen to know what the servicing income was this quarter? I think it was $10.1 million last quarter for the mortgage.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Yeah, it was pretty consistent with that.

Brody Preston -- Stephens Inc. -- Analyst

All, right. Thank you very much.

H. Palmer Proctor -- Chief Executive Officer

And you know, that's a good point you bring up there and for everybody on that's listening today, when you look at mortgage and you look at potential volatility in mortgage, one thing that's not as volatile in mortgage is servicing income and we've got a meaningful servicing asset there. I think it's important for people to remember that in terms of, it's certainly helpful for us in terms of our forecasting and budgeting and the income coming from mortgage because it's a nice stabilizer for what can sometimes be a volatile line of business.

Brody Preston -- Stephens Inc. -- Analyst

Thank you all for taking my questions. I really appreciate it.

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

Great, thanks, Brody.

Operator

[Operator Instructions] The next question comes from Christopher Marinac with Janney Montgomery Scott. Please go ahead.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Thanks, good morning. Palmer and Nicole, you've been able to gain business from other bank mergers for a long, long time. So today's news -- locally is not any surprise. I'm just curious kind of what makes customers move or existing customers do more business with Ameris since kind of how that gets applied as that sort of deck chairs gets shuffled once again?

H. Palmer Proctor -- Chief Executive Officer

Well, I think it's fairly typical of all disruption. Some of it is is when an account officer leaves their bank and moves to another bank, obviously, a lot of people bank with people, but then there is the execution side too and the commitment to the market. I do think that we've benefited from that because we've got a lot of meaningful presence in a lot of key growth markets, but when you start having changes in reporting lines, you start having changes in credit approvals, that can be disruptive to the lenders and it can also be disruptive as an end result to the customer, which is what we're all about. So I think with all the movement out there in terms of M&A and furthermore just changes in reporting lines, that's presented a lot of disruption that we've been able to capitalize on, I think we'll continue to going forward.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Is it fair to say, Palmer, that there is more hires coming just from your core lenders on all sides of the bank?

H. Palmer Proctor -- Chief Executive Officer

There are new opportunities and we've got several folks right now and I'm excited to say a lot of them are coming from some of our new initiatives and new markets, especially in the Carolinas and Florida, but that being said, the thing that gives me comfort in terms of our projections for growth, we have all the folks we need to deliver on the forecast that we have set out for the remainder of this year. So anything beyond that will be incremental lift for us which we'll continue to capitalize on as we move forward.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Okay, great. And last question from me is just about how fintech is evolving for you at Ameris? What are the priorities or new initiatives there that we should expect the next couple of quarters?

H. Palmer Proctor -- Chief Executive Officer

Yeah, I think for us, we like to stay, not on the bleeding edge, but on the cutting edge of that. We're obviously heavily involved in a lot of the fintech initiatives that are out there with Canopy and Fintop and just staying on the forefront of that, but at the same time, it gives us an opportunity to be exposed to that new technology. We've embraced a lot of it. As we've talked about before, robotics continue to be a major focus for us in some of our higher volume areas like mortgage and then we'll continue to roll that out into areas like premium finance and you garner a lot of efficiencies there.

We have an aggressive sales force initiative underway right now throughout the entire company. We were utilizing sales force and into in many of the areas of the company, but going forward, we've got an active rollout of sales force over the next two or three quarters. And I think the important thing, there're so many things that you want to do, but you got to prioritize in terms of where you're going to see the largest gain in efficiencies and so, right now, we see that on the robotics front and on the sales force front and a lot of that has to do with workflow, not just managing pipelines and that's where we will continue to make meaningful investments.

And then obviously, down the road, as we all talk about is what opportunities we might have in terms of our core processors going forward and getting into a more open architecture type of environment, which is really exciting to me and I don't think for the industry, we're quite there yet. We've certainly got some prototypes or experimental activity going on, but until that's a little bit more secure and we've got the comfort of our regulators and everyone else. I think that's probably a couple years out, but in the meantime, there's a lot that banks can be doing now to position themselves to become more efficient and that's what we've prided ourselves on over the last year.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great and that ties all back to the core expense improvements that Nicole was elaborating on earlier and there's more there in general.

H. Palmer Proctor -- Chief Executive Officer

Absolutely. We've always talked about mortgage and have a scalable business. The question is, is do you execute on that and with the robotics that we had in place that allows quite frankly to make some expense reductions immediately without creating havoc or some sort of concern in the back office environment and so that's where you start really appreciating the efficiency garnered from technology.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great, thanks for the background.

H. Palmer Proctor -- Chief Executive Officer

Thank you.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Palmer Proctor for any closing remarks.

H. Palmer Proctor -- Chief Executive Officer

Thank you very much. And once again, I'd like to thank everyone for listening to our second quarter 2021 earnings result call. We're excited about the momentum as you can tell throughout the entire footprint and we feel like we're extremely well positioned for the second half of 2021 and into the future and as I've always said before, we're going to continue to deliver on top quartile financial results and remain focused on our disciplined growth and our operating efficiencies and growing our franchise value, but thank you all again for your time and your interest in Ameris Bank.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Nicole S. Stokes -- Corporate Executive Vice President and Chief Financial Officer

H. Palmer Proctor -- Chief Executive Officer

Brady Gailey -- KBW -- Analyst

Casey Whitman -- Piper Sandler -- Analyst

Jennifer Demba -- Truist Securities -- Analyst

Brody Preston -- Stephens Inc. -- Analyst

Christopher Marinac -- Janney Montgomery Scott -- Analyst

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