Good morning or good afternoon, everyone, and welcome to the Ameris Bank Third Quarter Earnings Conference Call. My name is Adam, and I will be your operator today. I will now turn it over to Nicole Stokes, Chief Financial Officer, to begin. Nicole, please go ahead when you are ready.

Great. Thank you, Adam. 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 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'll 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 our GAAP financial measures in the appendix to our presentation. And with that, I'll turn it over to Palmer for opening comments.

Thank you, Nicole, and good morning everyone. I want to thank you all for taking time to join us this morning for our third quarter 2021 earnings call. We were very pleased with the third quarter and the momentum that we have with the loan production, the growth, and the financial results. Nicole is going to update you on some of the detailed results in a few minutes, but I did want to hit a few highlights for the quarter, as well as a few other successes, which positively impact our outlook as we go forward. For the quarter, we earned $83.9 million or $1.20 per diluted share on an adjusted basis. And this represented a 1.51% return on average assets and a 17.65% return on tangible equity. For the year-to-date period, we earned $287.2 million or $4.12 per diluted share on an adjusted basis, which is a significant increase from the $2.86 reported in the same period last year. The 2021 results represent a year-to-date ROA of 1.79% and a year-to-date return on average tangible equity of 21.38%. Our adjusted efficiency ratio this quarter was 56.56%, an increase from the 54.07% last quarter due to certain non-recurring expenses during the quarter. And that said, our year-to-date efficiency ratio is 55.05%. It should return below 55% by the end of the year. We remain very encouraged by our organic growth, both on the loan and deposit side, and excluding PPP runoff loans grew over $250 million or 7% annualized during the quarter. And that leaves our year-to-date annualized loan growth at 8.7% and excluding PPP runoff at 3.2%, including PPP runoff. We still expect to see mid to upper single-digit loan growth for the year based on our pipelines and opportunities within our growth markets. On the deposit side, we continue to see a lot of success there and growing non-interest-bearing deposits, which now account for over 40% of our total deposits. Nicole is going to discuss our excess liquidity and the impact, obviously it has on margin, in more detail in a few minutes, but I did want to mention the continued success we have there on the deposit front. On the capital side of the balance sheet, our capital position remained strong. We've consistently said that we're very focused on tangible book value growth, and this quarter was no different. I'm happy to report. We grew tangible book value by over $1 per share or 3.8% during the third quarter alone. And we'd grown tangible book value by $3.77 or almost 16% for the year so far. And this equates to over 20% annualized growth rate and tangible book value, which is very meaningful. Our TCE ratio increased to 8.8%, very close to our 9% goal. And if you exclude the $3 billion of excess liquidity on our balance sheet, the TCE ratio would have been well over 10%. So, clearly, we have ample capital to support our growth initiatives and consider opportunistic transactions. While we remain focused on capital preservation, we did announce, as many of you may have seen in our release, that our Board approved extending our share repurchase program through October 31st of next year. We did repurchase 6.5 million during the third quarter. And that leaves approximately 79 million left on that program. And while we don't anticipate executing on this during the remainder of 2021, we do like having the optionality that the right opportunity presents itself. As for our dividend, we still remain very comfortable with where our dividends are today. Jon Edwards, our Chief Credit Officer, is with us today, and he's certainly available to take any credit questions after our prepared remarks. But I wanted to hit a few highlights in terms of credit. For the quarter, we had net recoveries of $127,000, so the zero charge-off ratio compared to 2.6 million of net charge-offs last quarter totaling seven basis points. Our non-performing assets as a percentage of total assets was consistent with last quarter at 32 basis points. Loans that remain on deferral at the end of the quarter were approximately 0.6% of total loans, which is down from approximately 4.3% of total loans this same time last year. Our allowance coverage ratio, excluding unfunded commitments, was 1.18%, net of our PPP loans at the end of the quarter. And I’ll tell you, despite the uncertainty that's still in the economy out there, we continue to see very strong asset quality and solid growth opportunities in our markets for the remainder of this year, and the investments that we made last year and over the last 18 months in both technology and talent continue to propel our incremental growth and really help us to further leverage our platform. And that certainly has helped us eliminate any dependency on recent hires or future hires to deliver our growth targets. And that's a meaningful distinction for our company. But I'll stop there and now turn it over to Nicole to discuss our financial results in more detail.

Thank you, Palmer. For the third quarter, we're reporting a net income of $81.7 million, which translates to $1.17 per diluted share on an adjusted basis. When excluding the servicing asset impairment, the loss on bank premises, and the merger charges, our earnings were $83.9 million or $1.20 per diluted share. For the year-to-date period, our net income stands at $295 million, or $4.23 per diluted share adjusted. Excluding the previously mentioned items, we earned $287.2 million, or $4.12 per diluted share. We are satisfied with our operating ratios, with an adjusted return on assets of 1.51% for the third quarter and 1.79% year-to-date. Our adjusted return on tangible common equity was 17.65% for the quarter and 21.38% for the year-to-date period. As Palmer noted, tangible book value increased by $1.01, or 3.8%, going from $26.45 at the end of the second quarter to $27.46 at the end of this quarter. Year-over-year, from September 30 last year to September 30 this year, our tangible book value rose by $5 per share, exceeding 22% from $22.46 at the same time last year. Additionally, our tangible common equity ratio grew by five basis points to 8.88 million, an increase of 61 basis points from 8.27% this time last year. We have approximately $3 million of excess liquidity on our balance sheet, which negatively affected this ratio by 144 basis points. If we exclude that cash from our assets, our TCE ratio would have been around 10.32% at quarter-end, well above our stated target of 9%. We remain well-capitalized and are comfortable with our capital and dividend ratios. Turning to our net interest income and margin, our net interest income has been fairly stable since last year. Notably, excluding accretion and PPP, our core net interest income increased by $3.4 million from last quarter and $1.7 million year-over-year. This reflects a positive trend despite concerns about the impact of PPP running off. Our net interest margin decreased by 12 basis points this quarter from 3.34% to 3.22%. The yield on earning assets fell by 14 basis points, but our funding costs helped to offset that by two basis points. The margin was influenced by eight basis points from our excess liquidity, three basis points from compression, and another three basis points from a decline in accretion income. Thus, excluding excess liquidity, our margin would have only declined about three to four basis points this quarter. That decline is attributed primarily to the PPP and accretion decline. On slide eight, you can also see how our $3 billion of excess liquidity has affected our margin ratio, contributing about 42 basis points to the negative compression over the past year. We remain focused on managing our deposit costs and expect improvements as we utilize excess liquidity more effectively. We anticipate net loan growth next year in the high single digits, around 7% to 9%, which is about $1 billion to $1.3 billion in loan growth. We have about $1.8 billion of excess cash to prepare for deposit runoff and to invest in other opportunities as they arise. Regarding provisions, we reversed about $9.7 million of provision expense this quarter due to improvements in the economy, particularly in home prices and the CRE index, as well as our improved credit quality. Our ending allowance for loan losses was $171.2 million compared to $175.1 million at the end of last quarter. Including the unfunded commitment reserve and allowance for other credit losses, our total allowance for credit losses stood at $188.2 million at quarter-end. Non-interest income dropped by $12.7 million this quarter due to declines in mortgage banking activity. Retail mortgage originations are now 17% of our pre-provision pretax income for the third quarter, down from 49% last year, with production in the retail mortgage group dropping by about 14% to $2.1 billion for the quarter. Non-interest expenses in the retail mortgage division also declined by 8%, or $4.4 million. The average gain on sale rose to 3.17% compared to 2.77% last quarter. Encouragingly, the open pipeline at the end of the third quarter was $1.9 billion, up from $1.7 billion at the end of the second quarter. Total non-interest expenses increased by $1.4 million this quarter from $135.8 million last quarter to $137 million. However, excluding the loss on bank premises and merger charges, non-interest expense actually declined by $120,000. Mortgage revenue declined by about $4.4 million this quarter, but this was offset by increases in other areas like enterprise-wide services and support staff. Most of those increases were associated with higher legal and professional fees and other one-time expenses. Due to these non-recurring expenses, our adjusted efficiency ratio was 56.56% compared to 54.7% last quarter, but we expect it to drop back under 55% by year-end. On the balance sheet, we ended the quarter with assets totaling $22.5 billion compared to $21.9 billion at the end of last quarter. We are pleased to report organic loan growth of $43.7 million, exceeding 1% for the third quarter. As displayed on slide 16, we faced $471 million in headwinds against $515 million growth in CRE, C&I, premium finance, and residential. PPP loans decreased by $208 million, and indirect loans fell by $72 million. Excluding the PPP runoff, our annualized loan growth was about 7%. Currently, we have approximately $280 million in PPP loans and about $325 million in indirect loans remaining. We expect the impact of runoff in both portfolios to diminish early next year. As an update on PPP, we've received payments and forgiveness of just over $1 billion on the first round, leaving a balance of $21 million. For the second round, the outstanding balance is about $259 million. The average balance of PPP loans this quarter was $377 million, down from $708 million in the previous quarter. We also have about $14.7 million of deferred fee income on the PPP loan, which we aim to recognize as income over the next three quarters. Our tremendous deposit growth this quarter resulted in an increase of $575 million, with non-interest-bearing deposits growing by $633 million while interest-bearing deposits decreased by about $58 million. As mentioned, non-interest-bearing deposits now exceed 40% of our total deposits, which is crucial for funding future growth. We anticipate some deposit runoff as life returns to normal post-pandemic and as interest rates potentially rise. Thank you all for your time today. I will now turn the call back over to Adam for any questions.

Thank you. Our first question today comes from Brady Gailey from KBW. Brady, please go ahead.

Hey. Thanks. Good morning, guys.

Good morning, Brady.

I just wanted to start with mortgage fees. If you back out the noise related to the MSR, mortgage fees were down about 17% linked-quarter, which is a little more than I thought they would be. So, maybe just any kind of comment on that decline? Did it surprise you guys? And how are you thinking about mortgage as we head into 2022? I know it's a tough thing to predict.

Sure, Brady. I apologize for the mix-up with the name. We're adjusting to a new system for the conference call. Regarding mortgage revenue, much of it is tied to timing and the significant production we experienced in the second quarter, along with some sales that accelerated during that time. This led to a slight decrease. While it impacted the third quarter, it was more due to the elevated figures of the second quarter. Production dropped about 14%, and revenue decreased by 17%, but again, some of that was related to timing. We expect the pair-off mentioned in the press release to increase a bit next quarter, and we anticipate a rebound.

And more importantly, too, Brady, I think everybody saw the improvement in the margin there. That bounced back to over 3%; we were down at 2.75%, I think, last quarter. So, between the production and the margin, we feel very positive about the fourth quarter in terms of mortgage, but a lot of mortgages, as you all know, is about timing, and we had the opportunity to have some meaningful sales at the end of the second quarter that obviously impacted the third quarter.

All right. That's helpful. And then, Nicole, I noticed that other expenses were up about $7 million linked-quarter. Was there anything notable in other expenses this quarter?

We had some one-time expenses, including the settlement of an old legal suit, which resulted in additional professional fees. We do not expect these expenses to recur. Additionally, we incurred some lease expenses that we are exiting, and our tax rate increased slightly this quarter due to a one-time state tax liability. We anticipate that this will also normalize.

Okay. All right. And then, the last one for me. I know we've talked about an efficiency ratio of 53% to 55% for you guys. Is that still the way you're thinking about it as we head into 2022?

It is. We are still targeting below 55%.

Okay. Great. Thanks, guys.

Thank you.

Our next question is from Casey Whitman of Piper Sandler. Casey, your line is open. Please go ahead.

Good morning.

Good morning, Casey.

Good morning, Casey.

Could you provide some insight on how to evaluate the core net interest income excluding PPP and accretion, particularly in light of your loan growth expectations for next year? What might be a reasonable estimate for growth in that core net interest income next year? Would mid-single digits be a fair expectation, or is that too conservative?

Thank you, Casey. I want to briefly address the situation if rates remain flat. Our bankers have done an excellent job in this regard. In this quarter, excluding PPP and accretion, we have managed to grow our net interest income. We still have some capacity on the deposit side. This quarter, we experienced about two basis points of net interest margin defense from deposits, particularly on the certificate of deposit side, which should help mitigate some of the compression we anticipate from loans. As we consider the possibility of a steepening yield curve and potential tightening from the Federal Reserve, we have positioned ourselves to benefit from these changes. A 100 basis point increase could yield approximately $44 million in net interest income for us. Therefore, we expect that once we see an upward movement of between 25 and 50 basis points in the yield curve alongside actions from the Fed, we'll begin to notice a significant positive impact on our net interest income.

I understand. To clarify the loan growth guidance, I noted a mid to upper range and then a 7% to 9% range. Are you considering the mid to upper for this year and possibly reaching closer to that 7% to 9% range next year? Thank you.

That's right. That's exactly right. This year is kind of in that 5% to 7% range and then next year is coming in that 7% to 9%. A lot of that is because of the headwind of the indirect and the PPP.

I am assuming out next year. I'll let some one else move. Thanks.

Great. Thank you, Casey.

Our next question comes from Kevin Fitzsimmons from D.A. Davidson. Kevin, please go ahead.

Hey. Good morning, everyone.

Good morning, Kevin.

Good morning, Kevin.

I was curious if you could clarify your comments about margin and its drivers. Can you provide your outlook on reported margin or core margin for the fourth quarter and into next year? Also, Nicole, an important aspect of this is how you'll handle the excess liquidity. Do you plan to be more aggressive in deploying it into securities, or are you content to wait for loan growth? Thank you.

Sure. We experienced a compression of 12 basis points in margin this quarter. Analyzing the details, eight basis points were due to liquidity while six basis points came from the loan side, mainly from a decrease in PPP accretion income along with a decline in our regular accretion income, which was partially offset by two basis points. Consequently, our core margin remained flat for the quarter, which I consider a significant achievement. However, I am unsure if we can maintain that next quarter. We might see another one to two basis points of pressure on the deposit side which could counterbalance a few basis points on the loan side. We really need interest rates to rise by 25 to 50 basis points. Our incoming rates are currently lower than our margins, creating some pressure. We are actively working on the deposit side to mitigate this. Regarding our excess liquidity, we currently have around $3 billion, with plans to allocate $1 to $1.5 billion for loan growth next year. This leaves us with $1.5 billion to invest in the bond portfolio and to prepare for potential deposit runoff. During the second quarter, we purchased about $100 million of BOLI, which doesn't impact the margin, but contributes to non-interest income. We see such transactions as potential opportunities to utilize our liquidity. We are being cautious with our bond portfolio, having started to acquire some CRA investments in our held-to-maturity category, but we are careful with these investments to avoid negative impacts in the future when rates may change. Our focus is on growing net interest income through loan growth and managing deposit costs to effectively handle excess liquidity and maintain our margin ratio, while prioritizing the growth of net interest income.

Great. That makes perfect sense. One additional question. I wanted to get your updated thoughts on mergers and acquisitions. Could you differentiate between bank and non-bank? We've noticed a lot of banks becoming more interested in acquiring asset generators due to the excess liquidity. Is M&A still as important, or in this environment, could you pursue team lift-outs and strategic hires instead? I'm curious about your latest thoughts on this. Thanks, Palmer.

You bet. I would kind of answer that in one word: optionality. That's one of the benefits of our company here is that we've positioned ourselves to take advantage of opportunities. That being said, as you know, we're pretty disciplined here, and things have to make sense to do it. We're very sensitive to dilution. To answer your question more specifically, we look at both banking and non-bank. If we're able to further a particular line of business or do a team lift-out somewhere, we will certainly entertain that as well. I think we can all see as we go forward the importance of not having a dependency on just the margin; fee income piece is critical, which speaks well to our profile. When you look at the lines of business that we're in, whether it's premium finance, SBA, or mortgage, I think we could do things to further those existing lines in addition to potentially finding other opportunities for fee income on both the bank and non-bank side.

Great. Thank you.

Our next question is from David Feaster from Raymond James. David, please go ahead.

Hey. Good morning, both.

Good morning, David.

I just wanted to begin with production. Overall, you have done a great job maintaining production, staying above $900 million in the last few quarters. How do you view the potential to increase production moving forward? We have discussed in the past the possibility of moving upstream. Could that be beneficial? Or is it more about the new hires you've mentioned? I’m interested in your insights on the production aspect.

I would respond this way, David. We are very fortunate with the investments we've made over the last 18 months, and we are not heavily reliant on future projections because we have the right resources in place. We are lucky to be in high-growth markets. When looking at incremental growth for the remainder of this year and into next year, our pipelines remain strong. I feel optimistic across all business lines, particularly in many of the new markets we are entering, both in terms of deposits and loan production. Unlike many others, we have a clear understanding of where that production is coming from, and the investments we made earlier are already proving effective. As you know, when investing in new talent, there is typically a ramp-up period; however, we are already operating at a steady rate. This will be a significant advantage, especially in the heavily growing markets we are involved in. As Nicole mentioned regarding our growth expectations, much depends on the economy and political challenges, but I am very confident in our capacity to continue growing, largely due to the talent we have and the growth markets we are part of.

That's helpful. I would like to discuss the competitive landscape. There's noticeable competition regarding pricing, and new loan yields have decreased. I’m interested in your perspective on how competitive conditions have evolved in terms of pricing and structure. Has it intensified? Additionally, do you see increased pressure on the variable side of pricing? I'm curious if the steepening of the curve is benefiting new pricing, potentially suggesting we are at a low point.

I believe pricing will continue to be a challenge. In terms of structure, I don't see anyone in our peer group compromising on asset quality, which is positive because, as we know, that can lead to significant issues later. From what I've observed, there isn’t anyone compromising on asset quality. What I do notice regarding structure is an increase in extended interest-only periods being offered. There is also a rise in non-recourse loans, but simultaneously, there is more equity being invested in deals and stronger sponsors backing those deals. I think these factors help mitigate risks. We plan to remain very competitive on pricing where there is a relationship involved. However, if it's merely a transaction, the approach changes significantly. Additionally, a key distinction for us is our ability to grow organically. Many are reliant on third-party indirect relationships and participations to grow their portfolios, which we do not depend on. I'm glad we have avoided that; I believe relying on such a strategy could become permanent, and we want to steer clear of that. Given this, we will have to compete for business. Moving forward, we intend to stay competitive on pricing for both the commercial and industrial side and the commercial real estate side. The only area where I see some compromise is in structure, particularly regarding interest rate risk and the interest-only periods in non-recourse loans.

Okay. That's helpful. And then, just kind of following up on the M&A commentary. I mean there's a lot of discussions out there. Everybody's playing matchmaker. Just appreciate that you guys are coming at this from an opportunistic standpoint and don't need to do something. I guess, what's your appetite for maybe more of a transformative type acquisition versus some more of those bolt-on type deals? Just curious how you think about those.

We have been very disciplined in our approach. While we are open to larger transactions, the recent experience has shown us that they can be quite challenging to execute over time. We need to be ready for these difficulties. Therefore, any potential deal would have to meet several criteria. We are also very cautious about dilution, which often complicates finding suitable partners. That said, we remain open to larger transactions, but they would need to align with our established practices.

Thank you. Nicole, could you provide more details on the one-time expenses? Also, can you share your insights on a reasonable core expense run rate moving forward?

Yes. So, the tax piece was about $4 million. And then, the kind of the one-time other expenses were about another $3.50 to $4 million.

Our next question is from Christopher Marinac from Janney Montgomery Scott. Christopher, your line is open.

Hey, thanks. Good morning. Palmer, Nicole, can you talk about new hires across all of the commercial, wealth, and mortgage channels? I'm curious about any upcoming staffing changes.

Thank you, Chris, for the question. As I've mentioned before, we are fortunate to have the team needed to meet our current growth projections. Any new talent we bring on will be an addition to our capabilities. In the third quarter, we hired about five individuals, evenly distributed among our commercial bankers in locations such as Greenville, Atlanta, Jacksonville, and Tampa. We also made some recent hires in the wealth department, which I believe will have a significant impact as that area continues to grow and presents a strong fee income opportunity, especially as we enter new markets. We are continuously hiring in the mortgage sector as well. Currently, most of our new banker hires are coming from the larger regional banks, focusing primarily on the commercial side. Some of these hires are in our newer markets, like Charlotte and Tampa, where we see promising opportunities, in addition to bringing in more talent for our Greenville, Atlanta, and Jacksonville markets.

Okay. Great. And then just a follow-up on the mortgage business. I know that the gain on sale was better this quarter, as you disclosed. I know it's a multi-quarter evolution on kind of some of the efficiencies in mortgage, but what's the progress there? And kind of how will that play out this next year?

We are actively monitoring the efficiency ratio in the mortgage group. On the mortgage side, our expenses are continuing to decline in line with revenues. This quarter, we did experience some impact from pair-off fees, but those costs remain approximately 80% variable. Changes in production levels will significantly influence that efficiency. We are also exploring additional areas within the mortgage sector to identify further efficiencies.

Chris, as we talked about last quarter too, technology is a big opportunity here and a big driver for all mortgage companies, ours included. We feel like we've got a good head start on that, which really helped us propel through the opportunities during the pandemic. That being said, as we go forward, we will continue to find more and more opportunities for efficiency just in terms of how we produce and looking at capturing more of the online type mortgage opportunities that exist, as opposed to just through the retail network.

Great. And just to expand on Nicole's point. So, if you have a quarter or a year where production is not expanding, there's still opportunities to get the margin slightly better, just purely those efficiencies.

When you say the margin, the gain on sale is not necessarily, but there is an opportunity for efficiency based on the production.

Okay. Two separate?

That's right. And so really, when you think about mortgage revenue, you've got two drivers: you've got production and gain on sale. A lot of the expense structure is based on the production and not necessarily on the gain on sale. So, if the gain on sale goes up, obviously, the efficiency ratio will get better. But if the gain on sale goes down, there's not necessarily that driver on the expense side to stabilize it. As production goes up or down, you have the expenses moving in line with that. It's certainly driven by the production side as far as the downward improvement of an efficiency ratio.

Our next question is from Brody Preston from Stephens Inc. Brody, please go ahead.

Hey, good morning, everyone.

Good morning, Brody.

Nicole, I noticed a line in the press release regarding mortgages that stood out to me. You mentioned there was an $18.5 million decrease in mortgage pair-off fees compared to the second quarter. These fees are usually charged to mortgage loan sellers if they do not meet their obligations. Are you purchasing mortgage loans for securitization purposes? What do those pair-off fees mean for your company?

Sure. And so no, we are not a buyer of those. What that really had to do with is last quarter because of it's a timing issue. Because last quarter, the overall production, we accelerated the selling of some loans in the second quarter that we received some pay-offs and excess. We were able to over-fulfill some. That drove that reduction this quarter. So, it's not necessarily that we were penalized this quarter. It's just that we had some excess or some additional last quarter.

Okay. Got it. And was any of that in the gain on sale margin last quarter? Or is that excluded from that?

It's excluded from that.

Okay. Understood. Understood. Thanks for that. Maybe just on the margin front, maybe try this a different way. When I look at the HFI loan income and I stripped out the impacts of purchase accounting and PPP. Year-over-year, you all are down about 2.5% to about $145 million this quarter versus about $149 million, in the 3Q $20 million quarter. I know that the new production yields are relatively challenging, but you all have grown core loans 5% over that period. How do we think about the trajectory, I guess, maybe of loan income going forward, especially as new production yields seem to be coming on a bit lower? When I look at the back book, at least for standalone Ameris, I know some of that change post Lion. But in 2018 and 2019, the banking division was putting on loans in the high fours to mid-fives kind of range. So, it just seems like a challenging ramp for loan income despite a strong growth outlook from here. So, how do we think about that?

No, I think you're exactly right. Our projections do not reflect any impacts from the Federal Reserve's rate changes or steepening. It presents a significant challenge, but our bankers have performed exceptionally well, particularly this quarter, which is a prime example. Even though we continue to see incoming rates below our current margin and a squeeze on the loan side, we still have growth that can counterbalance some of that. We can recover some of the lost revenue through increased volume rather than relying solely on rate increases. It's interesting to note that our fixed-rate production has remained quite stable over the past few quarters, while variable-rate production has decreased. This dynamic supports us on the asset sensitivity front, so when rates begin to rise, that portion of the portfolio will also adjust, benefiting us in that environment.

Thank you for the information. Regarding the CECL, there was a $7.5 million decrease in specific reserves, along with net recoveries this quarter, and gross charge-offs were only $3.5 million. I would like to know what contributed to this. I believe there was a reduction in hotel exposure this quarter. Was that a factor? I’m curious about what occurred in this situation.

That's exactly what happened. As we move further past the COVID impact, certain hotel loans showed improvement during the quarter, allowing them to be removed from the watch list.

I understand. There was $49.3 million in hotel exposure still on the watch list. Did you continue working with those borrowers, or are those loans that you've set aside to naturally decline as they mature?

What this really reflects is that some hotels have recovered more quickly than others. Until we gain better clarity on the financial performance after COVID, they are more sustainable and have been left on the watch list. This is mainly a result of hotel loans that have yet to achieve breakeven or better operating results, but it doesn't mean we plan to push those out of the bank. They are just taking a bit more time to overcome their challenges.

Got it. Okay. And then, I just had one more question. Nicole, can I go back to the pair-off fees I asked about earlier? Should we expect those to be included in the yearly run rate, similar to some of the pair-off fees related to the excess production, which can vary significantly from quarter to quarter? Or is that something more specific to that quarter, and it shouldn't be accounted for in future models?

The latter. You're exactly right. It really had to do with that push in the second quarter to accelerate some sales in the second quarter. It typically is not as lumpy.

Got it. Thank you very much for taking my questions. Everyone, I appreciate it.

Thanks, Brody.

This concludes today's Q&A session. So, I'll now hand back to Palmer Proctor for any closing remarks.

Great. Thank you, Adam. I'd like to thank everybody again for listening to our third quarter 2021 earnings results. We remain well-positioned for the future as we stay focused and disciplined on growth and operating efficiencies and opportunities as we go forward to grow the franchise. We really remain excited about the remainder of 2021 and into 2022. So, thank you all again for your interest in Ameris Bank.

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