Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13901

 

 

 

LOGO

AMERIS BANCORP

(Exact name of registrant as specified in its charter)

 

 

 

GEORGIA   58-1456434
(State of incorporation)   (IRS Employer ID No.)

310 FIRST STREET, S.E., MOULTRIE, GA 31768

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes  ¨    No  x

There were 23,814,144 shares of Common Stock outstanding as of April 30, 2012.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

         Page  

PART I – FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements.

  
 

Consolidated Balance Sheets at March 31, 2012, December 31, 2011 and March 31, 2011

     3   
 

Consolidated Statements of Earnings and Comprehensive Income  for the Three Months Ended March 31, 2012 and 2011

     4   
 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2012 and 2011

     5   
 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011

     6   
 

Notes to Consolidated Financial Statements

     7   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     36   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

     47   

Item 4.

 

Controls and Procedures.

     47   

PART II – OTHER INFORMATION

  

Item 1.

 

Legal Proceedings.

     48   

Item 1A.

 

Risk Factors.

     48   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

     48   

Item 3.

 

Defaults Upon Senior Securities.

     48   

Item 4.

 

Mine Safety Disclosures.

     48   

Item 5.

 

Other Information.

     48   

Item 6.

 

Exhibits.

     48   

Signatures

     48   

 

2


Table of Contents

Item 1. Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

 

     March 31,
2012
    December 31,
2011
    March 31,
2011
 
     (Unaudited)     (Audited)     (Unaudited)  

Assets

      

Cash and due from banks

   $ 64,963      $ 65,528      $ 88,386   

Federal funds sold and interest bearing accounts

     194,172        229,042        264,508   

Investment securities available for sale, at fair value

     371,791        339,967        305,620   

Other investments

     10,967        9,878        12,436   

Mortgage loans held for sale

     14,863        11,563        —     

Loans

     1,323,844        1,332,086        1,345,981   

Covered loans

     653,377        571,489        526,012   

Less: allowance for loan losses

     28,689        35,156        35,443   
  

 

 

   

 

 

   

 

 

 

Loans, net

     1,948,532        1,868,419        1,836,550   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     40,035        50,301        62,258   

Covered other real estate owned

     85,803        78,617        59,757   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned

     125,838        128,918        122,015   
  

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     72,755        73,124        66,359   

FDIC indemnification asset

     220,016        242,394        167,176   

Intangible assets

     4,179        3,250        3,973   

Goodwill

     956        956        956   

Other assets

     14,202        21,268        50,444   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,043,234      $ 2,994,307      $ 2,918,423   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 444,707      $ 395,347      $ 316,060   

Interest-bearing

     2,220,653        2,196,219        2,256,629   
  

 

 

   

 

 

   

 

 

 

Total deposits

     2,665,360        2,591,566        2,572,689   

Securities sold under agreements to repurchase

     28,790        37,665        20,257   

Other borrowings

     3,810        20,000        —     

Other liabilities

     5,308        9,037        9,351   

Subordinated deferrable interest debentures

     42,269        42,269        42,269   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     2,745,537        2,700,537        2,644,566   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

      

Stockholders’ Equity

      

Preferred stock, stated value $1,000; 5,000,000 shares authorized; 52,000 shares issued and outstanding

     50,884        50,727        50,269   

Common stock, par value $1; 30,000,000 shares authorized; 25,150,318, 25,087,468 and 25,102,218 issued

     25,150        25,087        25,102   

Capital surplus

     166,579        166,639        165,995   

Retained earnings

     59,402        54,852        37,580   

Accumulated other comprehensive income

     6,513        7,296        5,742   

Treasury stock, at cost, 1,336,174 shares

     (10,831     (10,831     (10,831
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     297,697        293,770        273,857   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,043,234      $ 2,994,307      $ 2,918,423   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Interest income

    

Interest and fees on loans

   $ 29,482      $ 28,971   

Interest on taxable securities

     2,309        2,658   

Interest on nontaxable securities

     365        320   

Interest on deposits in other banks

     120        175   

Interest on federal funds sold

     6        13   
  

 

 

   

 

 

 

Total interest income

     32,282        32,137   
  

 

 

   

 

 

 

Interest expense

    

Interest on deposits

     4,084        7,375   

Interest on other borrowings

     471        555   
  

 

 

   

 

 

 

Total interest expense

     4,555        7,930   
  

 

 

   

 

 

 

Net interest income

     27,727        24,207   

Provision for loan losses

     12,882        7,043   
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     14,845        17,164   
  

 

 

   

 

 

 

Noninterest income

    

Service charges on deposit accounts

     4,386        4,267   

Mortgage origination fees

     1,475        450   

Other service charges, commissions and fees

     391        239   

Gain on acquisition

     20,037        —     

Gain on sale of securities

     —          224   

Other

     975        1,013   
  

 

 

   

 

 

 

Total noninterest income

     27,264        6,193   
  

 

 

   

 

 

 

Noninterest expense

    

Salaries and employee benefits

     11,446        9,843   

Occupancy and equipment expense

     3,335        2,730   

Advertising and marketing expense

     349        163   

Amortization of intangible assets

     220        263   

Data processing and communications costs

     1,925        2,396   

Other operating expenses

     16,971        5,760   
  

 

 

   

 

 

 

Total noninterest expense

     34,246        21,155   
  

 

 

   

 

 

 

Income before income tax expense

     7,863        2,202   

Applicable income tax expense

     2,498        824   
  

 

 

   

 

 

 

Net income

   $ 5,365      $ 1,378   
  

 

 

   

 

 

 

Preferred stock dividends

     815        798   
  

 

 

   

 

 

 

Net income available to common stockholders

   $ 4,550      $ 580   
  

 

 

   

 

 

 

Other comprehensive loss

    

Unrealized holding loss arising during period on investment securities available for sale, net of tax

     (689     (262

Reclassification adjustment for gains included in net income, net of tax

     —          (146

Unrealized loss on cash flow hedges arising during period, net of tax

     (94     (54
  

 

 

   

 

 

 

Other comprehensive loss

   $ (783   $ (462
  

 

 

   

 

 

 

Comprehensive income

   $ 3,767      $ 118   
  

 

 

   

 

 

 

Basic and Diluted earnings per share

   $ 0.19      $ 0.02   
  

 

 

   

 

 

 

Weighted average common shares outstanding

    

Basic

     23,762        23,440   

Diluted

     23,916        23,474   

See notes to unaudited consolidated financial statements

 

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AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended     Three Months Ended  
     March 31, 2012     March 31, 2011  
     Shares      Amount     Shares     Amount  

PREFERRED STOCK

         

Balance at beginning of period

     52,000       $ 50,727        52,000      $ 50,121   

Accretion of fair value of warrant

     —           157        —          148   
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at end of period

     52,000       $ 50,884        52,000      $ 50,269   

COMMON STOCK

         

Balance at beginning of period

     25,087,468       $ 25,087        24,982,911      $ 24,983   

Issuance of restricted shares

     62,450         62        125,075        125   

Cancellation of restricted shares

     —           —          (7,000     (7

Proceeds from exercise of stock options

     400         1        1,232        1   
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at end of period

     25,150,318       $ 25,150        25,102,218      $ 25,102   

CAPITAL SURPLUS

         

Balance at beginning of period

      $ 166,639        $ 165,930   

Stock-based compensation

        —            174   

Proceeds from exercise of stock options

        2          9   

Issuance of restricted shares

        (62       (125

Cancellation of restricted shares

        —            7   
     

 

 

     

 

 

 

Balance at end of period

      $ 166,579        $ 165,995   

RETAINED EARNINGS

         

Balance at beginning of period

      $ 54,852        $ 37,000   

Net income

        5,365          1,378   

Dividends on preferred shares

        (657       (650

Accretion of fair value warrant

        (158       (148
     

 

 

     

 

 

 

Balance at end of period

      $ 59,402        $ 37,580   

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX

         

Unrealized gains on securities and derivatives:

         

Balance at beginning of period

      $ 7,296        $ 6,204   

Accumulated other comprehensive income

        (783       (462
     

 

 

     

 

 

 

Balance at end of period

      $ 6,513        $ 5,742   

TREASURY STOCK

         

Balance at beginning of period

      $ 10,831        $ 10,831   

Purchase of treasury shares

        —            —     
     

 

 

     

 

 

 

Balance at end of period

      $ 10,831        $ 10,831   
     

 

 

     

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

      $ 297,697        $ 273,857   
     

 

 

     

 

 

 

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Cash flows from operating activities:

    

Net income

   $ 5,365      $ 1,378   

Adjustments reconciling net income to net cash provided by operating activities:

    

Depreciation

     1,143        1,112   

Net gains on sale or disposal of premises and equipment

     (4     (189

Gain on acquisition

     (20,037     —     

Net losses or write-downs on sale of other real estate owned

     7,252        33   

Provision for loan losses

     12,882        7,043   

Amortization of intangible assets

     220        263   

Net change in mortgage loans held for sale

     (3,300     —     

Net gains on securities available for sale

     —          (224

Other prepaids, deferrals and accruals, net

     4,201        (162
  

 

 

   

 

 

 

Net cash provided by operating activities

     7,722        9,254   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net decrease (increase) in federal funds sold and interest bearing deposits

     34,870        (3,246

Proceeds from maturities of securities available for sale

     21,912        12,922   

Purchase of securities available for sale

     (15,637     (19,869

Proceeds from sales of securities available for sale

     760        23,503   

Net change in loans

     17,496        37,682   

Proceeds from sales of other real estate owned

     16,296        9,306   

Proceeds from sales of premises and equipment

     305        344   

Decrease in FDIC indemnification asset

     75,032        502   

Net cash proceeds received from FDIC-assisted acquisitions

     65,050        —     

Purchases of premises and equipment

     (1,075     (1,539
  

 

 

   

 

 

 

Net cash provided by investing activities

     215,009        59,605   
  

 

 

   

 

 

 

Cash Flows From Financing Activities:

    

Net (decrease) increase in deposits

     (187,242     37,263   

Net decrease in securities sold under agreements to repurchase

     (8,875     (47,927

Repayment of other borrowings

     (26,524     (43,495

Dividends paid - preferred stock

     (657     (650

Proceeds from exercise of stock options

     2        10   
  

 

 

   

 

 

 

Net cash used in financing activities

     (223,296     (54,799
  

 

 

   

 

 

 

Net (decrease) increase in cash and due from banks

     (565     14,060   

Cash and due from banks at beginning of period

     65,528        74,326   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 64,963      $ 88,386   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid/(received) during the period for:

    

Interest

   $ 5,098      $ 8,494   

Income taxes

   $ —        $ —     

See notes to unaudited consolidated financial statements

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly-owned banking subsidiary, Ameris Bank (the “Bank”). At March 31, 2012 the Bank operated 67 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. Ameris’ Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within Ameris’ established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Newly Adopted Accounting Pronouncements

ASU 2011-04 - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 generally represents clarifications of Topic 820, but also includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. ASU 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011 for public companies. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-05 - Amendments to Topic 220, Comprehensive Income (“ASU 2011-05”). ASU 2011-05 grants an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. For public entities, ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and is to be adopted retrospectively. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350) Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 grants an entity the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This conclusion can be used as a basis for determining whether it is necessary to perform the two-step goodwill impairment test required in Topic 350. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

 

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Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The accounting standard for disclosures about the fair value of financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The fair value hierarchy describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments and other accounts recorded based on their fair value:

Cash, Due From Banks, Interest-Bearing Deposits in Banks and Federal Funds Sold: The carrying amount of cash, due from banks and interest-bearing deposits in banks and federal funds sold approximates fair value.

Investment Securities Available for Sale: The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and municipal bonds. The level 2 fair value pricing is provided by an independent third-party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.

Other Investments: Federal Home Loan Bank (“FHLB”) stock is included in other investment securities at its original cost basis, as cost approximates fair value and there is no ready market for such investments.

Mortgage Loans Held-for-Sale: Mortgage loans held-for-sale are carried at cost, which is a reasonable estimate of fair value.

Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is based on estimated discounted cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with accounting standards and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 2 assets due to the extensive use of market appraisals. To the extent that market appraisals or other methods do not produce reliable determinations of fair value, these assets are deemed to be Level 3.

Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.

Covered Assets: Covered assets include loans and other real estate owned on which the majority of losses would be covered by loss-sharing agreements with the Federal Deposit Insurance Corporation (the “FDIC”). Management initially valued these assets at fair value using mostly unobservable inputs and, as such, has classified these assets as Level 3.

 

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Table of Contents

Intangible Assets and Goodwill: Intangible assets consist of core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of three to ten years. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill and other intangible assets deemed to have an indefinite useful life are not amortized but instead are subject to an annual review for impairment.

FDIC Indemnification Asset: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared-loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared-loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.

Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently offered for certificates with similar maturities.

Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements.

Subordinated Deferrable Interest Debentures: The carrying amount of the Company’s variable rate trust preferred securities approximates fair value.

Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.

Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

 

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The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of March 31, 2012, December 31, 2011 and March 31, 2011, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial instruments, were as follows:

 

    

 

     Fair Value Measurements at March 31, 2012 Using:  
     Carrying
Amount
     Level 1      Level 2      Level 3      Total  
     (Dollars in Thousands)  

Financial assets:

              

Loans, net

   $ 1,948,532       $ —         $ 1,981,385       $ —         $ 1,981,385   

Financial liabilities:

              

Deposits

     2,665,360         —           2,667,731         —           2,667,731   

Other borrowings

     3,810         3,854         —           —           3,854   

 

     December 31, 2011      March 31, 2011  
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 
     (Dollars in Thousands)  

Financial assets:

           

Loans, net

   $ 1,868,419       $ 1,877,320       $ 1,836,550       $ 1,845,963   

Financial liabilities:

           

Deposits

     2,591,566         2,593,113         2,572,689         2,576,253   

Other borrowings

     20,000         20,936         —           —     

 

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The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):

 

     Fair Value Measurements on a Recurring Basis
As of March 31, 2012
 
     Fair Value     Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

U.S. government agencies

   $ 28,848      $ —         $ 28,848      $ —     

State, county and municipal securities

     81,997        —           81,997        —     

Corporate debt securities

     11,385        —           9,385        2,000   

Mortgage-backed securities

     249,561        2,292         247,269        —     

Derivative financial instruments

     (2,089     —           (2,089     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total recurring assets at fair value

   $ 369,702      $ 2,292       $ 365,410      $ 2,000   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

     Fair Value Measurements on a Recurring Basis
As of December 31, 2011
 
     Fair Value     Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

U.S. government agencies

   $ 14,937      $ —         $ 14,937      $ —     

State, county and municipal securities

     79,133        2,966         76,167        —     

Corporate debt securities

     11,401        —           9,401        2,000   

Mortgage-backed securities

     234,496        3,302         231,194        —     

Derivative financial instruments

     (2,049     —           (2,049     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total recurring assets at fair value

   $ 337,918      $ 6,268       $ 329,650      $ 2,000   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

     Fair Value Measurements on a Recurring Basis
As of March 31, 2011
 
     Fair Value      Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

U.S. government agencies

   $ 33,545       $ —         $ 33,545       $ —     

State, county and municipal securities

     56,898         —           56,898         —     

Corporate debt securities

     9,749         —           7,749         2,000   

Mortgage-backed securities

     205,428         12,764         192,664         —     

Derivative financial instruments

     598         —           598         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 306,218       $ 12,764       $ 291,454       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following table is a presentation of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):

 

     Fair Value Measurements on a Nonrecurring Basis
As of March 31, 2012
 
     Fair Value      Quoted Prices
in Active
Markets for
Identical
Assets (Level
1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Impaired loans carried at fair value

   $ 69,606       $ —         $ 69,606       $ —     

Other real estate owned

     40,035         —           —           40,035   

Covered loans

     653,377         —           —           653,377   

Covered other real estate owned

     85,803         —           —           85,803   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 848,821       $ —         $ 69,606       $ 779,215   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2011
 
     Fair Value      Quoted Prices
in Active
Markets for
Identical
Assets (Level
1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Impaired loans carried at fair value

   $ 70,296       $ —         $ 70,296       $ —     

Other real estate owned

     50,301         —           —           50,301   

Covered loans

     571,489         —           —           571,489   

Covered other real estate owned

     78,617         —           —           78,617   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 770,703       $ —         $ 70,296       $ 700,407   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements on a Nonrecurring Basis
As of March 31, 2011
 
     Fair Value      Quoted Prices
in Active
Markets for
Identical
Assets (Level
1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Impaired loans carried at fair value

   $ 68,391       $ —         $ 68,391       $ —     

Other real estate owned

     62,258         —           —           62,258   

Covered loans

     524,105         —           —           524,105   

Covered other real estate owned

     59,757         —           —           59,757   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 714,511       $ —         $ 68,391       $ 646,120   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Below is the Company’s reconciliation of Level 3 assets as of March 31, 2012.

 

     Investment
Securities
Available
for Sale
     Other Real
Estate
Owned
    Covered
Loans
    Covered Other
Real Estate
Owned
 

Beginning balance January 1, 2012

   $ 2,000       $ 50,301      $ 571,489      $ 78,617   

Total gains/(losses) included in net income

     —           (6,538     —          (714

Purchases, sales, issuances, and settlements, net

     —           (8,799     91,108        (1,320

Transfers in or out of Level 3

     —           5,071        (9,220     9,220   
  

 

 

    

 

 

   

 

 

   

 

 

 

Ending balance March 31, 2012

   $ 2,000       $ 40,035      $ 653,377      $ 85,803   
  

 

 

    

 

 

   

 

 

   

 

 

 

NOTE 2 – INVESTMENT SECURITIES

Ameris’ investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. Ameris’ portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of Ameris’ portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale at March 31, 2012, December 31, 2011 and March 31, 2011 are presented below:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     (Dollars in Thousands)  

March 31, 2012:

          

U. S. government agencies

   $ 28,634       $ 258       $ (44   $ 28,848   

State, county and municipal securities

     78,440         3,723         (166     81,997   

Corporate debt securities

     11,639         217         (471     11,385   

Mortgage-backed securities

     244,232         5,573         (244     249,561   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 362,945       $ 9,771       $ (925   $ 371,791   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2011:

          

U. S. government agencies

   $ 14,670       $ 267       $ —        $ 14,937   

State, county and municipal securities

     75,665         3,558         (90     79,133   

Corporate debt securities

     11,640         167         (406     11,401   

Mortgage-backed securities

     228,085         6,559         (148     234,496   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 330,060       $ 10,551       $ (644   $ 339,967   
  

 

 

    

 

 

    

 

 

   

 

 

 

March 31, 2011:

          

U. S. government agencies

   $ 33,137       $ 455       $ (47   $ 33,545   

State, county and municipal securities

     55,971         1,310         (383     56,898   

Corporate debt securities

     12,150         168         (2,569     9,749   

Mortgage-backed securities

     202,204         5,143         (1,919     205,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 303,462       $ 7,076       $ (4,918   $ 305,620   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

The amortized cost and fair value of available-for-sale securities at March 31, 2012 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.

 

     Amortized
Cost
     Fair
Value
 
     (Dollars in Thousands)  

Due in one year or less

   $ 16,167       $ 16,220   

Due from one year to five years

     18,833         19,527   

Due from five to ten years

     43,629         46,232   

Due after ten years

     40,084         40,251   

Mortgage-backed securities

     244,232         249,561   
  

 

 

    

 

 

 
   $ 362,945       $ 371,791   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $208.1 million serve as collateral to secure public deposits and other purposes required or permitted by law at March 31, 2012.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at March 31, 2012, December 31, 2011 and March 31, 2011.

 

     Less Than 12 Months     12 Months or More     Total  
Description of Securities    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 
     (Dollars in Thousands)  

March 31, 2012:

               

U. S. government agencies

   $ 8,960       $ (44   $ —         $ —        $ 8,960       $ (44

State, county and municipal securities

     8,960         (166     —           —          8,960         (166

Corporate debt securities

     100         —          6,611         (471     6,711         (471

Mortgage-backed securities

     37,860         (234     2,292         (10     40,152         (244
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 55,880       $ (444   $ 8,903       $ (481   $ 64,783       $ (925
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2011:

               

U. S. government agencies

   $ —         $ —        $ —         $ —        $ —         $ —     

State, county and municipal securities

     10,134         (90     —           —          10,134         (90

Corporate debt securities

     100         —          6,681         (406     6,781         (406

Mortgage-backed securities

     20,929         (148     —           —          20,929         (148
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 31,163       $ (238   $ 6,681       $ (406   $ 37,844       $ (644
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

March 31, 2011:

               

U. S. government agencies

   $ 11,037       $ (47   $ —         $ —        $ 11,037       $ (47

State, county and municipal securities

     12,171         (383     —           —          12,171         (383

Corporate debt securities

     413         (26     5,067         (2,543     5,480         (2,569

Mortgage-backed securities

     75,721         (1,919     —           —          75,721         (1,919
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 99,342       $ (2,375   $ 5,067       $ (2,543   $ 104,409       $ (4,918
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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NOTE 3 – LOANS

The Company engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. Ameris concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond Ameris’ control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, construction of one-to-four family residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank’s market areas.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and both secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commercial, financial and agricultural

   $ 149,320       $ 142,960       $ 142,826   

Real estate – construction and development

     122,331         130,270         152,863   

Real estate – commercial and farmland

     658,054         672,765         672,212   

Real estate – residential

     328,053         330,727         336,755   

Consumer installment

     42,085         37,296         33,698   

Other

     24,001         18,068         7,627   
  

 

 

    

 

 

    

 

 

 
   $ 1,323,844       $ 1,332,086       $ 1,345,981   
  

 

 

    

 

 

    

 

 

 

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $653.4 million, $571.5 million and $526.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively, are not included in the above schedule.

Covered loans are shown below according to loan type as of the end of the periods shown:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commercial, financial and agricultural

   $ 43,157       $ 41,867       $ 45,954   

Real estate – construction and development

     93,430         77,077         89,356   

Real estate – commercial and farmland

     350,244         321,257         242,153   

Real estate – residential

     162,768         127,644         140,239   

Consumer installment

     3,778         3,644         8,310   
  

 

 

    

 

 

    

 

 

 
   $ 653,377       $ 571,489       $ 526,012   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

The following table presents an analysis of non-covered loans accounted for on a nonaccrual basis.

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commercial, financial and agricultural

   $ 4,732       $ 3,987       $ 5,966   

Real estate – construction and development

     10,647         15,020         17,893   

Real estate – commercial and farmland

     21,539         35,385         28,313   

Real estate – residential

     14,065         15,498         15,557   

Consumer installment

     1,275         933         662   
  

 

 

    

 

 

    

 

 

 
   $ 52,258       $ 70,823       $ 68,391   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of covered loans accounted for on a nonaccrual basis:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commercial, financial and agricultural

   $ 14,185       $ 11,952       $ 9,149   

Real estate – construction and development

     35,170         30,977         28,364   

Real estate – commercial and farmland

     79,620         75,458         44,110   

Real estate – residential

     40,609         41,139         34,701   

Consumer installment

     637         473         1,488   
  

 

 

    

 

 

    

 

 

 
   $ 170,221       $ 159,999       $ 117,812   
  

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

The following table presents an analysis of non-covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and

Still
Accruing
 
     (Dollars in Thousands)  

As of March 31, 2012:

                    

Commercial, financial & agricultural

   $ 1,477       $ 291       $ 4,559       $ 6,327       $ 142,993       $ 149,320       $ —     

Real estate – construction & development

     2,356         481         9,531         12,368         109,963         122,331         —     

Real estate – commercial & farmland

     9,991         2,412         19,646         32,049         626,005         658,054         —     

Real estate – residential

     3,905         6,175         13,298         23,378         304,675         328,053         —     

Consumer installment loans

     856         497         1,070         2,423         39,662         42,085         —     

Other

     —           —           —           —           24,001         24,001         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 18,585       $ 9,856       $ 48,104       $ 76,545       $ 1,247,299       $ 1,323,844       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and

Still
Accruing
 
     (Dollars in Thousands)  

As of December 30, 2011:

                    

Commercial, financial & agricultural

   $ 1,103       $ 705       $ 3,975       $ 5,783       $ 137,177       $ 142,960       $ —     

Real estate – construction & development

     2,395         1,507         13,608         17,510         112,760         130,270         —     

Real estate – commercial & farmland

     6,686         7,071         32,953         46,710         626,055         672,765         —     

Real estate – residential

     5,229         4,995         12,874         23,098         307,629         330,727         —     

Consumer installment loans

     963         305         725         1,993         35,303         37,296         —     

Other

     —           —           —           —           18,068         18,068         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 16,376       $ 14,583       $ 64,135       $ 95,094       $ 1,236,992       $ 1,332,086       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of March 31, 2011:

                    

Commercial, financial & agricultural

   $ 848       $ 695       $ 5,923       $ 7,466       $ 135,360       $ 142,826       $ —     

Real estate – construction & development

     2,324         1,864         16,011         20,199         132,664         152,863         —     

Real estate – commercial & farmland

     7,127         7,315         17,883         32,325         639,887         672,212         —     

Real estate – residential

     4,314         2,732         13,480         20,526         316,229         336,755         —     

Consumer installment loans

     409         177         444         1,030         32,668         33,698         —     

Other

     —           —           —           —           7,627         7,627         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,022       $ 12,783       $ 53,741       $ 81,546       $ 1,264,435       $ 1,345,981       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

The following table presents an analysis of covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of March 31, 2012:

                    

Commercial, financial & agricultural

   $ 682       $ 430       $ 14,229       $ 15,341       $ 27,816       $ 43,157       $ 549   

Real estate – construction & development

     2,704         778         32,302         35,784         57,646         93,430         909   

Real estate – commercial & farmland

     12,905         6,994         68,282         88,181         262,063         350,244         2,583   

Real estate – residential

     5,859         3,514         34,870         44,243         118,525         162,768         3   

Consumer installment loans

     65         68         685         818         2,960         3,778         241   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 22,215       $ 11,784       $ 150,368       $ 184,367       $ 469,010       $ 653,377       $ 4,285   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of December 30, 2011:

                    

Commercial, financial & agricultural

   $ 968       $ 4,297       $ 11,253       $ 16,518       $ 25,349       $ 41,867       $ —     

Real estate – construction & development

     2,444         1,318         27,867         31,629         45,448         77,077         —     

Real estate – commercial & farmland

     18,282         8,544         64,091         90,917         230,340         321,257         165   

Real estate – residential

     3,485         1,493         35,950         40,928         86,716         127,644         290   

Consumer installment loans

     127         270         440         837         2,807         3,644         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 25,306       $ 15,922       $ 139,601       $ 180,829       $ 390,660       $ 571,489       $ 455   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans
30-59
Days  Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of March 31, 2011:

                    

Commercial, financial & agricultural

   $ 963       $ 3,511       $ 8,223       $ 12,697       $ 33,257       $ 45,954       $ —     

Real estate – construction & development

     1,870         3,233         27,717         32,820         56,536         89,356         532   

Real estate – commercial & farmland

     9,144         11,607         38,496         59,247         182,906         242,153         402   

Real estate – residential

     6,669         5,268         34,423         46,360         93,879         140,239         3,006   

Consumer installment loans

     118         99         1,394         1,611         6,699         8,310         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 18,764       $ 23,718       $ 110,253       $ 152,735       $ 373,277       $ 526,012       $ 3,940   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to non-covered impaired loans:

 

     As of and For the Period Ended  
     March 31,
2012
     December 31,
2011
     March 31,
2011
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 52,258       $ 70,823       $ 68,391   

Troubled debt restructurings not included above

     26,848         17,951         25,832   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 79,106       $ 88,774       $ 94,223   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ 79,106       $ 88,774       $ 94,223   
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ 9,500       $ 18,478       $ 16,821   
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 83,940       $ 88,320       $ 88,761   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 57       $ 637       $ 75   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 187       $ 613       $ 389   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to non-covered impaired loans as of March 31, 2012, December 31, 2011 and March 31, 2011.

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of March 31, 2012:

                 

Commercial, financial & agricultural

   $ 7,599       $ —         $ 4,732       $ 4,732       $ 932       $ 4,921   

Real estate – construction & development

     20,593         —           11,952         11,952         1,993         13,812   

Real estate – commercial & farmland

     45,098         —           39,304         39,304         3,615         42,155   

Real estate – residential

     24,845         —           21,843         21,843         2,928         21,948   

Consumer installment loans

     1,391         —           1,275         1,275         32         1,104   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   99,526       $ —         $   79,106       $   79,106       $ 9,500       $   83,940   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19


Table of Contents
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2011:

                 

Commercial, financial & agricultural

   $ 9,592       $ —         $ 5,110       $ 5,110       $ 1,366       $ 5,700   

Real estate – construction & development

     21,893         —           15,672         15,672         4,053         18,667   

Real estate – commercial & farmland

     48,688         —           45,006         45,006         8,331         42,192   

Real estate – residential

     25,309         —           22,053         22,053         4,499         21,081   

Consumer installment loans

     1,056         —           933         933         229         680   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   106,538       $ —         $   88,774       $   88,774       $ 18,478       $   88,320   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of March 31, 2011:

                 

Commercial, financial & agricultural

   $ 9,419       $ —         $ 6,397       $ 6,397       $ 2,425       $ 5,872   

Real estate – construction & development

     33,590         —           20,801         20,801         4,254         20,052   

Real estate – commercial & farmland

     51,874         —           45,731         45,731         5,584         44,281   

Real estate – residential

     23,440         —           20,632         20,632         4,405         18,026   

Consumer installment loans

     890         —           662         662         153         530   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   119,213       $ —         $   94,223       $   94,223       $ 16,821       $   88,761   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following is a summary of information pertaining to covered impaired loans:

 

     As of and For the Period Ended  
     March 31,
2012
     December 31,
2011
     March 31,
2011
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 170,221       $ 159,999       $ 117,812   

Troubled debt restructurings not included above

     18,220         19,884         8,859   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 188,441       $ 179,883       $ 126,671   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ 188,441       $ 179,883       $ 126,671   
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 184,162       $ 138,950       $ 107,497   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 179       $ 526       $ 286   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 441       $ 202       $ 32   
  

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

The following table presents an analysis of information pertaining to impaired covered loans as of March 31, 2012, December 31, 2011 and March 31, 2011.

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of March 31, 2012:

                 

Commercial, financial & agricultural

   $ 24,085       $ 14,260       $ —         $ 14,260       $ —         $ 13,144   

Real estate – construction & development

     59,102         37,831         —           37,831         —           36,097   

Real estate – commercial & farmland

     128,389         90,847         —           90,847         —           87,793   

Real estate – residential

     65,971         44,866         —           44,866         —           46,573   

Consumer installment loans

     786         637         —           637         —           555   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   278,333       $   188,441       $ —         $   188,441       $ —         $   184,162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2011:

                 

Commercial, financial & agricultural

   $ 21,352       $ 12,027       $ —         $ 12,027       $ —         $ 10,210   

Real estate – construction & development

     47,005         34,363         —           34,363         —           30,610   

Real estate – commercial & farmland

     106,953         84,740         —           84,740         —           56,607   

Real estate – residential

     68,411         48,280         —           48,280         —           40,675   

Consumer installment loans

     623         473         —           473         —           848   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   244,344       $   179,883       $ —         $   179,883       $ —         $   138,950   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of March 31, 2011:

                 

Commercial, financial & agricultural

   $ 17,627       $ 9,207       $ —         $ 9,207       $ —         $ 7,482   

Real estate – construction & development

     74,222         28,365         —           28,365         —           27,088   

Real estate – commercial & farmland

     77,769         45,760         —           45,760         —           37,639   

Real estate – residential

     67,307         41,851         —           41,851         —           33,983   

Consumer installment loans

     1,619         1,488         —           1,488         —           1,305   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   238,544       $   126,671       $ —         $   126,671       $ —         $   107,497   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage, interim losses); (ii)adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire, divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

 

22


Table of Contents

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2012.

 

Risk Grade

   Commercial,
financial &
agricultural
     Real estate -
construction &
development
     Real estate -
commercial  &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 18,767       $ 19       $ 211       $ 415       $ 7,042       $ —         $ 26,454   

15

     14,063         5,402         155,568         80,623         1,198         —           256,854   

20

     63,200         33,805         269,746         85,022         19,478         24,001         495,252   

23

     265         8,458         9,188         11,719         1         —           29,631   

25

     44,035         58,943         164,642         107,530         11,983         —           387,133   

30

     3,148         1,955         20,551         16,135         540         —           42,329   

40

     5,716         13,459         38,148         26,515         1,828         —           85,666   

50

     123         290         —           94         15         —           522   

60

     3         —           —           —           —           —           3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   149,320       $   122,331       $   658,054       $   328,053       $   42,085       $ 24,001       $   1,323,844   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the non-covered loan portfolio by risk grade as of December 31, 2011.

 

Risk Grade

   Commercial,
financial  &
agricultural
     Real estate  -
construction &
development
     Real estate -
commercial  &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 17,213       $ 20       $ 235       $ 252       $ 6,210       $ —         $ 23,930   

15

     15,379         5,391         151,068         88,586         1,065         —           261,489   

20

     60,631         32,654         272,241         80,989         20,781         18,068         485,364   

23

     32         7,994         10,679         10,997         28         —           29,730   

25

     42,815         62,029         163,554         110,786         7,181         —           386,365   

30

     2,509         2,027         21,490         15,001         557         —           41,584   

40

     4,258         19,864         53,498         23,867         1,460         —           102,947   

50

     123         291         —           249         14         —           677   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   142,960       $   130,270       $   672,765       $   330,727       $   37,296       $ 18,068       $   1,332,086   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2011.

 

Risk Grade

   Commercial,
financial &
agricultural
     Real estate  -
construction &
development
     Real estate -
commercial  &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 14,048       $ 220       $ 1,104       $ 111       $ 5,451       $ —         $ 20,934   

15

     11,087         2,395         137,897         36,377         907         —           188,663   

20

     50,300         38,200         267,341         115,189         18,573         7,627         497,230   

23

     2,244         7,775         8,533         8,167         30         —           26,749   

25

     55,843         69,541         165,089         137,846         7,460         —           435,779   

30

     1,913         7,568         41,089         14,129         573         —           65,272   

40

     7,386         26,889         51,158         24,936         672         —           111,041   

50

     5         275         —           —           6         —           286   

60

     —           —           1         —           26         —           27   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   142,826       $   152,863       $   672,212       $   336,755       $   33,698       $   7,627       $   1,345,981   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

The following table presents the covered loan portfolio by risk grade as of March 31, 2012.

 

Risk Grade

   Commercial,
financial &
agricultural
     Real estate -
construction &
development
     Real estate  -
commercial &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 216       $ 9       $ —         $ 1,036       $ 458       $ —         $ 1,719   

15

     26         51         1,734         579         12         —           2,402   

20

     4,592         5,541         24,784         17,716         622         —           53,255   

23

     11         1,534         3,763         1,686         —           —           6,994   

25

     17,075         31,707         157,031         75,809         1,550         —           283,172   

30

     2,400         10,628         49,518         12,044         102         —           74,692   

40

     18,837         43,960         113,414         53,898         1,034         —           231,143   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   43,157       $   93,430       $   350,244       $   162,768       $   3,778       $      —         $   653,377   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of December 31, 2011.

 

Risk Grade

   Commercial,
financial  &
agricultural
     Real estate  -
construction &
development
     Real estate  -
commercial &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 442       $ —         $ —         $ 1,329       $ 768       $ —         $ 2,539   

15

     29         52         1,755         586         14         —           2,436   

20

     4,807         5,751         26,211         19,216         687         —           56,672   

23

     —           1,177         3,262         1,038         —           —           5,477   

25

     15,531         21,142         137,981         43,606         1,308         —           219,568   

30

     5,882         10,654         49,642         12,374         172         —           78,724   

40

     15,176         38,273         102,406         49,495         695         —           206,045   

50

     —           28         —           —           —           —           28   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   41,867       $   77,077       $   321,257       $   127,644       $   3,644       $      —         $   571,489   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of March 31, 2011.

 

Risk Grade

   Commercial,
financial &
agricultural
     Real estate -
construction &
development
     Real estate  -
commercial &
farmland
     Real estate  -
residential
     Consumer
installment  loans
     Other      Total  
     (Dollars in Thousands)  

10

   $ 965       $ —         $ —         $ —         $ 1,139       $ —         $ 2,104   

15

     66         54         1,409         372         22         —           1,923   

20

     10,601         6,832         18,539         21,190         1,357         —           58,519   

23

     —           —           —           —           —           —           —     

25

     14,443         21,023         93,423         53,379         3,614         —           185,882   

30

     5,646         15,590         41,345         12,798         331         —           75,710   

40

     13,979         45,857         87,437         52,460         1,847         —           201,580   

50

     209         —           —           40         —           —           249   

60

     45         —           —           —           —           —           45   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $   45,954       $   89,356       $   242,153       $   140,239       $   8,310       $      —         $   526,012   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) when it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Senior Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first three months of 2012 totaling $11.4 million and loans in 2011 totaling $37.2 million under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

The following table presents the amount of troubled debt restructurings by loan class, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.

 

As of March 31, 2012    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Real estate – construction & development

     6       $ 1,305             4       $ 1,626   

Real estate – commercial & farmland

     18         17,765         2         2,176   

Real estate – residential

     22         7,778         3         1,065   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     46       $ 26,848         9       $ 4,867   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2011    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Real estate – construction & development

     6       $ 1,774             5       $ 2,122   

Real estate – commercial & farmland

     14         9,622         2         4,737   

Real estate – residential

     19         6,555         4         1,296   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     39       $ 17,951         11       $ 8,155   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Table of Contents

The following table presents the amount of troubled debt restructurings by loan class, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at March 31, 2012 and December 31, 2011.

 

As of March 31, 2012    Loans Currently
Paying Under
Restructured Terms
     Loans that have
Defaulted Under
Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Real estate – construction & development

         7       $ 2,413             3       $ 518   

Real estate – commercial & farmland

     19         17,869         1         2,072   

Real estate – residential

     22         7,778         3         1,065   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     48       $ 28,060         7       $ 3,655   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2011    Loans Currently
Paying Under
Restructured Terms
     Loans that have
Defaulted Under
Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Real estate – construction & development

         7       $ 2,897             4       $ 999   

Real estate – commercial & farmland

     15         11,695         1         2,664   

Real estate – residential

     20         6,862         3         989   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     42       $ 21,454         8       $ 4,652   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.

 

As of March 31, 2012    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     3       $ 2,275         —         $ —     

Forgiveness of Principal

     2         893             1         136   

Payment Modification Only

     2         5,202         1         307   

Rate Reduction Only

     10         6,541         4         1,140   

Rate Reduction, Forbearance of Interest

     12         8,360         1         103   

Rate Reduction, Forbearance of Principal

     16         3,514         1         1,109   

Rate Reduction, Payment Modification

         1         63         1         2,072   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     46       $ 26,848         9       $ 4,867   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2011    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     1       $ 311         —         $ —     

Forgiveness of Principal

     2         902             1         136   

Payment Modification Only

     1         92         1         307   

Rate Reduction Only

     7         4,192         4         1,145   

Rate Reduction, Forbearance of Interest

     14         9,347         —           —     

Rate Reduction, Forbearance of Principal

     14         3,107         1         1,123   

Rate Reduction, Payment Modification

     —           —           4         5,444   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     39       $ 17,951         11       $ 8,155   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

26


Table of Contents

The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.

 

As of March 31, 2012    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Apartments

         1       $ 5,111         —         $ —     

Warehouse

     1         1,343         —           —     

Raw Land

     4         1,595             1         137   

Hotel & Motel

     3         2,449         1         2,072   

Office

     3         1,695         1         103   

Retail, including Strip Centers

     9         6,657         —           —     

1-4 Family Residential

     25         7,998         6         2,555   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     46       $ 26,848         9       $ 4,867   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2011    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Apartments

         1       $ 1,347         —         $ —     

Raw Land

     3         1,549         2         618   

Hotel & Motel

     1         503             1         2,072   

Office

     3         1,077         —           —     

Retail, including Strip Centers

     9         6,694         1         2,665   

1-4 Family Residential

     22         6,781         7         2,800   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     39       $ 17,951         11       $ 8,155   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2012 and December 31, 2011, the Company had a balance of $31.7 million and $26.1 million, respectively, in troubled debt restructurings. The Company has recorded $2.3 million and $1.7 million in previous charge-offs on such loans at March 31, 2012 and December 31, 2011, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $3.2 million and $2.7 million at March 31, 2012 and December 31, 2011, respectively.

Allowance for Loan Losses

The allowance for loan losses represents a reserve for inherent losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by independent auditors and regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on data such as current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in their markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

 

27


Table of Contents

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of credit card receivables and overdraft protection loans which are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. Many of the larger loans require an annual review by an independent loan officer or an independent third party loan review firm. As a result of these loan reviews, certain loans may be assigned specific reserve allocations. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the Director of Internal Audit.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

Activity in the allowance for loan losses for the three months ended March 31, 2012, for the year ended December 31, 2011 and for the three months ended March 31, 2011 is as follows:

 

(Dollars in Thousands)

   March 31,
2012
    December 31,
2011
    March 31,
2011
 

Balance, January 1

   $ 35,156      $ 34,576      $ 34,576   

Provision for loan losses charged to expense

     12,600        30,341        7,092   

Loans charged off

     (19,337     (31,623     (7,067

Recoveries of loans previously charged off

     270        1,862        842   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 28,689      $ 35,156      $ 35,443   
  

 

 

   

 

 

   

 

 

 

During the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011, the Company recorded provision for loan loss expense of $282,000, $2.4 million and ($49,000), respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards above and below but are reflected in the Company’s Consolidated Statements of Earnings.

 

28


Table of Contents

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2012

   $ 2,918      $ 9,438      $ 14,226      $ 8,128      $ 446      $ 35,156   

Provision for loan losses

     (693     1,967        8,585        2,002        739        12,600   

Loans charged off

     (155     (3,930     (12,964     (2,123     (165     (19,337

Recoveries of loans previously charged off

     48        17        16        141        48        270   

Balance, March 31, 2012

   $ 2,118      $ 7,492      $ 9,863      $ 8,148      $ 1,068      $ 28,689   

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 827      $ 1,450      $ 3,421      $ 2,659      $ 3      $ 8,360   

Loans collectively evaluated for impairment

     1,291        6,042        6,442        5,489        1,065        20,329   

Ending balance

   $ 2,118      $ 7,492      $ 9,863      $ 8,148      $ 1,068      $ 28,689   

Loans:

            

Individually evaluated for impairment

   $ 3,220      $ 8,980      $ 35,971      $ 17,098      $ 17      $ 65,286   

Collectively evaluated for impairment

     146,100        113,351        622,083        310,955        66,069        1,258,558   

Ending balance

   $ 149,320      $ 122,331      $ 658,054      $ 328,053      $ 66,086      $ 1,323,844   

 

     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2011

   $ 2,779      $ 7,705      $ 14,971      $ 8,664      $ 457      $ 34,576   

Provision for loan losses

     5,772        11,354        7,883        4,717        615        30,341   

Loans charged off

     (5,807     (10,988     (8,680     (5,399     (749     (31,623

Recoveries of loans previously charged off

     174        1,367        52        146        123        1,862   

Balance, December 31, 2011

   $ 2,918      $ 9,438      $ 14,226      $ 8,128      $ 446      $ 35,156   

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 766      $ 3,478      $ 8,152      $ 3,567      $ 3      $ 15,966   

Loans collectively evaluated for impairment

     2,152        5,960        6,074        4,561        443        19,190   

Ending balance

   $ 2,918      $ 9,438      $ 14,226      $ 8,128      $ 446      $ 35,156   

Loans:

            

Individually evaluated for impairment

   $ 2,831      $ 13,561      $ 45,084      $ 16,080      $ 17      $ 77,573   

Collectively evaluated for impairment

     140,129        116,709        627,681        314,647        55,347        1,254,513   

Ending balance

   $ 142,960      $ 130,270      $ 672,765      $ 330,727      $ 55,364      $ 1,332,086   

 

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Table of Contents
     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2011

   $ 2,779      $ 7,705      $ 14,971      $ 8,664      $ 457      $ 34,576   

Provision for loan losses

     2,078        1,477        2,387        1,015        135        7,092   

Loans charged off

     (1,113     (2,425     (2,557     (809     (163     (7,067

Recoveries of loans previously charged off

     20        772        2        14        34        842   

Balance, March 31, 2011

   $ 3,764      $ 7,529      $ 14,803      $ 8,884      $ 463      $ 35,443   

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 2,012      $ 3,513      $ 6,282      $ 2,484      $ 1      $ 14,292   

Loans collectively evaluated for impairment

     1,752        4,016        8,521        6,400        462        21,151   

Ending balance

   $ 3,764      $ 7,529      $ 14,803      $ 8,884      $ 463      $ 35,443   

Loans:

            

Individually evaluated for impairment

   $ 4,752      $ 18,054      $ 48,594      $ 12,448      $ 18      $ 83,866   

Collectively evaluated for impairment

     138,074        134,809        623,618        324,307        41,307        1,262,115   

Ending balance

   $ 142,826      $ 152,863      $ 672,212      $ 336,755      $ 41,325      $ 1,345,981   

NOTE 4 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

From October 2009 through February 2012, the Company participated in nine FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include:

 

Bank Acquired

   Location:    Branches:    Date Acquired

American United Bank (“AUB”)

   Lawrenceville, Ga.    1    October 23, 2009

United Security Bank (“USB”)

   Sparta, Ga.    2    November 6, 2009

Satilla Community Bank (“SCB”)

   St. Marys, Ga.    1    May 14, 2010

First Bank of Jacksonville (“FBJ”)

   Jacksonville, Fl.    2    October 22, 2010

Tifton Banking Company (“TBC”)

   Tifton, Ga.    1    November 12, 2010

Darby Bank & Trust (“DBT”)

   Vidalia, Ga.    7    November 12, 2010

High Trust Bank (“HTB”)

   Stockbridge, Ga.    2    July 15, 2011

One Georgia Bank (“OGB”)

   Midtown Atlanta, Ga.    1    July 15, 2011

Central Bank of Georgia (“CBG”)

   Ellaville, Ga.    5    February 24, 2012

On February 24, 2012, the Bank purchased substantially all of the assets and assumed substantially all the liabilities of Central Bank of Georgia (“CBG”) from the FDIC, as Receiver of CBG. CBG operated five branches in Ellaville, Buena Vista, Butler, Cusseta and Macon, Georgia. The Company’s agreement with the FDIC included shared-loss agreements that afford the Bank significant protection from losses associated with loans and OREO. Under the terms of the shared-loss agreements, the FDIC will absorb 80% of all losses and share 80% of all loss recoveries. The shared-loss agreement applicable to single family residential mortgage loans provides for FDIC loss sharing and reimbursement by the Bank to the FDIC for ten years. The shared-loss agreement applicable to commercial loans and securities provides for FDIC loss sharing for five years and reimbursement by the Bank to the FDIC for eight years.

 

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Table of Contents

The estimated fair value of the assets acquired and the liabilities assumed are shown below:

 

(Dollars in Thousands)

   Central Bank of
Georgia
 

Assets acquired:

  

Cash and due from banks

   $ 33,150   

Securities available for sale

     39,920   

Loans

     124,782   

Foreclosed property

     6,177   

Estimated FDIC indemnification asset

     52,654   

Other assets

     4,606   
  

 

 

 

Assets acquired

     261,289   

Cash received (paid) to settle the acquisition

     31,900   
  

 

 

 

Fair value of assets acquired

   $ 293,189   
  

 

 

 

Liabilities assumed:

  

Deposits

   $ 261,036   

Other borrowings

     10,334   

Other liabilities

     1,782   
  

 

 

 

Fair value of liabilities assumed

   $ 273,152   
  

 

 

 

Net assets acquired / gain from acquisition

   $ 20,037   

The Company’s bid to acquire the assets of CBG included a discount of approximately $33.9 million, and the Company received a $31.9 million cash payment from the FDIC to settle the acquisition.

The shared-loss agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the CBG shared-loss agreements were recorded as an indemnification asset at its estimated fair value of $52.7 million on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded on the transaction.

The CBG transaction resulted in a before-tax gain of $20.0 million, which is included in the Company’s March 31, 2012 Consolidated Statement of Earnings. Due to the difference in tax bases of the assets acquired and liabilities assumed, the Bank recorded deferred tax liabilities with respect to CBG of $7.0 million, resulting in an after-tax gain of $13.0 million.

The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

FASB ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, the Company records a provision for loan loss in its consolidated statement of operations.

 

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Table of Contents

On the acquisition date, the preliminary estimates of the contractually required payments receivable for all ASC 310 loans acquired in the CBG acquisition totaled $137.2 million and the estimated fair values of the loans totaled $73.4 million, net of an accretable discount of $10.2 million, the difference between the value of the loans on the Company’s balance sheet and the cash flows they are expected to produce. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments.

The estimated fair values of loans acquired in the CBG acquisition are detailed below based on their initial estimate of credit quality (dollars in thousands):

 

     Loans with
deterioration
of credit
quality
     Loans
without a
deterioration
of credit
quality
     Total
loans, at
fair value
 

Commercial, industrial, agricultural

   $ 1,256       $ 6,288       $ 7,544   

Real estate – residential

     22,389         22,213         44,602   

Real estate – commercial & farmland

     34,458         10,538         44,996   

Construction & development

     15,038         5,507         20,545   

Consumer

     273         6,822         7,095   
  

 

 

    

 

 

    

 

 

 
   $ 73,414       $ 51,368       $ 124,782   
  

 

 

    

 

 

    

 

 

 

The results of operations of CBG subsequent to the acquisition date are included in the Company’s consolidated statements of earnings. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on December 31, 2011 and 2010, unadjusted for potential cost savings (in thousands).

 

     Three Months Ended
March 31,
 
     2012      2011  

Net interest income and noninterest income

   $ 56,461       $ 33,040   

Net income (loss)

   $ 5,252       $ (4,379

Net income (loss) available to common stockholders

   $ 4,437       $ (5,177

Income (loss) per common share available to common stockholders – basic

   $ 0.19       $ (0.22

Income (loss) per common share available to common stockholders – diluted

   $ 0.19       $ (0.22

Average number of shares outstanding, basic

     23,762         23,474   

Average number of shares outstanding, diluted

     23,916         23,766   

 

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Table of Contents

In addition to the covered assets acquired in the most recent acquisitions, the Company has other investments in covered assets remaining from its previous FDIC-assisted acquisitions. The following table summarizes components of all covered assets at March 31, 2012 and December 31, 2011 and their origin:

 

     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less:  Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification

asset
 
As of March 31, 2012:    (Dollars in thousands)  

AUB

   $ 33,063       $ 2,672       $ —         $ 30,391       $ 11,842       $ —         $ 11,842       $ 42,233       $ 2,648   

USB

     48,017         5,083         —           42,934         8,401         50         8,351         51,285         6,621   

SCB

     53,643         5,628         52         47,963         10,833         405         10,428         58,391         7,660   

FBJ

     38,116         6,994         76         31,046         2,674         534         2,140         33,186         7,540   

DBT

     245,117         64,530         579         180,008         28,759         2,253         26,506         206,514         65,932   

TBC

     74,893         14,052         292         60,549         6,678         880         5,798         66,347         18,166   

HTB

     106,730         23,637         73         83,020         17,755         8,055         9,700         92,720         29,997   

OGB

     96,271         27,105         190         68,976         12,049         7,037         5,012         73,988         30,126   

CBG

     164,541         55,830         221         108,490         13,792         7,766         6,026         114,516         51,326   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 860,391       $ 205,531       $ 1,483       $ 653,377       $ 112,783       $ 26,980       $ 85,803       $ 739,180       $ 220,016   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less: Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification
asset
 
As of December 31, 2011:    (Dollars in thousands)  

AUB

   $ 34,242       $ 3,236       $ —         $ 31,006       $ 11,100       $ —         $ 11,100       $ 42,106       $ 7,271   

USB

     51,409         5,259         50         46,100         7,445         50         7,395         53,495         10,648   

SCB

     56,780         5,779         155         50,846         10,635         500         10,135         60,981         6,527   

FBJ

     40,106         7,473         92         32,541         2,370         641         1,729         34,270         8,551   

DBT

     260,883         68,757         703         191,423         28,947         2,763         26,184         217,607         105,528   

TBC

     79,586         14,358         331         64,897         8,441         1,274         7,167         72,064         18,628   

HTB

     110,899         28,024         73         82,802         20,132         10,171         9,961         92,763         48,289   

OGB

     105,285         33,221         190         71,874         12,615         7,669         4,946         76,820         36,952   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 739,190       $ 166,107       $ 1,594       $ 571,489       $ 101,685       $ 23,068       $ 78,617       $ 650,106       $ 242,394   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less: Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification
asset
 
As of March 31, 2011:    (Dollars in thousands)  

AUB

   $ 51,845       $ 4,332       $ 150       $ 47,363       $ 12,816       $ 139       $ 12,677       $ 60,040       $ 3,769   

USB

     74,470         5,609         398         68,463         10,664         74         10,590         79,053         6,698   

SCB

     68,655         7,177         464         61,014         7,700         550         7,150         68,164         10,120   

FBJ

     46,990         9,847         135         37,008         2,997         1,616         1,381         38,389         10,839   

DBT

     360,610         128,975         1,075         230,560         36,190         11,101         25,089         255,649         108,091   

TBC

     107,458         25,456         398         81,604         4,151         1,281         2,870         84,474         27,659   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 710,028       $ 181,396       $ 2,620       $ 526,012       $ 74,518       $ 14,761       $ 59,757       $ 585,769       $ 167,176   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

On the dates of acquisition, the Company estimated the future cash flows on each individual loan and made the necessary adjustments to reflect the asset at fair value. At each quarter end subsequent to the acquisition dates, the Company revises the estimates of future cash flows based on current information and makes the necessary adjustments to continue reflecting the assets at fair value. The adjustments to fair value are performed on a loan-by-loan basis and have resulted in the following:

 

$22,031 $22,031 $22,031

Total Amounts

   March 31,
2012
     December 31,
2011
     March 31,
2011
 
     (Dollars in thousands)  

Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)

   $ 2,818       $ 22,031       $ 4,435  

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)

     1,410         11,940         380  

Amounts reflected in the Company’s Statement of Earnings

   March 31,
2012
     December 31,
2011
     March 31,
2011
 
     (Dollars in thousands)  

Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)

   $ 564       $ 4,406       $ 848  

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)

     282         2,388         76  

A rollforward of acquired loans with deterioration of credit quality for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011 is shown below:

 

(Dollars in Thousands)

   March 31,
2012
    December 31,
2011
    March 31,
2011
 

Balance, January 1

   $ 307,790      $ 252,535      $ 252,535   

Change in estimate of cash flows, net of charge-offs or recoveries

     (3,388     (25,787     (2,092

Additions due to acquisitions

     73,414        124,136        —     

Other (loan payments, transfers, etc.)

     (9,451     (43,094     (4,033
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 368,365      $ 307,790      $ 246,410   
  

 

 

   

 

 

   

 

 

 

A rollforward of acquired loans without deterioration of credit quality for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011 is shown below:

 

(Dollars in Thousands)

   March 31,
2012
    December 31,
2011
    March 31,
2011
 

Balance, January 1

   $ 266,966      $ 302,456      $ 302,456   

Change in estimate of cash flows, net of charge-offs or recoveries

     222        (11,604     —     

Additions due to acquisitions

     51,367        35,439        —     

Other (loan payments, transfers, etc.)

     (19,684     (59,325     (22,854
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 298,871      $ 266,966      $ 279,602   
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

The following is a summary of changes in the accretable discounts of acquired loans during the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011.

 

(Dollars in Thousands)

   March 31,
2012
    December 31,
2011
    March 31,
2011
 

Balance, January 1

   $ 29,537      $ 37,383      $ 37,383   

Additions due to acquisitions

     9,863        24,094        —     

Accretion

     (12,051     (36,519     (4,454

Other activity, net

     2,818        4,579        887   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 30,167      $ 29,537      $ 33,816   
  

 

 

   

 

 

   

 

 

 

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. Changes in the FDIC shared-loss receivable for the three months ended March 31, 2012, for the year ended December 31, 2011 and for the three months ended March 31, 2011 are as follows:

 

(Dollars in Thousands)

   March 31,
2012
    December 31,
2011
    March 31,
2011
 

Balance, January 1

   $ 242,394      $ 177,187      $ 177,187   

Indemnification asset recorded in acquisitions

     52,654        94,973        —     

Payments received from FDIC

     (71,169     (36,813     (4,071

Effect of change in expected cash flows on covered assets

     (3,863     7,047        (5,940
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 220,016      $ 242,394      $ 167,176   
  

 

 

   

 

 

   

 

 

 

NOTE 5 – WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings per share have been computed based on the following weighted average number of common shares outstanding:

 

     For the Three Months
Ended March 31,
 
     2012      2011  
     (share data in
thousands)
 

Basic shares outstanding

     23,762         23,440   

Plus: Dilutive effect of ISOs

     105         34   

Plus: Dilutive effect of Restricted Grants

     49         —     
  

 

 

    

 

 

 

Diluted shares outstanding

     23,916         23,474   
  

 

 

    

 

 

 

NOTE 6 – OTHER BORROWINGS

The Company has, from time to time, utilized certain borrowing arrangements with various financial institutions to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At March 31, 2012 and December 31, 2011, there were $3.8 million and $20.0 million, respectively, outstanding borrowings with the Company’s correspondent banks. There were no outstanding borrowings with the Company’s correspondent banks at March 31, 2011. The Company’s success with attracting and retaining retail deposits has allowed for very low dependence on more volatile non-deposit funding.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as are used for on-balance-sheet instruments.

 

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Table of Contents

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Company issues standby letters of credit, which are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and expire in decreasing amounts with varying terms. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary.

The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held may include accounts receivable, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.

The Company’s commitments to extend credit and standby letters of credit are presented in the following table:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commitments to extend credit

   $ 156,330       $ 132,700       $ 163,442   

Standby letters of credit

   $ 8,349       $ 8,074       $ 7,531   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, legislative and regulatory initiatives; additional competition in Ameris’ markets; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by Ameris; state and federal banking regulations; changes in or application of environmental and other laws and regulations to which Ameris is subject; political, legal and economic conditions and developments; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather, natural disasters and other catastrophic events; and other factors discussed in Ameris’ filings with the SEC under the Exchange Act.

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.

 

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The following table sets forth unaudited selected financial data for the previous five quarters. This data should be read in conjunction with the consolidated financial statements and the notes thereto and the information contained in this Item 2.

 

     2012     2011  
(in thousands, except share data, taxable equivalent)    First
Quarter
    Fourth
Quarter
    Third
Quarter
    Second
Quarter
    First
Quarter
 

Results of Operations:

          

Net interest income

   $ 27,727      $ 32,768      $ 27,802      $ 28,747      $ 24,207   

Net interest income (tax equivalent)

     27,655        33,022        28,026        28,969        24,418   

Provision for loan losses

     12,882        9,019        7,552        9,115        7,043   

Non-interest income

     27,264        6,689        33,945        5,974        6,193   

Non-interest expense

     34,246        28,710        29,486        22,596        21,155   

Income tax expense

     2,498        587        8,249        896        824   

Preferred stock dividends

     815        819        817        807        798   

Net income available to common Shareholders

     4,550        322        15,643        1,307        580   

Selected Average Balances:

          

Loans, net of unearned income

   $ 1,329,146      $ 1,335,242      $ 1,437,609      $ 1,349,092      $ 1,361,964   

Covered loans

     602,353        600,367        540,959        506,251        540,127   

Investment securities

     356,112        338,076        327,195        289,149        301,572   

Earning assets

     2,482,070        2,516,100        2,503,121        2,426,041        2,453,040   

Assets

     2,978,469        2,978,469        3,048,337        2,909,012        2,949,943   

Deposits

     2,589,978        2,623,403        2,639,848        2,450,738        2,548,509   

Shareholders’ equity

     242,817        248,729        228,716        229,794        222,675   

Period-End Balances:

          

Loans, net of unearned income

   $ 1,323,844      $ 1,332,086      $ 1,368,895      $ 1,360,063      $ 1,345,981   

Covered loans

     653,377        571,489        595,428        486,489        526,012   

Earning assets

     2,558,047        2,484,147        2,475,511        2,399,258        2,442,121   

Total assets

     3,043,234        2,994,307        3,010,379        2,857,237        2,918,423   

Deposits

     2,665,360        2,591,566        2,628,892        2,511,363        2,572,689   

Common shareholders’ equity

     246,813        243,043        243,850        226,739        223,588   

Per Common Share Data:

          

Earnings per share - Basic

   $ 0.19      $ 0.01      $ 0.67      $ 0.06      $ 0.02   

Earnings per share - Diluted

     0.19        0.01        0.66        0.06        0.02   

Common book value per share

     10.36        10.23        10.27        9.54        9.41   

End of period shares

outstanding

     23,814,144        23,751,294        23,742,794        23,766,044        23,766,044   

Weighted average shares outstanding

          

Basic

     23,762,196        23,457,739        23,438,335        23,449,123        23,440,201   

Diluted

     23,916,421        23,611,964        23,559,063        21,508,419        23,474,424   

Market Data:

          

High closing price

   $ 13.32      $ 10.66      $ 10.30      $ 10.16      $ 11.10   

Low closing price

     10.34        8.55        8.47        8.49        9.32   

Closing price for quarter

     13.14        10.28        8.71        8.87        10.16   

Average daily trading volume

     59,139        68,654        71,955        58,706        46,618   

Cash dividends per share

     —          —          —          —          —     

Stock dividend

     —          —          —          —          —     

Price to earnings

     N/M        N/M        N/M        N/M        N/M   

Closing price to book value

     1.27        1.00        0.85        0.93        1.09   

Performance Ratios:

          

Return on average assets

     0.72     0.15     2.14     0.29     0.19

Return on average common equity

     8.89     1.82     28.55     3.69     2.51

Average loan to average deposits

     74.58     73.78     74.95     73.02     74.64

Average equity to average assets

     9.86     9.91     9.16     9.63     9.25

Net interest margin (tax equivalent)

     4.48     5.21     4.44     4.79     4.04

Efficiency ratio (tax equivalent)

     62.28     72.76     47.75     65.08     69.59

 

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Overview

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of March 31, 2012 as compared to December 31, 2011 and operating results for the three month periods ended March 31, 2012 and 2011. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

Results of Operations for the Three Months Ended March 31, 2012

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $4.6 million, or $0.19 per diluted share, for the quarter ended March 31, 2012, compared to $580,000, or $0.02 per diluted share, for the same quarter in 2011. The Company’s return on average assets and average shareholders’ equity increased in the first quarter of 2012 to 0.72% and 8.89%, respectively, compared to 0.19% and 2.51%, respectively, in the first quarter of 2011. The increase in earnings and profitability during the quarter included several items that are considered non-recurring, such as a $20.0 million gain on FDIC-assisted transaction, $11.7 million of losses associated with a bulk sale of problem assets and $2.6 million of additional write downs on OREO that the Company anticipates selling in the second quarter of 2012. Net of these non-recurring items, the Company would have earned $591,000, or $0.02 per diluted share, for the first quarter of 2012.

Net Interest Income and Margins

On a tax equivalent basis, net interest income for the first quarter of 2012 was $27.7 million, an increase of $3.5 million compared to the same quarter in 2011. Significant increases in the Company’s net interest margin have been the result of flat yields on all classes of earning assets complemented by steady decreases in the Company’s cost of funds. The Company’s net interest margin increased during the first quarter of 2012 to 4.48%, compared to 4.04% during the first quarter of 2011. Increases in earning assets over the past year have been in covered loans with favorable yields compared to the Company’s low cost of funds.

Total interest income during the first quarter of 2012 was $32.3 million compared to $32.1 million in the same quarter of 2011. Yields on earning assets fell to 5.22%, compared to 5.35% reported in the first quarter of 2011. During the first quarter of 2012, short-term assets averaged 7.4% of total earning assets compared to 9.7% in the same quarter in 2011. Current opportunities to invest a portion of the short-term assets in the bond market have been limited by the Company’s inability to maintain certain portfolio characteristics with current yields and structures being offered. Efforts to increase lending activities have been slow to generate increases in outstanding loans due to the current economic conditions in the Company’s markets. Management anticipates improving economic conditions and increased loan demand will provide opportunities to invest a portion of the short-term assets at higher yields.

Total funding costs declined to 0.69% in the first quarter of 2012 compared to 1.22% during the first quarter of 2011. Deposit costs decreased from 1.17% in the first quarter of 2011 to 0.63% in the first quarter of 2012. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 66.0% of total deposits in the first quarter of 2012 compared to 58.6% during the first quarter of 2011. Lower costs on deposits were realized due mostly to the lower rate environment and the Company’s ability to be less competitive on higher priced CDs due to its larger than normal position in short-term assets. Further opportunity to realize savings on deposits exists but may be limited due to current costs. Average balances of interest bearing deposits and their respective costs for the first quarter of 2012 and 2011 are shown below:

 

(Dollars in Thousands)    March 31, 2012     March 31, 2011  
     Average
Balance
     Average
Cost
    Average
Balance
     Average
Cost
 

NOW

   $ 619,047         0.34   $ 584,338         0.73

MMDA

     598,956         0.56     522,009         1.09

Savings

     87,219         0.16     76,341         0.70

Retail CDs < $100,000

     373,519         1.01     427,143         1.66

Retail CDs > $100,000

     444,838         1.12     504,011         1.68

Brokered CDs

     61,287         3.29     124,441         3.09
  

 

 

    

 

 

   

 

 

    

 

 

 

Interest bearing deposits

   $ 2,184,866         0.75   $ 2,238,283         1.34
  

 

 

      

 

 

    

 

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Provision for Loan Losses and Credit Quality

The Company’s provision for loan losses during the first quarter of 2012 amounted to $12.9 million, compared to $9.0 million in the fourth quarter of 2011 and to $7.0 million in the first quarter of 2011. Although the Company has experienced improving trends in criticized and classified assets for several quarters, provision for loan losses have still been required to account for continued devaluation of real estate collateral. At March 31, 2012, classified loans still accruing totaled $32.4 million, compared to $46.8 million at March 31, 2011. Non-accrual loans at March 31, 2012 totaled $52.3 million, a 23.6% decrease from $68.4 million reported at the end of the first quarter of 2011.

At March 31, 2012, OREO (excluding covered OREO) totaled $40.0 million, compared to $62.3 million at March 31, 2011. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. The Company has found that with a marketing window of 3-6 months, the liquidation of properties varies from 85% to 100% of current book value. Certain properties, mostly raw land and subdivision lots, have extended marketing periods because of excessive inventory and record low home building activity. At the end of the first quarter of 2012, total non-performing assets decreased to 3.03% of total assets compared to 4.48% at March 31, 2011. Management continues to aggressively identify and resolve problem assets while seeking quality credits to grow the loan portfolio.

Net charge-offs on loans during the first quarter of 2012 increased to $19.1 million, or 5.79% of loans on an annualized basis, compared to $6.2 million, or 1.88% of loans, in the first quarter of 2011. The increased level of charge-offs is due to the Company’s bulk sale of non-performing loans during the first quarter of 2012. Excluding amounts charged-off in the bulk sale, the Company’s net charge-offs would have been $8.7 million, or 2.65% of loans on an annualized basis. The Company’s allowance for loan losses at March 31, 2012 was $28.7 million, or 2.17% of total loans, compared to $35.4 million, or 2.63% of total loans, at March 31, 2011.

Non-interest Income

Total non-interest income for the first quarter of 2012 increased to $27.3 million from $6.2 million in the first quarter of 2011. Excluding the gain on acquisition, non-interest income increased $1.1 million to $7.3 million in the first three months of 2012. Income from mortgage related activities continued to increase due to the Company’s increased number of mortgage bankers and higher level of productions. Service charges on deposit accounts in the first quarter of 2012 increased slightly to $4.4 million, compared to $4.3 million in the first quarter of 2011.

Non-interest Expense

Total non-interest expense for the first quarter of 2012 increased to $34.2 million, compared to $21.2 million at the same time in 2011. Salaries and employee benefits increased from $9.8 million in the first quarter of 2011 and $10.7 million in the fourth quarter of 2011 to $11.4 million in the first quarter of 2012. The majority of the increase is due to the reinstatement of foregone compensation (including incentive accruals and board fees) totaling approximately $433,000 and approximately $225,000 of compensation associated with the recently acquired Central Bank of Georgia. Occupancy and equipment expense increased during the quarter from $2.7 million in the first quarter of 2011 to $3.3 million in the first quarter of 2012. Increases in occupancy and equipment over the same period in 2011 relate to eight additional branches acquired in FDIC transactions over the past year. These increases were mostly offset by decreases in data processing and telecommunications expense that resulted from renegotiation of the Company’s contract with its core service provider as well as other synergies from recent conversions. Total data processing and telecommunications expense in the first quarter of 2012 was $1.9 million, compared to $2.4 million in the first quarter of 2011. Credit related expenses in the first quarter of 2012 totaled $12.7 million, a significant increase from the same quarter in 2011. The majority of the non-provision credit costs related to the Company’s bulk sale in the first quarter of 2012.

Income taxes

Income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the first quarter of 2012, the Company reported income tax expense of $2.5 million compared to $824,000 in the same period of 2011. The Company’s effective tax rate for the three months ended March 31, 2012 and 2011 was 31.8% and 37.4%, respectively.

Balance Sheet Comparison

Securities

Debt securities with readily determinable fair values are classified as available for sale and recorded at fair value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Equity securities, including restricted equity securities, are classified as other investment securities and are recorded at their fair market value.

 

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The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the settlement date. Declines in the fair value of securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.

In determining whether other-than-temporary impairment losses exist, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Substantially all of the unrealized losses on debt securities are related to changes in interest rates and do not affect the expected cash flows of the issuer or underlying collateral. All unrealized losses are considered temporary because each security carries an acceptable investment grade and the Company does not intend to sell these investment securities at an unrealized loss position at March 31, 2012, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at March 31, 2012, these investments are not considered impaired on an other-than temporary basis.

The following table illustrates certain information regarding the Company’s investment portfolio with respect to yields, sensitivities and expected cash flows over the next twelve months assuming constant prepayments and maturities:

 

     Book Value      Fair Value      Yield     Modified
Duration
     Estimated Cash
Flows
12 months
 
     Dollars in Thousands  
             

March 31, 2012:

             

U.S. government agencies

   $ 28,634       $ 28,848         1.55     1.42       $ 18,000   

State, county and municipal securities

   $ 78,440       $ 81,997         4.59     6.04       $ 6,017   

Corporate debt securities

   $ 11,639       $ 11,385         6.80     7.20       $ 1,350   

Mortgage-backed securities

   $ 244,232       $ 249,561         2.88     2.82       $ 75,992   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 362,945       $ 371,791         3.28     3.54       $ 101,359   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

March 31, 2011:

             

U.S. government agencies

   $ 33,137       $ 33,545         1.58     2.16       $ 9,165   

State, county and municipal securities

   $ 55,971       $ 56,898         4.84     5.65       $ 1,462   

Corporate debt securities

   $ 12,150       $ 9,749         6.89     6.33       $ 512   

Mortgage-backed securities

   $ 202,204       $ 205,428         4.08     3.72       $ 46,174   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 303,462       $ 305,620         4.06     4.01       $ 57,313   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Loans and Allowance for Loan Losses

At March 31, 2012, gross loans outstanding (including covered loans) were $1.98 billion, an increase of $105.2 million, or 5.6%, compared to balances at March 31, 2011. Covered loans increased $127.4 million, from $526.0 million at March 31, 2011 to $653.4 million at March 31, 2012. This increase in covered loans is due to the FDIC-assisted transactions completed during 2011. The Company’s participation in FDIC-assisted acquisitions was integral to being able to maintain a certain level of loans because management does not feel that enough loan opportunities with acceptable quality and profitability exist in our current market areas to stabilize and increase. The amount of non-covered loans did not decrease as rapidly as in prior periods, with non-covered loans decreasing by only $22.1 million, or 1.6%, from $1.35 billion at March 31, 2011 to $1.32 billion at March 31, 2012.

The slower decline in loans reflects increased economic activity compared to 2009 and 2010, offset by management’s focus on reducing higher risk loans within the Bank’s loan portfolio. The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loan losses in light of the impact that changes in the economic environment may have on the loan portfolio.

The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) residential real estate; (3) commercial and farmland real estate; (4) construction and development related real estate; and (5) consumer. The Company’s management has strategically located its branches in select markets in south and southeast Georgia, north Florida, southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.

 

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The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged-off.

The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the risk of loss inherent in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors. The review that management has developed primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation, and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional, and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the bank president or lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the Company’s corporate loan review system; and other factors management deems appropriate.

For the three month period ended March 31, 2012, the Company recorded net charge-offs totaling $19.1 million, compared to $6.2 million for the period ended March 31, 2011. The provision for loan losses for the three months ended March 31, 2012 increased to $12.6 million compared to $7.1 million during the three month period ended March 31, 2011. Increased levels of charge-offs and provision expense relates almost entirely to the Company’s bulk sale of non-performing loans during the first quarter of 2012. At the end of the first quarter of 2012, the allowance for loan losses totaled $28.7 million, or 2.17% of total loans, compared to $35.2 million, or 2.64% of total loans, at December 31, 2011 and $35.4 million, or 2.63% of total loans, at March 31, 2011.

 

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The following table presents an analysis of the allowance for loan losses for the three month periods ended March 31, 2012 and March 31, 2011:

 

(Dollars in Thousands)

   March 31,
2012
    March 31,
2011
 

Balance of allowance for loan losses at beginning of period

   $ 35,156      $ 34,576   

Provision charged to operating expense

     12,600        7,092   

Charge-offs:

    

Commercial, financial and agricultural

     155        1,113   

Real estate – residential

     2,123        809   

Real estate – commercial and farmland

     12,964        2,557   

Real estate – construction and development

     3,930        2,425   

Consumer installment

     165        163   

Other

     —          —     
  

 

 

   

 

 

 

Total charge-offs

     19,337        7,067   
  

 

 

   

 

 

 

Recoveries:

    

Commercial, financial and agricultural

     48        20   

Real estate – residential

     141        14   

Real estate – commercial and farmland

     16        2   

Real estate – construction and development

     17        772   

Consumer installment

     48        34   

Other

     —          —     
  

 

 

   

 

 

 

Total recoveries

     270        842   
  

 

 

   

 

 

 

Net charge-offs

     19,067        6,225   
  

 

 

   

 

 

 

Balance of allowance for loan losses at end of period

   $ 28,689      $ 35,443   
  

 

 

   

 

 

 

Net annualized charge-offs as a percentage of average loans

     5.79     1.88

Allowance for loan losses as a percentage of loans at end of period

     2.17     2.63

Assets Covered by Loss-Sharing Agreements with the FDIC

Loans that were acquired in FDIC-assisted transactions that are covered by the loss-sharing agreements with the FDIC (“covered loans”) totaled $653.4 million, $571.5 million and $526.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively. OREO that is covered by the loss- sharing agreements with the FDIC totaled $85.8 million, $78.6 million and $59.8 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively. The loss-sharing agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value on the acquisition dates. The FDIC loss-share receivable reported at March 31, 2012, December 31, 2011 and March 31, 2011 was $220.0 million, $242.4 million and $167.2 million, respectively.

The Company recorded the loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company is confident in its estimation of credit risk and its adjustments to the carrying balances of the acquired loans. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. During the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011, the Company recorded provision for loan loss expense of $282,000, $776,000 and $76,000, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively.

 

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Covered loans are shown below according to loan type as of the end of the periods shown:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Commercial, financial and agricultural

   $ 43,157       $ 41,867       $ 45,954   

Real estate – construction and development

     93,430         77,077         89,356   

Real estate – commercial and farmland

     350,244         321,257         242,153   

Real estate – residential

     162,768         127,644         140,239   

Consumer installment

     3,778         3,644         8,310   
  

 

 

    

 

 

    

 

 

 
   $ 653,377       $ 571,489       $ 526,012   
  

 

 

    

 

 

    

 

 

 

Non-Performing Assets

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate owned. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

For the quarter ended March 31, 2012, nonaccrual or impaired loans totaled $52.3 million, a decrease of approximately $18.6 million since December 31, 2011. The decrease in nonaccrual loans is due to the bulk sale of problem assets during the first quarter of 2012, the success in the foreclosure and resolution process , and a significant slowdown in the formation of new problem credits. Non-performing assets as a percentage of total assets were 3.03%, 4.05% and 4.48% at March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

Non-performing assets at March 31, 2012, December 31, 2011 and March 31, 2011 were as follows:

 

(Dollars in Thousands)

   March 31,
2012
     December 31,
2011
     March 31,
2011
 

Total nonaccrual loans

   $ 52,258       $ 70,823       $ 68,391   

Accruing loans delinquent 90 days or more

     —           —           —     

Other real estate owned and repossessed collateral

     40,035         50,301         62,258   
  

 

 

    

 

 

    

 

 

 

Total non-performing assets

   $ 92,293       $ 121,124       $ 130,649   
  

 

 

    

 

 

    

 

 

 

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. The following table presents the amount of accruing troubled debt restructurings by loan class at March 31, 2012 and December 31, 2011.

 

     March 31,2012      December 31, 2011  

Loan class:

   #      Balance
(in  thousands)
     #      Balance
(in  thousands)
 

Real estate – construction & development

     6       $ 1,305         6       $ 1,774   

Real estate – commercial & farmland

     18         17,765         14         9,622   

Real estate – residential

     22         7,778         19         6,555   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     46       $ 26,848         39       $ 17,951   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Commercial Lending Practices

On December 12, 2006, the Federal Bank Regulatory Agencies released guidance on Concentration in Commercial Real Estate Lending. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans for owner occupied CRE are generally excluded from the CRE guidance.

The CRE guidance is applicable when either:

 

  (1) total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or

 

  (2) total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital.

Banks that are subject to the CRE guidance’s criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.

As of March 31, 2012, the Company exhibited a concentration in CRE loans based on Federal Reserve Call codes. The primary risks of CRE lending are:

 

  (1) within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;

 

  (2) on average, CRE loan sizes are generally larger than non-CRE loan types; and

 

  (3) certain construction and development loans may be less predictable and more difficult to evaluate and monitor.

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of March 31, 2012 and December 31, 2011. The loan categories and concentrations below are based on Federal Reserve Call codes and include covered loans.

 

(Dollars in Thousands)    March 31, 2012     December 31, 2011  
     Balance      % of Total
Loans
    Balance      % of Total
Loans
 

Construction and development loans

   $ 215,761         11   $ 207,347         11

Multi-family loans

     58,627         3     60,247         3

Nonfarm non-residential loans

     824,266         42     806,176         42
  

 

 

    

 

 

   

 

 

    

 

 

 

Total CRE Loans

   $ 1,098,654         56   $ 1,073,770         56

All other loan types

     878,567         44     829,805         44
  

 

 

    

 

 

   

 

 

    

 

 

 

Total Loans

   $ 1,977,221         100   $ 1,903,575         100
  

 

 

    

 

 

   

 

 

    

 

 

 

The following table outlines the percent of total CRE loans, net owner occupied loans to total risk-based capital, and the Company’s internal concentration limits as of March 31, 2012 and December 31, 2011.

 

     Internal
Limit
  March 31,
2012
  December 31,
2011
       Actual   Actual

Construction and development

   100%   73%   71%

Commercial real estate

   300%   233%   228%

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest bearing balances. At March 31, 2012, the Company’s short-term investments were $194.2 million, compared to $229.0 million and $264.5 million at December 31, 2011 and March 31, 2011, respectively. At March 31, 2012, approximately 85.5% of the balance was comprised of interest bearing balances, the majority of which were at the FHLB.

 

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Derivative Instruments and Hedging Activities

The Company had cash flow hedges with notional amounts totaling $35.0 million at March 31, 2011, for the purpose of converting floating rate loans to fixed rate. The Company had a cash flow hedge with notional amount of $37.1 million at March 31, 2012, December 31, 2011 and March 31, 2011 for the purpose of converting the variable rate on the junior subordinated debentures to fixed rate. The fair value of these instruments amounted to a liability of approximately $2.1 million and $2.0 million at March 31, 2012 and December 31, 2011, respectively, and an asset of approximately $598,099 at March 31, 2011. No hedge ineffectiveness from cash flow hedges was recognized in the statement of operations. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

Capital

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia Department of Banking and Finance (the “GDBF”), and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.

The FRB, the FDIC and the GDBF have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure. The regulatory capital standards are defined by the following three key measurements:

 

  a) The “Leverage Ratio” is defined as Tier 1 capital to average assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a leverage ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a leverage ratio greater than or equal to 5.00%.

 

  b) The “Core Capital Ratio” is defined as Tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a core capital ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a core capital ratio greater than or equal to 6.00%.

 

  c) The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00%. For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.

As of March 31, 2011, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of Ameris at March 31, 2012, December 31, 2011 and March 31, 2011.

 

     March 31,
2012
    December 31,
2011
    March 31,
2011
 

Leverage Ratio(tier 1 capital to average assets)

      

Consolidated

     11.01     10.76     10.34

Ameris Bank

     10.93        10.62        10.15   

Core Capital Ratio(tier 1 capital to risk weighted assets)

      

Consolidated

     19.12        18.80        18.11   

Ameris Bank

     19.01        18.61        17.69   

Total Capital Ratio(total capital to risk weighted assets)

      

Consolidated

     20.38        20.05        19.37   

Ameris Bank

     20.27        19.87        18.95   

Capital Purchase Program

On November 21, 2008, the Company, elected to participate in the Capital Purchase Program (“CPP”) established under the Emergency Economic Stabilization Act of 2008 (“EESA”). Accordingly, on such date, the Company issued and sold to the United States Treasury (“Treasury”), for an aggregate cash purchase price of $52 million, (i) 52,000 shares (the “Preferred Shares”) of the Company’s fixed rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant (the “Warrant”) to purchase up to 679,443 shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), at an exercise price of $11.48 per share. The issuance and sale of these securities was a private placement exempt from registration pursuant to Section 4(2) of the Securities Act.

 

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Cumulative dividends on the Preferred Shares will accrue on the liquidation preference at a rate of 5% per annum for the first five years and at a rate of 9% per annum thereafter, but such dividends will be paid only if, as and when declared by the Company’s Board of Directors. The Preferred Shares have no maturity date and rank senior to the Common Stock (and pari passu with the Company’s other authorized preferred stock, of which no shares are currently designated or outstanding) with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company. Subject to the approval of the Board of Governors of the Federal Reserve System, the Preferred Shares are redeemable at the option of the Company at 100% of their liquidation preference.

The Purchase Agreement pursuant to which the Preferred Shares and the Warrant were sold contains limitations on the payment of dividends on the Common Stock (including with respect to the payment of cash dividends in excess of $0.05 per share, which was the amount of the last regular dividend declared by the Company prior to October 14, 2008) and on the Company’s ability to repurchase its Common Stock, and subjects the Company to certain of the executive compensation limitations included in the EESA.

Interest Rate Sensitivity and Liquidity

The Company’s primary market risk exposures are credit, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the Asset and Liability Committee (the “ALCO Committee”). The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.

The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s board and executive management to minimize those identified risks.

The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to decrease no more than 5.00% given a change in selected interest rates of 200 basis points over any 24-month period.

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term investments at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 20% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At March 31, 2012, there were $3.8 million outstanding borrowings with the Company’s correspondent banks, compared to $20.0 million at December 31, 2011. There were no outstanding borrowings with the Company’s correspondent banks at March 31, 2011.

 

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Table of Contents

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:

 

    March 31,
2012
    December 31,
2011
    September 30,
2011
    June 30,
2011
    March 31,
2011
 

Investment securities available for sale to total deposits

    13.95     13.12     12.97     13.31     11.76

Loans (net of unearned income) to total deposits (1)

    49.67     51.40     52.07     54.16     52.32

Interest-earning assets to total assets

    84.06     82.96     82.23     83.97     83.63

Interest-bearing deposits to total deposits

    83.32     84.74     86.52     87.34     87.71

 

(1) Loans exclude covered assets where appropriate

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at March 31, 2012 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and are part of the Company’s program to manage interest rate sensitivity. At March 31, 2012, the Company had one effective LIBOR rate swap with a notional amount of $37.1 million. The LIBOR rate swap exchanges fixed rate payments of 4.15% for floating rate payments based on the three month LIBOR and matures December 2018. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk”. The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “Gap management”.

The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected to a gradual 200 basis point increase or decrease in market rates on net interest income and is monitored on a quarterly basis.

Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.

Item 4. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

During the quarter ended March 31, 2012, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Nothing to report with respect to the period covered by this report.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. of Part 1 in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits required to be furnished with this report are listed on the exhibit index attached hereto.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: May 10, 2012   AMERIS BANCORP
 

/s/ Dennis J. Zember Jr.

 

Dennis J. Zember Jr., Executive Vice President and

Chief Financial Officer (duly authorized signatory

and principal accounting and financial officer)

 
 

 

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Table of Contents

EXHIBIT INDEX

 

Exhibit

No.

 

Description

  3.1   Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the Commission on August 14, 1987).
  3.2   Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1.1 to Ameris Bancorp’s Form 10-K filed with the Commission on March 28, 1996).
  3.3   Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 4.3 to Ameris Bancorp’s Registration Statement on Form S-4 filed with the Commission on July 17, 1996).
  3.4   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.5 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 25, 1998).
  3.5   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 26, 1999).
  3.6   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 31, 2003).
  3.7   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on December 1, 2005).
  3.8   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on November 21, 2008).
  3.9   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on June 1, 2011).
  3.10   Amended and Restated Bylaws of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on March 14, 2005).
31.1   Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer
31.2   Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer
32.1   Section 1350 Certification by the Company’s Chief Executive Officer
32.2   Section 1350 Certification by the Company’s Chief Financial Officer

 

49