10-Q 1 form10q0309.htm FORM 10Q 0309 form10q0309.htm



 


 
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, 2009

OR

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

Commission File Number:   001-13901

 
 
AMERIS BANCORP
(Exact name of registrant as specified in its charter)

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

310 FIRST STREET, SE,  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 o

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 o
Accelerated filer x
Smaller reporting company o
   
Non-accelerated filer o (Do not check if 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 o No x

 
There were 13,584,107 shares of Common Stock outstanding as of April 28, 2009.







 
AMERIS BANCORP

PART I - FINANCIAL INFORMATION
Page
Item 1.
Financial Statements
 
 
3
     
 
4
     
 
5
     
 
6
     
Item 2.
15
     
Item 3.
30
     
Item 4.
31
     
PART II - OTHER INFORMATION
 
Item 1.
32
     
Item 1A.
32
     
Item 2.
32
     
Item 3.
32
     
Item 4.
33
     
Item 5.
33
     
Item 6.
33
     
 
34
     
     
     
     
     
 
 

Item 1.
 Financial Statements

AMERIS BANCORP AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
(Dollars in Thousands)
 
                   
   
March 31,
   
December 31,
   
March 31,
 
   
2009
   
2008
   
2008
 
   
(Unaudited)
   
(Audited)
   
(Unaudited)
 
Assets
                 
Cash and due from banks
 
$
54,758
   
$
66,787
   
$
63,401
 
Federal funds sold & interest bearing accounts
   
137,770
     
144,383
     
4,389
 
Investment securities available for sale, at fair value
   
344,032
     
367,894
     
295,801
 
Other investments
   
5,702
     
8,627
     
8,784
 
                         
Loans
   
1,672,923
     
1,695,777
     
1,622,437
 
    Less: allowance for loan losses
   
42,417
     
39,652
     
28,094
 
Loans, net
   
1,630,506
     
1,656,125
     
1,594,343
 
                         
Premises and equipment, net
   
65,152
     
66,107
     
60,053
 
Intangible assets, net
   
3,485
     
3,631
     
4,509
 
Goodwill
   
54,813
     
54,813
     
54,675
 
Other assets
   
50,060
     
38,723
     
32,288
 
       Total assets
 
$
2,346,278
   
$
2,407,090
   
$
2,118,243
 
                         
Liabilities and Stockholders' Equity
                       
Deposits:
                       
Noninterest-bearing
 
$
207,686
   
$
208,532
   
$
199,692
 
Interest-bearing
   
1,820,998
     
1,804,993
     
1,584,599
 
       Total deposits
   
2,028,684
     
2,013,525
     
1,784,291
 
Federal funds purchased & securities sold under agreements to repurchase
   
18,295
     
27,416
     
4,987
 
Other borrowings
   
7,000
     
72,000
     
74,500
 
Other liabilities
   
12,046
     
12,521
     
15,888
 
Subordinated deferrable interest debentures
   
42,269
     
42,269
     
42,269
 
       Total liabilities
   
2,108,294
     
2,167,731
     
1,921,935
 
                         
Stockholders' Equity
                       
Preferred stock, par value$1; 5,000,000 shares authorized; 52,000 shares issued
   
49,140
     
49,028
     
-
 
Common stock, par value $1; 30,000,000 shares authorized; 14,915,209, 14,865,703 and 14,886,967 issued
   
14,915
     
14,866
     
14,887
 
Capital surplus
   
86,141
     
86,038
     
82,920
 
Retained earnings
   
91,619
     
93,696
     
104,182
 
Accumulated other comprehensive income
   
6,956
     
6,518
     
5,093
 
Treasury stock, at cost, 1,331,102, 1,331,102 and 1,330,197 shares
   
(10,787
)
   
(10,787
)
   
(10,774
)
       Total stockholders' equity
   
237,984
     
239,359
     
196,308
 
       Total liabilities and stockholders' equity
 
$
2,346,278
   
$
2,407,090
   
$
2,118,243
 
 
See notes to unaudited consolidated financial statements




AMERIS BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
(Unaudited)
               
   
Three Months Ended
   
March 31,
   
2009
   
2008
Interest Income
         
Interest and fees on loans
  $ 25,727     $ 30,134  
Interest on taxable securities
    3,657       3,583  
Interest on nontaxable securities
    167       172  
Interest on deposits in other banks and federal funds sold
    66       200  
      Total Interest Income
    29,617       34,089  
                   
Interest Expense
                 
Interest on deposits
    12,155       14,142  
Interest on other borrowings
    494       1,487  
      Total Interest Expense
    12,649       15,629  
                   
     Net Interest Income
    16,968       18,460  
Provision for Loan Losses
    7,912       3,200  
     Net Interest Income After Provision for Loan Losses
    9,056       15,260  
                   
Noninterest Income
                 
Service charges on deposit accounts
    3,035       3,316  
Mortgage banking activity
    763       869  
Other service charges, commissions and fees
    63       278  
Gain on sale of securities
    713       -  
Other noninterest income
    922       379  
     Total Noninterest Income
    5,496       4,842  
                   
Noninterest Expense
                 
Salaries and employee benefits
    7,991       8,618  
Equipment and occupancy expense
    2,158       1,992  
Amortization of intangible assets
    146       293  
Data processing and communication costs
    1,627       1,523  
Advertising and marketing expense
    574       878  
Other operating expenses
    3,231       2,336  
     Total Noninterest Expense
    15,727       15,640  
                   
     (Loss)/Income Before Tax (Benefit)/Expense
    (1,175 )     4,462  
Applicable Income Tax (Benefit)/Expense
    (539 )     1,496  
     Net (Loss)/Income
    (636 )     2,966  
                   
Preferred Stock Dividends
    589       -  
     Net (Loss)/Income Available to Common Shareholders
  $ (1,225 )   $ 2,966  
                   
Other Comprehensive Income
                 
Net unrealized holding gain arising during period on investment securities available for sale, net of tax
    2,762       871  
Net unrealized gain on cash flow hedge arising during period, net of tax
    789       1,593  
Reclassification adjustment for (gains) included in net income, net of tax
    (463 )     -  
   Comprehensive Income
  $ 1,863     $ 5,430  
                   
Basic (loss)/earnings per share
  $ (0.09 )   $ 0.22  
Diluted (loss)/earnings per share
  $ (0.09 )   $ 0.22  
                   
Weighted average common shares outstanding:
                 
   Basic
    13,567       13,497  
   Diluted
    13,567       13,560  
                   
Dividends declared per share
  $ 0.05     $ 0.14  
 
See notes to unaudited consolidated financial statements. 



AMERIS BANCORP AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Dollars in Thousands)
 
(Unaudited)
 
   
Three Months Ended
 
   
March 31,
 
   
2009
   
2008
 
Cash Flows From Operating Activities:
           
Net Income/(Loss)
 
$
(636
)
 
$
2,966
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
865
     
741
 
Net loss on sale or disposal of premises and equipment
   
(4
)
   
(46
)
Net gain/(loss) on sale of other real estate owned
   
161
     
(319
)
Provision for loan losses
   
7,912
     
3,200
 
Amortization of intangible assets
   
146
     
293
 
Other prepaids, deferrals and accruals, net
   
1,022
     
(4,958
)
      Net cash provided by operating activities
   
9,466
     
1,877
 
                 
                 
                 
Cash Flows From Investing Activities:
               
Net decrease in federal funds sold & interest bearing deposits
   
6,612
     
7,633
 
Proceeds from maturities of securities available for sale
   
27,073
     
36,915
 
Purchase of securities available for sale
   
(8,419
)
   
(39,132
)
Proceeds from sales of securities available for sale
   
5,351
     
-
 
Net (increase)/decrease in loans
   
7,084
     
(8,388
)
Proceeds from sales of other real estate owned
   
934
     
6,457
 
Proceeds from sales of premises and equipment
   
1,647
     
275
 
Purchases of premises and equipment
   
(1,553
)
   
(1,636
)
      Net cash used in investing activities
   
38,729
     
2,124
 
                 
                 
                 
Cash Flows From Financing Activities:
               
Net increase in deposits
   
15,159
     
27,026
 
Net decrease in federal funds purchased & securities sold under agreements to repurchase
   
(9,121
)
   
(9,718
)
Net decrease in other borrowings
   
(65,000
)
   
(16,000
)
Dividends paid - preferred stock
   
(589
)
   
-
 
Dividends paid – common stock
   
(679
)
   
(1,898
)
Purchase of treasury shares
   
-
     
(4
)
Proceeds from exercise of stock options
   
6
     
190
 
        Net cash provided by financing activities
   
(60,224
)
   
(404
)
                 
Net decrease in cash and due from banks
 
$
(12,029
)
 
$
3,597
 
                 
Cash and due from banks at beginning of period
   
66,787
     
59,804
 
                 
Cash and due from banks at end of period
 
$
54,758
   
$
63,401
 

See notes to unaudited consolidated financial statements.



AMERIS BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
 
NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES
Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia.  Ameris conducts the majority of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”).  Ameris Bank currently operates 48 branches in Georgia, Alabama, northern 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, each advisory board and senior managers make lending and community specific decisions.  This approach allows the banker closest to the customer to respond to the differing needs and demands of their 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 quarter ended March 31, 2009 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, 2008.

Certain amounts reported for the periods ended March 31, 2008 and December 31, 2008 have been reclassified to conform with the presentation as of March 31, 2009.  These reclassifications had no effect on previously reported net income or stockholders' equity.

Newly Adopted Accounting Pronouncements
In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133” (“SFAS 161”). This statement requires an entity to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133”) and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is intended to enhance the current disclosure framework in SFAS 133, by requiring the objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation.

The goal of the Company’s interest rate risk management process is to minimize the volatility in the net interest margin caused by changes in interest rates. Derivative instruments are used to hedge certain assets or liabilities as a part of this process. The Company is required to recognize certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative. Under the guidelines of SFAS 133, as amended, all derivative instruments are required to be carried at fair value on the balance sheet.



NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES (Continued)

The Company’s current hedging strategies involve utilizing interest rate floors and swaps classified as Cash Flow Hedges.  Cash flows related to floating-rate assets and liabilities will fluctuate with changes in an underlying rate index.  When effectively hedged, the increases or decreases in cash flows related to the floating rate asset or liability will generally be offset by changes in cash flows of the derivative instrument designated as a hedge.  The fair value of derivatives is recognized as assets or liabilities in the financial statements.  The accounting for the changes in the fair value of a derivative depends on the intended use of the derivative instrument at inception.  The change in fair value of the effective portion of cash flow hedges is accounted for in other comprehensive income.  The change in fair value of the ineffective portion of cash flow hedges would be reflected in the statement of income.

At March 31, 2009, the Company had cash flow hedges with notional amounts totaling $107.1 million for the purpose of managing interest rate sensitivity.  These cash flow hedges included a LIBOR rate swap under which it pays a fixed rate and receives a variable rate.  In addition, the Company utilizes Prime interest rate floor contracts for the purpose of converting floating rate assets to fixed rate.    No hedge ineffectiveness from cash flow hedges was recognized in the statement of income.  All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

The following table presents the interest rate derivative contracts outstanding at March 31, 2009.

Type (Maturity)
 
Notional Amount
   
Rate Received
/Floor Rate
   
Rate Paid
   
Fair Value
 
   
(Dollars in Thousands)
 
LIBOR Swap (12/15/2018)
 
$
37,114
     
2.95
%
   
4.15
%
 
$
856
 
    Total Swaps:
   
37,114
     
2.95
     
4.15
     
856
 
                                 
Prime Interest Rate Floor (08/15/09)
   
35,000
     
7.00
     
-
     
555
 
Prime Interest Rate Floor (08/15/11)
   
35,000
     
7.00
     
-
     
2,793
 
    Total  Floors:
   
70,000
     
7.00
%
   
-
%
   
3,348
 
                                 
    Total  Derivative Contracts:
 
$
107,114
                   
$
4,204
 



NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES (Continued)

Fair Value Measurements
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, (“SFAS 157”), 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 active 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.

Securities Available For SaleThe 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 certain U.S. agency bonds, collateralized mortgage and debt obligations, and certain municipal securities.  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.  Fair value of securities is based on available quoted market prices.  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.
 
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 estimated based on discounted contractual 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 SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” 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.
 

NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES (Continued)
 
Deposits:  The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposits approximates fair value.  The fair value of fixed-rate certificates of deposits is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.
 
Repurchase Agreements and/or 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:  The carrying amount of commitments to extend credit and standby letters of credit approximates fair value.  The carrying amount of the off-balance-sheet financial instruments is based on fees charged to enter into such agreements.

Derivatives: The Company’s current hedging strategies involve utilizing interest rate floors. The fair value of derivatives is recognized as assets or liabilities in the financial statements.  The accounting for the changes in the fair value of a derivative depends on the intended use of the derivative instrument at inception and ongoing tests of effectiveness.  As of March 31, 2009, the Company had cash flow hedges with a notional amount of $107.1 million.

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.  Management has determined that in most cases the valuation method for other real estate produces reliable estimates of fair value and has classified these assets as Level 2.
 


NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES (Continued)

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 SFAS 157 fair value hierarchy in which the fair value measurements fall as of March 31, 2009.


   
Fair Value Measurements on a Recurring Basis
 
   
As of March 31, 2009
 
         
Quoted Prices
             
         
in Active
   
Significant
       
         
Markets for
   
Other
   
Significant
 
         
Identical
   
Observable
   
Unobservable
 
         
Assets
   
Inputs
   
Inputs
 
   
Fair Value
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
   
(Dollars in Thousands)
 
Securities available for sale
  $ 344,032     $ -     $ 342,032     $ 2,000  
Derivative financial instruments
    4,204       -       4,204       -  
     Total recurring assets at fair value
  $ 348,236     $ -     $ 346,236     $ 2,000  


Following is a description 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 SFAS 157 valuation hierarchy.

   
Fair Value Measurements on a Nonrecurring Basis
 
   
As of March 31, 2009
 
         
Quoted Prices
             
         
in Active
   
Significant
       
         
Markets for
   
Other
   
Significant
 
         
Identical
   
Observable
   
Unobservable
 
         
Assets
   
Inputs
   
Inputs
 
   
Fair Value
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
   
(Dollars in Thousands)
 
Impaired loans carried at fair value
  $ 63,908     $ -     $ 62,815     $ 1,093  
Other real estate owned
    14,271       -       14,271       -  
     Total nonrecurring assets at fair value
  $ 78,179     $ -     $ 77,086     $ 1,093  

Pursuant to SFAS 157, below is the Company’s reconciliation of Level 3 assets as of March 31, 2009.  Gains or losses on impaired loans are recorded in the provision for loan losses.

   
Investment
 Securities Available
for Sale
   
Impaired Loans
 
Beginning balance January 1, 2009
 
 $
2,000
   
 $
1,387
 
Total gains/(losses) included in net income
   
-
     
-
 
Purchases, sales, issuances, and settlements, net
   
-
     
(294
)
Transfers in or out of Level 3
   
-
     
-
 
Ending balance March 31, 2009
 
 $
2,000
   
 $
1,093
 



NOTE 2 – INVESTMENT SECURITIES

Ameris’ investment policy blends the needs of the Company’s liquidity and interest rate risk with its desire to improve income and provide funds for expected growth in loans.  The investment securities portfolio primarily consists of U.S Government sponsored mortgage-backed securities and agencies, state and municipal securities and corporate debt securities.  Ameris’ portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited.  For a small portion of Ameris’ portfolio that has been 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, 2009, December 31, 2008 and March 31, 2008 are presented below:
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(Dollars in Thousands)
 
                         
March 31, 2009:
                       
U. S. Government sponsored agencies
 
$
   122,382
   
$
1,258
   
$
-
   
$
  123,640
 
State and municipal securities
   
  17,998
     
    368
     
     (125)
     
      18,241
 
Corporate debt securities
   
    12,197
     
     52
     
    (1,399)
     
      10,850
 
Mortgage-backed securities
   
  184,828
     
  6,630
     
    (157)
     
   191,301
 
Total debt securities
 
$
   337,405
   
$
8,308
   
$
     (1,681)
   
$
   344,032
 
                                 
December 31, 2008:
                               
U. S. Government sponsored agencies
 
$
   130,966
   
$
 1,680
   
$
    -
   
$
   132,646
 
State and municipal securities
   
  18,095
     
      330
     
     (123)
     
      18,302
 
Corporate debt securities
   
    12,209
     
      186
     
    (777)
     
       11,618
 
Mortgage-backed securities
   
  200,128
     
   5,332
     
    (132)
     
    205,328
 
Total securities
 
$
    361,398
   
$
   7,528
   
$
     (1,032)
   
$
367,894
 
                                 
March 31, 2008:
                               
U. S. Government sponsored agencies
 
$
   46,665
   
$
1,169
   
$
-
   
$
   47,834
 
State and municipal securities
   
  18,967
     
    406
     
     (47)
     
      19,326
 
Corporate debt securities
   
    11,733
     
     135
     
    (177)
     
      11,691
 
Mortgage-backed securities
   
  213,438
     
  3,603
     
    (91)
     
   216,950
 
Total securities
 
$
290,803
     
5,313
     
(315)
     
295,801
 




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.  Ameris concentrates the majority of its lending activities on real estate loans where the historical loss percentages have been low.  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.  
 
The Company evaluates loans for impairment when a loan is risk rated as substandard or worse.  The Company measures impairment based upon the present value of the loan’s expected future cash flows discounted at the loan’s effective interest rate, except where foreclosure or liquidation is probable or when the primary source of repayment is provided by real estate collateral.  In these circumstances, impairment is measured based upon the estimated fair value of the collateral.  In addition, in certain circumstances, impairment may be based on the loan’s observable estimated fair value.  Impairment with regard to substantially all of Ameris’ impaired loans has been measured based on the estimated fair value of the underlying collateral.  At the time the contractual principal payments on a loan are deemed to be uncollectible, Ameris’ policy is to record a charge-off against the allowance for loan losses.
 
Nonperforming assets include loans classified as nonaccrual or renegotiated and foreclosed or repossessed assets.  It is the general policy of the Company to stop accruing interest income and place the recognition of interest on a cash basis when any commercial, industrial or commercial real estate loan is 90 days or more past due as to principal or interest and/or the ultimate collection of either is in doubt, unless collection of both principal and interest is assured by way of collateralization, guarantees or other security.  When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income unless the collateral for the loan is sufficient to cover the accrued interest or a guarantor assures payment of interest.

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

 
(Dollars in Thousands)
 
March 31,
2009
   
December 31,
2008
   
March 31,
2008
 
Commercial, financial & agricultural
 
$
183,860
   
$
200,421
   
$
218,964
 
Real estate – residential
   
189,069
     
189,203
     
156,014
 
Real estate – commercial & farmland
   
1,077,044
     
1,070,483
     
1,002,849
 
Real estate – construction & development
   
151,539
     
162,887
     
172,600
 
Consumer installment
   
62,176
     
64,707
     
68,459
 
Other
   
9,235
     
8,076
     
3,551
 
   
$
1,672,923
   
$
1,695,777
   
$
1,622,437
 

 



NOTE 4 – ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses for the three months ended March 31, 2009, for the year ended December 31, 2008 and for the three months ended March 31, 2008 is as follows:

 
(Dollars in Thousands)
 
March 31,
 2009
   
December 31,
2008
   
March 31,
2008
 
Balance, January 1
 
$
39,652
   
$
27,640
   
$
27,640
 
     Provision for loan losses charged to expense
   
7,912
     
35,030
     
3,200
 
     Loans charged off
   
(5,521
)
   
(24,340
)
   
(2,945
)
     Recoveries of loans previously charged off
   
374
     
1,322
     
199
 
Ending balance
 
$
42,417
   
$
39,652
   
$
28,094
 
 
The following is a summary of information pertaining to impaired loans for the three months ended March 31, 2009 and the twelve months December 31, 2008:

(Dollars in Thousands)
 
March 31,
 2009
 
December 31,
2008
Impaired loans
 
$
63,908
 
$
65,414
Valuation allowance related to impaired loans
 
$
10,019
 
$
9,078
Average investment in impaired loans
 
$ 
64,661
 
$
40,940
Interest income recognized on impaired loans
 
$ 
59
 
$
323
Foregone interest income on impaired loans
 
$
751
 
$
4,643


NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of cost over the fair value of the net assets purchased in business combinations.  Goodwill is required to be tested annually for impairment or whenever events occur that may indicate that the recoverability of the carrying amount is not probable.  In the event of an impairment, the amount by which the carrying amount exceeds the fair value is charged to earnings.  

The determination of whether impairment has occurred is based on an estimate of undiscounted cash flows attributable to the assets as compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment loss recognized would be determined by estimating the fair value of the assets and recording a loss if the fair value was less than the book value. On an annual basis, the Company engages an independent party to review business strategies as well as current and forecasted levels of earnings and capital.  The most recent study, completed in the fourth quarter of 2008, found no impairment in the carrying value of goodwill.



 
NOTE 6 – WEIGHTED AVERAGE SHARES OUTSTANDING

Due to the net loss reported at the end of the quarter ended March 31, 2009, the Company has excluded the effects of options as these would have been anti-dilutive. Earnings per share have been computed based on the following weighted average number of common shares outstanding:

   
For the Three Months Ended March 31,
 
   
2009
   
2008
 
   
(share data in thousands)
 
Basic shares outstanding
   
13,527
     
13,497
 
     Plus: Dilutive effect of ISOs
   
-
     
49
 
     Plus: Dilutive effect of Restricted Grants
   
-
     
14
 
Diluted shares outstanding
   
13,527
     
13,560
 


NOTE 7 – OTHER BORROWINGS

The Company has certain borrowing arrangements with various financial institutions that are used in the Company’s operations primarily to fund growth in earning assets when appropriate spreads can be realized.  At March 31, 2009, total other borrowings amounted to $7.0 million compared to $74.5 million at March 31, 2008.  During the quarter, the Company reduced borrowings with the FHLB by $67.5 million.  The reduction was made possible by the Company’s growth in total deposits over the last several quarters.  At March 31, 2009, $2.0 million of the other borrowings consisted of borrowings with the FHLB of Atlanta.  

NOTE 8 – 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.

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 on those commitments for which collateral is deemed necessary.

The following represent the Company’s commitments to extend credit and standby letters of credit:

(Dollars in Thousands)
 
March 31,
2009
   
March 31,
2008
 
             
Commitments to extend credit
 
$
141,233
   
$
187,125
 
                 
Standby letters of credit
 
$
4,285
   
$
6,804
 
 



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, 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 Securities and Exchange Commission 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.


 





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.
 

   
2009
 
2008
(in thousands, except share
 
First
 
Fourth
 
Third
 
Second
 
First
data, taxable equivalent)
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Results of Operations:
                                 
   Net interest income
 
$
16,968
   
$
15,972
   
$
19,177
   
$
19,056
   
$
18,460
 
   Net interest income (tax equivalent)
   
17,126
     
15,991
     
19,691
     
19,514
     
18,814
 
   Provision for loan losses
   
7,912
     
19,890
     
8,220
     
3,720
     
3,200
 
   Non-interest income
   
5,496
     
4,393
     
4,639
     
5,313
     
4,842
 
   Non-interest expense
   
15,727
     
16,428
     
14,761
     
15,962
     
15,640
 
   Provision for income tax (benefit)/expense
   
(539
)
   
(5,556)
     
469
     
1,538
     
1,496
 
   Preferred stock dividends
   
589
     
328
     
-
     
-
     
-
 
   Net (loss)/income available to common
   shareholders
   
(1,225
)
   
(10,725
)
   
366
     
3,149
     
2,966
 
Selected Average Balances:
                                       
   Loans, net of unearned income
 
$
1,683,615
   
$
1,703,137
   
$
1,698,024
   
$
1,650,781
   
$
1,617,991
 
   Investment securities
   
359,754
     
328,956
     
287,973
     
296,597
     
281,756
 
   Earning assets
   
2,166,624
     
2,174,387
     
2,018,807
     
1,976,321
     
1,933,179
 
   Assets
   
2,346,958
     
2,354,142
     
2,192,501
     
2,141,940
     
2,115,561
 
   Deposits
   
2,002,534
     
1,987,840
     
1,792,821
     
1,764,067
     
1,748,961
 
   Common shareholders’ equity
   
190,395
     
192,479
     
186,541
     
192,605
     
193,971
 
Period-End Balances:
                                       
   Loans, net of unearned income
 
$
1,672,923
   
$
1,695,777
   
$
1,710,109
   
$
1,678,147
   
$
1,622,437
 
   Earning assets
   
2,160,427
     
2,216,681
     
2,083,193
     
2,019,525
     
1,931,411
 
   Total assets
   
2,346,278
     
2,407,090
     
2,257,643
     
2,193,021
     
2,118,243
 
   Deposits
   
2,028,684
     
2,013,525
     
1,806,339
     
1,770,861
     
1,784,291
 
   Common shareholders’ equity
   
188,844
     
190,331
     
193,344
     
192,555
     
196,308
 
Per Common Share Data:
                                       
   Earnings per share - Basic
 
$
(0.09
 
$
(0.79
)
 
$
0.03
   
$
0.23
   
$
0.22
 
   Earnings per share - Diluted
   
(0.09
   
(0.79
)
   
0.03
     
0.23
     
0.22
 
   Book value per share
   
13.90
     
14.06
     
14.25
     
14.2
     
14.48
 
   End of period shares outstanding
   
13,584,107
     
13,534,601
     
13,564,032
     
13,564,032
     
13,556,770
 
Weighted average shares outstanding
                                       
   Basic
   
13,527,437
     
13,532,521
     
13,515,767
     
13,510,907
     
13,497,344
 
   Diluted
   
13,527,437
     
13,532,521
     
13,543,612
     
13,563,032
     
13,559,761
 
Market Data:
                                       
   High closing price
 
$
11.73
   
$
14.21
   
$
15.02
   
$
16.26
   
$
16.41
 
   Low closing price
   
3.66
     
7.19
     
7.79
     
8.70
     
12.49
 
   Closing price for quarter
   
4.71
     
11.85
     
14.85
     
8.70
     
16.06
 
   Average daily trading volume
   
31,931
     
31,527
     
43,464
     
62,739
     
61,780
 
   Cash dividends per share
   
0.05
     
0.05
     
0.05
     
0.14
     
0.14
 
   Price to earnings
   
N/M
     
N/M
     
N/M
     
9.45
     
18.25
 
   Price to book value
   
0.34
     
0.84
     
1.04
     
0.61
     
1.11
 
Performance Ratios:
                                       
   Return on average assets
   
(0.21%
)
   
(1.81%
)
   
0.07%
     
0.59%
     
0.56%
 
   Return on average common equity
   
(2.61%
)
   
(22.17%
)
   
0.78%
     
6.58%
     
6.15%
 
   Average loan to average deposits
   
84.07%
     
85.67%
     
94.71%
     
93.58%
     
92.51%
 
   Average equity to average assets
   
8.11%
     
8.18%
     
8.51%
     
8.99%
     
9.27%
 
   Net interest margin (tax equivalent)
   
3.21%
     
2.92%
     
3.87%
     
3.96%
     
3.91%
 
   Efficiency ratio
   
70.01%
     
80.67%
     
61.98%
     
65.50%
     
67.12%
 



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 statement of condition as of March 31, 2009 as compared to December 31, 2008 and operating results for the three-month period ended March 31, 2008.  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, 2009 and 2008

Consolidated Earnings and Profitability
Ameris reported a net loss available to common shareholders of $1.2 million, or $0.09 per diluted share, for the quarter ended March 31, 2009, compared to net income for the same quarter in 2008 of $3.0 million, or $0.22 per share.  The Company’s return on average assets and average shareholders’ equity declined in the first quarter of 2009 to (0.21%) and (2.61%), respectively, compared to 0.56% and 6.15% in the first quarter of 2008.  The decline in earnings and profitability during the quarter was principally due to higher levels of loan loss provisions, lower net interest margins and costs associated with problem assets.

Net Interest Income and Margins
On a tax equivalent basis, net interest income for the first quarter of 2009 was $17.1 million, a decrease of 9.0% compared to the same quarter in 2008.  The Company’s net interest margin fell during the first quarter of 2009 to 3.21% compared to 3.91% during the same quarter in 2008.  The margin was negatively impacted by the lower interest rate environment which caused loan yields to fall commensurately with national rate indices.  Normally, the company would offset these declines in asset yields and interest income with lower deposit costs but intense competition for local deposits have kept deposit yields unusually high.

Total interest income during the first quarter of 2009 was $29.6 million compared to $34.1 million in the same quarter of 2008.  Yields on earning assets fell 22.3% to 5.57% compared to 7.17% reported in the first quarter of 2008. During the quarter, loan yields decreased when compared to the first quarter of 2008 due mostly to the lower interest rate environment that materialized late in 2008.  Although rates are at historical lows, current spreads on loan production in the Bank’s local markets have widened significantly.  Because of these wide spreads, management does not anticipate significant erosion to current loan yields.

Interest expense declined significantly, helping somewhat to offset declines in interest income.  Total interest expense in the first quarter of 2009 amounted to $12.6 million, reflecting a decline of 19.2% from the same quarter in 2008.  Total funding costs declined to 2.45% in the first quarter of 2009 compared to 3.30% at the same time in 2008.  The decline in total funding costs relates to savings realized on both deposit funding and non-deposit funding.  Deposit costs decreased from 3.25% in the first quarter of 2008 to 2.46% in the current quarter of 2009.  Management expects significant savings to be realized in the coming quarters as the Company reprices a substantial part of its time deposits to rates reflecting the current rate environment.  Savings on non-deposit borrowings reflect lower levels of one and three month LIBOR as well as lower outstanding balances.  At the end of the first quarter of 2009, the Company’s total non-deposit funding was 2.88% of total assets compared to 5.75% at the same time in 2008.

Provision for Loan Losses and Credit Quality
The Company’s provision for loan losses during the first quarter amounted to $7.9 million, an increase of $4.7 million over the $3.2 million recorded in the first quarter of 2008.  The increase in the provision for loan losses reflected the trend in the level of non-performing assets.  At the end of the first quarter of 2009, total non-performing assets increased to 4.63% of total loans compared to 2.00% at March 31, 2008.

Net charge-offs on loans during the first quarter of 2009 increased to $5.1 million, compared to $2.7 million in the first quarter of 2008.  For the quarters ended March 31, 2009 and 2008, net charge-offs as a percentage of loans were 1.23% and 0.68% respectively.  The Company’s allowance for loan losses at March 31, 2009 was $42.4 million or 2.54% of total loans, compared to $28.1 million or 1.7% at March 31, 2008.

Noninterest Income
Total non-interest income for the first quarter of 2009 increased 14.5% to $5.5 million from $4.8 million in the first quarter of 2008.  During the first quarter of 2009, the Company sold several positions in its investment portfolio and recognized a gain of approximately $713,000.  In addition, the Company recognized a gain of approximately $543,000 on the early repayment of FHLB advances.  Excluding these gains, non-interest income would have declined in the current quarter by 11.6% to $4.2 million when compared to the same period in 2008.  The majority of the decrease in non-interest income related to declines in service charge revenue where the Company experienced significantly fewer overdrafts. For the first quarter of 2009, total service charges were $3.0 million when compared to $3.3 million in the same quarter of 2008.




Noninterest Expense
Total non-interest expenses for the first quarter of 2009 rose slightly to $15.7 million, compared to $15.6 million at the same time in 2008.  Salaries and benefits declined 7.3% from the year ago period, which reflected a decrease in full time equivalent employees of 5.8%.  Occupancy and equipment expense for the first quarter of 2009 was $2.2 million, representing an increase of 8.4% from the same quarter in 2008, reflecting the cost of several new offices opened during the past few quarters.  Other operating expenses increased $942,000 during the first quarter of 2009 compared to the same quarter in 2008.  Increases in collection expenses and losses on OREO contributed to the increase in other operating expenses as did increases in FDIC premiums and costs associated with dealing with problem loans.

Income taxes
Federal 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 2009, the Company reported an income tax benefit of $539,000. This compares to income tax expense of $1.5 million in the same period of 2008.  The Company’s effective tax rate was 45% and 34% for the quarters ended March 31, 2009 and 2008, respectively.  The increase in the Company’s effective tax rate for the period ended March 31, 2009, is primarily related to certain tax benefits that were recognizable despite the current period’s pretax loss.