Loans

6 Months Ended

Jun. 30, 2011

Loans

Loans

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 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.

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:

		$1,493,126		$1,493,126		$1,493,126
(Dollars in Thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Commercial, financial and agricultural	$	150,377	$	142,312	$	171,060
Real estate – construction and development		143,684		162,594		199,016
Real estate – commercial and farmland		681,228		683,974		722,617
Real estate – residential		336,485		344,830		359,370
Consumer installment		35,584		34,293		37,434
Other		12,705		6,754		3,629
	$	1,360,063	$	1,374,757	$	1,493,126

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 $486.5 million, $555.0 million and $192.5 million at June 30, 2011, December 31, 2010 and June 30, 2010, 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:

		$486,489		$486,489		$486,489
(Dollars in Thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Commercial, financial and agricultural	$	42,494	$	47,309	$	18,771
Real estate – construction and development		79,540		89,781		30,177
Real estate – commercial and farmland		229,924		257,428		92,483
Real estate – residential		129,721		149,226		43,995
Consumer installment		4,810		11,247		7,119
	$	486,489	$	554,991	$	192,545

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 loans accounted for on a nonaccrual basis:

		$60,545		$60,545		$60,545
(Dollars in Thousands)	June 30, 2011		December 31, 2010		June 30, 2010
Commercial, financial and agricultural	$	5,439	$	8,648	$	10,560
Real estate – construction and development		13,714		7,887		9,280
Real estate – commercial and farmland		24,205		55,170		63,871
Real estate – residential		16,625		6,376		6,799
Consumer installment		562		1,208		1,826
	$	60,545	$	79,289	$	92,336

The following table presents an analysis of past due loans as of June 30, 2011 and December 31, 2010:

	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 June 30, 2011:
Commercial, financial & agricultural	$	653	$	282	$	5,334	$	6,269	$	144,108	$	150,377	$	—
Real estate – construction & development		1,551		1,243		13,194		15,988		127,696		143,684		—
Real estate – commercial & farmland		8,494		807		23,898		33,199		648,029		681,228		—
Real estate – residential		5,086		2,729		14,539		22,354		314,131		336,485		—
Consumer installment loans		525		178		493		1,196		34,388		35,584		—
Other		—		—		—		—		12,705		12,705		—
Total	$	16,309	$	5,239	$	57,458	$	79,006	$	1,281,057	$	1,360,063	$	—
	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 31, 2010:
Commercial, financial & agricultural	$	898	$	120	$	6,746	$	7,764	$	134,548	$	142,312	$	—
Real estate – construction & development		2,121		2,039		19,458		23,618		138,976		162,594		—
Real estate – commercial & farmland		1,740		3,725		25,914		31,379		652,595		683,974		—
Real estate – residential		3,384		3,066		14,393		20,843		323,987		344,830		—
Consumer installment loans		493		142		475		1,110		33,183		34,293		3
Other		—		—		—		—		6,754		6,754		—
Total	$	8,636	$	9,092	$	66,986	$	84,714	$	1,290,043	$	1,374,757	$	3

There were no material amount of loans past due ninety days or more and still accruing interest at June 30, 2010.

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. Impaired loans include loans on nonaccrual status and troubled debt restructurings. 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 impaired loans:

	As of and For the Period Ended
	June 30, 2011		December 31, 2010		June 30, 2010
	(Dollars in Thousands)
Nonaccrual loans	$	60,545	$	79,289	$	92,336
Troubled debt restructurings not included above		21,756		21,972		14,177
Total impaired loans	$	82,301	$	101,261	$	106,513
Impaired loans not requiring a related allowance	$	—	$	—	$	—
Impaired loans requiring a related allowance	$	82,301	$	101,261	$	106,513
Allowance related to impaired loans	$	15,328	$	16,688	$	17,292
Average investment in impaired loans	$	76,136	$	86,849	$	92,705
Interest income recognized on impaired loans	$	150	$	545	$	192
Foregone interest income on impaired loans	$	249	$	3,828	$	1,508

The following table presents an analysis of information pertaining to impaired loans as of June 30, 2011 and December 31, 2010:

	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 June 30, 2011:
Commercial, financial & agricultural	$	9,229	$	—	$	3,853	$	3,853	$	1,586	$	4,391
Real estate – construction & development		26,562		—		12,198		12,198		3,695		16,113
Real estate – commercial & farmland		42,445		—		33,045		33,045		5,096		38,738
Real estate – residential		24,118		—		17,456		17,456		4,810		16,451
Consumer installment loans		732		—		421		421		141		443
Total	$	103,086	$	—	$	66,973	$	66,973	$	15,328	$	76,136
	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, 2010:
Commercial, financial & agricultural	$	9,983	$	—	$	5,336	$	5,336	$	1,649	$	5,411
Real estate – construction & development		38,060		—		19,462		19,462		4,023		30,226
Real estate – commercial & farmland		57,224		—		43,831		43,831		6,795		33,882
Real estate – residential		22,819		—		15,547		15,547		4,085		16,785
Consumer installment loans		738		—		397		397		136		545
Total	$	128,824	$	—	$	84,573	$	84,573	$	16,688	$	86,849

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The 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 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 28 – 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 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.

The following table presents the loan portfolio by risk grade as of June 30, 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	$	13,799	$	213	$	329	$	109	$	5,926	$	—	$	20,376
15		11,307		3,483		151,047		35,416		899		—		202,152
20		61,543		36,007		274,185		128,581		21,477		12,705		534,498
25		54,635		67,615		157,862		121,094		5,927		—		407,133
28		1,614		7,360		8,484		12,346		29		—		29,833
30		1,477		6,071		44,388		13,028		564		—		65,528
40		5,362		22,659		44,933		25,911		747		—		99,612
50		640		276		—		—		6		—		922
60		—		—		—		—		9		—		9
Total	$	150,377	$	143,684	$	681,228	$	336,485	$	35,584	$	12,705	$	1,360,063

The following table presents the loan portfolio by risk grade as of December 31, 2010:

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	$	17,739	$	211	$	1,109	$	110	$	5,507	$	—	$	24,676
15		11,191		3,006		145,376		40,783		858		—		201,214
20		48,738		39,407		274,817		118,179		18,566		6,754		506,461
25		53,957		73,589		168,273		137,416		8,261		—		441,496
28		2,246		7,696		9,159		6,197		31		—		25,329
30		998		6,437		29,029		17,069		273		—		53,806
40		6,633		32,009		56,090		25,076		791		—		120,599
50		810		239		120		—		6		—		1,175
60		—		—		1		—		—		—		1
Total	$	142,312	$	162,594	$	683,974	$	344,830	$	34,293	$	6,754	$	1,374,757

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 fine tune 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.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company's Senior 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.

Activity in the allowance for loan losses for the six months ended June 30, 2011, for the year ended December 31, 2010 and for the six months ended June 30, 2010 is as follows:

(Dollars in Thousands)	June 30, 2011			December 31, 2010			June 30, 2010
Balance, January 1	$	34,576		$	35,762		$	35,762
Provision for loan losses charged to expense		14,554			48,839			29,378
Loans charged off		(15,626	)		(52,623	)		(32,002	)
Recoveries of loans previously charged off		1,019			2,598			1,330
Ending balance	$	34,523		$	34,576		$	34,468

During the six months ended June 30, 2011 and the year ended December 31, 2010, the Company recorded provision for loan loss expense of $1.6 million and $1.7 million, 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 Operations.

The following table details activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2011 and the year ended December 31, 2010. 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, 2011	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Provision for loan losses		3,234			3,683			4,908			2,466			263			14,554
Loans charged off		(3,241	)		(5,247	)		(4,889	)		(1,944	)		(305	)		(15,626	)
Recoveries of loans previously charged off		68			829			6			59			57			1,019
Balance, June 30, 2011	$	2,840		$	6,970		$	14,996		$	9,245		$	472		$	34,523
Period-end amount allocated to:
Loans individually evaluated for impairment	$	949		$	2,680		$	5,383		$	3,165		$	16		$	12,193
Loans collectively evaluated for impairment		1,891			4,290			9,613			6,080			456			22,330
Ending balance	$	2,840		$	6,970		$	14,996		$	9,245		$	472		$	34,523
Loans:
Individually evaluated for impairment	$	3,509		$	12,110		$	39,289		$	15,199		$	63		$	70,170
Collectively evaluated for impairment		146,868			131,574			641,939			321,286			48,226			1,289,893
Ending balance	$	150,377		$	143,684		$	681,228		$	336,485		$	48,289		$	1,360,063
	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, 2010	$	3,428		$	13,098		$	11,296		$	7,391		$	549		$	35,762
Provision for loan losses		4,265			13,776			18,937			11,178			683			48,839
Loans charged off		(5,481	)		(19,853	)		(16,108	)		(10,091	)		(1,090	)		(52,623	)
Recoveries of loans previously charged off		567			684			846			186			315			2,598
Balance, December 31, 2010	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Period-end amount allocated to:
Loans individually evaluated for impairment	$	677		$	3,554		$	6,300		$	2,554		$	—		$	13,085
Loans collectively evaluated for impairment		2,102			4,151			8,671			6,110			457			21,491
Ending balance	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Loans:
Individually evaluated for impairment	$	3,930		$	22,838		$	50,179		$	14,740		$	—		$	91,687
Collectively evaluated for impairment		138,382			139,756			633,795			330,090			41,047			1,283,070
Ending balance	$	142,312		$	162,594		$	683,974		$	344,830		$	41,047		$	1,374,757