10-Q 1 d10q.htm FORM 10-Q 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 June 30, 2011

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 a 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 23,766,044 shares of Common Stock outstanding as of August 3, 2011.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

          Page  
PART I – FINANCIAL INFORMATION   
Item 1.    Financial Statements   
   Consolidated Balance Sheets at June 30, 2011, December 31, 2010 and June 30, 2010      1   
  

Consolidated Statements of Operations and Comprehensive Income/(Loss) for the Three and Six Month Periods Ended June 30, 2011 and 2010

     2   
  

Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June  30, 2011 and 2010

     3   
   Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010      4   
   Notes to Consolidated Financial Statements      5   
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      23   
Item 3.    Quantitative and Qualitative Disclosures About Market Risk      35   
Item 4.    Controls and Procedures      35   
PART II – OTHER INFORMATION   
Item 1.    Legal Proceedings      36   
Item 1A.    Risk Factors      36   
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      36   
Item 3.    Defaults Upon Senior Securities      36   
Item 4.    (Removed and Reserved)      36   
Item 5.    Other Information      36   
Item 6.    Exhibits      36   

Signatures

     36   


Table of Contents

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

 

     June 30,
2011
    December 31,
2010
    June 30,
2010
 
     (Unaudited)     (Audited)     (Unaudited)  

Assets

      

Cash and due from banks

   $ 68,552      $ 74,326      $ 54,444   

Federal funds sold and interest bearing accounts

     218,330        261,262        240,075   

Investment securities available for sale, at fair value

     334,376        322,581        237,764   

Other investments

     10,354        12,440        7,752   

Loans

     1,360,063        1,374,757        1,493,126   

Covered loans

     486,489        554,991        192,545   

Less: allowance for loan losses

     34,523        34,576        34,468   
  

 

 

   

 

 

   

 

 

 

Loans, net

     1,812,029        1,895,172        1,651,204   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     61,533        57,915        41,079   

Covered other real estate owned

     63,583        54,931        25,845   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned

     125,116        112,846        66,924   
  

 

 

   

 

 

   

 

 

 

FDIC indemnification asset

     160,927        177,187        59,179   

Premises and equipment, net

     65,925        66,589        66,708   

Intangible assets, net

     3,745        4,261        3,314   

Goodwill

     956        956        —     

Other assets

     56,927        44,548        34,546   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,857,237      $ 2,972,168      $ 2,421,910   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 318,004      $ 301,971      $ 218,012   

Interest-bearing

     2,193,359        2,233,455        1,862,014   
  

 

 

   

 

 

   

 

 

 

Total deposits

     2,511,363        2,535,426        2,080,026   

Securities sold under agreements to repurchase

     17,136        68,184        17,600   

Other borrowings

     —          43,495        —     

Other liabilities

     9,311        9,387        7,145   

Subordinated deferrable interest debentures

     42,269        42,269        42,269   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     2,580,079        2,698,761        2,147,040   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

      

Stockholders’ Equity

      

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

     50,419        50,121        49,832   

Common stock, par value $1; 30,000,000 shares authorized; 25,102,218, 24,982,911 and 24,961,239 issued

     25,102        24,983        24,961   

Capital surplus

     166,170        165,930        165,398   

Retained earnings

     38,888        37,000        37,665   

Accumulated other comprehensive income

     7,410        6,204        7,834   

Treasury stock, at cost, 1,336,174, 1,336,174 and 1,334,234 shares

     (10,831     (10,831     (10,820
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     277,158        273,407        274,870   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,857,237      $ 2,972,168      $ 2,421,910   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Interest income

        

Interest and fees on loans

   $ 32,876      $ 28,187      $ 61,847      $ 53,343   

Interest on taxable securities

     2,574        2,502        5,232        4,964   

Interest on nontaxable securities

     314        299        634        603   

Interest on deposits in other banks and federal funds sold

     159        109        347        178   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     35,923        31,097        68,060        59,088   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

        

Interest on deposits

     6,828        7,084        14,200        14,416   

Interest on other borrowings

     351        154        906        400   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     7,176        7,238        15,106        14,816   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     28,747        23,859        52,954        44,272   

Provision for loan losses

     9,115        18,608        16,158        29,378   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     19,632        5,251        36,796        14,894   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

        

Service charges on deposit accounts

     4,665        3,620        8,932        7,059   

Mortgage banking activity

     376        675        826        1,229   

Other service charges, commissions and fees

     273        232        515        445   

Gain on acquisitions

     —          8,208        —          8,208   

Gain/(loss) on sale of securities

     14        —          238        200   

Other noninterest income

     646        314        1,656        793   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     5,974        13,049        12,167        17,934   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

        

Salaries and employee benefits

     9,421        8,027        19,264        15,853   

Equipment and occupancy expenses

     2,752        2,025        5,482        4,052   

Amortization of intangible assets

     242        186        505        457   

Data processing and telecommunications expenses

     2,452        2,077        4,848        3,840   

Advertising and marketing expenses

     149        143        312        302   

Other non-interest expenses

     7,580        10,925        13,340        15,810   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     22,596        23,383        43,751        40,314   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit)

     3,010        (5,083     5,212        (7,486

Applicable income tax expense (benefit)

     896        (1,664     1,720        (2,533
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,114      $ (3,419   $ 3,492      $ (4,953
  

 

 

   

 

 

   

 

 

   

 

 

 

Preferred stock dividends

     807        799        1,605        1,595   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common shareholders

   $ 1,307      $ (4,218   $ 1,887      $ (6,548
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

        

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

     2,250        374        1,988        1,073   

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

     (574     (216     (628     (349

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

     (8     —          (154     (130
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income/(loss)

     1,668        158        1,206        594   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,975      $ (4,060   $ 3,093      $ (5,954
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and Diluted earnings/(loss) per share

   $ 0.06      $ (0.20   $ 0.08      $ (0.37
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares Outstanding

        

Basic

     23,449        21,231        23,445        17,569   

Diluted

     23,508        21,231        23,491        17,569   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

 

     Six Months Ended     Six Months Ended  
     June 30, 2011     June 30, 2010  
     Shares     Amount     Shares     Amount  

PREFERRED STOCK

        

Balance at beginning of period

     52,000      $ 50,121        52,000      $ 49,552   

Accretion of fair value of warrant

     —          298        —          280   
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     52,000      $ 50,419        52,000      $ 49,832   

COMMON STOCK

        

Issued at beginning of period

     24,982,911      $ 24,983        15,379,131      $ 15,379   

Issuance of common stock

     —          —          9,473,125        9,473   

Issuance of restricted shares

     125,075        125        113,800        114   

Cancellation of restricted shares

     (7,000     (7     (8,500     (9

Proceeds from exercise of stock options

     1,232        1        3,683        4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     25,102,218      $ 25,102        24,961,239      $ 24,961   

CAPITAL SURPLUS

        

Balance at beginning of period

     $ 165,930        $ 89,389   

Stock-based compensation

       349          243   

Issuance of common stock

       —            75,797   

Proceeds from exercise of stock options

       9          26   

Issuance of restricted shares

       (125       (66

Cancellation of restricted shares

       7          9   
    

 

 

     

 

 

 

Balance at end of period

     $ 166,170        $ 165,398   

RETAINED EARNINGS

        

Balance at beginning of period

     $ 37,000        $ 44,216   

Net income /(loss)

       3,492          (4,953

Dividends on preferred shares

       (1,306       (1,308

Accretion of fair value of warrant

       (298       (287

Cash dividends on common shares

       —            (3
    

 

 

     

 

 

 

Balance at end of period

     $ 38,888        $ 37,665   

ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX

        

Unrealized gains (losses) on securities and derivatives:

        

Balance at beginning of period

     $ 6,204        $ 7,240   

Accumulated other comprehensive income

       1,206          594   
    

 

 

     

 

 

 

Balance at end of period

     $ 7,410        $ 7,834   

TREASURY STOCK

        

Balance at beginning of period

     $ 10,831        $ 10,812   

Purchase of treasury shares

       —            8   
    

 

 

     

 

 

 

Balance at end of period

     $ 10,831        $ 10,820   

TOTAL STOCKHOLDERS’ EQUITY

     $ 277,158        $ 274,870   

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)

 

     Six Months Ended
June  30,
 
     2011     2010  

Cash Flows From Operating Activities:

    

Net income (loss)

   $ 3,492      $ (4,953

Adjustments reconciling net income (loss) to net cash provided by operating activities:

    

Depreciation

     2,168        1,742   

Net gains on sale or disposal of premises and equipment

     (139     (397

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

     3,570        5,048   

Provision for loan losses

     16,158        29,378   

Gain on acquisitions

     —          (8,208

Amortization of intangible assets

     505        457   

Net gains on securities available for sale

     (238     (200

Change in other prepaids, deferrals and accruals, net

     (15,659     (1,282
  

 

 

   

 

 

 

Net cash provided by operating activities

     9,857        21,585   
  

 

 

   

 

 

 

Cash Flows From Investing Activities:

    

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

     42,932        (19,712

Proceeds from maturities of securities available for sale

     37,430        51,596   

Purchase of securities available for sale

     (85,556     (37,857

Proceeds from sales of securities available for sale

     39,388        6,145   

Net decrease in loans

     33,819        37,232   

Proceeds from sales of other real estate owned

     21,361        15,983   

Proceeds from sales of premises and equipment

     1,105        1,584   

Purchases of premises and equipment

     (2,459     (2,000

Decrease in FDIC indemnification asset

     16,260        9,061   

Cash paid in FDIC-assisted acquisition

     —          (35,657
  

 

 

   

 

 

 

Net cash provided by investing activities

     104,280        26,375   
  

 

 

   

 

 

 

Cash Flows From Financing Activities:

    

Net decrease in deposits

     (24,063     (118,884

Net decrease in securities sold under agreements to repurchase

     (51,048     (37,654

Decrease in other borrowings

     (43,495     (2,000

Dividends paid - preferred stock

     (1,305     (1,308

Issuance of common stock

     —          85,270   
  

 

 

   

 

 

 

Net cash used in financing activities

     (119,911     (74,576
  

 

 

   

 

 

 

Net decrease in cash and due from banks

   $ (5,774   $ (26,616

Cash and due from banks at beginning of period

     74,326        81,060   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 68,552      $ 54,444   
  

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011

(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 June 30, 2011, the Bank operated 59 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 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 period ended June 30, 2011 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, 2010.

Certain amounts reported for the periods ended December 31, 2010 and June 30, 2010 have been reclassified to conform to the presentation as of June 30, 2011. These reclassifications had no effect on previously reported net income or stockholders’ equity.

Newly Adopted Accounting Pronouncements

ASU 2011-01 - Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (“ASU 2011-01”). ASU 2011-01 temporarily delays the effective date of the disclosures surrounding troubled debt restructurings in Update 2010-20 for public companies. The Financial Accounting Standards Board (“FASB”) is deliberating on what constitutes a troubled debt restructuring and will coordinate that guidance with the effective date of the new disclosures, which is anticipated to be effective for interim and annual periods ending after June 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-02 - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”). ASU 2011-02 provides additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. ASU 2011-02 is effective for the first interim or annual period beginning on or after June 15, 2011, and is to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying ASU 2011-02, an entity may identify receivables that are newly considered impaired. The Company is continuing to evaluate the impact of adoption of ASU 2011-02.

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 is not expected to 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 applied retrospectively. 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 and Due From Banks, Federal Funds Sold and Interest-Bearing Accounts: The carrying amount of cash and due from banks, federal funds sold and interest-bearing accounts 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 investments 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 expected future 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 loan 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.

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.

 

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Table of Contents

FDIC Loss-Share Receivable: 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 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).

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 June 30, 2011, December 31, 2010 and June 30, 2010, 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.

 

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Table of Contents

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

 

     June 30, 2011      December 31, 2010      June 30, 2010  
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 
     (Dollars in Thousands)  

Financial assets:

                 

Loans, net

   $ 1,812,029       $ 1,818,152       $ 1,895,172       $ 1,905,346       $ 1,651,204       $ 1,662,689   

Financial liabilities:

                 

Deposits

     2,511,363         2,513,459         2,535,426         2,542,767         2,080,026         2,082,649   

Other borrowings

     —           —           43,495         43,685         —           —     

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 June 30, 2011 and 2010 and December 31, 2010 (dollars in thousands):

 

     Fair Value Measurements on a Recurring Basis
As of June 30, 2011
 
     Fair Value      Level 1      Level 2      Level 3  

U.S. government agencies

   $ 24,259       $ —         $ 24,259       $ —     

State, county and municipal securities

     60,546         2,367        58,179         —     

Corporate debt securities

     9,722         —           7,722         2,000   

Mortgage backed securities

     239,849         8,153         231,696         —     

Derivative financial instruments

     243         —           243         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 334,619       $ 10,520       $ 322,099       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Recurring Basis
As of December 31, 2010
 
     Fair Value      Level 1      Level 2      Level 3  

U.S. government agencies

   $ 35,468       $ —         $ 35,468       $ —     

State, county and municipal securities

     57,696         —           54,951         2,745   

Corporate debt securities

     10,786         —           8,786         2,000   

Mortgage backed securities

     218,631         —           218,631         —     

Derivative financial instruments

     936         —           936         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 323,517       $ —         $ 318,772       $ 4,745   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Recurring Basis
As of June 30, 2010
 
     Fair Value      Level 1      Level 2      Level 3  

U.S. government agencies

   $ 19,914       $ —         $ 19,914       $ —     

State, county and municipal securities

     43,910         —           43,910         —     

Corporate debt securities

     9,585         —           7,585         2,000   

Mortgage backed securities

     164,355         —           164,355         —     

Derivative financial instruments

     1,505         —           1,505         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 239,269       $ —         $ 237,269       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The following table 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 valuation hierarchy as of June 30, 2011 and 2010 and December 31,2010 (dollars in thousands):

 

     Fair Value Measurements on a Nonrecurring Basis
As of June 30, 2011
 
     Fair Value      Level 1      Level 2      Level 3  

Impaired loans carried at fair value

   $ 60,545       $ —         $ 60,545       $ —     

Other real estate owned

     61,533         —           —           61,533   

Covered loans

     486,489         —           —           486,489   

Covered other real estate owned

     63,583         —           —           63,583   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-recurring assets at fair value

   $ 672,150       $ —         $ 60,545       $ 611,605   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2010
 
     Fair Value      Level 1      Level 2      Level 3  

Impaired loans carried at fair value

   $ 79,289       $ —         $ 79,289       $ —     

Other real estate owned

     57,915         —           —           57,915   

Covered loans

     554,991         —           —           554,991   

Covered other real estate owned

     54,931         —           —           54,931   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 747,126       $ —         $ 79,289       $ 667,837   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Nonrecurring Basis
As of June 30, 2010
 
     Fair Value      Level 1      Level 2      Level 3  

Impaired loans carried at fair value

   $ 82,071       $ —         $ 82,071       $ —     

Other real estate owned

     41,079         —           —           41,079   

Covered loans

     192,545         —           —           192,545   

Covered other real estate owned

     25,845         —           —           25,845   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 341,540       $ —         $ 82,071       $ 259,469   
  

 

 

    

 

 

    

 

 

    

 

 

 

Below is the Company’s reconciliation of Level 3 assets as of June 30, 2011. Gains or losses on impaired loans are recorded in the provision for loan losses.

 

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

Beginning balance January 1, 2011

   $ 4,745      $ 57,915      $ 554,991      $ 54,931   

Total gains/(losses) included in net income

     —          (3,649     —          79   

Purchases, sales, issuances, and settlements, net

     —          (13,604     (56,207     (3,722

Transfers in or out of Level 3

     (2,745     20,871        (12,295     12,295   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance June 30, 2011

   $ 2,000      $ 61,533      $ 486,489      $ 63,583   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

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 June 30, 2011, December 31, 2010 and June 30, 2010 are presented below:

 

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

June 30, 2011:

          

U. S. government agencies

   $ 24,056       $ 203       $ —        $ 24,259   

State, county and municipal securities

     58,636         1,950         (40     60,546   

Corporate debt securities

     11,637         242         (2,157     9,722   

Mortgage-backed securities

     234,437         5,979         (567     239,849   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 328,766       $ 8,374       $ (2,764   $ 334,376   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2010:

          

U. S. government agencies

   $ 35,128       $ 448       $ (108   $ 35,468   

State, county and municipal securities

     57,385         928         (617     57,696   

Corporate debt securities

     13,540         123         (2,877     10,786   

Mortgage-backed securities

     213,737         6,732         (1,838     218,631   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 319,790       $ 8,231       $ (5,440   $ 322,581   
  

 

 

    

 

 

    

 

 

   

 

 

 

June 30, 2010:

          

U. S. government agencies

   $ 19,329       $ 585       $ —        $ 19,914   

State, county and municipal securities

     42,823         1,100         (13     43,910   

Corporate debt securities

     12,635         92         (3,142     9,585   

Mortgage-backed securities

     156,307         8,110         (62     164,355   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 231,094       $ 9,887       $ (3,217   $ 237,764   
  

 

 

    

 

 

    

 

 

   

 

 

 

The amortized cost and fair value of available-for-sale securities at June 30, 2011 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

   $ 13,491       $ 13,543   

Due from one year to five years

     22,120         22,722   

Due from five to ten years

     35,564         37,000   

Due after ten years

     23,154         21,262   

Mortgage-backed securities

     234,437         239,849   
  

 

 

    

 

 

 
   $ 328,766       $ 334,376   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $200.2 million serve as collateral to secure public deposits and other purposes required or permitted by law at June 30, 2011.

 

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Table of Contents

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2011, December 31, 2010 and June 30, 2010.

 

     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)  

June 30, 2011:

               

U. S. government agencies

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

State, county and municipal securities

     3,844         (39     203         (1     4,047         (40

Corporate debt securities

     100         (1     4,936         (2,156     5,036         (2,157

Mortgage-backed securities

     60,926         (567     —           —          60,926         (567
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 64,870       $ (607   $ 5,139       $ (2,158   $ 70,009       $ (2,764
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2010:

               

U. S. government agencies

   $ 25,017       $ (108   $ —         $ —        $ 25,017       $ (108

State, county and municipal securities

     17,563         (617     —           —          17,563         (617

Corporate debt securities

     1,048         (20     5,078         (2,857     6,126         (2,877

Mortgage-backed securities

     64,549         (1,838     15         —          64,564         (1,838
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 108,177       $ (2,583   $ 5,093       $ (2,857   $ 113,270       $ (5,440
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

June 30, 2010:

               

U. S. government agencies

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

State, county and municipal securities

     2,488         (9     921         (4     3,409         (13

Corporate debt securities

     916         (84     5,045         (3,058     5,961         (3,142

Mortgage-backed securities

     3,072         (1     1,509         (61     4,581         (62
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 6,476       $ (94   $ 7,475       $ (3,123   $ 13,951       $ (3,217
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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.

 

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Table of Contents

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   
  

 

 

    

 

 

    

 

 

 

 

12


Table of Contents

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.

 

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Table of Contents

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.

 

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Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

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.

 

16


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

     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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

17


Table of Contents

NOTE 4 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

From October 2009 through June 2011, the Company participated in six 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

The determination of the initial fair value of loans at the acquisition and the initial fair value of the related FDIC indemnification asset involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification asset 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 these financial statements, 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 asset 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 yield 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. During the six months ended June 30, 2011 and the year ended December 31, 2010, the Company recorded provision for loan loss expense of $1.9 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.

On the acquisition date, the preliminary estimates of the contractually required payments receivable for all ASC 310 loans acquired in the acquisitions totaled $505.1 million and the estimated fair values of the loans totaled $273.1 million, net of an accretable yield of $38.8 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

 

18


Table of Contents

The following table summarizes components of all covered assets at June 30, 2011 and December 31, 2010 and their origin:

 

     SCB      FBJ      TBC      DBT      AUB      USB      Total  

As of June 30, 2011:

     (Dollars in thousands)   

Covered loans

   $ 61,958       $ 45,011       $ 99,529       $ 326,991       $ 48,309       $ 67,203       $ 649,001   

Less adjustments related to credit risk

     6,471         8,500         21,249         112,589         5,208         6,332         160,349   

Less adjustments related to liquidity and yield

     361         119         397         951         86         249         2,163   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Covered Loans

   $ 55,126       $ 36,392       $ 77,883       $ 213,451       $ 43,015       $ 60,622       $ 486,489   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

OREO

   $ 9,761       $ 3,053       $ 6,113       $ 36,383       $ 11,064       $ 10,274       $ 76,648   

Less fair value adjustments

     500         1,559         1,274         9,582         77         73         13,065   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Covered OREO

   $ 9,261       $ 1,494       $ 4,839       $ 26,801       $ 10,987       $ 10,201       $ 63,583   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered assets

   $ 64,387       $ 37,886       $ 82,722       $ 240,252       $ 54,002       $ 70,823       $ 550,072   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

FDIC loss-share receivable

   $ 9,669       $ 9,812       $ 26,070       $ 100,150       $ 5,338       $ 9,888       $ 160,927   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     SCB      FBJ      TBC      DBT      AUB      USB      Total  
As of December 31, 2010:    (Dollars in thousands)  

Covered loans

   $ 76,472       $ 48,632       $ 113,283       $ 380,238       $ 53,203       $ 77,188       $ 749,016   

Less adjustments related to credit risk

     12,336         10,532         25,388         130,769         4,332         7,593         190,950   

Less adjustments related to liquidity and yield

     506         151         458         1,199         214         547         3,075   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Covered Loans

   $ 63,630       $ 37,949       $ 87,437       $ 248,270       $ 48,657       $ 69,048       $ 554,991   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

OREO

   $ 8,311       $ 2,799       $ 4,178       $ 42,724       $ 13,207       $ 11,473       $ 82,692   

Less fair value adjustments

     1,373         2,500         2,031         21,000         783         74         27,761   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Covered OREO

   $ 6,938       $ 299       $ 2,147       $ 21,724       $ 12,424       $ 11,399       $ 54,931   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered assets

   $ 70,568       $ 38,248       $ 89,584       $ 269,994       $ 61,081       $ 80,447       $ 609,922   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

FDIC loss-share receivable

   $ 14,333       $ 11,944       $ 27,436       $ 112,404       $ 4,208       $ 6,862       $ 177,187   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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:

 

Total Amounts

   June 30,
2011
     December 31,
2010
     June 30,
2010
 
     (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 yield)

   $ 8,448       $ 30,448       $ 16,987  

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

     8,018         8,410         4,417  

Amounts reflected in the Company’s Statement of Operations

   June 30,
2011
     December 31,
2010
     June 30,
2010
 
     (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 yield)

   $ 1,689       $ 4,245       $ 2,353  

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

     1,604         1,682         883  

A rollforward of acquired loans with deterioration of credit quality for the six months ended June 30, 2011, the year ended December 31, 2010 and the six months ended June 30, 2010 is shown below:

 

(Dollars in Thousands)

   June 30,
2011
    December 31,
2010
    June 30,
2010
 

Balance, January 1

   $ 252,535      $ 56,793      $ 56,793   

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

     (6,681     (8,081     (849

Additions due to acquisitions

     —          214,500        25,471   

Other (loan payments, transfers, etc.)

     (2,648     (10,677     (2,429
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 243,206      $ 252,535      $ 78,986   
  

 

 

   

 

 

   

 

 

 

The following is a summary of changes in the accretable yields of acquired loans during the six months ended June 30, 2011, the year ended December 31, 2010 and the six months ended June 30, 2010.

 

(Dollars in Thousands)

   June 30,
2011
    December 31,
2010
    June 30,
2010
 

Balance, January 1

   $ 37,383      $ 3,550      $ 3,550   

Additions due to acquisitions

     —          35,245        1,508   

Accretion

     (10,073     (7,502     (2,353

Other activity, net

     (7,178     6,090        3,398   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 20,132      $ 37,383      $ 6,103   
  

 

 

   

 

 

   

 

 

 

 

20


Table of Contents

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 value of $168.9 million and $45.8 million on the 2010 and 2009 acquisition dates, respectively. Changes in the FDIC shared-loss receivable for the six months ended June 30, 2011, for the year ended December 31, 2010 and for the six months ended June 30, 2010 are as follows:

 

(Dollars in Thousands)

   June 30,
2011
    December 31,
2010
    June 30,
2010
 

Balance, January 1

   $ 177,187      $ 45,840      $ 45,840   

Indemnification asset recorded in acquisitions

     —          168,918        22,400  

Payments received from FDIC

     (5,162     (26,522  

Effect of change in expected cash flows on covered assets

     (11,098     (11,049     (9,061
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 160,927      $ 177,187      $ 59,179   
  

 

 

   

 

 

   

 

 

 

NOTE 5 – WEIGHTED AVERAGE SHARES OUTSTANDING

Due to the net loss reported for the quarter and six month period ending June 30, 2010, the Company has excluded the effects of potential common shares 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 June 30,
     For the Six  Months
Ended June 30,
 
     2011      2010      2011      2010  
     (share data in
thousands)
     (share data in
thousands)
 

Basic shares outstanding

     23,449         21,231         23,445         17,569   

Plus: Dilutive effect of ISOs

     34         —           34         —     

Plus: Dilutive effect of Restricted Grants

     25         —           12         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     23,508         21,231         23,491         17,569   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 June 30, 2011 and 2010, there were no outstanding borrowings with the Company’s correspondent banks, compared to $43.5 million at December 31, 2010. The Company’s success with attracting and retaining retail deposits has allowed for very low dependence on more volatile non-deposit funding.

 

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Table of Contents

NOTE 7 – COMMITMENTS

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.

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

 

(Dollars in Thousands)

   June 30,
2011
     December 31,
2010
     June 30,
2010
 

Commitments to extend credit

   $ 124,528       $ 166,845       $ 143,437   

Standby letters of credit

   $ 9,117       $ 7,874       $ 6,897   

NOTE 8 – SUBSEQUENT EVENT

Subsequent to June 30, 2011, the Company participated in two federally assisted acquisitions that will likely not have a material impact on the Company’s operations and statement of condition. The acquisitions are described as follows:

High Trust Bank, Stockbridge, Georgia:

On July 15, 2011, the Bank purchased substantially all of the assets and assumed substantially all the liabilities of High Trust Bank (“HTB”) from the FDIC, as Receiver of HTB. HTB operated two branches in Stockbridge and Leary, Georgia. The Company’s agreement with the FDIC included a loss-sharing agreement which affords the Bank significant protection from losses associated with loans and OREO. Under the terms of the loss-sharing agreements, the FDIC will absorb 80% of losses and share 80% of loss recoveries during the term of the agreements. The term for loss sharing on residential real estate loans is ten years, while the term for loss sharing on all other loans is five years.

The Company’s bid to acquire HTB included a discount on the book value of the assets totaling $33.5 million. The Bank’s bid resulted in a cash payment from the FDIC totaling $30.2 million. The Company’s gain on the acquisition is estimated to be less than $10.0 million, after tax.

One Georgia Bank, Atlanta, Georgia:

On July 15, 2011, the Bank purchased substantially all of the assets and assumed substantially all the liabilities of One Georgia Bank (“OGB”) from the FDIC, as Receiver of OGB. OGB operated one branch in Atlanta, Georgia. The Company’s agreement with the FDIC included a loss-sharing agreement which affords the Bank significant protection from losses associated with loans and OREO. Under the terms of the loss-sharing agreements, the FDIC will absorb 80% of losses and share 80% of loss recoveries during the term of the agreements. The term for loss sharing on residential real estate loans is ten years, while the term for loss sharing on all other loans is five years.

The Company’s bid to acquire OGB included a discount on the book value of the assets totaling $22.5 million. The Bank’s bid resulted in a cash payment to the FDIC totaling $5.7 million. The Company’s gain on the acquisition is estimated to be less than $4.0 million, after tax.

 

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Table of Contents

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.

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.

 

23


Table of Contents

(in thousands, except share data,

taxable equivalent)

   Second
Quarter 2011
    First
Quarter 2011
    Fourth
Quarter 2010
    Third
Quarter 2010
    Second
Quarter 2010
    For Six Months Ended  
             June 30, 2011     June 30, 2010  

Results of Operations:

              

Net interest income

   $ 28,747      $ 24,207      $ 23,006      $ 21,999      $ 23,859      $ 52,954      $ 44,272   

Net interest income (tax equivalent)

     28,969        24,418        23,245        22,220        24,588        53,387        45,232   

Provision for loan losses

     9,115        7,043        11,404        9,739        18,608        16,158        29,378   

Non-interest income

     5,974        6,193        12,303        5,011        13,049        12,167        17,934   

Non-interest expense

     22,596        21,155        21,946        18,928        23,383        43,751        40,314   

Income tax expense (benefit)

     896        824        98        (760     (1,664     1,720        (2,533

Preferred stock dividends

     807        798        811        807        799        1,605        1,595   

Net income (loss) available to common shareholders

     1,307        580        1,050        (1,704     (4,218     1,887        (6,548

Selected Average Balances:

              

Loans, net of unearned income

   $ 1,349,092      $ 1,361,964      $ 1,416,254      $ 1,503,149      $ 1,528,220      $ 1,357,664      $ 1,533,468   

Covered loans

     506,251        540,127        374,282        187,556        155,302        522,497        150,052   

Investment securities

     289,149        301,572        284,066        235,057        245,182        295,344        245,539   

Earning assets

     2,426,041        2,453,040        2,378,065        2,184,676        2,223,743        2,440,683        2,178,804   

Assets

     2,909,012        2,949,943        2,872,207        2,429,709        2,444,425        2,945,426        2,410,887   

Deposits

     2,540,738        2,548,509        2,310,372        2,088,997        2,111,612        2,547,066        2,106,696   

Common shareholders’ equity

     229,794        222,675        225,088        224,656        217,042        228,645        230,233   

Period-End Balances:

              

Loans, net of unearned income

   $ 1,360,063      $ 1,345,981      $ 1,374,757      $ 1,455,853      $ 1,493,126      $ 1,360,063      $ 1,493,126   

Covered loans

     486,489        526,012        554,991        192,268        191,663        486,489        191,663   

Earning assets

     2,399,258        2,442,121        2,513,591        2,191,035        2,162,849        2,399,258        2,162,849   

Total assets

     2,857,237        2,918,423        2,972,168        2,434,703        2,421,910        2,857,237        2,421,910   

Total deposits

     2,511,363        2,572,689        2,535,426        2,099,001        2,080,026        2,511,363        2,080,026   

Common shareholders’ equity

     226,739        223,588        223,286        223,993        225,038        226,739        225,038   

Per Common Share Data:

              

Earnings per share - Basic

   $ 0.06      $ 0.02      $ 0.04      $ (0.07   $ (0.20   $ 0.08      $ (0.37

Earnings per share - Diluted

     0.06        0.02        0.04        (0.07     (0.20     0.08        (0.37

Common book value per share

     9.54        9.41        9.44        9.48        9.57        9.54        9.57   

End of period shares outstanding

     23,766,044        23,766,044        23,647,841        23,625,065        23,627,005        23,766,044        23,627,005   

Weighted average shares outstanding

              

Basic

     23,449,123        23,440,201        23,427,393        23,427,919        21,231,367        23,522,361        17,568,752   

Diluted

     23,508,419        23,474,424        23,579,205        23,427,919        21,231,367        23,566,476        17,568,752   

Market Price:

              

High closing price

     10.16        11.10        11.07        10.49        11.55        11.10        11.55   

Low closing price

     8.49        9.32        8.73        7.83        9.00        8.49        7.36   

Closing price for quarter

     8.87        10.16        10.54        9.35        9.66        8.87        9.66   

Average daily trading volume

     58,706        46,618        55,281        75,573        205,388        52,545        121,552   

Cash dividends per share

     —          —          —          —          —          —          —     

Stock dividend

     —          —          —          —          1 for 210        —          2 for 170   

Closing price to book value

     0.93        1.09        1.12        0.99        1.01        0.93        1.01   

Performance Ratios:

              

Return on average assets

     0.18     0.08     0.15     (0.28 %)      (0.68 %)      0.13     (0.47 %) 

Return on average common equity

     2.28     1.06     1.85     (2.46 %)      (6.34 %)      1.66     (4.95 %) 

Average loans to average deposits

     73.02     74.64     77.50     80.93     79.73     73.82     79.91

Average equity to average assets

     9.63     9.25     9.58     11.25     10.99     9.47     9.54

Net interest margin (tax equivalent)

     4.79     4.04     3.88     4.04     4.43     4.41     4.19

Efficiency ratio (tax equivalent)

     65.08     69.59     62.15     70.08     63.35     66.85     64.81

 

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Table of Contents

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 June 30, 2011 as compared to December 31, 2010 and operating results for the three-and six-month periods ended June 30, 2011 and 2010. 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 June 30, 2011

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $1.3 million, or $0.06 per diluted share, for the quarter ended June 30, 2011, compared to a net loss for the same quarter in 2010 of $4.2 million, or $0.20 per diluted share. The Company’s return on average assets and average shareholders’ equity increased in the second quarter of 2011 to 0.18% and 2.31%, respectively, compared to (0.69%) and (6.34%) in the second quarter of 2010. The increase in earnings and profitability during the quarter was primarily due to increased net interest income and reduced credit costs.

Net Interest Income and Margins

On a tax equivalent basis, net interest income for the second quarter of 2011 was $29.0 million, an increase of $4.4 million compared to $24.6 reported in the same quarter in 2010. This increase includes $3.8 million of accretion on covered loans during the second quarter from improvements in the expected cash flows from recent FDIC acquisitions. The Company’s net interest margin has also been positively affected by flat yields on all other classes of earning assets complemented by steady decreases in the Company’s cost of funds. The Company’s net interest margin increased as well in the current quarter, to 4.79% compared to 4.43% in the second quarter of 2010. 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.

During the second quarter of 2011, interest income, on a tax equivalent basis, totaled $36.1 million compared to $31.8 million in the same quarter of 2010. Yields on earning assets increased to 5.98% in the second quarter of 2011 compared to 5.74% reported in the second quarter of 2010, due to the additional accretion on covered loans. During the second quarter of 2011, short-term assets averaged 11.2% of total earning assets compared to 12.9% in the same quarter in 2010. 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 continued participation in FDIC-assisted acquisitions as well as improving economic conditions and increased loan demand which will provide opportunities to invest a portion of the short-term assets at higher yields.

Total funding costs declined to 1.10% in the second quarter of 2011 compared to 1.34% during the second quarter of 2010. Deposit costs decreased from 1.35% in the second quarter of 2010 and 1.17% in the first quarter of 2011 to 1.08% in the second quarter of 2011. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 60.1% of total deposits in the second quarter of 2011 compared to 58.1% during the second quarter of 2010. Local customer deposits in the second quarter of 2011 comprised 93.5% of total funding compared to 90.8% of total funding in the same quarter in 2010. Lower costs on deposits were 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 second quarter of 2011 and 2010 are shown below:

 

(Dollars in Thousands)    June 30, 2011     June 30, 2010  
     Average
Balance
     Average
Cost
    Average
Balance
     Average
Cost
 

NOW

   $ 582,773         0.71   $ 482,798         0.94

MMDA

     545,261         1.06     441,445         1.31

Savings

     78,674         0.45     64,887         0.46

Retail CDs < $100,000

     417,297         1.43     375,339         1.80

Retail CDs > $100,000

     490,660         1.61     371,754         1.81

Brokered CDs

     105,338         3.33     138,113         3.09
  

 

 

    

 

 

   

 

 

    

 

 

 

Interest bearing deposits

   $ 2,220,003         1.25   $ 1,874,336         1.51

 

25


Table of Contents

Provision for Loan Losses and Credit Quality

The Company’s provision for loan losses during the second quarter of 2011 amounted to $9.1 million compared to $7.0 million in the first quarter of 2011 and $18.6 million in the second quarter of 2010. Although the Company has experienced improving trends in criticized and classified assets for several quarters, higher levels of provision for loan losses have been required to account for continued devaluation of real estate collateral. At June 30, 2011, classified loans still accruing totaled $40.0 million compared to $32.7 million at June 30, 2010. Non-accrual loans at June 30, 2011 totaled $60.5 million, an 11.5% decrease from the $68.4 million reported at March 31, 2011 and a 34.4% decrease from the $92.3 million reported at June 30, 2010.

At June 30, 2011, other real estate owned (excluding covered OREO) totaled $61.5 million, compared to $62.3 million at March 31, 2011 and $41.1 million at June 30, 2010. 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 vary 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 second quarter of 2011, total non-performing assets decreased to 4.27% of total assets compared to 5.51% at June 30, 2010. 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 second quarter of 2011 were $8.4 million or 2.50% of loans on an annualized basis, compared to $17.7 million or 4.2% of loans in the second quarter of 2010. The Company’s allowance for loan losses at June 30, 2011 was $34.5 million, or 2.54% of total loans, compared to $34.5 million, or 2.31% of total loans, at June 30, 2010.

Non-interest Income

Total non-interest income for the second quarter of 2011 was $6.0 million, compared to $13.0 million in the second quarter of 2010. During the second quarter of 2010, the Company reported a gain of $8.2 million on an FDIC-assisted transaction. Excluding this gain, total non-interest income increased by $1.1 million, or 23.4%, in the second quarter of 2011, when compared to the same period in 2010. Service charges on deposit accounts in the second quarter of 2011 were $4.7 million, compared to $3.6 million in the second quarter of 2010. Increases in service charges related to the acquired deposits in FDIC-assisted transactions, along with increased retention of fees related to insufficient funds were the primary reason for the increase over prior period levels.

Non-interest Expense

Total non-interest expenses for the second quarter of 2011 decreased to $22.6 million, compared to $23.4 million in the same quarter in 2010. Salaries and benefits increased $1.4 million when compared to the second quarter of 2010; however, this increase is in proportion to the Company’s asset growth. Occupancy and equipment expenses for the second quarter of 2011 amounted to $2.8 million, representing an increase of $727,000 from the same quarter in 2010. Data processing and telecommunications expenses increased $375,000 to $2.5 million for the second quarter of 2011 from $2.1 million for the same period in 2010. Both of these increases are directly correlated to the increase in the number of branch locations from the second quarter of 2010 to the second quarter of 2011. Credit related expenses, including problem loan and OREO expense and OREO write-downs and losses, decreased to $3.9 million in the second quarter of 2011 compared to $6.2 million in the second quarter of 2010.

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 second quarter of 2011, the Company reported an income tax expense of $896,000. This compares to an income tax benefit of $1.7 million in the same period of 2010. The Company’s effective tax rate for the three months ending June 30, 2011 and 2010 was 29.8% and 32.7%, respectively.

Results of Operations for the Six Months Ended June 30, 2011

Interest Income

Interest income for the six months ended June 30, 2011 was $68.5 million on a tax equivalent basis, an increase of $8.5 million when compared to $60.0 million for the same period in 2010. Average earning assets for the six-month period increased $261.9 million to $2.44 billion as of June 30, 2011 compared to $2.18 billion as of June 30, 2010. Yield on average earning assets improved slightly to 5.66% in the first six months of 2011 compared to 5.56% in the first six months of 2010. Earning assets acquired in connection with the Company’s FDIC-assisted acquisitions have allowed the Company to maintain rather level amounts of earning assets while interest rate floors on individual customer loans have allowed the Company to keep the yield on loans from falling precipitously in the current rate environment. Additionally, yields on the acquired assets have been much stronger than the Company’s other earning assets, helping boost the Company’s overall yield on earning assets.

 

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Interest Expense

Total interest expense for the six months ended June 30, 2011 amounted to $15.1 million, reflecting a slight increase of $289,000 from the same period of 2010. During the six-month period ended June 30, 2011, the Company’s funding costs declined to 1.16% from 1.37% reported in the previous year. The majority of the decline in interest expense and costs relates to improvements in the cost of the Company’s retail time deposits which fell to 1.60% in the six-month period ending June 30, 2011 compared to 1.87% in the same period in 2010. In addition to lower costs on deposits, the Company’s mix of deposits has improved over the past year. At the end of the second quarter of 2011, the Company had $1.53 billion in non-CD deposits compared to $1.23 billion at the same time in 2010. Non-interest bearing deposits increased 45.8% from $218.0 million and 10.4% of total deposits at June 30, 2010 to $318.0 million and 12.7% of total deposits at June 30, 2011.

Net Interest Income

Higher levels of earning assets with generally level yields have combined with reduced funding costs to have resulted in material improvements in net interest income. For the year-to-date period ending June 30, 2011, the Company reported $53.4 million of net interest income on a tax equivalent basis, compared to $45.2 million of net interest income for the same period in 2010. The Company’s net interest margin increased to 4.41% in the six month period ending June 30, 2011 compared to 4.19% in the same period in 2010.

Provision for Loan Losses

The provision for loan losses decreased to $16.2 million for the six months ended June 30, 2011 compared to $29.4 million in the same period in 2010. Non-performing assets totaled $122.1 million at June 30, 2011, compared to $133.4 million at June 30, 2010. For the six-month period ended June 30, 2011, Ameris had net charge-offs totaling $14.6 million compared to $30.7 million for the same period in 2010. Annualized net charge-offs as a percentage of loans improved from 3.64% during the first six month of 2010 to 2.17% during the first six months of 2011.

Non-interest Income

Non-interest income for the first six months of 2011 was $12.2 million compared to $17.9 million in the same period in 2010. Excluding non-recurring gains on investment securities and an FDIC-assisted acquisition, the Company’s non-interest income totaled $11.9 million, an increase of 25.2% compared to the same period in 2010. Service charges on deposit accounts increased approximately $1.9 million to $8.9 million in the first six months of 2011 compared to the same period in 2010. The increases in service charges are related to higher numbers of deposit accounts subject to fees and charges as well as incremental revenue from the deposit accounts acquired in the Company’s FDIC-assisted acquisitions. Income from mortgage banking activity declined from $1.2 million in the first six months of 2010 to $826,000 in the first half of 2011. The accretion of the discount of the FDIC indemnification asset also attributed to the increase of non-interest income during the first six months of 2011 compared to the same period in 2010.

Non-interest Expense

Total operating expenses for the first six months of 2011 increased to $43.8 million compared to $40.3 million in the same period in 2010. Salaries and benefits increased $3.4 million when compared to the first half of 2010; however, this increase is in proportion to the Company’s asset growth. Occupancy and equipment expenses for the first six months of 2011 amounted to $5.5 million, representing an increase of $1.4 million from the same period in 2010. Data processing and telecommunications expenses increased $1.0 million to $4.8 million for the first six months of 2011 from $3.8 million for the same period in 2010. Both of these increases are directly correlated to the increase in the number of branch locations from June 30, 2010 to the June 30, 2011. Credit related expenses, including problem loan and OREO expense and OREO write-downs and losses, decreased to $5.7 million in the first six months of 2011 compared to $8.2 million in the first half of 2010.

Income Taxes

In the first six months of 2011, the Company recorded an income tax expense totaling approximately $1.7 million, representing an effective tax rate of 33.0%. This compares to a benefit of $2.5 million in the first six months of 2010 representing an effective rate of 33.8%.

 

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Financial Condition as of June 30, 2011

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 investments and are recorded at cost.

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 has the intent and ability to hold to maturity. Therefore, at June 30, 2011, 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  

June 30, 2011:

             

U.S. government agencies

   $ 24,056       $ 24,259         1.30     1.44       $ 18,300   

State and municipal securities

     58,636         60,546         3.70     5.59         4,722   

Corporate debt securities

     11,637         9,722         6.66     5.98         100   

Mortgage-backed securities

     234,437         239,849         3.56     3.13         62,159   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 328,766       $ 334,376         3.54     3.57       $ 85,281   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

June 30, 2010:

             

U.S. government agencies

   $ 19,329       $ 19,914         3.61     2.01       $ 10,205   

State and municipal securities

     42,823         43,910         5.03     5.85         910   

Corporate debt securities

     12,635         9,885         6.85     7.95         —     

Mortgage-backed securities

     156,307         164,355         4.55     2.42         36,990   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 231,094       $ 237,764         4.86     3.51       $ 48,105   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Loans and Allowance for Loan Losses

At June 30, 2011, gross loans outstanding (including covered loans) were $1.85 billion, an increase from $1.69 billion reported at June 30, 2010. When compared to December 31, 2010, gross loans declined approximately $83.2 million, or 4.3%. The Company’s participation in FDIC-assisted acquisitions was integral to being able to maintain a certain level of loans because management does not believe that enough loan opportunities with acceptable quality and profitability existed in our current market areas to cause loan footings to stabilize and increase. Decreases in legacy loans over the past year reflect this trend, with legacy loans declining 8.9% from $1.49 billion at June 30, 2010 to $1.36 billion at June 30, 2011.

 

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The decline in loans also reflects management’s focus on reducing higher risk loans within the Bank’s loan portfolio as well as the slower economic environment that persisted throughout 2009 and 2010. 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.

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 six month period ended June 30, 2011, the Company recorded net charge-offs totaling $14.6 million compared to $30.7 million for the period ended June 30, 2010. The provision for loan losses for the six months ended June 30, 2011 decreased to $16.2 million compared to $29.4 million during the six-month period ended June 30, 2010. At the end of the second quarter of 2011, the allowance for loan losses totaled $34.5 million, or 2.54% of total legacy loans, compared to $34.6 million, or 2.52% of total legacy loans, at December 31, 2010 and $34.5 million, or 2.31% of total legacy loans, at June 30, 2010.

 

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Table of Contents

The following table presents an analysis of the allowance for loan losses for the six months ended June 30, 2011 and 2010:

 

(Dollars in Thousands)

   June 30,
2011
    June 30,
2010
 

Balance of allowance for loan losses at beginning of period

   $ 34,576      $ 35,762   

Provision charged to operating expense

     14,554        29,378   

Charge-offs:

    

Commercial, financial and agricultural

     3,241        2,711   

Real estate – residential

     1,944        5,663   

Real estate – commercial and farmland

     4,889        9,616   

Real estate – construction and development

     5,247        13,778   

Consumer installment

     305        234   

Other

     —          —     
  

 

 

   

 

 

 

Total charge-offs

     15,626        32,002   
  

 

 

   

 

 

 

Recoveries:

    

Commercial, financial and agricultural

     68        508   

Real estate – residential

     59        112   

Real estate – commercial and farmland

     6        266   

Real estate – construction and development

     829        204   

Consumer installment

     57        240   

Other

     —          —     
  

 

 

   

 

 

 

Total recoveries

     1,019        1,330   
  

 

 

   

 

 

 

Net charge-offs

     14,607        30,672   
  

 

 

   

 

 

 

Balance of allowance for loan losses at end of period

   $ 34,523      $ 34,468   
  

 

 

   

 

 

 

Net annualized charge-offs as a percentage of average loans

     2.17     3.64

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

     2.54     2.31

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 $486.5 million, $555.0 million and $192.5 million at June 30, 2011, December 31, 2010 and June 30, 2010, respectively. OREO that is covered by the loss-sharing agreements with the FDIC totaled $63.6 million, $54.9 million and $25.8 million at June 30, 2011, December 31, 2010 and June 30, 2010, 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 of $168.9 million and $45.8 million on the 2010 and 2009 acquisition dates, respectively. The FDIC loss-share receivable reported at June 30, 2011, December 31, 2010 and June 30, 2010 was $160.9 million, $177.2 million and $59.2 million, respectively.

The Bank 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 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. 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 are 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)

   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   
  

 

 

    

 

 

    

 

 

 

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 permanent 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.

As of June 30, 2011, nonaccrual or impaired loans totaled $60.5 million, a decrease of approximately $18.7 million since December 31, 2010. The decrease in nonaccrual loans is due to success in the foreclosure and resolution process as well as a significant slowdown in the formation of new problem credits. Non-performing assets as a percentage of total assets were 4.27%, 4.62% and 5.51% at June 30, 2011, December 31, 2010 and June 30, 2010, respectively.

Non-performing assets at June 30, 2011, December 31, 2010 and June 30, 2010 were as follows:

 

(Dollars in Thousands)

   June 30,
2011
     December 31,
2010
     June 30,
2010
 

Total nonaccrual loans

   $ 60,545       $ 79,289       $ 92,336   

Other real estate owned and repossessed collateral

     61,533         57,915         41,079   
  

 

 

    

 

 

    

 

 

 

Total non-performing assets

   $ 122,078       $ 137,204       $ 133,415   
  

 

 

    

 

 

    

 

 

 

 

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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 June 30, 2011, the Company exhibited a concentration in CRE loan category 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 June 30, 2011 and December 31, 2010. The loan categories and concentrations below are based on Federal Reserve Call codes and include “covered” loans.

 

(Dollars in Thousands)    June 30, 2011     December 31, 2010  
     Balance      % of  Total
Loans
    Balance      % of  Total
Loans
 

Construction and development loans

   $ 223,225         12   $ 250,211         13

Multi-family loans

     56,245         3     55,121         3

Nonfarm non-residential loans

     725,415         39     760,598         39
  

 

 

    

 

 

   

 

 

    

 

 

 

Total CRE Loans

   $ 1,004,885         54   $ 1,065,930         55

All other loan types

     841,667         46     863,818         45
  

 

 

    

 

 

   

 

 

    

 

 

 

Total Loans

   $ 1,846,552         100   $ 1,929,748         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 June 30, 2011 and December 31, 2010:

 

     Internal
Limit
    June 30,
2011
    December 31,
2010
 
       Actual     Actual  

Construction and development

     100     69     79

Commercial real estate

     300     243     257

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest bearing balances. At June 30, 2011, the Company’s short-term investments were $218.3 million, compared to $261.3 million and $240.1 million at December 31, 2010 and June 30, 2010, respectively. At June 30, 2011, approximately 45.5% of the balance was comprised of interest bearing balances 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 June 30, 2011, December 31, 2010 and June 30, 2010, 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 June 30, 2011 and December 31, 2010 for the purpose of converting the variable rate on the junior subordinated debentures to fixed rate. The fair value of these instruments amounted to approximately $243,000, $936,000 and $1.5 million as of June 30, 2011, December 31, 2010 and June 30, 2010, respectively, and was recorded as an asset. 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” a bank 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” a bank 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” a bank must maintain a total capital ratio greater than or equal to 10.00%.

As of June 30, 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 June 30, 2011, December 31, 2010 and June 30, 2010.

 

     June 30,
2011
    December 31,
2010
    June 30,
2010
 

Leverage Ratio (tier 1 capital to average assets)

      

Consolidated

     10.68     11.34     12.65

Ameris Bank

     10.39        11.05        12.19   

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

      

Consolidated

     18.64        18.19        18.68   

Ameris Bank

     18.19        17.62        18.08   

Total Capital Ratio (total capital to risk weighted assets)

      

Consolidated

     19.90        19.45        19.94   

Ameris Bank

     19.45        18.88        19.34   

 

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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 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.

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 risk, 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 of Directors 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 June 30, 2011, there were no advances outstanding on any of the Company’s lines of credit.

 

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

 

     June 30,
2011
    March 31,
2011
    December 31,
2010
    September 30,
2010
    June 30,
2010
 

Investment securities available for sale to total deposits

     13.31     11.76     12.72     11.25     11.44

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

     54.16     52.32     54.22     69.36     81.04

Interest-earning assets to total assets

     83.97     83.63     84.57     89.99     89.65

Interest-bearing deposits to total deposits

     87.34     87.71     88.09     88.77     89.52

 

(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 June 30, 2011 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 June 30, 2011, the Company had one effective interest rate floor with a notional amount totaling $35 million and one effective LIBOR rate swap with a notional amount of $37.1 million. The floor is hedging specific cash flows associated with variable rate loans, has a strike rate of 7.00% and matures August 2011. 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 June 30, 2011, there were no changes 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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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, 2010.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

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: August 9, 2011     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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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
101    Interactive data file

 

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