Ameris Bancorp 2014 Form 10-K Summary
Business context and reporting period
Ameris Bancorp is a financial holding company operating primarily through Ameris Bank, a community bank serving selected markets in Georgia, Alabama, Florida and South Carolina. The filing covers the fiscal year ended December 31, 2014, including fourth-quarter results. The Company operated 73 domestic banking offices and had approximately 1,027 full-time-equivalent employees at year-end.
Ameris completed the acquisition of Coastal Bankshares on June 30, 2014, expanding its Savannah, Georgia presence. Acquisitions materially affect period-to-period comparability.
Financial performance and key metrics
| Metric | 2014 | 2013 |
|---|---|---|
| Total assets | $4.04 billion | $3.67 billion |
| Total loans, including purchased and covered loans | Approximately $2.93 billion | Not clearly stated in the filing summary |
| Total deposits | $3.43 billion | $3.00 billion |
| Stockholders’ equity | $366.0 million | $316.7 million |
| Net interest income | $149.9 million | $116.2 million |
| Provision for loan losses | $5.6 million | $11.5 million |
| Noninterest income | $62.8 million | $46.5 million |
| Noninterest expense | $150.9 million | $121.9 million |
| Net income available to common shareholders | $38.4 million | $18.3 million |
| Diluted earnings per share | $1.46 | $0.75 |
| Net interest margin | 4.59% | 4.74% |
| Return on average assets | 1.08% | 0.70% |
| Return on average common equity | 12.40% | 8.06% |
| Efficiency ratio | 70.92% | 74.94% |
Fourth-quarter 2014 net income available to common shareholders was $10.6 million, or $0.39 diluted EPS, compared with $1.0 million, or $0.04 diluted EPS, in the fourth quarter of 2013.
Operating cash flow was negative $5.6 million in 2014, compared with positive $21.8 million in 2013. Investing activities provided $143.8 million, while financing activities used $123.2 million. Cash and due from banks increased to $78.0 million from $63.0 million.
At December 31, 2014, debt and funding included $73.3 million of repurchase agreements, $78.9 million of other borrowings and $65.3 million of subordinated deferrable interest debentures. The Company reported $221.5 million of unused FHLB borrowing capacity, $16.0 million available under a revolving credit agreement and $442.8 million available through the Federal Reserve discount window, subject to applicable conditions.
Regulatory capital remained strong. Consolidated total risk-based capital was 13.42%, Tier 1 risk-based capital was 12.66% and the leverage ratio was 8.94%. Ameris Bank was categorized as well capitalized.
Material changes versus the prior comparable period
- Total assets increased $369.4 million, or approximately 10%, primarily reflecting the Coastal acquisition and growth in traditional earning assets.
- Coastal added approximately $449.0 million of assets, $279.4 million of loans and $369.0 million of deposits. Ameris issued approximately 1.599 million shares and recorded $27.4 million of goodwill and $4.6 million of core deposit intangibles.
- Net income available to common shareholders increased approximately 110% to $38.4 million, supported by higher net interest income, noninterest income and lower credit costs.
- Average earning assets increased 33.6% to approximately $3.30 billion. Lower asset yields caused the net interest margin to decline 15 basis points to 4.59%, although lower funding costs partly offset the pressure.
- Noninterest income increased $16.3 million, driven primarily by mortgage banking, deposit service charges and SBA loan sales. Mortgage banking income increased to $26.0 million from $19.1 million.
- Noninterest expense increased $28.9 million, primarily from salaries, occupancy, data processing, acquisition-related costs and expansion of the mortgage and SBA divisions.
- Credit quality improved in the legacy portfolio. Nonaccrual loans excluding purchased loans declined 25.6% to $21.7 million, and legacy net charge-offs declined to 0.31% of average loans from 0.69%.
- The allowance for loan losses declined to $21.2 million, or 1.12% of applicable loans, from $22.4 million, or 1.38%.
- The Company redeemed its remaining $28.0 million of preferred stock in March 2014 and reinstated a quarterly common dividend of $0.05 per share beginning in June 2014.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide formal quantitative earnings or revenue guidance. Management describes an acquisition-oriented strategy focused on expanding in existing markets and neighboring communities, while continuing organic growth in banking, mortgage and SBA activities.
On January 28, 2015, Ameris agreed to acquire Merchants & Southern Banks of Florida for $50.0 million, subject to regulatory approval, and agreed to acquire 18 Bank of America branches. The branch transaction is expected to add approximately $812 million of deposits and was also expected to close in the second quarter of 2015. On January 29, 2015, Ameris issued 5.32 million common shares at $22.50 per share and received approximately $114.5 million of net proceeds to help fund these transactions and for general corporate purposes.
Management identifies material sensitivity to interest rates, credit losses, commercial and residential real estate values, local economic conditions, deposit competition, regulatory changes, acquisition integration and access to capital. The Company was mildly liability-sensitive to interest rates; management stated that a gradual 200-basis-point rate increase would slightly reduce net interest income over the following year.
Commercial real estate remains a significant concentration. At year-end, construction and development loans represented 66.5% of capital and commercial real estate loans, excluding owner-occupied loans, represented 232.3% of capital when purchased and covered loans were included.
FDIC loss-sharing protection continued to decline as covered assets paid down and certain loss-sharing periods expired. The FDIC loss-share receivable declined to $31.4 million from $65.4 million. The Company also had a $2.9 million lender-liability judgment against it on appeal in South Carolina; management considered an adverse outcome not probable and did not record a reserve.
The Company reported no material adverse effect from pending litigation generally, no unresolved SEC staff comments, and effective disclosure controls and internal control over financial reporting. The audit report was unqualified, although Coastal operations, representing approximately 10.44% of consolidated assets, were excluded from management’s internal-control assessment as permitted for a recent acquisition.
Most important facts for investors to verify
- Reconcile reported earnings growth with acquisition-related contributions, purchase-accounting accretion and recurring operating performance.
- Monitor the declining FDIC loss-share benefits, the expiration of additional protections and potential post-protection credit losses.
- Review commercial real estate and construction concentrations, nonaccrual trends, purchased-loan performance and allowance adequacy.
- Assess the impact of the 2015 equity issuance, Merchants acquisition and 18-branch transaction on tangible book value, dilution, capital and earnings.
- Evaluate funding and liquidity, including large certificate-of-deposit maturities, repurchase agreements, FHLB capacity and Federal Reserve borrowing availability.
- Verify the status and potential financial effect of the $2.9 million South Carolina lender-liability judgment on appeal.
- Assess sensitivity of net interest income and mortgage banking activity to changes in interest rates, prepayments and secondary-market conditions.