Ameris Bancorp 2013 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 select markets in Georgia, Alabama, Florida and South Carolina. The filing covers the fiscal year ended December 31, 2013; fourth-quarter results are also provided. Ameris operated 68 domestic banking offices and had approximately 984 full-time-equivalent employees at year-end.
The December 23, 2013 acquisition of The Prosperity Banking Company expanded Ameris's Florida presence by 12 locations and materially affected year-over-year comparability.
Key financial metrics
| Metric | 2013 | 2012 |
|---|---|---|
| Total assets | Approximately $3.67 billion | $3.02 billion |
| Total loans | Approximately $2.52 billion | Not directly comparable due to acquisition presentation |
| Total deposits | $2.999 billion | $2.625 billion |
| Stockholders' equity | $316.7 million | $279.0 million |
| Net interest income | $116.2 million | $114.4 million |
| Provision for loan losses | $11.5 million | $31.1 million |
| Noninterest income | $46.5 million | $57.9 million |
| Noninterest expense | $121.9 million | $119.5 million |
| Net income | $20.0 million | $14.4 million |
| Net income available to common shareholders | $18.3 million | $10.9 million |
| Diluted earnings per share | $0.75 | $0.46 |
| Net interest margin | 4.74% | 4.60% |
| Return on average assets | 0.70% | 0.49% |
| Return on average common equity | 8.06% | 5.99% |
| Efficiency ratio | 74.94% | 69.35% |
Fourth-quarter net income available to common shareholders was $966,000, or $0.04 diluted EPS, compared with $3.6 million, or $0.15 diluted EPS, in the fourth quarter of 2012. Fourth-quarter results included approximately $4.35 million of acquisition-related expenses.
Net cash provided by operating activities was $33.6 million, compared with $32.2 million in 2012. Investing activities provided $40.2 million, while financing activities used $91.1 million. Cash and due from banks declined to $63.0 million from $80.3 million.
At year-end, the allowance for loan losses was $22.4 million, or 1.38% of non-covered loans. Non-covered net charge-offs were 0.69% of average loans, compared with 2.76% in 2012. Nonperforming assets excluding covered assets were $73.5 million, or 2.00% of total assets. Legacy nonperforming loans declined to $29.2 million from $38.9 million, and legacy OREO declined to $33.4 million from $39.9 million.
Debt, liquidity and capital
- Year-end deposits were $2.999 billion, including $668.5 million of noninterest-bearing deposits. The loans-to-deposits ratio was 81.94%.
- Other borrowings totaled $194.6 million, including a $165.0 million FHLB advance due January 24, 2014, a $10.0 million revolving credit facility and $19.6 million of assumed Prosperity subordinated debt.
- Repurchase agreements totaled $83.5 million, and subordinated deferrable interest debentures totaled $55.5 million.
- Ameris had $182.8 million available under FHLB lines and $330.8 million available through the Federal Reserve discount window at December 31, 2013.
- Regulatory capital remained strong: consolidated total risk-based capital was 15.32%, Tier 1 risk-based capital was 14.35% and the leverage ratio was 11.33%. Ameris Bank qualified as well capitalized.
- The company was liability-sensitive to interest-rate changes over the near term; management stated that a gradual 200-basis-point increase in rates would slightly reduce net interest income.
Material changes versus the prior comparable period
- The Prosperity acquisition added approximately $744.9 million of assets, $449.7 million of loans and $473.7 million of deposits. Ameris issued approximately 1.169 million common shares and recorded $34.1 million of goodwill and $4.4 million of core deposit intangibles.
- Total assets increased approximately $648.6 million, while legacy loans and investment securities increased by approximately $154.9 million and covered assets declined by approximately $159.9 million.
- Net income available to common shareholders increased approximately 68% to $18.3 million, primarily reflecting lower credit costs and reduced funding costs.
- Net interest margin improved 14 basis points to 4.74%, while the average cost of interest-bearing liabilities declined to 0.49% from 0.68%. The deposit mix improved as noninterest-bearing deposits increased and time deposits declined.
- Mortgage banking income increased to $19.1 million from $13.0 million, but total noninterest income declined because 2012 included a $20.0 million gain on an FDIC-assisted acquisition.
- Noninterest expense increased modestly, including $4.4 million of Prosperity acquisition expenses and higher salaries and data-processing costs.
- Accumulated other comprehensive income declined to a $294,000 loss from income of $6.6 million, primarily due to unrealized losses on available-for-sale securities.
Outlook, commentary, risks and unusual items
Management emphasized an acquisition-oriented growth strategy focused on existing and neighboring markets. No formal earnings or revenue guidance is provided in the filing. The company stated that it expects to pursue additional acquisitions, including potential FDIC-assisted transactions, subject to capital availability, regulatory approval and management capacity.
Ameris intended to redeem its remaining 28,000 Series A preferred shares on March 24, 2014, subject to the Federal Reserve approval received in February 2014. The company also announced a March 2014 agreement to acquire Coastal Bankshares, Inc., expected to close in the third quarter of 2014 subject to approvals and other conditions. Coastal reported approximately $433 million of assets, $295 million of loans and $364 million of deposits at December 31, 2013.
- Credit risk remains concentrated in real estate, particularly commercial real estate. Including covered assets, commercial real estate concentration was 232.1% of capital and construction and development concentration was 69.7% of capital.
- Local economic conditions in Georgia, Florida, Alabama and South Carolina could affect delinquencies, collateral values, OREO and charge-offs.
- FDIC loss-sharing arrangements mitigate certain acquired-asset losses, but coverage is subject to contractual requirements and limited terms. The FDIC loss-share receivable declined to $65.4 million from $159.7 million.
- Interest-rate risk, deposit competition, mortgage banking volatility, regulatory changes and the integration of acquisitions could adversely affect results.
- Basel III capital requirements were scheduled to begin applying to the company and bank on January 1, 2015. Management's pro forma analysis indicated that both would have been well capitalized under the new framework as of December 31, 2013.
- The company had $257.2 million of commitments to extend credit and $7.7 million of standby letters of credit at year-end. Management did not expect existing legal proceedings to have a material effect.
Most important facts an investor should verify
- Reconcile reported total assets, loans and deposits after separating legacy, purchased non-covered and FDIC-covered portfolios.
- Assess whether the improvement in earnings is sustainable after removing lower credit costs, acquisition effects and other unusual items.
- Review the quality and valuation of the $448.8 million purchased non-covered loan portfolio and the remaining FDIC-covered assets.
- Evaluate commercial real estate concentrations, nonperforming assets, troubled debt restructurings and the adequacy of the $22.4 million allowance.
- Confirm the effect of the Prosperity integration, the planned preferred-stock redemption and the pending Coastal acquisition on capital, liquidity, goodwill and tangible common equity.
- Monitor the near-term maturity of the $165.0 million FHLB advance and the company's liability-sensitive exposure to rising interest rates.
- Verify the filing's audited cash-flow statement and subsequent-event disclosures before relying on balance-sheet liquidity measures.