Business Context and Reporting Period
Ameris Bancorp is a Georgia-based financial holding company operating primarily through Ameris Bank. At March 31, 2014, the Bank operated 68 branches in Georgia, Alabama, Florida and South Carolina. This unaudited Form 10-Q covers the three months ended March 31, 2014, with comparisons to March 31, 2013 and December 31, 2013.
Financial Results and Key Metrics
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Total interest income | $37.9 million | $30.9 million |
| Net interest income | $34.5 million | $28.3 million |
| Provision for loan losses | $1.7 million | $2.9 million |
| Noninterest income | $12.8 million | $11.4 million |
| Noninterest expense | $33.2 million | $28.9 million |
| Net income | $8.4 million | $5.3 million |
| Net income available to common shareholders | $8.1 million | $4.8 million |
| Diluted EPS | $0.32 | $0.20 |
| Tax-equivalent net interest margin | 4.57% | 4.74% |
| Return on average assets | 0.96% | 0.75% |
| Return on average common equity | 11.66% | 8.53% |
| Efficiency ratio | 70.36% | 72.76% |
- Net interest income increased approximately 22%, primarily reflecting the December 2013 Prosperity Banking Company acquisition, loan growth and lower deposit costs.
- Noninterest income increased approximately 12%, including higher service charges and mortgage origination fees.
- Noninterest expense increased approximately 15%, driven by Prosperity-related costs, mortgage expansion, salaries, occupancy and data processing.
- Net charge-offs were $1.1 million, or 0.27% annualized of loans, compared with $2.8 million, or 0.76%, in Q1 2013.
Balance Sheet, Liquidity and Capital
- Total assets were $3.49 billion at March 31, 2014, compared with $3.67 billion at December 31, 2013 and $2.86 billion at March 31, 2013.
- Legacy loans were $1.70 billion, up from $1.62 billion at December 31, 2013 and $1.49 billion at March 31, 2013. Purchased non-covered loans were $437.3 million and covered loans were $372.7 million.
- Total deposits were $3.01 billion, compared with $3.00 billion at year-end 2013 and $2.49 billion a year earlier.
- The allowance for loan losses was $22.7 million, or 1.34% of total loans, versus 1.57% a year earlier.
- Cash and due from banks totaled $71.4 million. Federal funds sold and interest-bearing accounts were $48.7 million, down from $205.0 million at December 31, 2013.
- Cash provided by operating activities was $32.2 million; investing activities provided $161.8 million; financing activities used $185.6 million. Period-end cash and due from banks increased $8.4 million during the quarter.
- Other borrowings were $59.7 million, down from $194.6 million at year-end 2013. The quarter included repayment of $165.0 million of other borrowings.
- Subordinated deferrable interest debentures were $55.6 million. The Company redeemed its remaining $28.0 million of preferred stock in March 2014.
- Ameris Bank was considered well capitalized under all regulatory capital measurements. Its leverage, core capital and total capital ratios were 9.43%, 14.09% and 15.06%, respectively.
Material Changes Versus Comparable Periods
- Net income available to common shareholders increased from $4.8 million to $8.1 million, while diluted EPS increased from $0.20 to $0.32.
- Loan growth and the Prosperity acquisition expanded the earning-asset base, but the tax-equivalent net interest margin declined to 4.57% from 4.74% because of lower asset yields.
- Nonaccrual legacy loans declined to $26.7 million from $37.5 million a year earlier. However, nonaccrual purchased non-covered loans increased to $15.3 million, primarily from assets acquired in the Prosperity transaction.
- Total non-performing assets were $79.8 million, or 2.29% of total assets, compared with $77.9 million, or 2.72%, a year earlier and $73.5 million, or 2.00%, at December 31, 2013.
- Other real estate owned declined to $33.8 million from $40.4 million a year earlier, excluding purchased and covered OREO.
- Covered loans, covered OREO and the FDIC loss-share receivable continued to decline from the prior year, to $372.7 million, $42.6 million and $53.2 million, respectively.
Guidance, Outlook, Risks and Unusual Items
- Management stated that improving economic conditions and increased loan demand could support consistent interest income, while additional deposit-cost savings may be limited.
- The Company entered into an agreement to acquire Coastal Bankshares, Inc. in an all-stock transaction valued at approximately $37.3 million based on the referenced share price. Coastal reported approximately $433 million of assets, $295 million of loans and $364 million of deposits at December 31, 2013. Closing was expected in the third quarter of 2014, subject to shareholder and regulatory approvals.
- Commercial real estate represented approximately 58% of total loans, including $1.45 billion of CRE loans. The filing identifies risks from property values, construction activity, borrower cash flow, concentration, collateral valuation and local economic conditions.
- FDIC loss-share accounting reduces expected losses on covered acquired assets, but the value of covered loans and the FDIC indemnification asset depends on future collections, collateral values and estimated cash flows.
- The Company had $271.1 million of commitments to extend credit and $8.0 million of standby letters of credit at March 31, 2014.
- Interest-rate risk is managed through asset-liability modeling and hedging. The Company had a $37.1 million LIBOR swap and mortgage-related forward contracts. Management’s stated policy target is that net interest income should not decline more than 5% under a 200-basis-point rate change over a 24-month period.
- The filing reports no material changes to previously disclosed risk factors and no material legal proceedings. Management concluded that disclosure controls and procedures were effective.
Most Important Facts for Investors to Verify
- Whether the Coastal Bankshares merger closed on the expected timetable and the final purchase accounting, consideration and capital impact.
- The sustainability of loan growth and mortgage-related income after the Prosperity acquisition.
- Trends in nonaccrual purchased non-covered loans, criticized assets, OREO and commercial real estate concentrations.
- The adequacy of the allowance for loan losses relative to portfolio growth, collateral values and future charge-offs.
- The timing and amount of FDIC loss-share reimbursements and any changes in the related indemnification asset.
- The effect of lower asset yields, interest-rate movements and funding costs on the 4.57% net interest margin.
- Future liquidity needs, borrowing levels and regulatory capital ratios following the preferred-stock redemption and any merger activity.