Ameris Bancorp 2013 Q2 SEC Filing Summary
Business context and reporting period
Ameris Bancorp is a Georgia-based financial holding company operating through Ameris Bank, which had 56 branches in Georgia, Alabama, Florida and South Carolina at June 30, 2013. The unaudited Form 10-Q covers the three and six months ended June 30, 2013, with comparisons to the corresponding 2012 periods and December 31, 2012 balance-sheet data.
Financial performance and condition
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Net interest income | $29.5 million | $28.9 million | $57.8 million | $56.6 million |
| Provision for loan losses | $4.2 million | $7.2 million | $7.1 million | $20.1 million |
| Noninterest income | $11.4 million | $8.9 million | $22.7 million | $36.1 million |
| Noninterest expense | $26.7 million | $26.6 million | $55.6 million | $60.9 million |
| Net income | $6.7 million | $2.5 million | $12.0 million | $7.9 million |
| Net income available to common shareholders | $6.2 million | $1.7 million | $11.1 million | $6.2 million |
| Diluted EPS | $0.26 | $0.07 | $0.46 | $0.26 |
| Tax-equivalent net interest margin | 4.96% | 4.66% | 4.88% | 4.56% |
| Return on average assets | 0.95% | 0.34% | 0.85% | 0.53% |
| Return on average common equity | 10.66% | 4.12% | 9.60% | 6.49% |
At June 30, 2013, total assets were $2.81 billion, deposits were $2.44 billion, loans were $1.56 billion, covered loans were $443.5 million and total stockholders’ equity was $287.8 million. The allowance for loan losses was $24.2 million, or 1.56% of non-covered loans.
Six-month operating cash flow was $23.7 million, compared with $25.0 million in the prior-year period. Investing activities provided $159.5 million, while financing activities used $213.1 million, primarily reflecting a $181.6 million decrease in deposits and a $31.0 million decrease in repurchase-agreement funding. Cash and due from banks ended at $50.3 million.
Debt and funding consisted primarily of deposits, $19.1 million of repurchase agreements and $42.3 million of subordinated deferrable interest debentures. There were no outstanding correspondent-bank borrowings at June 30, 2013. Management reported satisfactory liquidity, and the Bank was well capitalized under all applicable regulatory capital measures, including an 11.32% leverage ratio and a 19.16% total capital ratio.
Material changes versus comparable periods
- Q2 net income available to common shareholders increased approximately 272% from $1.7 million to $6.2 million; diluted EPS increased from $0.07 to $0.26.
- Six-month net income available to common shareholders increased approximately 78% to $11.1 million, while diluted EPS increased from $0.26 to $0.46.
- Net interest margin improved to 4.96% in Q2 and 4.88% year to date, supported by lower funding costs and a greater proportion of loans in earning assets.
- Mortgage banking income increased to $5.0 million in Q2 and $9.5 million for the first six months, compared with $3.0 million and $4.5 million, respectively, in 2012.
- Credit costs improved materially. Six-month net charge-offs declined to $5.7 million from $27.6 million, and nonaccrual non-covered loans declined to $31.8 million from $44.4 million at June 30, 2012.
- Non-covered loans increased to $1.56 billion from $1.45 billion at December 31, 2012 and $1.37 billion at June 30, 2012. Covered loans declined to $443.5 million from $601.7 million a year earlier.
- Noninterest income for the six months declined year over year because the 2012 period included a $20.0 million acquisition gain; excluding nonrecurring items, 2013 noninterest income increased.
- Total non-performing assets declined to $71.7 million, or 2.55% of total assets, from $80.8 million, or 2.77%, at June 30, 2012.
Guidance, outlook, risks and unusual items
Management did not provide formal earnings or revenue guidance. Management expected improving economic conditions and increased loan demand to support interest income and stated that it was seeking quality credits while resolving problem assets. Mortgage banking performance remained an important contributor to results and may be sensitive to production volumes and interest rates.
Ameris entered into a merger agreement with The Prosperity Banking Company on May 1, 2013. Prosperity had reported approximately $742 million of assets, $464 million of loans and $478 million of deposits at December 31, 2012. The transaction was expected to close in the third or fourth quarter of 2013, subject to shareholder and regulatory approvals; consideration could be up to 50% cash, with an assumed all-stock value of approximately $15.7 million.
Key risks include concentration in commercial real estate, which represented 62% of total loans; real estate collateral values; interest-rate and liquidity risk; mortgage banking volatility; regulatory changes, including Basel III; acquisition execution; and the estimation and collectability of FDIC loss-share assets. Covered assets included $443.5 million of covered loans, $62.2 million of covered other real estate owned and a $105.5 million FDIC loss-share receivable.
Other notable items included $30.0 million invested in bank-owned life insurance during the first six months, $4.2 million of Q2 loan-loss provision, and $3.6 million of other comprehensive loss for the quarter, primarily from unrealized securities losses. The filing reported no material changes to previously disclosed risk factors, no material legal proceedings and effective disclosure controls.
Important facts for investors to verify
- Whether the Prosperity merger closed on the expected timetable, including the final cash-versus-stock mix, purchase accounting and resulting dilution.
- Whether mortgage banking revenue remains sustainable as interest rates, refinancing activity and loan production change.
- Trends in non-performing assets, criticized loans, charge-offs, OREO valuations and the adequacy of the $24.2 million allowance.
- The continued realization and timing of the $105.5 million FDIC loss-share receivable and the remaining covered-asset portfolio.
- Commercial real estate exposure, collateral values and compliance with internal concentration limits.
- Future deposit trends, funding costs, liquidity levels and the effect of Basel III capital requirements.