Ameris Bancorp 2015 First-Quarter Form 10-Q Summary
Business Context and Reporting Period
Ameris Bancorp is a Georgia-based financial holding company operating primarily through Ameris Bank. At March 31, 2015, the Bank operated 73 branches across Georgia, Alabama, Florida and South Carolina. The filing covers the unaudited three months ended March 31, 2015, with comparisons to March 31, 2014 and December 31, 2014. Results are not necessarily indicative of full-year performance.
Key Financial Metrics
| Metric | Q1 2015 | Comparable period | Change |
|---|---|---|---|
| Total interest income | $42.4 million | $37.9 million | Up $4.5 million |
| Net interest income | $38.8 million | $34.5 million | Up $4.3 million |
| Provision for loan losses | $1.1 million | $1.7 million | Down $0.7 million |
| Noninterest income | $17.6 million | $12.8 million | Up $4.8 million |
| Noninterest expense | $40.8 million | $33.2 million | Up $7.6 million |
| Net income | $9.8 million | $8.4 million | Up $1.4 million |
| Net income available to common shareholders | $9.8 million | $8.1 million | Up $1.7 million |
| Diluted EPS | $0.32 | $0.32 | Unchanged |
| Tax-equivalent net interest margin | 4.39% | 4.57% | Down 18 basis points |
| Return on average assets | 0.97% | 0.96% | Up 1 basis point |
| Return on average common equity | 8.76% | 11.66% | Down 290 basis points |
| Net cash provided by operating activities | $12.3 million | $12.6 million | Down $0.3 million |
At March 31, 2015, total assets were $4.15 billion, compared with $4.04 billion at December 31, 2014 and $3.49 billion at March 31, 2014. Total deposits were $3.48 billion, and stockholders’ equity was $489.8 million. Cash and due from banks totaled $80.1 million, while federal funds sold and interest-bearing accounts totaled $126.2 million.
Loans, net of unearned income, were $2.00 billion. Including purchased non-covered and FDIC-covered loans, total loans were approximately $2.89 billion before the allowance for loan losses. The allowance was $21.9 million, or 1.09% of total loans. Other borrowings were $43.9 million, securities sold under repurchase agreements were $55.5 million, and subordinated deferrable interest debentures were $65.6 million.
Liquidity resources included $275.5 million of available FHLB borrowing capacity and $409.7 million available through the Federal Reserve discount window. Management stated that liquidity ratios were satisfactory and that it was aware of no events or trends likely to result in a material liquidity change.
Material Changes Versus Prior Comparable Period
- Net income increased primarily from higher net interest income and noninterest income, partly offset by higher operating expenses.
- Mortgage banking income rose to $8.1 million from $5.1 million, reflecting more mortgage bankers and higher production.
- Service charges on deposits increased to $6.4 million from $5.6 million, supported by account growth, including the Coastal acquisition.
- Net interest margin declined to 4.39% from 4.57% as yields on earning assets fell to 4.79% from 5.01%. Management attributed higher net interest income to the Coastal acquisition, organic loan growth and low funding costs.
- Noninterest expense increased 23%, driven by Coastal-related scale, mortgage volume, information technology, customer-care investments and preparation for pending acquisitions.
- Net charge-offs declined to $405,000, or 0.08% of average loans annualized, from $1.1 million, or 0.27%. Nonaccrual legacy loans fell to $20.8 million from $26.7 million.
- Non-performing assets excluding covered assets were $84.3 million, or 2.03% of total assets, compared with $79.8 million, or 2.29%, a year earlier.
- Common equity increased substantially following a January 29, 2015 private placement of 5.32 million shares, generating approximately $114.5 million of net proceeds.
- Noninterest-bearing deposits increased to $967.0 million from $698.9 million year over year, while interest-bearing deposits increased to $2.51 billion from $2.31 billion.
Guidance, Outlook, Risks and Unusual Items
Management did not provide formal earnings guidance. It stated that improving economic conditions and increased loan demand were expected to support interest income, while continued deposit mix improvements could provide additional funding-cost savings, although further benefit may be limited.
Ameris announced two pending transactions. It agreed to purchase Merchants & Southern Banks of Florida for $50.0 million, with closing expected May 22, 2015. It also agreed to acquire 18 Bank of America branches, assume approximately $864 million of deposits at a 3.00% deposit premium and close the transaction on June 12, 2015. Both transactions had received regulatory approval as of the filing date.
The Company continues to have significant commercial real estate exposure. CRE loans were $1.62 billion, or 56% of total loans, including 45% in nonfarm nonresidential loans. Management identified risks related to property values, construction demand, loan size and borrower cash flows.
FDIC-covered loans declined to $245.7 million from $372.7 million a year earlier, and the FDIC loss-share receivable declined to $23.3 million from $53.2 million. The carrying values remain dependent on estimates of future collections, losses and FDIC reimbursements. A clawback liability of $6.8 million was recorded.
A former borrower obtained an approximately $2.9 million lender-liability judgment against the Company. The matter was on appeal to the South Carolina Court of Appeals. Management believed the loss was neither probable nor reasonably estimable and therefore recorded no reserve; an adverse change in assessment could require a future liability.
Other risks include credit deterioration, interest-rate changes, regulatory requirements, acquisition execution and integration, competition, economic and real estate conditions, weather and other catastrophic events. The filing reported no material changes to the risk factors in the 2014 Form 10-K. Management concluded that disclosure controls and procedures were effective.
Important Facts for Investors to Verify
- Whether the Merchants & Southern Banks transaction and Bank of America branch acquisition closed on the expected dates and the resulting purchase accounting, goodwill and deposit growth.
- Whether margin compression continues as asset yields decline or interest rates change.
- Trends in CRE concentrations, classified loans, nonaccrual loans, troubled debt restructurings and charge-offs.
- The adequacy of the $21.9 million allowance for loan losses relative to total and acquired loans.
- The collectability and remaining duration of the $23.3 million FDIC loss-share receivable and exposure to clawback obligations.
- Integration costs and operating leverage associated with the pending acquisitions and technology investments.
- The outcome of the approximately $2.9 million lender-liability appeal and any change in the Company’s reserve assessment.
- Capital strength: the Bank was reported as well capitalized, with a 15.67% CET1 ratio, 15.67% core capital ratio and 16.42% total capital ratio at March 31, 2015.