Ameris Bancorp 2012 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, 2012, with audited comparative results for 2011 and 2010. The requested 2012 Q4 information is included through unaudited quarterly data.
- 66 domestic banking offices and approximately 866 full-time-equivalent employees at year-end.
- December 31, 2012 total assets were approximately $3.02 billion, total loans were approximately $1.96 billion including covered loans, deposits were $2.62 billion and stockholders’ equity was $279.0 million.
Financial performance and key metrics
| Metric | 2012 | 2011 | Change |
|---|---|---|---|
| Interest income | $129.5 million | $141.1 million | Down 8.2% |
| Net interest income | $114.4 million | $113.5 million | Up 0.8% |
| Provision for loan losses | $31.1 million | $32.7 million | Down 5.0% |
| Other income | $57.9 million | $52.8 million | Up 9.6% |
| Other expenses | $119.5 million | $102.0 million | Up 17.2% |
| Net income | $14.4 million | $21.1 million | Down 31.6% |
| Net income available to common shareholders | $10.9 million | $17.9 million | Down 39.2% |
| Diluted EPS | $0.46 | $0.76 | Down $0.30 |
| Net interest margin | 4.60% | 4.57% | Up 3 basis points |
| Efficiency ratio | 69.35% | 61.30% | Higher |
| Return on average assets | 0.49% | 0.60% | Lower |
| Return on average common equity | 5.99% | 7.21% | Lower |
Fourth-quarter 2012 net income available to common shareholders was $3.6 million, or $0.15 per diluted share, compared with $322,000, or $0.01 per diluted share, in fourth-quarter 2011. Fourth-quarter 2012 included $2.1 million of restructuring charges.
- Mortgage banking income increased to $13.0 million from $3.0 million, while acquisition gains declined to $20.0 million from $26.9 million.
- Deposit costs declined to 0.51% from 0.98% as noninterest-bearing deposits increased and time deposits declined.
- Net cash provided by operating activities was $32.2 million. Investing activities provided $414.5 million, primarily reflecting FDIC-assisted transaction proceeds, FDIC indemnification cash flows and securities activity. Financing activities used $432.1 million.
- Cash and due from banks increased to $80.3 million from $65.5 million.
Balance sheet, credit quality, debt and capital
- Legacy loans increased to $1.45 billion from $1.33 billion; covered loans declined to $507.7 million from $571.5 million. Investment securities increased to $346.9 million from $340.0 million.
- Nonperforming assets excluding covered assets declined $38.8 million, or 33.0%, to $78.7 million. Noncovered nonaccrual loans declined to $38.9 million from $70.8 million, and legacy OREO declined to $39.9 million from $46.7 million.
- Net charge-offs were 2.76% of average noncovered loans versus 2.23% in 2011. The allowance for loan losses declined to $23.6 million, or 1.63% of noncovered loans, from $35.2 million, or 2.64%.
- Approximately 82.2% of the loan portfolio was secured by real estate. Commercial real estate and farmland loans totaled $732.3 million, and construction and development loans totaled $114.2 million.
- Deposits increased to $2.62 billion from $2.59 billion. Noninterest-bearing deposits represented 19.46% of total deposits at year-end versus 15.26% in 2011.
- Year-end borrowings included $50.1 million of repurchase agreements and $42.3 million of subordinated deferrable interest debentures. The filing reports no other borrowings at year-end, compared with $20.0 million in 2011.
- Contractual obligations included $745.3 million of time certificates of deposit, of which $634.0 million matured within one year, and $42.3 million of subordinated debentures due after five years.
- Consolidated total risk-based capital was 18.74%, Tier 1 risk-based capital was 17.49% and the leverage ratio was 10.34%. Ameris Bank was classified as well capitalized.
- Available liquidity included $70.6 million of FHLB borrowing capacity, $267.8 million available through the Federal Reserve discount window and $60 million of federal funds purchasing arrangements.
Material changes and unusual items
- Ameris completed two FDIC-assisted acquisitions: Central Bank of Georgia on February 24, 2012 and Montgomery Bank & Trust on July 6, 2012. The transactions added deposits and generated approximately $13.0 million of after-tax acquisition gains, primarily from CBG.
- The company received approximately $31.9 million and $138.7 million from the FDIC in connection with the two transactions. MBT assets were acquired without a discount and were not covered by an FDIC loss-sharing agreement.
- The company sold 24,000 preferred shares originally issued under TARP for $24.0 million and repurchased the related Treasury warrant for $2.67 million. Preferred shares outstanding declined to 28,000 from 52,000.
- Management announced a restructuring program involving reduced headcount and the planned closure of 13 branches in 2013. The company recorded $2.1 million of fourth-quarter restructuring charges.
- The company’s FDIC loss-share receivable declined to $159.7 million from $242.4 million, while covered assets declined to $596.0 million from $650.1 million.
Guidance, outlook, commentary and risks
Management did not provide formal numerical earnings guidance in the filing. Management stated that it intended to continue expanding the Ameris franchise through organic growth, market expansion and potential acquisitions, including future FDIC-assisted transactions, subject to capital availability, regulatory approval and management capacity. Management also expected continued mortgage banking revenue growth following recruiting and service expansion efforts.
- Management expected the restructuring and branch closures to reduce core operating expenses in future periods.
- The company is liability-sensitive over the near term; management projected that a gradual 200-basis-point rise in rates would slightly reduce net interest income.
- Key risks include concentration in real estate and southeastern markets, credit losses and collateral values, FDIC loss-share expiration and estimation risk, interest-rate changes, deposit retention, acquisition integration, regulatory and capital changes, competition and technology or operational failures.
- The company reported $187.5 million of off-balance-sheet commitments, consisting of $180.7 million of commitments to extend credit and $6.8 million of standby letters of credit.
- Management stated that ordinary-course litigation was not expected to have a material adverse effect. No amounts of bank retained earnings were available for dividends to the parent without regulatory approval at December 31, 2012.
Important facts for investors to verify
- Reconcile the recurring earnings trend excluding the $20.0 million acquisition gain, mortgage banking results and $2.1 million restructuring charge.
- Review the sustainability of the 4.60% net interest margin as loan yields decline and the company remains liability-sensitive.
- Assess credit performance in the real estate-heavy legacy portfolio, including the 2.76% net charge-off ratio and remaining OREO.
- Evaluate the timing, coverage limits and expiration dates of FDIC loss-sharing agreements and the valuation of the $159.7 million loss-share receivable.
- Monitor the 2013 restructuring, 13 planned branch closures, expected cost savings and related execution costs.
- Review the maturity and repricing profile of $745.3 million of time deposits, including $634.0 million maturing within one year.
- Confirm regulatory treatment of trust preferred securities and the potential effects of Basel III, Dodd-Frank and other capital-rule changes.