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 is the Form 10-K for the fiscal year ended December 31, 2011, with unaudited fourth-quarter information also provided. Ameris operated 62 banking offices and had approximately 746 full-time-equivalent employees at year-end.
At December 31, 2011, total assets were $2.994 billion, total deposits were $2.592 billion, total stockholders’ equity was $293.8 million and total loans, including covered loans acquired in FDIC-assisted transactions, were approximately $1.92 billion.
Key Financial Metrics
| Metric | 2011 | 2010 |
|---|---|---|
| Interest income | $141.1 million | $119.1 million |
| Interest expense | $27.5 million | $29.8 million |
| Net interest income | $113.5 million | $89.3 million |
| Provision for loan losses | $32.7 million | $50.5 million |
| Other income | $52.8 million | $35.2 million |
| Other expenses | $102.0 million | $81.2 million |
| Net income | $21.1 million | $(4.0) million |
| Net income available to common shareholders | $17.9 million | $(7.2) million |
| Diluted earnings per share | $0.76 | $(0.35) |
| Net interest margin | 4.57% | 4.11% |
| Efficiency ratio | 61.30% | 65.20% |
| Operating cash flow | $46.2 million | $45.0 million |
Average earning assets increased 13.5% to $2.50 billion. The cost of average interest-bearing liabilities declined to 1.18% from 1.50%, aided by growth in noninterest-bearing and lower-cost transaction deposits. Noninterest-bearing deposits increased 30.9% to $395.3 million.
Credit metrics remained stressed but improved in the non-covered portfolio. Net charge-offs declined to 2.23% of average non-covered loans from 3.33%; non-covered nonaccrual loans declined to $70.8 million from $79.3 million; and other real estate owned declined to $50.3 million from $57.9 million. The allowance for loan losses was $35.2 million, or 2.64% of non-covered loans.
Liquidity included $200.5 million of interest-bearing deposits in banks, $28.5 million of federal funds sold and $339.97 million of available-for-sale securities. The loan-to-deposit ratio was 51.4%. At year-end, the Company had $37.7 million of repurchase-agreement borrowings, $20.0 million of FHLB advances and $42.3 million of subordinated debentures. FHLB borrowing capacity was $59.0 million and Federal Reserve discount-window availability was $237.9 million.
Regulatory capital remained strong: consolidated total risk-based capital was 20.05%, Tier 1 risk-based capital was 18.80% and the leverage ratio was 10.76%. Ameris Bank was classified as well capitalized.
Material Changes Versus the Prior Comparable Period
- Ameris returned to profitability, reporting $17.9 million of income available to common shareholders versus a $7.2 million loss in 2010.
- Net interest income increased 26.1% on a taxable-equivalent basis, primarily from higher average earning assets, improved loan yields and lower funding costs.
- The provision for loan losses decreased 35.2% to $32.7 million, while total credit costs declined 16.5% to $58.1 million.
- Other income increased 49.8%, principally because gains on FDIC-assisted acquisitions rose to $26.9 million from $14.7 million.
- Noninterest expense increased 25.6% to $102.0 million, reflecting acquired branches, higher staffing and occupancy costs, system conversions and elevated problem-loan and OREO expenses.
- Total assets increased 0.7% to $2.994 billion. Non-covered gross loans declined to $1.332 billion from $1.375 billion, while covered loans increased to $571.5 million from $555.0 million.
- The Company completed FDIC-assisted acquisitions of High Trust Bank and One Georgia Bank on July 15, 2011. The transactions generated a pretax gain of $26.9 million, an after-tax gain of approximately $17.5 million and net cash proceeds of $24.5 million.
- Fourth-quarter net income available to common shareholders was $322,000, or $0.01 per diluted share, compared with $1.05 million, or $0.04 per share, in the fourth quarter of 2010.
Outlook, Commentary, Risks and Unusual Items
Management emphasized continued expansion of the Ameris franchise through organic growth and acquisitions, including potential future FDIC-assisted transactions. The filing does not provide formal earnings or revenue guidance.
FDIC-assisted acquisitions are significant to reported results. At December 31, 2011, covered loans and covered OREO totaled $650.1 million, supported by a $242.4 million FDIC loss-share receivable. Loss-sharing generally covered 80% of losses and recoveries, subject to contractual terms, thresholds and limited durations. Results therefore depend on the timing and amount of collections, charge-offs, recoveries and FDIC reimbursements.
Principal risks include continued weakness in real estate markets, the concentration of lending in commercial and residential real estate, elevated nonperforming and impaired assets, uncertain collateral values, geographically concentrated operations, interest-rate sensitivity, regulatory and capital changes, competition, acquisition integration risk and possible increases in FDIC assessments. Management reported that the Company is mildly liability-sensitive to interest rates and that a gradual 200-basis-point increase would slightly reduce projected net interest income.
The Company remained subject to TARP Capital Purchase Program restrictions, including preferred dividends, limits on common dividends and executive-compensation requirements. No common cash or stock dividends were declared in 2011. No retained earnings of the Bank were available for dividend payment to the holding company without regulatory approval.
A February 24, 2012 subsequent event was the FDIC-assisted acquisition of Central Bank of Georgia. Management estimated an after-tax gain of less than $11.4 million, but had not completed the purchase accounting disclosures as of the filing date.
Independent auditors issued an unqualified opinion on the consolidated financial statements and reported effective internal control over financial reporting as of December 31, 2011.
Important Facts for Investors to Verify
- Reconcile recurring earnings with the $26.9 million of acquisition gains and assess the sustainability of reported profitability.
- Review the composition, valuation and performance of the $650.1 million of covered assets and the $242.4 million FDIC loss-share receivable.
- Monitor non-covered and covered nonaccrual loans, OREO, troubled debt restructurings and the adequacy of the $35.2 million allowance.
- Evaluate commercial real estate exposure: excluding covered assets, CRE concentration was 136.5% of capital and construction-and-development concentration was 44.3%.
- Assess deposit stability, the $67.9 million of brokered deposits and the maturity of $892.7 million of time deposits.
- Consider the effect of TARP preferred stock, its 5% dividend rate through the first five years and the 9% rate thereafter, on common shareholder returns.
- Review the timing and terms of the Central Bank of Georgia acquisition and any subsequent FDIC-assisted transactions.
- Verify future regulatory capital, FDIC assessment, interest-rate and Dodd-Frank impacts, for which the filing does not provide a precise quantified forecast.