UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31,
2008
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File Number: 001-13901
|
AMERIS
BANCORP
|
|
(Exact
name of registrant as specified in its
charter)
|
|
GEORGIA
|
58-1456434
|
|
|
(State
of incorporation)
|
(IRS
Employer ID No.)
|
|
24
SECOND AVE., SE MOULTRIE, GA 31768
|
|
(Address
of principal executive offices)
|
|
(229)
890-1111
|
|
(Registrant’s
telephone number)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities
Exchange Act. (Check one):
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
|
Non-accelerated filer o (Do not check if
smaller reporting company)
|
Smaller
Reporting Company o
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act).Yes o No x
There
were 13,564,937
shares of Common Stock outstanding as of May 8, 2008.
-1-
AMERIS
BANCORP
|
PART
I - FINANCIAL INFORMATION
|
Page
|
|
|
Item
1.
|
Financial
Statements
|
|
|
3
|
||
|
4
|
||
|
5
|
||
|
6
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||
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Item
2.
|
12
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|
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Item
3.
|
20
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|
|
Item
4.
|
21
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|
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PART
II - OTHER INFORMATION
|
||
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Item
1.
|
22
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|
|
Item
1A.
|
22
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|
|
Item
2.
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22
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|
|
Item
3.
|
22
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|
|
Item
4.
|
23
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|
|
Item
5.
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23
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|
|
Item
6.
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23
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|
|
24
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||
-2-
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||||||||
|
(dollars
in thousands)
|
||||||||||||
|
March
31,
|
December
31,
|
March
31,
|
||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
(Unaudited)
|
|
(Audited)
|
|
(Unaudited)
|
|
|||||||
|
Assets
|
||||||||||||
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Cash
and due from banks
|
$
|
63,401
|
$
|
59,804
|
$
|
49,640
|
||||||
|
Federal
funds sold & interest bearing balances
|
4,389
|
12,022
|
94,496
|
|||||||||
|
Securities
available for sale, at fair value
|
297,589
|
291,170
|
300,322
|
|||||||||
|
Restricted
equity securities, at cost
|
6,996
|
7,559
|
6,884
|
|||||||||
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Loans
|
1,622,437
|
1,614,048
|
1,475,869
|
|||||||||
|
Less: allowance for loan losses
|
28,094
|
27,640
|
25,113
|
|||||||||
|
Loans,
net
|
1,594,343
|
1,586,408
|
1,450,756
|
|||||||||
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Premises
and equipment, net
|
60,053
|
59,132
|
47,251
|
|||||||||
|
Intangible
assets, net
|
4,509
|
4,802
|
5,775
|
|||||||||
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Goodwill
|
54,675
|
54,813
|
54,419
|
|||||||||
|
Other
assets
|
32,288
|
36,353
|
26,870
|
|||||||||
|
Total assets
|
$
|
2,118,243
|
$
|
2,112,063
|
$
|
2,036,413
|
||||||
|
Liabilities
and Stockholders' Equity
|
||||||||||||
|
Deposits:
|
||||||||||||
|
Noninterest-bearing
|
$
|
199,692
|
$
|
197,345
|
$
|
197,845
|
||||||
|
Interest-bearing
|
1,584,599
|
1,559,920
|
1,514,662
|
|||||||||
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Total
deposits
|
1,784,291
|
1,757,265
|
1,712,507
|
|||||||||
|
Federal
funds purchased & securities sold under agreements to
repurchase
|
4,987
|
14,705
|
5,370
|
|||||||||
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Other
borrowings
|
74,500
|
90,500
|
75,500
|
|||||||||
|
Other
liabilities
|
15,888
|
16,075
|
18,003
|
|||||||||
|
Subordinated
deferrable interest debentures
|
42,269
|
42,269
|
42,269
|
|||||||||
|
Total liabilities
|
1,921,935
|
1,920,814
|
1,853,649
|
|||||||||
|
Stockholders'
Equity
|
||||||||||||
|
Common
stock, par value $1; 30,000,000 shares authorized;14,886,967,
14,869,924 and 14,850,237 issued
|
14,887
|
14,870
|
14,850
|
|||||||||
|
Capital
surplus
|
82,920
|
82,750
|
81,620
|
|||||||||
|
Retained
earnings
|
104,182
|
103,095
|
98,631
|
|||||||||
|
Accumulated
other comprehensive income(loss)
|
5,093
|
1,303
|
(1,744
|
)
|
||||||||
|
207,082
|
202,018
|
193,357
|
||||||||||
|
Treasury
stock, at cost, 1,330,197, 1,329,939 and 1,322,717
shares
|
(10,774
|
)
|
(10,769
|
)
|
(10,593
|
)
|
||||||
|
Total stockholders' equity
|
196,308
|
191,249
|
182,764
|
|||||||||
|
Total liabilities and stockholders' equity
|
$
|
2,118,243
|
$
|
2,112,063
|
$
|
2,036,413
|
||||||
See
notes to unaudited consolidated financial statements.
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||
|
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
||||||
|
(dollars
in thousands, except per share data)
|
||||||
|
(Unaudited)
|
||||||
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2008
|
2007
|
|||||
|
Interest
Income
|
||||||
|
Interest
and fees on loans
|
$
|
30,134
|
$
|
30,760
|
||
|
Interest
on taxable securities
|
3,583
|
3,337
|
||||
|
Interest
on nontaxable securities
|
172
|
179
|
||||
|
Interest
on deposits in other banks
|
200
|
1,042
|
||||
|
Interest
on federal funds sold
|
-
|
94
|
||||
|
Total
Interest Income
|
34,089
|
35,412
|
||||
|
Interest
Expense
|
||||||
|
Interest
on deposits
|
14,142
|
15,205
|
||||
|
Interest
on other borrowings
|
1,487
|
1,786
|
||||
|
Total
Interest Expense
|
15,629
|
16,991
|
||||
|
Net
Interest Income
|
18,460
|
18,419
|
||||
|
Provision
for Loan Losses
|
3,200
|
507
|
||||
|
Net
Interest Income After Provision for Loan Losses
|
15,260
|
17,911
|
||||
|
Noninterest
Income
|
||||||
|
Service
charges on deposit accounts
|
3,316
|
2,870
|
||||
|
Mortgage
banking activity
|
869
|
683
|
||||
|
Other
service charges, commissions and fees
|
278
|
345
|
||||
|
Other
noninterest income
|
379
|
627
|
||||
|
Total
Noninterest Income
|
4,842
|
4,525
|
||||
|
Noninterest
Expense
|
||||||
|
Salaries
and employee benefits
|
8,618
|
7,732
|
||||
|
Equipment
and occupancy expense
|
1,992
|
1,676
|
||||
|
Amortization
of intangible assets
|
293
|
324
|
||||
|
Data
processing fees
|
604
|
793
|
||||
|
Other
operating expenses
|
4,133
|
3,919
|
||||
|
Total
Noninterest Expense
|
15,640
|
14,444
|
||||
|
Net
Income Before Taxes
|
4,462
|
7,992
|
||||
|
Provision
for Income Taxes
|
1,496
|
2,968
|
||||
|
Net
Income
|
$
|
2,966
|
$
|
5,024
|
||
|
Unrealized
holding losses arising during period, net of tax
|
871
|
785
|
||||
|
Unrealized
gain on cashflow hedge arising during period, net of tax
|
1,593
|
-
|
||||
|
Comprehensive
Income
|
$
|
5,430
|
$
|
5,809
|
||
|
Income
per common share-Basic
|
$
|
0.22
|
$
|
0.37
|
||
|
Income
per common share-Diluted
|
$
|
0.22
|
$
|
0.37
|
||
|
Dividends
declared per share
|
$
|
0.14
|
$
|
0.14
|
||
See
notes to unaudited consolidated financial statements.
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
|
(dollars
in thousands)
|
||||||||
|
(Unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Cash
Flows From Operating Activities:
|
||||||||
|
Net
Income
|
$
|
2,966
|
$
|
5,024
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
741
|
769
|
||||||
|
Provision
for loan losses
|
3,200
|
507
|
||||||
|
Amortization
of intangible assets
|
293
|
324
|
||||||
|
Other
prepaids, deferrals and accruals, net
|
(5,048
|
) |
(3,592
|
)
|
||||
|
Net cash provided by operating
activities
|
2,152
|
3,032
|
||||||
|
Cash
Flows From Investing Activities:
|
||||||||
|
Net
decrease in federal funds sold & interest bearing
deposits
|
7,633
|
40,736
|
||||||
|
Proceeds
from maturities of securities available for sale
|
36,915
|
8,818
|
||||||
|
Purchase
of securities available for sale
|
(39,132
|
)
|
(24,736
|
)
|
||||
|
Net
increase in loans
|
(8,388
|
)
|
(34,003
|
)
|
||||
|
Proceeds
from sales of other real estate owned
|
6,457
|
488
|
||||||
|
Purchases
of premises and equipment
|
(1,636
|
)
|
(1,416
|
)
|
||||
|
Net cash provided by/(used in)
investing activities
|
1,849
|
(10,113
|
)
|
|||||
|
Cash
Flows From Financing Activities:
|
||||||||
|
Net
increase in deposits
|
27,026
|
2,344
|
||||||
|
Net
decrease/(increase) in federal funds purchased & securities sold under
agreements to repurchase
|
(9,718
|
)
|
10,563
|
|||||
|
Decrease
in other borrowings
|
(16,000
|
)
|
-
|
|||||
|
Dividends
paid
|
(1,898
|
)
|
(1,916
|
)
|
||||
|
Purchase
of treasury shares
|
(4
|
)
|
-
|
|||||
|
Proceeds
from exercise of stock options
|
190
|
-
|
||||||
|
Net cash used in financing
activities
|
(404
|
)
|
(10,135
|
)
|
||||
|
Net
increase/(decrease) in cash and due from banks
|
$
|
3,597
|
$
|
(17,216
|
)
|
|||
|
Cash
and due from banks at beginning of period
|
59,804
|
66,856
|
||||||
|
Cash
and due from banks at end of period
|
$
|
63,401
|
$
|
49,640
|
||||
See notes to unaudited
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2008
(Unaudited)
Note
1 - Basis of Presentation & Accounting Policies
Ameris
Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered
in Moultrie, Georgia. Ameris conducts the majority of its operations
through its wholly owned banking subsidiary, Ameris Bank (the
“Bank”). Ameris Bank currently operates 46 branches in Georgia,
Alabama, Northern Florida and South Carolina. Our business model
capitalizes on the efficiencies of a large financial services company while
still providing the community with the personalized banking service expected by
our customers. We manage our Bank through a balance of decentralized
management responsibilities and efficient centralized operating systems,
products and loan underwriting standards. Ameris’ board of directors
and senior managers establish corporate policy, strategy and administrative
policies. Within Ameris’ established guidelines and policies, each
advisory board and senior managers make lending and community-specific
decisions. This approach allows the banker closest to the customer to
respond to the differing needs and demands of their unique market.
The
accompanying unaudited consolidated financial statements for Ameris have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and Regulation S-X.
Accordingly, the financial statements do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statement presentation. The
interim consolidated financial statements included herein are unaudited, but
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of the consolidated financial position and results of
operations for the interim periods presented. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the three months and
quarter ended March 31, 2008 are not necessarily indicative of the results to be
expected for the full year. These financial statements should be read
in conjunction with the financial statements and notes thereto and the report of
our registered independent public accounting firm included in the Company’s
Annual Report on Form 10-K for the year ended December 31,
2007.
Certain
amounts reported for the periods ended March 31, 2007 and December 31,
2007 have been reclassified to conform with the presentation as of March 31,
2008. These reclassifications had no effect on previously reported
net income or stockholders' equity.
Newly
Adopted Accounting Pronouncements
Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 has been applied prospectively as
of the beginning of the period.
SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. SFAS 157 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used
to measure fair value:
Level 1 - Quoted prices in
active markets for identical assets or liabilities.
Level 2 - Observable inputs
other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in active markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs
that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
Following
is a description of the valuation methodologies used for instruments measured at
fair value, as well as the general classification of such instruments pursuant
to the valuation hierarchy.
Securities Available for Sale
– The fair value of securities available for sale is determined by various
valuation methodologies. Where quoted market prices are available in
an active market, securities are classified within Level 1 of the valuation
hierarchy. If quoted market prices are not available, then fair
values are estimated by using pricing models, quoted prices of securities with
similar characteristics, or discounted cash flows. Level 2 securities
include certain U.S. agency bonds, collateralized mortgage and debt obligations,
and certain municipal securities. In certain cases where Level 1 or
Level 2 inputs are not available, securities are classified within Level 3 of
the hierarchy and include certain residual municipal securities and other less
liquid securities.
Derivatives – The Company’s
current hedging strategies involve utilizing interest floors. The fair value of
derivatives is recognized as assets or liabilities in the financial
statements. The accounting for the changes in the fair value of a
derivative depends on the intended use of the derivative instrument at
inception. As of March 31, 2008, the Company had cash flow
hedges with a notional amount of $70 million for the purpose of converting
floating rate assets to fixed rate.
Impaired Loans – Impaired
loans are carried at the present value of estimated future cash flows using the
loan's existing rate, or the fair value of collateral if the loan is collateral
dependent. A portion of the allowance for loan losses is
allocated to impaired loans if the value of such loans is deemed to be less than
the unpaid balance. If these allocations cause the allowance for loan
losses to increase, such increase is reported as a component of the provision
for loan losses. Loan losses are charged against the allowance when
management believes the uncollectability of a loan is
confirmed. Throughout the quarter certain impaired loans were
partially charged-off or re-evaluated for impairment resulting in a remaining
balance for these loans. The fair value of these impaired loans
is considered Level 3, and was computed by analysis of appraisals on the
underlying collateral and discounted cash flow analysis.
Other Real Estate Owned – The
fair value of other real estate owned ("OREO") is determined using certified
appraisals that value the property at its highest and best uses by applying
traditional valuation methods common to the industry. The Company does not
hold any OREO for profit purposes and all other real estate is actively marketed
for sale.
The
following table presents the fair value measurements of assets and liabilities
measured at fair value on a recurring basis and the level within the FAS 157
fair value hierarchy in which the fair value measurements fall as of March 31,
2008:
|
Fair
Value Measurements Using
|
||||||||||||||||
|
Quoted
Prices
|
||||||||||||||||
|
in
Active
|
Significant
|
|||||||||||||||
|
Markets for
|
Other
|
Significant
|
||||||||||||||
|
Identical
|
Observable
|
Unobservable
|
||||||||||||||
|
Assets
|
Inputs
|
Inputs
|
||||||||||||||
|
Fair
Value
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
|
Securities
available for sale
|
$ | 297,589 | $ | 11,060 | $ | 283,463 | $ | 3,066 | ||||||||
|
Derivative
financial instruments
|
3,185 | 3,185 | ||||||||||||||
|
Impaired
loans carried at fair value
|
6,683 | 6,683 | ||||||||||||||
|
Other
real estate owned
|
5,727 | 5,727 | ||||||||||||||
|
Total
assets at fair value
|
$ | 313,184 | $ | 11,060 | $ | 286,648 | $ | 15,476 | ||||||||
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115. The standard provides companies with an option to report
selected financial assets and liabilities at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be reported in earnings. The objective of SFAS No. 159 is to improve
financial reporting by providing entities with the chance to mitigate volatility
in reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
standards. This standard is expected to expand the use of fair value
measurement, which is consistent with the FASB’s long-term measurement
objectives for accounting for financial instruments. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The
Company has not elected the fair value option for any financial assets or
liabilities as of March 31, 2008.
Note
3 - Investment Securities
Ameris’
investment policy blends the needs of the Company’s liquidity and interest rate
risk with its desire to improve income and provide funds for expected growth in
loans. Under this policy, the Company generally invests in
obligations of the United States Treasury or other governmental or
quasi-governmental agencies. Ameris’ portfolio and investing
philosophy concentrate activities in obligations where the credit risk is
limited. For a small portion of Ameris’ portfolio that has been found
to present credit risk, the Company has reviewed the investments and financial
performance of the obligors and believes the credit risk to be
acceptable.
The
amortized cost and estimated fair value of investment securities available for
sale at March 31, 2008, December 31, 2007 and March 31, 2007 are presented
below:
|
March
31, 2008
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsored agencies
|
$
|
46,665
|
$
|
1,169
|
$
|
-
|
$
|
47,834
|
||||||||
|
State
and municipal securities
|
18,967
|
406
|
(47
|
)
|
19,326
|
|||||||||||
|
Corporate
debt securities
|
11,733
|
134
|
(177
|
)
|
11,691
|
|||||||||||
|
Mortgage
backed securities
|
213,438
|
3,604
|
(91
|
)
|
216,950
|
|||||||||||
|
Marketable
equity securities
|
1,788
|
-
|
-
|
1,788
|
||||||||||||
|
$
|
292,591
|
$
|
5,313
|
$
|
(315
|
)
|
$
|
297,589
|
||||||||
|
December
31, 2007
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsored agencies
|
$
|
69,562
|
$
|
366
|
$
|
(5
|
)
|
$
|
69,923
|
|||||||
|
State
and municipal securities
|
18,232
|
181
|
(93
|
)
|
18,320
|
|||||||||||
|
Corporate
debt securities
|
9,812
|
37
|
(351
|
)
|
9,498
|
|||||||||||
|
Mortgage-backed
securities
|
190,896
|
1,281
|
(536
|
)
|
191,641
|
|||||||||||
|
Marketable
equity securities
|
1,788
|
-
|
-
|
1,788
|
||||||||||||
|
$
|
290.290
|
$
|
1,865
|
$
|
(985
|
)
|
$
|
291,170
|
||||||||
|
March
31, 2007
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsored agencies
|
$
|
112,248
|
$
|
73
|
$
|
(987
|
)
|
$
|
111,334
|
|||||||
|
State
and municipal securities
|
19,178
|
34
|
(481
|
)
|
18,731
|
|||||||||||
|
Corporate
debt securities
|
9,829
|
62
|
(49
|
)
|
9,842
|
|||||||||||
|
Mortgage-backed
securities
|
160,853
|
412
|
(1,599
|
)
|
159,666
|
|||||||||||
|
Marketable
equity securities
|
788
|
-
|
(39
|
)
|
528
|
|||||||||||
|
$
|
302,896
|
$
|
581
|
$
|
(3,155
|
)
|
$
|
300,322
|
||||||||
Note
4 - Loans
The
Company engages in a full complement of lending activities, including real
estate-related loans, agriculture-related loans, commercial and financial loans
and consumer installment loans. Ameris concentrates the majority of
its lending activities on real estate loans where the historical loss
percentages have been low. While risk of loss in the Company’s
portfolio is primarily tied to the credit quality of the various borrowers, risk
of loss may increase due to factors beyond Ameris’ control, such as local,
regional and/or national economic downturns. General conditions in
the real estate market may also impact the relative risk in the real estate
portfolio. Of the target areas of lending activities, commercial and
financial loans are generally considered to have a greater risk of loss than
real estate loans or consumer installment loans.
The
Company evaluates loans for impairment when a loan is risk rated as substandard
or doubtful. The Company measures impairment based upon the present
value of the loan’s expected future cash flows discounted at the loan’s
effective interest rate, except where foreclosure or liquidation is probable or
when the primary source of repayment is provided by real estate
collateral. In these circumstances, impairment is measured based upon
the estimated fair value of the collateral. In addition, in certain
circumstances, impairment may be based on the loan’s observable estimated fair
value. Impairment with regard to substantially all of Ameris’
impaired loans has been measured based on the estimated fair value of the
underlying collateral. At the time the contractual principal payments
on a loan are deemed to be uncollectible, Ameris’ policy is to record a
charge-off against the allowance for loan losses.
Nonperforming
assets include loans classified as nonaccrual or renegotiated and foreclosed
assets. It is the general policy of the Company to stop accruing
interest income and place the recognition of interest on a cash basis when any
commercial, industrial or commercial real estate loan is 90 days or more past
due as to principal or interest and/or the ultimate collection of either is in
doubt, unless collection of both principal and interest is assured by way of
collateralization, guarantees or other security. When a loan is
placed on nonaccrual status, any interest previously accrued but not collected
is reversed against current income unless the collateral for the loan is
sufficient to cover the accrued interest or a guarantor assures payment of
interest.
Loans are
stated at unpaid balances, net of unearned income and deferred loan fees.
Balances within the major loans receivable categories are represented in the
following table:
|
(dollars
in thousands)
|
March
31, 2008
|
December
31, 2007
|
March
31, 2007
|
|||||||||
|
Commercial,
mortgage, financial & agricultural
|
$
|
1,190,354
|
$
|
1,172,198
|
$
|
1,078,088
|
||||||
|
Residential
mortgage
|
377,878
|
386,736
|
340,920
|
|||||||||
|
Consumer
|
54,205
|
55,114
|
56,861
|
|||||||||
|
$
|
1,622,,437
|
$
|
1,614,048
|
$
|
1,475,869
|
|||||||
Note
5 - Allowance for Loan Losses
Activity
in the allowance for loan losses for the three months ended March 31, 2008, for
the year ended December 31, 2007 and for the three months ended March 31, 2007
is as follows:
|
(dollars
in thousands)
|
March
31, 2008
|
December
31, 2007
|
March
31, 2007
|
|||||||||
|
Balance,
January 1
|
$
|
27,640
|
$
|
24,863
|
$
|
24,863
|
||||||
|
Provision for loan losses charged to expense
|
3,200
|
11,321
|
507
|
|||||||||
|
Loans charged off
|
(2,945
|
)
|
(10,418
|
)
|
(787
|
)
|
||||||
|
Recoveries of loans previously charged off
|
199
|
1,874
|
530
|
|||||||||
|
Ending
balance
|
$
|
28,094
|
$
|
27,640
|
$
|
25,113
|
||||||
Note
6 - Weighted Average Shares Outstanding
Earnings
per share have been computed based on the following weighted average number of
common shares outstanding:
|
For
the Three Months Ended March 31,
|
|||||
|
2008
|
2007
|
||||
|
(share
data in thousands)
|
|||||
|
Basic
shares outstanding
|
13,497
|
13,444
|
|||
|
Plus: Dilutive effect of ISOs
|
49
|
194
|
|||
|
Plus: Dilutive effect of Restricted Grants
|
14
|
30
|
|||
|
Diluted
shares outstanding
|
13,560
|
13,668
|
|||
Note
7 – Other Borrowings
The
Company has certain borrowing arrangements with various financial institutions
that are used in the Company’s operations primarily to fund growth in earning
assets when appropriate spreads can be realized. At March 31, 2008,
total other borrowings amounted to $74.5 million compared to $75.5 million at
March 31, 2007. The majority of these balances are comprised in the
Company’s borrowing relationship with the FHLB of Atlanta. Total
borrowings at the FHLB were $69.5 million and $70.5 million at March 31, 2008
and 2007, respectively.
Note
8 – Commitments and Contingencies
The
Company is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the consolidated balance sheets.
The
contract amounts of those instruments reflect the extent of involvement the
Company has in particular classes of financial instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as are used for on-balance-sheet instruments.
Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
The
Company issues standby letters of credit, which are conditional commitments
issued to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and
private borrowing arrangements and expire in decreasing amounts with varying
terms. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The Company holds various assets as collateral supporting
those commitments for which collateral is deemed necessary.
The
Company evaluates each customer’s creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management’s credit evaluation of
the borrower. Collateral held may include accounts receivable,
inventory, property, plant and equipment, residential real estate, and
income-producing commercial properties on those commitments for which collateral
is deemed necessary.
The
following represent the Company’s commitments to extend credit and standby
letters of credit:
|
(dollars
in thousands)
|
March
31, 2008
|
March
31, 2007
|
||||||
|
Commitments
to extend credit
|
$
|
187,125
|
$
|
178,343
|
||||
|
Standby
letters of credit
|
$ |
6,804
|
$ |
7,335
|
||||
Certain
of the statements made in this report are “forward-looking statements” within
the meaning of, and subject to the protections of, Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Forward-looking statements include
statements with respect to our beliefs, plans, objectives, goals, expectations,
anticipations, assumptions, estimates, intentions and future performance and
involve known and unknown risks, uncertainties and other factors, many of which
may be beyond our control and which may cause the actual results, performance or
achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements.
All
statements other than statements of historical fact are statements that could be
forward-looking statements. You can identify these forward-looking
statements through our use of words such as “may,” “will,” “anticipate,”
“assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,”
“estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,”
“intend,” “target,” “potential” and other similar words and expressions of the
future. These forward-looking statements may not be realized due to a
variety of factors, including, without limitation, legislative and regulatory
initiatives; additional competition in Ameris’ markets; potential business
strategies, including acquisitions or dispositions of assets or internal
restructuring, that may be pursued by Ameris; state and federal banking
regulations; changes in or application of environmental and other laws and
regulations to which Ameris is subject; political, legal and economic conditions
and developments; financial market conditions and the results of financing
efforts; changes in commodity prices and interest rates; weather, natural
disasters and other catastrophic events; and other factors discussed in Ameris’
filings with the Securities and Exchange Commission under the Exchange
Act.
All
written or oral forward-looking statements that are made by or are attributable
to us are expressly qualified in their entirety by this cautionary
notice. Our forward-looking statements apply only as of the date of
this report or the respective date of the document from which they are
incorporated herein by reference. We have no obligation and do not
undertake to update, revise or correct any of the forward-looking statements
after the date of this report, or after the respective dates on which such
statements otherwise are made, whether as a result of new information, future
events or otherwise.
Overview
The
following is management’s discussion and analysis of certain significant factors
which have affected the financial condition and results of operations of the
Company as reflected in the unaudited consolidated statement of condition as of
March 31, 2008 as compared to December 31, 2007 and operating results for the
three-month period ended March 31, 2007. These comments should be
read in conjunction with the Company’s unaudited consolidated financial
statements and accompanying notes appearing elsewhere herein.
The
following table sets forth unaudited selected financial data for the previous
five quarters. This data should be read in conjunction with the
consolidated financial statements and the notes thereto and the information
contained in this Item 2.
|
(in
thousands, except
|
2008
|
2007
|
||||||||||||||||||
|
share
data, taxable
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||
|
equivalent)
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||||
|
Results
of Operations:
|
||||||||||||||||||||
|
Net
interest income
|
$ | 18,460 | $ | 19,248 | $ | 19,081 | $ | 18,330 | $ | 18,419 | ||||||||||
|
Net
interest income (tax equivalent)
|
18,814 | 19,009 | 19,257 | 18,722 | 18,565 | |||||||||||||||
|
Provision
for loan losses
|
3,200 | 6,914 | 2,964 | 936 | 507 | |||||||||||||||
|
Non-interest
income
|
4,842 | 3,833 | 4,591 | 4,643 | 4,525 | |||||||||||||||
|
Non-interest
expense
|
15,640 | 15,502 | 15,170 | 13,780 | 14,444 | |||||||||||||||
|
Net
income
|
2,966 | 1,186 | 3,570 | 5,373 | 5,024 | |||||||||||||||
|
Selected
Average Balances:
|
||||||||||||||||||||
|
Loans,
net of unearned income
|
$ | 1,617,991 | $ | 1,605,006 | $ | 1,569,906 | $ | 1,511,333 | $ | 1,458,725 | ||||||||||
|
Investment
securities
|
291,708 | 297,380 | 299,925 | 301,848 | 292,979 | |||||||||||||||
|
Earning
assets
|
1,933,179 | 1,924,212 | 1,896,044 | 1,862,381 | 1,837,001 | |||||||||||||||
|
Assets
|
2,115,561 | 2,112,579 | 2,069,715 | 2,030,018 | 2,014,040 | |||||||||||||||
|
Deposits
|
1,748,961 | 1,725,383 | 1,695,239 | 1,693,020 | 1,688,885 | |||||||||||||||
|
Shareholders’
equity
|
193,971 | 191,124 | 187,290 | 185,177 | 181,645 | |||||||||||||||
|
Period-End
Balances:
|
||||||||||||||||||||
|
Loans,
net of unearned income
|
$ | 1,622,437 | $ | 1,614,048 | $ | 1,593,014 | $ | 1,556,862 | $ | 1,475,869 | ||||||||||
|
Earning
assets
|
1,924,415 | 1,917,240 | 1,917,901 | 1,873,846 | 1,870,466 | |||||||||||||||
|
Total
assets
|
2,118,243 | 2,112,063 | 2,103,139 | 2,049,073 | 2,036,413 | |||||||||||||||
|
Deposits
|
1,784,291 | 1,757,265 | 1,707,855 | 1,695,185 | 1,712,507 | |||||||||||||||
|
Shareholders’
equity
|
196,308 | 191,249 | 188,596 | 184,099 | 182,764 | |||||||||||||||
|
Per
Common Share Data:
|
||||||||||||||||||||
|
Earnings
per share-Basic
|
$ | 0.22 | $ | 0.09 | $ | 0.26 | $ | 0.40 | $ | 0.37 | ||||||||||
|
Earnings
per share – Diluted
|
0.22 | 0.09 | 0.26 | 0.39 | 0.37 | |||||||||||||||
|
Book
value per share
|
14.48 | 14.12 | 13.93 | 13.60 | 13.51 | |||||||||||||||
|
End
of period shares outstanding
|
13,556,770 | 13,539,985 | 13,539,195 | 13,541,476 | 13,527,520 | |||||||||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||||||
|
Basic
|
13,497,344 | 13,485,765 | 13,501,663 | 13,485,683 | 13,443,850 | |||||||||||||||
|
Diluted
|
13,559,761 | 13,573,626 | 13,620,069 | 13,663,072 | 13,667,509 | |||||||||||||||
|
Market
Price:
|
||||||||||||||||||||
|
High
Closing Price
|
16.41 | 18.67 | 23.05 | 25.58 | 28.32 | |||||||||||||||
|
Low
Closing Price
|
12.49 | 13.73 | 17.72 | 21.76 | 23.25 | |||||||||||||||
|
Closing
Price for Quarter
|
16.06 | 16.85 | 18.08 | 22.47 | 24.48 | |||||||||||||||
|
Trading
volume (avg. daily)
|
61,780 | 51,604 | 50,547 | 38,941 | 41,130 | |||||||||||||||
|
Cash
dividends per share
|
0.14 | 0.14 | 0.14 | 0.14 | 0.14 | |||||||||||||||
|
Price
to earnings
|
18.25 | 15.18 | 12.38 | 14.40 | 16.54 | |||||||||||||||
|
Price
to book value
|
1.11 | 1.19 | 1.30 | 1.65 | 1.81 | |||||||||||||||
|
Performance
Ratios:
|
||||||||||||||||||||
|
Return
on average assets
|
0.56 | % | 0.23 | % | 0.68 | % | 1.06 | % | 1.01 | % | ||||||||||
|
Return on average equity
|
6.15 | % | 2.48 | % | 7.56 | % | 11.64 | % | 11.22 | % | ||||||||||
|
Avg. loans as % of avg. deposits
|
92.51 | % | 93.02 | % | 92.61 | % | 89.27 | % | 86.18 | % | ||||||||||
|
Net
interest margin (tax equivalent)
|
3.91 | % | 3.92 | % | 4.03 | % | 4.03 | % | 4.10 | % | ||||||||||
|
Average
equity to average assets
|
9.27 | % | 9.06 | % | 9.04 | % | 9.12 | % | 9.02 | % | ||||||||||
|
Efficiency
ratio
|
67.12 | % | 67.21 | % | 64.08 | % | 59.98 | % | 62.95 | % | ||||||||||
Results
of Operations for the Three Months Ended March 31, 2008 and 2007
Consolidated
Earnings and Profitability
Ameris
reported net income of $3.0 million, or $0.22 per share, for the quarter ended
March 31, 2008, compared to net income for the same quarter in 2007 of $5.0
million, or $0.37 per share. The Company’s return on average assets
and average shareholders’ equity declined in the first quarter of 2008 to 0.56%
and 6.15%, respectively, compared to 1.01% and 11.22% in the first quarter of
2007. Declines in credit quality and thinner net interest margins
were the primary reasons for the declines in earnings and profitability
levels.
Net
Interest Income and Margins
Net
interest income for the first quarter of 2008 was $18.5 million, a 0.22%
increase compared to the same quarter in 2007. While net interest
income increased minimally, the net interest margin declined reflecting the
recent declines in short term rates. The Company’s net interest
margin fell to 3.91% at the end of the first quarter compared to 4.10% in the
same period of 2007.
Interest
income during the first quarter of 2008 was $34.1 million compared to $35.4
million in the same quarter of 2007. Yields on earning assets also
fell, declining from 7.85% in the first quarter of 2007 to 7.17% in the first
quarter of 2008. Yields on loans led overall yields lower, declining
to 7.56% in the current quarter compared to 8.57% in the same period in
2007. Declines in loan yields were primarily to declines in variable
loans as fixed rate loans declined only marginally. At the end of the
first quarter, yields on the Company’s variable loan portfolio had decreased to
6.34%, compared to 8.78% for the same quarter of 2007. When compared
to the first quarter of 2007, yields on fixed rate loans in the first quarter of
2008 remained unchanged at 8.03%. Fixed rate loans account for
approximately 47.50% of the total portfolio.
Interest
expense also declined materially, offsetting the majority of declines in
interest income. Total interest expense in the first quarter of 2008
amounted to $15.6 million reflecting a decline of 8.02% from the same quarter in
2007. The Company’s cost of funding declined to 3.30% in the current
quarter from 3.79% reported during the first quarter of
2007. Declines in the cost of CDs contributed the most to declines in
interest expense. Yields on the Company’s CD portfolio declined to
4.78% in the first quarter of 2008 compared to 5.03% in the same quarter of
2007. In addition to CDs, the Company’s non-deposit funding declined
significantly. Yields on non-deposit borrowing in the first quarter
of 2008 were 3.81% compared to 5.68% in the first quarter of 2007.
Provision
for Loan Losses and Credit Quality
The
Company’s provision for loan loss during the first quarter of 2008 amounted to
$3.2 million compared to $507,000 for the first quarter of 2007. The
increase in the provision was related to deteriorating credit quality in two to
three of the Bank’s markets. Non-performing assets as a
percentage of loans and OREO increased to 2.00% at March 31, 2008 compared to
0.67% at March 31, 2007. A severe slowdown in real estate activity
(sales and valuations) centered primarily in our north Florida markets has
caused an increase in weaker financial conditions of larger
borrowers. Credit
quality has been a priority during the last three quarters as conditions
deteriorated rapidly. It has been the policy of the company to recognize losses
and potential losses as quickly as possible and to manage the accounts
appropriately. Subsequent to March 31, 2008, the Company has
either disposed of OREO or upgraded loans amounting to approximately $8.0
million.
Net
charge-offs in the first quarter of 2008 amounted to $2.7 million, or 0.68%, of
total loans compared to $257,000, or 0.07%, in the first quarter of
2007. Net charge-offs in the first quarter at 2008 were centered in
our north Florida markets on loans that were identified as weaker credits or
loans with deficiencies prior to December 31, 2007.
Noninterest
Income
Noninterest
income in the first quarter of 2008 increased to $4.8 million from $4.5 million
in the same quarter of 2007. Service charges on deposit accounts
increased approximately $446,000 to $3.3 million in the current quarter,
primarily the results of accelerated sales of transaction accounts and continued
efforts to increase service charges where appropriate. In addition to
increases in service charges, income from mortgage banking activities increased
27.20% to $869,000. Increases in mortgage related income was
primarily the result of expansion in the Company’s staff of producers in
the second half of 2007.
Noninterest
Expense
Noninterest
expenses in the first quarter of 2008 increased to $15.6 million compared to
$14.4 million in the same quarter of 2007. Salaries and benefits
increased 11.46% to $8.6 million during the current quarter when compared to the
same period a year ago. Increases are due primarily to continued
expansion in South Carolina where current operations are significantly more
active than in the prior period when the Company was in the initial stages of
the strategy. Similarly, the expansion in South Carolina contributed
to a larger than normal 13.2% increase in premises and equipment expense to end
the quarter at $2.0 million. Other operating expenses increased
approximately $214,000 to $4.1 million in the first quarter of 2008 when
compared to the first quarter of 2007. These increases are the result
of increased expenses associated with non-performing assets as well as increases
in advertising and marketing expenses.
Income
taxes
Income
taxes in the first quarter amounted to $1.5 million, an effective rate of 33.5%,
compared to $3.0 million and 37.2%, respectively, in the same quarter of
2007. Decreases in the effective rate relate mostly to lower levels of net
income relative to stable levels of tax free income.
Capital
Capital
management consists of providing equity to support both current and anticipated
future operations. The Company is subject to capital adequacy
requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia
Department of Banking and Finance (the “GDBF”), and the Bank is subject to
capital adequacy requirements imposed by the Federal Deposit Insurance
Corporation (the “FDIC”) and the GDBF.
The FRB,
the FDIC and the GDBF have adopted risk-based capital requirements for
assessing bank holding company and bank capital adequacy. These
standards define and establish minimum capital requirements in relation to
assets and off-balance sheet exposure, adjusted for credit risk. The
risk-based capital standards currently in effect are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among bank
holding companies and banks and to account for off-balance sheet
exposure.
The
minimum requirements established by the regulators for the Bank are set forth in
the table below along with the actual ratios at March 31, 2008 and
2007.
|
Well
Capitalized Requirement
|
Adequately
Capitalized Requirement
|
March
31, 2008 Actual
|
March
31, 2007 Actual
|
|||||||
|
Tier
1 Capital (to Average Assets)
|
≥5%
|
≥4%
|
8.61
|
%
|
8.47
|
%
|
||||
|
Tier
1 Capital (to Risk Weighted Assets)
|
≥6%
|
≥4%
|
10.58
|
%
|
10.44
|
%
|
||||
|
Total
Capital (to Risk Weighted Assets)
|
≥10%
|
≥8%
|
11.84
|
%
|
11.68
|
%
|
||||
Management
believes that the Company and the Bank met all capital requirements to
which they are subject as of March 31, 2008.
Loans
and Allowance for Loan Losses
At March
31, 2008, gross loans outstanding were $1.62 billion, an increase of $146.6
million, or 9.9%, over gross loans at March 31, 2007. The growth in the loan
portfolio was attributable to a consistent focus on quality loan production and
expansion into faster growing markets over the past few years. The
Company regularly monitors the composition of the loan portfolio to
evaluate the adequacy of the allowance for loan losses in light of the impact
that changes in the economic environment may have on the loan
portfolio.
The
Company focuses on the following loan categories: (1) commercial, mortgage,
financial & agricultural, (2) consumer, and (3) residential
mortgage. The Company’s management has strategically located its
branches in south and southeast Georgia, north Florida, southeast Alabama
and the state of South Carolina and has taken advantage of the growth in
these areas.
The
allowance for loan losses is a reserve established through charges to earnings
in the form of a provision for loan losses. The provision for loan
losses is based on management’s evaluation of the size and composition of the
loan portfolio, the level of non-performing and past due loans, historical
trends of charged-off loans and recoveries, prevailing economic conditions and
other factors management deems appropriate. The Company’s management
has established an allowance for loan losses which it believes is adequate for
the risk of loss inherent in the loan portfolio. Based on a credit
evaluation of the loan portfolio, management presents a monthly review of the
allowance for loan losses to the Company’s Board of Directors. The
review that management has developed primarily focuses on risk by evaluating
individual loans in certain risk categories. These categories have
also been established by management and take the form of loan
grades. By grading the loan portfolio in this manner the
Company’s management is able to effectively evaluate the portfolio by risk,
which management believes is the most effective way to analyze the loan
portfolio and thus analyze the adequacy of the allowance for loan
losses. The Company’s reserve for loan losses is completely allocated
to individual loans through this grading system.
The
Company’s risk management processes include a loan review program designed to
evaluate the credit risk in the loan portfolio and insure credit grade
accuracy. Through the loan review process, the Company maintains a
loan portfolio summary analysis, charge-off and recoveries analysis, trends in
accruing problem loan analysis, and problem and past due loan analysis which
serve as tools to assist management in assessing the overall quality of the loan
portfolio and the adequacy of the allowance for loan losses. Loans
classified as “substandard” are loans which are inadequately protected by the
current sound worth and paying capacity of the borrower or of the collateral
pledged. These assets exhibit a well-defined weakness or are
characterized by the distinct possibility that the Company will sustain some
loss if the deficiencies are not corrected. These weaknesses may be
characterized by past due performance, operating losses and/or questionable
collateral values. Loans classified as “doubtful” are those loans
that have characteristics similar to substandard loans but have an increased
risk of loss. Loans classified as “loss” are those loans which are
considered uncollectible and are in the process of being
charged-off.
The
allowance for loan losses is established by examining (1) the large classified
loans, nonaccrual loans and loans considered impaired and evaluating them
individually to determine the specific reserve allocation, and (2) the remainder
of the loan portfolio to allocate a portion of the allowance based on past loss
experience and the economic conditions for the particular loan
category. The Company will also consider other factors such as
changes in lending policies and procedures; changes in national, regional,
and/or local economic and business conditions; changes in the nature and volume
of the loan portfolio; changes in the experience, ability and depth of either
the bank president or lending staff; changes in the volume and severity of past
due and classified loans; changes in the quality of the Company’s corporate loan
review system; and other factors management deems
appropriate. Historically, we believe our estimates of the level of
allowance for loan losses required have been appropriate and our expectation is
that the primary factors considered in the provision calculation will continue
to be consistent with prior trends.
For the
three month period ending March 31, 2008, the Company recorded net charge-offs
totaling $2.7 million compared to $257,000 for the same period in
2007. The provision for loan losses for the three months ended March 31,
2008 and 2007 was $3.2 million and $507,000, respectively. The allowance
for loan losses totaled $28.1 million, or 1.73% of total loans at March 31,
2008, compared to $25.1 million, or 1.70% of total loans at March 31,
2007.
The
following table presents an analysis of the allowance for loan losses for the
three month periods ended March 31, 2008 and 2007:
|
(dollars
in thousands)
|
March
31, 2008
|
March
31, 2007
|
||||||
|
Balance
of allowance for loan losses at beginning of period
|
$
|
27,640
|
$
|
24,863
|
||||
|
Provision
charged to operating expense
|
3,200
|
507
|
||||||
|
Charge-offs:
|
||||||||
|
Commercial,
mortgage, financial, & agricultural
|
2,058
|
353
|
||||||
|
Consumer
|
272
|
146
|
||||||
|
Residential
mortgage
|
615
|
288
|
||||||
|
Total
charge-offs
|
2,945
|
787
|
||||||
|
Recoveries:
|
||||||||
|
Commercial,
mortgage, financial, & agricultural
|
84
|
357
|
||||||
|
Consumer
|
91
|
121
|
||||||
|
Residential
mortgage
|
24
|
51
|
||||||
|
Total
recoveries
|
199
|
530
|
||||||
|
Net
charge-offs
|
2,746
|
257
|
||||||
|
Balance
of allowance for loan losses at end of period
|
$
|
28,094
|
$
|
25,113
|
||||
|
Net
annualized charge-offs as a percentage of average
loans
|
0.68
|
%
|
0.07
|
%
|
||||
|
Reserve
for loan losses as a percentage of loans at end of period
|
1.73
|
%
|
1.70
|
%
|
||||
Non-Performing
Assets
Non-performing
assets include nonaccrual loans, accruing loans contractually past due 90 days
or more, repossessed personal property, and other real estate. Loans
are placed on nonaccrual status when management has concerns relating to the
ability to collect the principal and interest and generally when such loans are
90 days or more past due. A loan is considered impaired when it is
probable that not all principal and interest amounts will be collected according
to the loan contract. When a loan is placed on nonaccrual status, any
interest previously accrued but not collected is reversed against current
income. Non-performing assets increased $7.1 million during the
quarter ending March 31, 2008 to end at $32.5
million. Non-performing assets as a percentage of loans and
repossessed collateral were 2.00% and 1.57% at March 31, 2008 and December 31, 2007,
respectively.
Slowing
real estate activity in some of the Company’s markets has altered the Company’s
risk profile. These markets are centered primarily in northern Florida and
include Jacksonville, Gainesville and Crawfordville, Florida.
Deteriorating credit quality has been the result of primarily development or
construction loans in areas where there was significant speculation on real
estate. As the speculation diminished, many of the planned projects were
slower to develop or sell. Certain borrowers did not have the liquidity
necessary to withstand a severe downturn in the market place but do have
sufficient equity in the project that ultimately limits the Company’s potential
loss. The Company anticipates continued stress on its borrowers in these
markets until real estate activity increases.
Non-performing assets were as follows:
|
(dollars
in thousands)
|
March
31, 2008
|
December
31, 2007
|
||||||
|
Total
nonaccrual loans
|
$
|
26,812
|
$
|
18,468
|
||||
|
Accruing
loans delinquent 90 days or more
|
-
|
-
|
||||||
|
Other
real estate owned and repossessed collateral
|
5,727
|
6,991
|
||||||
|
Total
non-performing assets
|
$
|
32,539
|
$
|
25,459
|
||||
Interest
Rate Sensitivity and Liquidity
The
Company’s primary market risk exposures are credit, interest rate risk, and to a
lesser degree, liquidity risk. The Bank operates under an Asset
Liability Management Policy approved by the Company’s Board of Directors and the
Asset and Liability Committee (the “ALCO Committee”). The policy
outlines limits on interest rate risk in terms of changes in net interest income
and changes in the net market values of assets and liabilities over certain
changes in interest rate environments. These measurements are made
through a simulation model which projects the impact of changes in interest
rates on the Bank’s assets and liabilities. The policy also outlines
responsibility for monitoring interest rate risk, and the process for the
approval, implementation and monitoring of interest rate risk strategies to
achieve the Bank’s interest rate risk objectives.
The ALCO
Committee is comprised of senior officers of Ameris and two outside members
of the Company’s Board of Directors. The ALCO Committee makes all
strategic decisions with respect to the sources and uses of funds that may
affect net interest income, including net interest spread and net interest
margin. The objective of the ALCO Committee is to identify the
interest rate, liquidity and market value risks of the Company’s balance sheet
and use reasonable methods approved by the Company’s board and executive
management to minimize those identified risks.
The
normal course of business activity exposes the Company to interest rate
risk. Interest rate risk is managed within an overall asset and
liability framework for the Company. The principal objectives of
asset and liability management are to predict the sensitivity of net interest
spreads to potential changes in interest rates, control risk and enhance
profitability. Funding positions are kept within predetermined limits
designed to properly manage risk and liquidity. The Company employs
sensitivity analysis in the form of a net interest income simulation to help
characterize the market risk arising from changes in interest
rates. In addition, fluctuations in interest rates usually result in
changes in the fair market value of the Company’s financial instruments, cash
flows and net interest income. The Company’s interest rate risk
position is managed by the ALCO Committee.
The
Company uses a simulation modeling process to measure interest rate risk and
evaluate potential strategies. Interest rate scenario models are
prepared using software created and licensed from an outside
vendor. The Company’s simulation includes all financial assets and
liabilities. Simulation results quantify interest rate risk under
various interest rate scenarios. Management then develops and
implements appropriate strategies. ALCO has determined that an
acceptable level of interest rate risk would be for net interest income to
decrease no more than 5.00% given a change in selected interest rates of 200
basis points over any 24 month period.
Liquidity
management involves the matching of the cash flow requirements of customers, who
may be either depositors desiring to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their credit needs,
and the ability of Ameris to manage those requirements. The Company
strives to maintain an adequate liquidity position by managing the balances and
maturities of interest-earning assets and interest-bearing liabilities so that
the balance it has in short-term investments at any given time will adequately
cover any reasonably anticipated immediate need for
funds. Additionally, the Bank maintains relationships with
correspondent banks, which could provide funds on short notice, if
needed. The Company has invested in Federal Home Loan Bank stock for
the purpose of establishing credit lines with the Federal Home Loan
Bank. The credit availability to the Bank is equal to 20% of the
Bank's total assets as reported on the most recent quarterly financial
information submitted to the regulators subject to the pledging of sufficient
collateral. At March 31, 2008, there were $69.5 million in advances
outstanding with the Federal Home Loan Bank and there were $5 million in
advances outstanding on the Company’s line of credit held with a corresponding
bank.
The
following liquidity ratios compare certain assets and liabilities to total
deposits or total assets:
|
March
31, 2008
|
December
31,
2007
|
September
30, 2007
|
June
30,
2007
|
March
31,
2007
|
||||||||||||||||
|
Total
securities to total deposits
|
16.68
|
%
|
16.57
|
%
|
17.68
|
%
|
17.73
|
%
|
17.53
|
%
|
||||||||||
|
Total
loans (net of unearned income) to total deposits
|
90.93
|
%
|
91.85
|
%
|
93.26
|
%
|
91.82
|
%
|
86.17
|
%
|
||||||||||
|
Interest-earning
assets to total assets
|
90.85
|
%
|
90.78
|
%
|
91.10
|
%
|
91.31
|
%
|
91.65
|
%
|
||||||||||
|
Interest-bearing
deposits to total deposits
|
88.81
|
%
|
88.77
|
%
|
89.12
|
%
|
88.30
|
%
|
88.52
|
%
|
||||||||||
The
liquidity resources of the Company are monitored continuously by the ALCO
Committee and on a periodic basis by state and federal regulatory
authorities. As determined under guidelines established by these
regulatory authorities, the Company’s and the Bank's liquidity ratios at March
31, 2008 were considered satisfactory. The Company is aware of no
events or trends likely to result in a material change in
liquidity.
The
Company is exposed only to U. S. dollar interest rate changes, and, accordingly,
the Company manages exposure by considering the possible changes in the net
interest margin. The Company does not have any trading instruments
nor does it classify any portion of the investment portfolio as held for
trading. The Company’s hedging activities are limited to cash flow
hedges and are part of the Company’s program to manage interest rate
sensitivity. At March 31, 2008, the Company had two effective
interest rate floors with notional amounts totaling $70
million. These floors are hedging specific cash flows associated with
certain variable rate loans and have strike rates of
7.00%. Maturities range from September 2009 to September
2011. Finally, the Company has no exposure to foreign currency
exchange rate risk, commodity price risk and other market risks.
Interest
rates play a major part in the net interest income of a financial
institution. The sensitivity to rate changes is known as “interest
rate risk”. The repricing of interest-earning assets and interest-bearing
liabilities can influence the changes in net interest income. As part
of the Company’s asset/liability management program, the timing of repriced
assets and liabilities is referred to as "Gap management".
The
Company uses simulation analysis to monitor changes in net interest income due
to changes in market interest rates. The simulation of rising,
declining and flat interest rate scenarios allows management to monitor and
adjust interest rate sensitivity to minimize the impact of market interest rate
swings. The analysis of the impact on net interest income over a
twelve-month period is subjected to a gradual 200 basis point increase or
decrease in market rates on net interest income and is monitored on a quarterly
basis.
Additional
information required by Item 305 of Regulation S-K is set forth under Part I,
Item 2 of this report.
Item
4. Controls and Procedures
The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
Company’s disclosure controls and procedures (as such term is defined in Rules
13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), as of the end of the period covered by this
report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange
Act. Based on such evaluation, such officers have concluded that, as
of the end of the period covered by this report, the Company’s disclosure
controls and procedures are effective.
During
the quarter ended March 31, 2008, there was not any change in the Company’s
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange
Act that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.
PART
II - OTHER INFORMATION
|
Item
1.
|
|||
|
Nothing
to report with respect to the period covered by this
Report.
|
|||
|
Item
1A.
|
|||
|
There
have been no material changes to the risk factors disclosed in Item 1A. of
Part 1 in our Annual Report on Form 10-K for the year ended December
31, 2007.
|
|||
|
Item
2.
|
Unregistered Sales of Equity Securities and Use of
Proceeds
|
||
|
None.
|
|||
|
Item
3.
|
Defaults upon Senior Securities
|
||
|
None.
|
|||
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
||||
|
No
matter was submitted to a vote of our security holders by solicitation of
proxies or otherwise during the first quarter of 2008.
|
|||||
|
Item
5.
|
Other
Information
|
||||
|
None.
|
|||||
|
Item
6.
|
|||||
|
The
exhibits required to be furnished with this report are listed on the
exhibit index attached hereto.
|
|||||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
|
AMERIS
BANCORP
|
|
|
Date: May
12, 2008
|
|
|
/s/Dennis
J. Zember, Jr.
|
|
|
Dennis
J. Zember, Jr.,
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
(duly
authorized signatory and principal financial
officer)
|
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
3.1
|
Articles
of Incorporation of Ameris Bancorp, as amended (incorporated by reference
to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form
1-A filed August 14, 1987).
|
|
3.2
|
Amendment
to Amended Articles of Incorporation (incorporated by reference to Exhibit
3.1.1 to Ameris Bancorp’s Form 10-K filed March 28,
1996).
|
|
3.3
|
Amendment
to Amended Articles of Incorporation (incorporated by reference to Exhibit
4.3 to Ameris Bancorp’s Registration Statement on Form S-4 filed with the
Commission on July 17, 1996).
|
|
3.4
|
Articles
of Amendment to the Articles of Incorporation (incorporated by reference
to Exhibit 3.5 to Ameris Bancorp’s Annual Report on Form 10-K filed with
the Commission on March 25, 1998).
|
|
3.5
|
Articles
of Amendment to the Articles of Incorporation (incorporated by reference
to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with
the Commission on March 26, 1999).
|
|
3.6
|
Articles
of Amendment to the Articles of Incorporation (incorporated by reference
to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with
the Commission on March 31, 2003).
|
|
3.7
|
Articles
of Amendment to the Articles of Incorporation (incorporated by reference
to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with
the Commission on December 1, 2005).
|
|
3.8
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.1 to Ameris
Bancorp’s Current Report on Form 8-K filed with the Commission on March
14, 2005).
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive
Officer
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial
Officer
|
|
32.1
|
Section
1350 Certification by the Company’s Chief Executive
Officer
|
|
32.2
|
Section
1350 Certification by the Company’s Chief Financial
Officer
|