Edgar Filing: Ameris Bancorp

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if smaller reporting company)

Smaller reporting company

Form 10-Q

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, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13901

LOGO

AMERIS BANCORP

(Exact name of registrant as specified in its charter)


GEORGIA		58-1456434
(State of incorporation)		(IRS Employer ID No.)

310 FIRST STREET, S.E., 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 ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ¨ No x

There were 23,814,144 shares of Common Stock outstanding as of April 30, 2012.

AMERIS BANCORP

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets at March 31, 2012, December 31, 2011 and March 31, 2011		3

	Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 31, 2012 and 2011		4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2012 and 2011		5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		47

Item 4.	Controls and Procedures.		47

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.		48

Item 1A.	Risk Factors.		48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		48

Item 3.	Defaults Upon Senior Securities.		48

Item 4.	Mine Safety Disclosures.		48

Item 5.	Other Information.		48

Item 6.	Exhibits.		48

Signatures			48

Item 1. Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	March 31, 2012			December 31, 2011			March 31, 2011
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	64,963		$	65,528		$	88,386
Federal funds sold and interest bearing accounts		194,172			229,042			264,508
Investment securities available for sale, at fair value		371,791			339,967			305,620
Other investments		10,967			9,878			12,436
Mortgage loans held for sale		14,863			11,563			—

Loans		1,323,844			1,332,086			1,345,981
Covered loans		653,377			571,489			526,012
Less: allowance for loan losses		28,689			35,156			35,443

Loans, net		1,948,532			1,868,419			1,836,550


Other real estate owned		40,035			50,301			62,258
Covered other real estate owned		85,803			78,617			59,757

Total other real estate owned		125,838			128,918			122,015

Premises and equipment, net		72,755			73,124			66,359
FDIC indemnification asset		220,016			242,394			167,176
Intangible assets		4,179			3,250			3,973
Goodwill		956			956			956
Other assets		14,202			21,268			50,444

Total assets	$	3,043,234		$	2,994,307		$	2,918,423


Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	444,707		$	395,347		$	316,060
Interest-bearing		2,220,653			2,196,219			2,256,629

Total deposits		2,665,360			2,591,566			2,572,689
Securities sold under agreements to repurchase		28,790			37,665			20,257
Other borrowings		3,810			20,000			—
Other liabilities		5,308			9,037			9,351
Subordinated deferrable interest debentures		42,269			42,269			42,269

Total liabilities		2,745,537			2,700,537			2,644,566


Commitments and contingencies

Stockholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 52,000 shares issued and outstanding		50,884			50,727			50,269
Common stock, par value $1; 30,000,000 shares authorized; 25,150,318, 25,087,468 and 25,102,218 issued		25,150			25,087			25,102
Capital surplus		166,579			166,639			165,995
Retained earnings		59,402			54,852			37,580
Accumulated other comprehensive income		6,513			7,296			5,742
Treasury stock, at cost, 1,336,174 shares		(10,831	)		(10,831	)		(10,831	)

Total stockholders’ equity		297,697			293,770			273,857

Total liabilities and stockholders’ equity	$	3,043,234		$	2,994,307		$	2,918,423

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2012			2011
Interest income
Interest and fees on loans	$	29,482		$	28,971
Interest on taxable securities		2,309			2,658
Interest on nontaxable securities		365			320
Interest on deposits in other banks		120			175
Interest on federal funds sold		6			13

Total interest income		32,282			32,137


Interest expense
Interest on deposits		4,084			7,375
Interest on other borrowings		471			555

Total interest expense		4,555			7,930


Net interest income		27,727			24,207
Provision for loan losses		12,882			7,043

Net interest income after provision for loan losses		14,845			17,164


Noninterest income
Service charges on deposit accounts		4,386			4,267
Mortgage origination fees		1,475			450
Other service charges, commissions and fees		391			239
Gain on acquisition		20,037			—
Gain on sale of securities		—			224
Other		975			1,013

Total noninterest income		27,264			6,193


Noninterest expense
Salaries and employee benefits		11,446			9,843
Occupancy and equipment expense		3,335			2,730
Advertising and marketing expense		349			163
Amortization of intangible assets		220			263
Data processing and communications costs		1,925			2,396
Other operating expenses		16,971			5,760

Total noninterest expense		34,246			21,155


Income before income tax expense		7,863			2,202
Applicable income tax expense		2,498			824

Net income	$	5,365		$	1,378

Preferred stock dividends		815			798

Net income available to common stockholders	$	4,550		$	580


Other comprehensive loss
Unrealized holding loss arising during period on investment securities available for sale, net of tax		(689	)		(262	)
Reclassification adjustment for gains included in net income, net of tax		—			(146	)
Unrealized loss on cash flow hedges arising during period, net of tax		(94	)		(54	)

Other comprehensive loss	$	(783	)	$	(462	)

Comprehensive income	$	3,767		$	118


Basic and Diluted earnings per share	$	0.19		$	0.02


Weighted average common shares outstanding
Basic		23,762			23,440
Diluted		23,916			23,474

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended					Three Months Ended
	March 31, 2012					March 31, 2011
	Shares		Amount			Shares			Amount
PREFERRED STOCK
Balance at beginning of period		52,000	$	50,727			52,000		$	50,121
Accretion of fair value of warrant		—		157			—			148


*Balance at end of period*		52,000	$	50,884			52,000		$	50,269

COMMON STOCK
Balance at beginning of period		25,087,468	$	25,087			24,982,911		$	24,983
Issuance of restricted shares		62,450		62			125,075			125
Cancellation of restricted shares		—		—			(7,000	)		(7	)
Proceeds from exercise of stock options		400		1			1,232			1


*Balance at end of period*		25,150,318	$	25,150			25,102,218		$	25,102

CAPITAL SURPLUS
Balance at beginning of period			$	166,639					$	165,930
Stock-based compensation				—						174
Proceeds from exercise of stock options				2						9
Issuance of restricted shares				(62	)					(125	)
Cancellation of restricted shares				—						7


*Balance at end of period*			$	166,579					$	165,995

RETAINED EARNINGS
Balance at beginning of period			$	54,852					$	37,000
Net income				5,365						1,378
Dividends on preferred shares				(657	)					(650	)
Accretion of fair value warrant				(158	)					(148	)


*Balance at end of period*			$	59,402					$	37,580

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities and derivatives:
Balance at beginning of period			$	7,296					$	6,204
Accumulated other comprehensive income				(783	)					(462	)


*Balance at end of period*			$	6,513					$	5,742

TREASURY STOCK
Balance at beginning of period			$	10,831					$	10,831
Purchase of treasury shares				—						—


*Balance at end of period*			$	10,831					$	10,831


*TOTAL STOCKHOLDERS’ EQUITY*			$	297,697					$	273,857

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,
	2012			2011
Cash flows from operating activities:
Net income	$	5,365		$	1,378
Adjustments reconciling net income to net cash provided by operating activities:
Depreciation		1,143			1,112
Net gains on sale or disposal of premises and equipment		(4	)		(189	)
Gain on acquisition		(20,037	)		—
Net losses or write-downs on sale of other real estate owned		7,252			33
Provision for loan losses		12,882			7,043
Amortization of intangible assets		220			263
Net change in mortgage loans held for sale		(3,300	)		—
Net gains on securities available for sale		—			(224	)
Other prepaids, deferrals and accruals, net		4,201			(162	)

Net cash provided by operating activities		7,722			9,254


Cash flows from investing activities:
Net decrease (increase) in federal funds sold and interest bearing deposits		34,870			(3,246	)
Proceeds from maturities of securities available for sale		21,912			12,922
Purchase of securities available for sale		(15,637	)		(19,869	)
Proceeds from sales of securities available for sale		760			23,503
Net change in loans		17,496			37,682
Proceeds from sales of other real estate owned		16,296			9,306
Proceeds from sales of premises and equipment		305			344
Decrease in FDIC indemnification asset		75,032			502
Net cash proceeds received from FDIC-assisted acquisitions		65,050			—
Purchases of premises and equipment		(1,075	)		(1,539	)

Net cash provided by investing activities		215,009			59,605


Cash Flows From Financing Activities:
Net (decrease) increase in deposits		(187,242	)		37,263
Net decrease in securities sold under agreements to repurchase		(8,875	)		(47,927	)
Repayment of other borrowings		(26,524	)		(43,495	)
Dividends paid - preferred stock		(657	)		(650	)
Proceeds from exercise of stock options		2			10

Net cash used in financing activities		(223,296	)		(54,799	)


Net (decrease) increase in cash and due from banks		(565	)		14,060

Cash and due from banks at beginning of period		65,528			74,326


Cash and due from banks at end of period	$	64,963		$	88,386

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid/(received) during the period for:
Interest	$	5,098		$	8,494
Income taxes	$	—		$	—

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly-owned banking subsidiary, Ameris Bank (the “Bank”). At March 31, 2012 the Bank operated 67 branches in select markets in Georgia, Alabama, 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, the banker closest to the customer responds to the differing needs and demands of his or her 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 period ended March 31, 2012 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, 2011.

Newly Adopted Accounting Pronouncements

ASU 2011-04 - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 generally represents clarifications of Topic 820, but also includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. ASU 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011 for public companies. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-05 - Amendments to Topic 220, Comprehensive Income (“ASU 2011-05”). ASU 2011-05 grants an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. For public entities, ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and is to be adopted retrospectively. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350) Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 grants an entity the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This conclusion can be used as a basis for determining whether it is necessary to perform the two-step goodwill impairment test required in Topic 350. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The accounting standard for disclosures about the fair value of financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The fair value hierarchy 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 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.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments and other accounts recorded based on their fair value:

Cash, Due From Banks, Interest-Bearing Deposits in Banks and Federal Funds Sold: The carrying amount of cash, due from banks and interest-bearing deposits in banks and federal funds sold approximates fair value.

Investment 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 mortgage-backed securities issued by government sponsored enterprises and municipal bonds. The level 2 fair value pricing is provided by an independent third-party and is based upon similar securities in an active market. 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.

Other Investments: Federal Home Loan Bank (“FHLB”) stock is included in other investment securities at its original cost basis, as cost approximates fair value and there is no ready market for such investments.

Mortgage Loans Held-for-Sale: Mortgage loans held-for-sale are carried at cost, which is a reasonable estimate of fair value.

Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is based on estimated discounted cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with accounting standards and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 2 assets due to the extensive use of market appraisals. To the extent that market appraisals or other methods do not produce reliable determinations of fair value, these assets are deemed to be Level 3.

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. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.

Covered Assets: Covered assets include loans and other real estate owned on which the majority of losses would be covered by loss-sharing agreements with the Federal Deposit Insurance Corporation (the “FDIC”). Management initially valued these assets at fair value using mostly unobservable inputs and, as such, has classified these assets as Level 3.

Intangible Assets and Goodwill: Intangible assets consist of core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of three to ten years. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill and other intangible assets deemed to have an indefinite useful life are not amortized but instead are subject to an annual review for impairment.

FDIC Indemnification Asset: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared-loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared-loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.

Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently offered for certificates with similar maturities.

Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements.

Subordinated Deferrable Interest Debentures: The carrying amount of the Company’s variable rate trust preferred securities approximates fair value.

Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.

Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of March 31, 2012, December 31, 2011 and March 31, 2011, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial instruments, were as follows:


			Fair Value Measurements at March 31, 2012 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,948,532	$	—	$	1,981,385	$	—	$	1,981,385

Financial liabilities:
Deposits		2,665,360		—		2,667,731		—		2,667,731
Other borrowings		3,810		3,854		—		—		3,854


	December 31, 2011				March 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,868,419	$	1,877,320	$	1,836,550	$	1,845,963

Financial liabilities:
Deposits		2,591,566		2,593,113		2,572,689		2,576,253
Other borrowings		20,000		20,936		—		—

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 fair value hierarchy in which the fair value measurements fall as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):


	Fair Value Measurements on a Recurring Basis As of March 31, 2012
	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	28,848		$	—	$	28,848		$	—
State, county and municipal securities		81,997			—		81,997			—
Corporate debt securities		11,385			—		9,385			2,000
Mortgage-backed securities		249,561			2,292		247,269			—
Derivative financial instruments		(2,089	)		—		(2,089	)		—

Total recurring assets at fair value	$	369,702		$	2,292	$	365,410		$	2,000


	Fair Value Measurements on a Recurring Basis As of December 31, 2011
	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	14,937		$	—	$	14,937		$	—
State, county and municipal securities		79,133			2,966		76,167			—
Corporate debt securities		11,401			—		9,401			2,000
Mortgage-backed securities		234,496			3,302		231,194			—
Derivative financial instruments		(2,049	)		—		(2,049	)		—

Total recurring assets at fair value	$	337,918		$	6,268	$	329,650		$	2,000


	Fair Value Measurements on a Recurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	33,545	$	—	$	33,545	$	—
State, county and municipal securities		56,898		—		56,898		—
Corporate debt securities		9,749		—		7,749		2,000
Mortgage-backed securities		205,428		12,764		192,664		—
Derivative financial instruments		598		—		598		—

Total recurring assets at fair value	$	306,218	$	12,764	$	291,454	$	2,000

The following table is a presentation of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2012
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	69,606	$	—	$	69,606	$	—
Other real estate owned		40,035		—		—		40,035
Covered loans		653,377		—		—		653,377
Covered other real estate owned		85,803		—		—		85,803

Total nonrecurring assets at fair value	$	848,821	$	—	$	69,606	$	779,215


	Fair Value Measurements on a Nonrecurring Basis As of December 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	70,296	$	—	$	70,296	$	—
Other real estate owned		50,301		—		—		50,301
Covered loans		571,489		—		—		571,489
Covered other real estate owned		78,617		—		—		78,617

Total nonrecurring assets at fair value	$	770,703	$	—	$	70,296	$	700,407


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	68,391	$	—	$	68,391	$	—
Other real estate owned		62,258		—		—		62,258
Covered loans		524,105		—		—		524,105
Covered other real estate owned		59,757		—		—		59,757

Total nonrecurring assets at fair value	$	714,511	$	—	$	68,391	$	646,120

Below is the Company’s reconciliation of Level 3 assets as of March 31, 2012.


	Investment Securities Available for Sale		Other Real Estate Owned			Covered Loans			Covered Other Real Estate Owned
Beginning balance January 1, 2012	$	2,000	$	50,301		$	571,489		$	78,617
Total gains/(losses) included in net income		—		(6,538	)		—			(714	)
Purchases, sales, issuances, and settlements, net		—		(8,799	)		91,108			(1,320	)
Transfers in or out of Level 3		—		5,071			(9,220	)		9,220

Ending balance March 31, 2012	$	2,000	$	40,035		$	653,377		$	85,803

NOTE 2 – INVESTMENT SECURITIES

Ameris’ investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. Ameris’ portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of Ameris’ portfolio 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, 2012, December 31, 2011 and March 31, 2011 are presented below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)

March 31, 2012:
U. S. government agencies	$	28,634	$	258	$	(44	)	$	28,848
State, county and municipal securities		78,440		3,723		(166	)		81,997
Corporate debt securities		11,639		217		(471	)		11,385
Mortgage-backed securities		244,232		5,573		(244	)		249,561

Total debt securities	$	362,945	$	9,771	$	(925	)	$	371,791


December 31, 2011:
U. S. government agencies	$	14,670	$	267	$	—		$	14,937
State, county and municipal securities		75,665		3,558		(90	)		79,133
Corporate debt securities		11,640		167		(406	)		11,401
Mortgage-backed securities		228,085		6,559		(148	)		234,496

Total debt securities	$	330,060	$	10,551	$	(644	)	$	339,967


March 31, 2011:
U. S. government agencies	$	33,137	$	455	$	(47	)	$	33,545
State, county and municipal securities		55,971		1,310		(383	)		56,898
Corporate debt securities		12,150		168		(2,569	)		9,749
Mortgage-backed securities		202,204		5,143		(1,919	)		205,428

Total debt securities	$	303,462	$	7,076	$	(4,918	)	$	305,620

The amortized cost and fair value of available-for-sale securities at March 31, 2012 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.


	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	16,167	$	16,220
Due from one year to five years		18,833		19,527
Due from five to ten years		43,629		46,232
Due after ten years		40,084		40,251
Mortgage-backed securities		244,232		249,561

	$	362,945	$	371,791

Securities with a carrying value of approximately $208.1 million serve as collateral to secure public deposits and other purposes required or permitted by law at March 31, 2012.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at March 31, 2012, December 31, 2011 and March 31, 2011.


	Less Than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
March 31, 2012:
U. S. government agencies	$	8,960	$	(44	)	$	—	$	—		$	8,960	$	(44	)
State, county and municipal securities		8,960		(166	)		—		—			8,960		(166	)
Corporate debt securities		100		—			6,611		(471	)		6,711		(471	)
Mortgage-backed securities		37,860		(234	)		2,292		(10	)		40,152		(244	)

Total debt securities	$	55,880	$	(444	)	$	8,903	$	(481	)	$	64,783	$	(925	)


December 31, 2011:
U. S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities		10,134		(90	)		—		—			10,134		(90	)
Corporate debt securities		100		—			6,681		(406	)		6,781		(406	)
Mortgage-backed securities		20,929		(148	)		—		—			20,929		(148	)

Total debt securities	$	31,163	$	(238	)	$	6,681	$	(406	)	$	37,844	$	(644	)


March 31, 2011:
U. S. government agencies	$	11,037	$	(47	)	$	—	$	—		$	11,037	$	(47	)
State, county and municipal securities		12,171		(383	)		—		—			12,171		(383	)
Corporate debt securities		413		(26	)		5,067		(2,543	)		5,480		(2,569	)
Mortgage-backed securities		75,721		(1,919	)		—		—			75,721		(1,919	)

Total debt securities	$	99,342	$	(2,375	)	$	5,067	$	(2,543	)	$	104,409	$	(4,918	)

NOTE 3 – 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 within select markets in Georgia, Alabama, Florida and South Carolina. Ameris concentrates the majority of its lending activities in real estate loans. 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.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, construction of one-to-four family residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank’s market areas.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and both secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	149,320	$	142,960	$	142,826
Real estate – construction and development		122,331		130,270		152,863
Real estate – commercial and farmland		658,054		672,765		672,212
Real estate – residential		328,053		330,727		336,755
Consumer installment		42,085		37,296		33,698
Other		24,001		18,068		7,627

	$	1,323,844	$	1,332,086	$	1,345,981

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $653.4 million, $571.5 million and $526.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively, are not included in the above schedule.

Covered loans are shown below according to loan type as of the end of the periods shown:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	43,157	$	41,867	$	45,954
Real estate – construction and development		93,430		77,077		89,356
Real estate – commercial and farmland		350,244		321,257		242,153
Real estate – residential		162,768		127,644		140,239
Consumer installment		3,778		3,644		8,310

	$	653,377	$	571,489	$	526,012

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

The following table presents an analysis of non-covered loans accounted for on a nonaccrual basis.


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	4,732	$	3,987	$	5,966
Real estate – construction and development		10,647		15,020		17,893
Real estate – commercial and farmland		21,539		35,385		28,313
Real estate – residential		14,065		15,498		15,557
Consumer installment		1,275		933		662

	$	52,258	$	70,823	$	68,391

The following table presents an analysis of covered loans accounted for on a nonaccrual basis:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	14,185	$	11,952	$	9,149
Real estate – construction and development		35,170		30,977		28,364
Real estate – commercial and farmland		79,620		75,458		44,110
Real estate – residential		40,609		41,139		34,701
Consumer installment		637		473		1,488

	$	170,221	$	159,999	$	117,812

The following table presents an analysis of non-covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	1,477	$	291	$	4,559	$	6,327	$	142,993	$	149,320	$	—
Real estate – construction & development		2,356		481		9,531		12,368		109,963		122,331		—
Real estate – commercial & farmland		9,991		2,412		19,646		32,049		626,005		658,054		—
Real estate – residential		3,905		6,175		13,298		23,378		304,675		328,053		—
Consumer installment loans		856		497		1,070		2,423		39,662		42,085		—
Other		—		—		—		—		24,001		24,001		—

Total	$	18,585	$	9,856	$	48,104	$	76,545	$	1,247,299	$	1,323,844	$	—


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2011:
Commercial, financial & agricultural	$	1,103	$	705	$	3,975	$	5,783	$	137,177	$	142,960	$	—
Real estate – construction & development		2,395		1,507		13,608		17,510		112,760		130,270		—
Real estate – commercial & farmland		6,686		7,071		32,953		46,710		626,055		672,765		—
Real estate – residential		5,229		4,995		12,874		23,098		307,629		330,727		—
Consumer installment loans		963		305		725		1,993		35,303		37,296		—
Other		—		—		—		—		18,068		18,068		—

Total	$	16,376	$	14,583	$	64,135	$	95,094	$	1,236,992	$	1,332,086	$	—


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	848	$	695	$	5,923	$	7,466	$	135,360	$	142,826	$	—
Real estate – construction & development		2,324		1,864		16,011		20,199		132,664		152,863		—
Real estate – commercial & farmland		7,127		7,315		17,883		32,325		639,887		672,212		—
Real estate – residential		4,314		2,732		13,480		20,526		316,229		336,755		—
Consumer installment loans		409		177		444		1,030		32,668		33,698		—
Other		—		—		—		—		7,627		7,627		—

Total	$	15,022	$	12,783	$	53,741	$	81,546	$	1,264,435	$	1,345,981	$	—

The following table presents an analysis of covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	682	$	430	$	14,229	$	15,341	$	27,816	$	43,157	$	549
Real estate – construction & development		2,704		778		32,302		35,784		57,646		93,430		909
Real estate – commercial & farmland		12,905		6,994		68,282		88,181		262,063		350,244		2,583
Real estate – residential		5,859		3,514		34,870		44,243		118,525		162,768		3
Consumer installment loans		65		68		685		818		2,960		3,778		241

Total	$	22,215	$	11,784	$	150,368	$	184,367	$	469,010	$	653,377	$	4,285


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2011:
Commercial, financial & agricultural	$	968	$	4,297	$	11,253	$	16,518	$	25,349	$	41,867	$	—
Real estate – construction & development		2,444		1,318		27,867		31,629		45,448		77,077		—
Real estate – commercial & farmland		18,282		8,544		64,091		90,917		230,340		321,257		165
Real estate – residential		3,485		1,493		35,950		40,928		86,716		127,644		290
Consumer installment loans		127		270		440		837		2,807		3,644		—

Total	$	25,306	$	15,922	$	139,601	$	180,829	$	390,660	$	571,489	$	455


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	963	$	3,511	$	8,223	$	12,697	$	33,257	$	45,954	$	—
Real estate – construction & development		1,870		3,233		27,717		32,820		56,536		89,356		532
Real estate – commercial & farmland		9,144		11,607		38,496		59,247		182,906		242,153		402
Real estate – residential		6,669		5,268		34,423		46,360		93,879		140,239		3,006
Consumer installment loans		118		99		1,394		1,611		6,699		8,310		—

Total	$	18,764	$	23,718	$	110,253	$	152,735	$	373,277	$	526,012	$	3,940

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to non-covered impaired loans:


	As of and For the Period Ended
	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in Thousands)
Nonaccrual loans	$	52,258	$	70,823	$	68,391
Troubled debt restructurings not included above		26,848		17,951		25,832

Total impaired loans	$	79,106	$	88,774	$	94,223


Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	79,106	$	88,774	$	94,223

Allowance related to impaired loans	$	9,500	$	18,478	$	16,821

Average investment in impaired loans	$	83,940	$	88,320	$	88,761

Interest income recognized on impaired loans	$	57	$	637	$	75

Foregone interest income on impaired loans	$	187	$	613	$	389

The following table presents an analysis of information pertaining to non-covered impaired loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	7,599	$	—	$	4,732	$	4,732	$	932	$	4,921
Real estate – construction & development		20,593		—		11,952		11,952		1,993		13,812
Real estate – commercial & farmland		45,098		—		39,304		39,304		3,615		42,155
Real estate – residential		24,845		—		21,843		21,843		2,928		21,948
Consumer installment loans		1,391		—		1,275		1,275		32		1,104

Total	$	99,526	$	—	$	79,106	$	79,106	$	9,500	$	83,940


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	9,592	$	—	$	5,110	$	5,110	$	1,366	$	5,700
Real estate – construction & development		21,893		—		15,672		15,672		4,053		18,667
Real estate – commercial & farmland		48,688		—		45,006		45,006		8,331		42,192
Real estate – residential		25,309		—		22,053		22,053		4,499		21,081
Consumer installment loans		1,056		—		933		933		229		680

Total	$	106,538	$	—	$	88,774	$	88,774	$	18,478	$	88,320


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	9,419	$	—	$	6,397	$	6,397	$	2,425	$	5,872
Real estate – construction & development		33,590		—		20,801		20,801		4,254		20,052
Real estate – commercial & farmland		51,874		—		45,731		45,731		5,584		44,281
Real estate – residential		23,440		—		20,632		20,632		4,405		18,026
Consumer installment loans		890		—		662		662		153		530

Total	$	119,213	$	—	$	94,223	$	94,223	$	16,821	$	88,761

The following is a summary of information pertaining to covered impaired loans:


	As of and For the Period Ended
	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in Thousands)
Nonaccrual loans	$	170,221	$	159,999	$	117,812
Troubled debt restructurings not included above		18,220		19,884		8,859

Total impaired loans	$	188,441	$	179,883	$	126,671


Impaired loans not requiring a related allowance	$	188,441	$	179,883	$	126,671

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	184,162	$	138,950	$	107,497

Interest income recognized on impaired loans	$	179	$	526	$	286

Foregone interest income on impaired loans	$	441	$	202	$	32

The following table presents an analysis of information pertaining to impaired covered loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	24,085	$	14,260	$	—	$	14,260	$	—	$	13,144
Real estate – construction & development		59,102		37,831		—		37,831		—		36,097
Real estate – commercial & farmland		128,389		90,847		—		90,847		—		87,793
Real estate – residential		65,971		44,866		—		44,866		—		46,573
Consumer installment loans		786		637		—		637		—		555

Total	$	278,333	$	188,441	$	—	$	188,441	$	—	$	184,162


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	21,352	$	12,027	$	—	$	12,027	$	—	$	10,210
Real estate – construction & development		47,005		34,363		—		34,363		—		30,610
Real estate – commercial & farmland		106,953		84,740		—		84,740		—		56,607
Real estate – residential		68,411		48,280		—		48,280		—		40,675
Consumer installment loans		623		473		—		473		—		848

Total	$	244,344	$	179,883	$	—	$	179,883	$	—	$	138,950


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	17,627	$	9,207	$	—	$	9,207	$	—	$	7,482
Real estate – construction & development		74,222		28,365		—		28,365		—		27,088
Real estate – commercial & farmland		77,769		45,760		—		45,760		—		37,639
Real estate – residential		67,307		41,851		—		41,851		—		33,983
Consumer installment loans		1,619		1,488		—		1,488		—		1,305

Total	$	238,544	$	126,671	$	—	$	126,671	$	—	$	107,497

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage, interim losses); (ii)adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire, divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	18,767	$	19	$	211	$	415	$	7,042	$	—	$	26,454
15		14,063		5,402		155,568		80,623		1,198		—		256,854
20		63,200		33,805		269,746		85,022		19,478		24,001		495,252
23		265		8,458		9,188		11,719		1		—		29,631
25		44,035		58,943		164,642		107,530		11,983		—		387,133
30		3,148		1,955		20,551		16,135		540		—		42,329
40		5,716		13,459		38,148		26,515		1,828		—		85,666
50		123		290		—		94		15		—		522
60		3		—		—		—		—		—		3

Total	$	149,320	$	122,331	$	658,054	$	328,053	$	42,085	$	24,001	$	1,323,844

The following table presents the non-covered loan portfolio by risk grade as of December 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	17,213	$	20	$	235	$	252	$	6,210	$	—	$	23,930
15		15,379		5,391		151,068		88,586		1,065		—		261,489
20		60,631		32,654		272,241		80,989		20,781		18,068		485,364
23		32		7,994		10,679		10,997		28		—		29,730
25		42,815		62,029		163,554		110,786		7,181		—		386,365
30		2,509		2,027		21,490		15,001		557		—		41,584
40		4,258		19,864		53,498		23,867		1,460		—		102,947
50		123		291		—		249		14		—		677
60		—		—		—		—		—		—		—

Total	$	142,960	$	130,270	$	672,765	$	330,727	$	37,296	$	18,068	$	1,332,086

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	14,048	$	220	$	1,104	$	111	$	5,451	$	—	$	20,934
15		11,087		2,395		137,897		36,377		907		—		188,663
20		50,300		38,200		267,341		115,189		18,573		7,627		497,230
23		2,244		7,775		8,533		8,167		30		—		26,749
25		55,843		69,541		165,089		137,846		7,460		—		435,779
30		1,913		7,568		41,089		14,129		573		—		65,272
40		7,386		26,889		51,158		24,936		672		—		111,041
50		5		275		—		—		6		—		286
60		—		—		1		—		26		—		27

Total	$	142,826	$	152,863	$	672,212	$	336,755	$	33,698	$	7,627	$	1,345,981

The following table presents the covered loan portfolio by risk grade as of March 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	216	$	9	$	—	$	1,036	$	458	$	—	$	1,719
15		26		51		1,734		579		12		—		2,402
20		4,592		5,541		24,784		17,716		622		—		53,255
23		11		1,534		3,763		1,686		—		—		6,994
25		17,075		31,707		157,031		75,809		1,550		—		283,172
30		2,400		10,628		49,518		12,044		102		—		74,692
40		18,837		43,960		113,414		53,898		1,034		—		231,143
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	43,157	$	93,430	$	350,244	$	162,768	$	3,778	$	—	$	653,377

The following table presents the covered loan portfolio by risk grade as of December 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	442	$	—	$	—	$	1,329	$	768	$	—	$	2,539
15		29		52		1,755		586		14		—		2,436
20		4,807		5,751		26,211		19,216		687		—		56,672
23		—		1,177		3,262		1,038		—		—		5,477
25		15,531		21,142		137,981		43,606		1,308		—		219,568
30		5,882		10,654		49,642		12,374		172		—		78,724
40		15,176		38,273		102,406		49,495		695		—		206,045
50		—		28		—		—		—		—		28
60		—		—		—		—		—		—		—

Total	$	41,867	$	77,077	$	321,257	$	127,644	$	3,644	$	—	$	571,489

The following table presents the covered loan portfolio by risk grade as of March 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	965	$	—	$	—	$	—	$	1,139	$	—	$	2,104
15		66		54		1,409		372		22		—		1,923
20		10,601		6,832		18,539		21,190		1,357		—		58,519
23		—		—		—		—		—		—		—
25		14,443		21,023		93,423		53,379		3,614		—		185,882
30		5,646		15,590		41,345		12,798		331		—		75,710
40		13,979		45,857		87,437		52,460		1,847		—		201,580
50		209		—		—		40		—		—		249
60		45		—		—		—		—		—		45

Total	$	45,954	$	89,356	$	242,153	$	140,239	$	8,310	$	—	$	526,012

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) when it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Senior Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first three months of 2012 totaling $11.4 million and loans in 2011 totaling $37.2 million under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

The following table presents the amount of troubled debt restructurings by loan class, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.


As of March 31, 2012	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		6	$	1,305		4	$	1,626
Real estate – commercial & farmland		18		17,765		2		2,176
Real estate – residential		22		7,778		3		1,065

Total		46	$	26,848		9	$	4,867


As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		6	$	1,774		5	$	2,122
Real estate – commercial & farmland		14		9,622		2		4,737
Real estate – residential		19		6,555		4		1,296

Total		39	$	17,951		11	$	8,155

The following table presents the amount of troubled debt restructurings by loan class, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at March 31, 2012 and December 31, 2011.


As of March 31, 2012	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		7	$	2,413		3	$	518
Real estate – commercial & farmland		19		17,869		1		2,072
Real estate – residential		22		7,778		3		1,065

Total		48	$	28,060		7	$	3,655


As of December 31, 2011	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		7	$	2,897		4	$	999
Real estate – commercial & farmland		15		11,695		1		2,664
Real estate – residential		20		6,862		3		989

Total		42	$	21,454		8	$	4,652

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.


As of March 31, 2012	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		3	$	2,275		—	$	—
Forgiveness of Principal		2		893		1		136
Payment Modification Only		2		5,202		1		307
Rate Reduction Only		10		6,541		4		1,140
Rate Reduction, Forbearance of Interest		12		8,360		1		103
Rate Reduction, Forbearance of Principal		16		3,514		1		1,109
Rate Reduction, Payment Modification		1		63		1		2,072

Total		46	$	26,848		9	$	4,867


As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		1	$	311		—	$	—
Forgiveness of Principal		2		902		1		136
Payment Modification Only		1		92		1		307
Rate Reduction Only		7		4,192		4		1,145
Rate Reduction, Forbearance of Interest		14		9,347		—		—
Rate Reduction, Forbearance of Principal		14		3,107		1		1,123
Rate Reduction, Payment Modification		—		—		4		5,444

Total		39	$	17,951		11	$	8,155

The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.


As of March 31, 2012	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Apartments		1	$	5,111		—	$	—
Warehouse		1		1,343		—		—
Raw Land		4		1,595		1		137
Hotel & Motel		3		2,449		1		2,072
Office		3		1,695		1		103
Retail, including Strip Centers		9		6,657		—		—
1-4 Family Residential		25		7,998		6		2,555

Total		46	$	26,848		9	$	4,867


As of December 31, 2011	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Apartments		1	$	1,347		—	$	—
Raw Land		3		1,549		2		618
Hotel & Motel		1		503		1		2,072
Office		3		1,077		—		—
Retail, including Strip Centers		9		6,694		1		2,665
1-4 Family Residential		22		6,781		7		2,800

Total		39	$	17,951		11	$	8,155

As of March 31, 2012 and December 31, 2011, the Company had a balance of $31.7 million and $26.1 million, respectively, in troubled debt restructurings. The Company has recorded $2.3 million and $1.7 million in previous charge-offs on such loans at March 31, 2012 and December 31, 2011, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $3.2 million and $2.7 million at March 31, 2012 and December 31, 2011, respectively.

Allowance for Loan Losses

The allowance for loan losses represents a reserve for inherent losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by independent auditors and regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on data such as current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in their markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of credit card receivables and overdraft protection loans which are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. Many of the larger loans require an annual review by an independent loan officer or an independent third party loan review firm. As a result of these loan reviews, certain loans may be assigned specific reserve allocations. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the Director of Internal Audit.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

Activity in the allowance for loan losses for the three months ended March 31, 2012, for the year ended December 31, 2011 and for the three months ended March 31, 2011 is as follows:


(Dollars in Thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Balance, January 1	$	35,156		$	34,576		$	34,576
Provision for loan losses charged to expense		12,600			30,341			7,092
Loans charged off		(19,337	)		(31,623	)		(7,067	)
Recoveries of loans previously charged off		270			1,862			842

Ending balance	$	28,689		$	35,156		$	35,443

During the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011, the Company recorded provision for loan loss expense of $282,000, $2.4 million and ($49,000), respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards above and below but are reflected in the Company’s Consolidated Statements of Earnings.

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in thousands)
Balance, January 1, 2012	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156
Provision for loan losses		(693	)		1,967			8,585			2,002			739			12,600
Loans charged off		(155	)		(3,930	)		(12,964	)		(2,123	)		(165	)		(19,337	)
Recoveries of loans previously charged off		48			17			16			141			48			270
Balance, March 31, 2012	$	2,118		$	7,492		$	9,863		$	8,148		$	1,068		$	28,689

Period-end amount allocated to:
Loans individually evaluated for impairment	$	827		$	1,450		$	3,421		$	2,659		$	3		$	8,360
Loans collectively evaluated for impairment		1,291			6,042			6,442			5,489			1,065			20,329
Ending balance	$	2,118		$	7,492		$	9,863		$	8,148		$	1,068		$	28,689

Loans:
Individually evaluated for impairment	$	3,220		$	8,980		$	35,971		$	17,098		$	17		$	65,286
Collectively evaluated for impairment		146,100			113,351			622,083			310,955			66,069			1,258,558
Ending balance	$	149,320		$	122,331		$	658,054		$	328,053		$	66,086		$	1,323,844


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in thousands)
Balance, January 1, 2011	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Provision for loan losses		5,772			11,354			7,883			4,717			615			30,341
Loans charged off		(5,807	)		(10,988	)		(8,680	)		(5,399	)		(749	)		(31,623	)
Recoveries of loans previously charged off		174			1,367			52			146			123			1,862
Balance, December 31, 2011	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156

Period-end amount allocated to:
Loans individually evaluated for impairment	$	766		$	3,478		$	8,152		$	3,567		$	3		$	15,966
Loans collectively evaluated for impairment		2,152			5,960			6,074			4,561			443			19,190
Ending balance	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156

Loans:
Individually evaluated for impairment	$	2,831		$	13,561		$	45,084		$	16,080		$	17		$	77,573
Collectively evaluated for impairment		140,129			116,709			627,681			314,647			55,347			1,254,513
Ending balance	$	142,960		$	130,270		$	672,765		$	330,727		$	55,364		$	1,332,086


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in thousands)
Balance, January 1, 2011	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Provision for loan losses		2,078			1,477			2,387			1,015			135			7,092
Loans charged off		(1,113	)		(2,425	)		(2,557	)		(809	)		(163	)		(7,067	)
Recoveries of loans previously charged off		20			772			2			14			34			842
Balance, March 31, 2011	$	3,764		$	7,529		$	14,803		$	8,884		$	463		$	35,443

Period-end amount allocated to:
Loans individually evaluated for impairment	$	2,012		$	3,513		$	6,282		$	2,484		$	1		$	14,292
Loans collectively evaluated for impairment		1,752			4,016			8,521			6,400			462			21,151
Ending balance	$	3,764		$	7,529		$	14,803		$	8,884		$	463		$	35,443

Loans:
Individually evaluated for impairment	$	4,752		$	18,054		$	48,594		$	12,448		$	18		$	83,866
Collectively evaluated for impairment		138,074			134,809			623,618			324,307			41,307			1,262,115
Ending balance	$	142,826		$	152,863		$	672,212		$	336,755		$	41,325		$	1,345,981

NOTE 4 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

From October 2009 through February 2012, the Company participated in nine FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include:


Bank Acquired	Location:	Branches:	Date Acquired
American United Bank (“AUB”)	Lawrenceville, Ga.	1	October 23, 2009
United Security Bank (“USB”)	Sparta, Ga.	2	November 6, 2009
Satilla Community Bank (“SCB”)	St. Marys, Ga.	1	May 14, 2010
First Bank of Jacksonville (“FBJ”)	Jacksonville, Fl.	2	October 22, 2010
Tifton Banking Company (“TBC”)	Tifton, Ga.	1	November 12, 2010
Darby Bank & Trust (“DBT”)	Vidalia, Ga.	7	November 12, 2010
High Trust Bank (“HTB”)	Stockbridge, Ga.	2	July 15, 2011
One Georgia Bank (“OGB”)	Midtown Atlanta, Ga.	1	July 15, 2011
Central Bank of Georgia (“CBG”)	Ellaville, Ga.	5	February 24, 2012

On February 24, 2012, the Bank purchased substantially all of the assets and assumed substantially all the liabilities of Central Bank of Georgia (“CBG”) from the FDIC, as Receiver of CBG. CBG operated five branches in Ellaville, Buena Vista, Butler, Cusseta and Macon, Georgia. The Company’s agreement with the FDIC included shared-loss agreements that afford the Bank significant protection from losses associated with loans and OREO. Under the terms of the shared-loss agreements, the FDIC will absorb 80% of all losses and share 80% of all loss recoveries. The shared-loss agreement applicable to single family residential mortgage loans provides for FDIC loss sharing and reimbursement by the Bank to the FDIC for ten years. The shared-loss agreement applicable to commercial loans and securities provides for FDIC loss sharing for five years and reimbursement by the Bank to the FDIC for eight years.

The estimated fair value of the assets acquired and the liabilities assumed are shown below:


(Dollars in Thousands)	Central Bank of Georgia
Assets acquired:
Cash and due from banks	$	33,150
Securities available for sale		39,920
Loans		124,782
Foreclosed property		6,177
Estimated FDIC indemnification asset		52,654
Other assets		4,606

Assets acquired		261,289
Cash received (paid) to settle the acquisition		31,900


Fair value of assets acquired	$	293,189


Liabilities assumed:
Deposits	$	261,036
Other borrowings		10,334
Other liabilities		1,782

Fair value of liabilities assumed	$	273,152


Net assets acquired / gain from acquisition	$	20,037

The Company’s bid to acquire the assets of CBG included a discount of approximately $33.9 million, and the Company received a $31.9 million cash payment from the FDIC to settle the acquisition.

The shared-loss agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the CBG shared-loss agreements were recorded as an indemnification asset at its estimated fair value of $52.7 million on the acquisition date. Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded on the transaction.

The CBG transaction resulted in a before-tax gain of $20.0 million, which is included in the Company’s March 31, 2012 Consolidated Statement of Earnings. Due to the difference in tax bases of the assets acquired and liabilities assumed, the Bank recorded deferred tax liabilities with respect to CBG of $7.0 million, resulting in an after-tax gain of $13.0 million.

The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

FASB ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, the Company records a provision for loan loss in its consolidated statement of operations.

On the acquisition date, the preliminary estimates of the contractually required payments receivable for all ASC 310 loans acquired in the CBG acquisition totaled $137.2 million and the estimated fair values of the loans totaled $73.4 million, net of an accretable discount of $10.2 million, the difference between the value of the loans on the Company’s balance sheet and the cash flows they are expected to produce. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments.

The estimated fair values of loans acquired in the CBG acquisition are detailed below based on their initial estimate of credit quality (dollars in thousands):


	Loans with deterioration of credit quality		Loans without a deterioration of credit quality		Total loans, at fair value
Commercial, industrial, agricultural	$	1,256	$	6,288	$	7,544
Real estate – residential		22,389		22,213		44,602
Real estate – commercial & farmland		34,458		10,538		44,996
Construction & development		15,038		5,507		20,545
Consumer		273		6,822		7,095


	$	73,414	$	51,368	$	124,782

The results of operations of CBG subsequent to the acquisition date are included in the Company’s consolidated statements of earnings. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on December 31, 2011 and 2010, unadjusted for potential cost savings (in thousands).


	Three Months Ended March 31,
	2012		2011
Net interest income and noninterest income	$	56,461	$	33,040
Net income (loss)	$	5,252	$	(4,379	)
Net income (loss) available to common stockholders	$	4,437	$	(5,177	)
Income (loss) per common share available to common stockholders – basic	$	0.19	$	(0.22	)
Income (loss) per common share available to common stockholders – diluted	$	0.19	$	(0.22	)
Average number of shares outstanding, basic		23,762		23,474
Average number of shares outstanding, diluted		23,916		23,766

In addition to the covered assets acquired in the most recent acquisitions, the Company has other investments in covered assets remaining from its previous FDIC-assisted acquisitions. The following table summarizes components of all covered assets at March 31, 2012 and December 31, 2011 and their origin:


	Covered loans		Less: Credit risk adjustments		Less: Liquidity and rate adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of March 31, 2012:	(Dollars in thousands)

AUB	$	33,063	$	2,672	$	—	$	30,391	$	11,842	$	—	$	11,842	$	42,233	$	2,648

USB		48,017		5,083		—		42,934		8,401		50		8,351		51,285		6,621

SCB		53,643		5,628		52		47,963		10,833		405		10,428		58,391		7,660

FBJ		38,116		6,994		76		31,046		2,674		534		2,140		33,186		7,540

DBT		245,117		64,530		579		180,008		28,759		2,253		26,506		206,514		65,932

TBC		74,893		14,052		292		60,549		6,678		880		5,798		66,347		18,166

HTB		106,730		23,637		73		83,020		17,755		8,055		9,700		92,720		29,997

OGB		96,271		27,105		190		68,976		12,049		7,037		5,012		73,988		30,126

CBG		164,541		55,830		221		108,490		13,792		7,766		6,026		114,516		51,326


Total	$	860,391	$	205,531	$	1,483	$	653,377	$	112,783	$	26,980	$	85,803	$	739,180	$	220,016


	Covered loans		Less: Credit risk adjustments		Less: Liquidity and rate adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of December 31, 2011:	(Dollars in thousands)

AUB	$	34,242	$	3,236	$	—	$	31,006	$	11,100	$	—	$	11,100	$	42,106	$	7,271

USB		51,409		5,259		50		46,100		7,445		50		7,395		53,495		10,648

SCB		56,780		5,779		155		50,846		10,635		500		10,135		60,981		6,527

FBJ		40,106		7,473		92		32,541		2,370		641		1,729		34,270		8,551

DBT		260,883		68,757		703		191,423		28,947		2,763		26,184		217,607		105,528

TBC		79,586		14,358		331		64,897		8,441		1,274		7,167		72,064		18,628

HTB		110,899		28,024		73		82,802		20,132		10,171		9,961		92,763		48,289

OGB		105,285		33,221		190		71,874		12,615		7,669		4,946		76,820		36,952


Total	$	739,190	$	166,107	$	1,594	$	571,489	$	101,685	$	23,068	$	78,617	$	650,106	$	242,394


	Covered loans		Less: Credit risk adjustments		Less: Liquidity and rate adjustments		Total covered loans		OREO		Less: Fair value adjustments		Total covered OREO		Total covered assets		FDIC indemnification asset
As of March 31, 2011:	(Dollars in thousands)

AUB	$	51,845	$	4,332	$	150	$	47,363	$	12,816	$	139	$	12,677	$	60,040	$	3,769

USB		74,470		5,609		398		68,463		10,664		74		10,590		79,053		6,698

SCB		68,655		7,177		464		61,014		7,700		550		7,150		68,164		10,120

FBJ		46,990		9,847		135		37,008		2,997		1,616		1,381		38,389		10,839

DBT		360,610		128,975		1,075		230,560		36,190		11,101		25,089		255,649		108,091

TBC		107,458		25,456		398		81,604		4,151		1,281		2,870		84,474		27,659


Total	$	710,028	$	181,396	$	2,620	$	526,012	$	74,518	$	14,761	$	59,757	$	585,769	$	167,176

On the dates of acquisition, the Company estimated the future cash flows on each individual loan and made the necessary adjustments to reflect the asset at fair value. At each quarter end subsequent to the acquisition dates, the Company revises the estimates of future cash flows based on current information and makes the necessary adjustments to continue reflecting the assets at fair value. The adjustments to fair value are performed on a loan-by-loan basis and have resulted in the following:

		$22,031		$22,031		$22,031
Total Amounts	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in thousands)
Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)	$	2,818	$	22,031	$	4,435

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)		1,410		11,940		380

Amounts reflected in the Company’s Statement of Earnings	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in thousands)
Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)	$	564	$	4,406	$	848

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)		282		2,388		76

A rollforward of acquired loans with deterioration of credit quality for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011 is shown below:


(Dollars in Thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Balance, January 1	$	307,790		$	252,535		$	252,535
Change in estimate of cash flows, net of charge-offs or recoveries		(3,388	)		(25,787	)		(2,092	)
Additions due to acquisitions		73,414			124,136			—
Other (loan payments, transfers, etc.)		(9,451	)		(43,094	)		(4,033	)

Ending balance	$	368,365		$	307,790		$	246,410

A rollforward of acquired loans without deterioration of credit quality for the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011 is shown below:


(Dollars in Thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Balance, January 1	$	266,966		$	302,456		$	302,456
Change in estimate of cash flows, net of charge-offs or recoveries		222			(11,604	)		—
Additions due to acquisitions		51,367			35,439			—
Other (loan payments, transfers, etc.)		(19,684	)		(59,325	)		(22,854	)

Ending balance	$	298,871		$	266,966		$	279,602

The following is a summary of changes in the accretable discounts of acquired loans during the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011.


(Dollars in Thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Balance, January 1	$	29,537		$	37,383		$	37,383
Additions due to acquisitions		9,863			24,094			—
Accretion		(12,051	)		(36,519	)		(4,454	)
Other activity, net		2,818			4,579			887

Ending balance	$	30,167		$	29,537		$	33,816

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. Changes in the FDIC shared-loss receivable for the three months ended March 31, 2012, for the year ended December 31, 2011 and for the three months ended March 31, 2011 are as follows:


(Dollars in Thousands)	March 31, 2012			December 31, 2011			March 31, 2011
Balance, January 1	$	242,394		$	177,187		$	177,187
Indemnification asset recorded in acquisitions		52,654			94,973			—
Payments received from FDIC		(71,169	)		(36,813	)		(4,071	)
Effect of change in expected cash flows on covered assets		(3,863	)		7,047			(5,940	)

Ending balance	$	220,016		$	242,394		$	167,176

NOTE 5 – 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,
	2012		2011
	(share data in thousands)
Basic shares outstanding		23,762		23,440
Plus: Dilutive effect of ISOs		105		34
Plus: Dilutive effect of Restricted Grants		49		—

Diluted shares outstanding		23,916		23,474

NOTE 6 – OTHER BORROWINGS

The Company has, from time to time, utilized certain borrowing arrangements with various financial institutions to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At March 31, 2012 and December 31, 2011, there were $3.8 million and $20.0 million, respectively, outstanding borrowings with the Company’s correspondent banks. There were no outstanding borrowings with the Company’s correspondent banks at March 31, 2011. The Company’s success with attracting and retaining retail deposits has allowed for very low dependence on more volatile non-deposit funding.

NOTE 7 – 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.

The Company’s commitments to extend credit and standby letters of credit are presented in the following table:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011

Commitments to extend credit	$	156,330	$	132,700	$	163,442

Standby letters of credit	$	8,349	$	8,074	$	7,531

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 (the “securities Act”), 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 SEC 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.

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.


	2012			2011
(in thousands, except share data, taxable equivalent)	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Results of Operations:
Net interest income	$	27,727		$	32,768		$	27,802		$	28,747		$	24,207
Net interest income (tax equivalent)		27,655			33,022			28,026			28,969			24,418
Provision for loan losses		12,882			9,019			7,552			9,115			7,043
Non-interest income		27,264			6,689			33,945			5,974			6,193
Non-interest expense		34,246			28,710			29,486			22,596			21,155
Income tax expense		2,498			587			8,249			896			824
Preferred stock dividends		815			819			817			807			798
Net income available to common Shareholders		4,550			322			15,643			1,307			580
Selected Average Balances:
Loans, net of unearned income	$	1,329,146		$	1,335,242		$	1,437,609		$	1,349,092		$	1,361,964
Covered loans		602,353			600,367			540,959			506,251			540,127
Investment securities		356,112			338,076			327,195			289,149			301,572
Earning assets		2,482,070			2,516,100			2,503,121			2,426,041			2,453,040
Assets		2,978,469			2,978,469			3,048,337			2,909,012			2,949,943
Deposits		2,589,978			2,623,403			2,639,848			2,450,738			2,548,509
Shareholders’ equity		242,817			248,729			228,716			229,794			222,675
Period-End Balances:
Loans, net of unearned income	$	1,323,844		$	1,332,086		$	1,368,895		$	1,360,063		$	1,345,981
Covered loans		653,377			571,489			595,428			486,489			526,012
Earning assets		2,558,047			2,484,147			2,475,511			2,399,258			2,442,121
Total assets		3,043,234			2,994,307			3,010,379			2,857,237			2,918,423
Deposits		2,665,360			2,591,566			2,628,892			2,511,363			2,572,689
Common shareholders’ equity		246,813			243,043			243,850			226,739			223,588
Per Common Share Data:
Earnings per share - Basic	$	0.19		$	0.01		$	0.67		$	0.06		$	0.02
Earnings per share - Diluted		0.19			0.01			0.66			0.06			0.02
Common book value per share		10.36			10.23			10.27			9.54			9.41
End of period shares outstanding		23,814,144			23,751,294			23,742,794			23,766,044			23,766,044
Weighted average shares outstanding
Basic		23,762,196			23,457,739			23,438,335			23,449,123			23,440,201
Diluted		23,916,421			23,611,964			23,559,063			21,508,419			23,474,424
Market Data:
High closing price	$	13.32		$	10.66		$	10.30		$	10.16		$	11.10
Low closing price		10.34			8.55			8.47			8.49			9.32
Closing price for quarter		13.14			10.28			8.71			8.87			10.16
Average daily trading volume		59,139			68,654			71,955			58,706			46,618
Cash dividends per share		—			—			—			—			—
Stock dividend		—			—			—			—			—
Price to earnings		N/M			N/M			N/M			N/M			N/M
Closing price to book value		1.27			1.00			0.85			0.93			1.09
Performance Ratios:
Return on average assets		0.72	%		0.15	%		2.14	%		0.29	%		0.19	%
Return on average common equity		8.89	%		1.82	%		28.55	%		3.69	%		2.51	%
Average loan to average deposits		74.58	%		73.78	%		74.95	%		73.02	%		74.64	%
Average equity to average assets		9.86	%		9.91	%		9.16	%		9.63	%		9.25	%
Net interest margin (tax equivalent)		4.48	%		5.21	%		4.44	%		4.79	%		4.04	%
Efficiency ratio (tax equivalent)		62.28	%		72.76	%		47.75	%		65.08	%		69.59	%

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 balance sheet as of March 31, 2012 as compared to December 31, 2011 and operating results for the three month periods ended March 31, 2012 and 2011. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

Results of Operations for the Three Months Ended March 31, 2012

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $4.6 million, or $0.19 per diluted share, for the quarter ended March 31, 2012, compared to $580,000, or $0.02 per diluted share, for the same quarter in 2011. The Company’s return on average assets and average shareholders’ equity increased in the first quarter of 2012 to 0.72% and 8.89%, respectively, compared to 0.19% and 2.51%, respectively, in the first quarter of 2011. The increase in earnings and profitability during the quarter included several items that are considered non-recurring, such as a $20.0 million gain on FDIC-assisted transaction, $11.7 million of losses associated with a bulk sale of problem assets and $2.6 million of additional write downs on OREO that the Company anticipates selling in the second quarter of 2012. Net of these non-recurring items, the Company would have earned $591,000, or $0.02 per diluted share, for the first quarter of 2012.

Net Interest Income and Margins

On a tax equivalent basis, net interest income for the first quarter of 2012 was $27.7 million, an increase of $3.5 million compared to the same quarter in 2011. Significant increases in the Company’s net interest margin have been the result of flat yields on all classes of earning assets complemented by steady decreases in the Company’s cost of funds. The Company’s net interest margin increased during the first quarter of 2012 to 4.48%, compared to 4.04% during the first quarter of 2011. Increases in earning assets over the past year have been in covered loans with favorable yields compared to the Company’s low cost of funds.

Total interest income during the first quarter of 2012 was $32.3 million compared to $32.1 million in the same quarter of 2011. Yields on earning assets fell to 5.22%, compared to 5.35% reported in the first quarter of 2011. During the first quarter of 2012, short-term assets averaged 7.4% of total earning assets compared to 9.7% in the same quarter in 2011. Current opportunities to invest a portion of the short-term assets in the bond market have been limited by the Company’s inability to maintain certain portfolio characteristics with current yields and structures being offered. Efforts to increase lending activities have been slow to generate increases in outstanding loans due to the current economic conditions in the Company’s markets. Management anticipates improving economic conditions and increased loan demand will provide opportunities to invest a portion of the short-term assets at higher yields.

Total funding costs declined to 0.69% in the first quarter of 2012 compared to 1.22% during the first quarter of 2011. Deposit costs decreased from 1.17% in the first quarter of 2011 to 0.63% in the first quarter of 2012. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 66.0% of total deposits in the first quarter of 2012 compared to 58.6% during the first quarter of 2011. Lower costs on deposits were realized due mostly to the lower rate environment and the Company’s ability to be less competitive on higher priced CDs due to its larger than normal position in short-term assets. Further opportunity to realize savings on deposits exists but may be limited due to current costs. Average balances of interest bearing deposits and their respective costs for the first quarter of 2012 and 2011 are shown below:


(Dollars in Thousands)	March 31, 2012					March 31, 2011
	Average Balance		Average Cost			Average Balance		Average Cost
NOW	$	619,047		0.34	%	$	584,338		0.73	%
MMDA		598,956		0.56	%		522,009		1.09	%
Savings		87,219		0.16	%		76,341		0.70	%
Retail CDs < $100,000		373,519		1.01	%		427,143		1.66	%
Retail CDs > $100,000		444,838		1.12	%		504,011		1.68	%
Brokered CDs		61,287		3.29	%		124,441		3.09	%


Interest bearing deposits	$	2,184,866		0.75	%	$	2,238,283		1.34	%

Provision for Loan Losses and Credit Quality

The Company’s provision for loan losses during the first quarter of 2012 amounted to $12.9 million, compared to $9.0 million in the fourth quarter of 2011 and to $7.0 million in the first quarter of 2011. Although the Company has experienced improving trends in criticized and classified assets for several quarters, provision for loan losses have still been required to account for continued devaluation of real estate collateral. At March 31, 2012, classified loans still accruing totaled $32.4 million, compared to $46.8 million at March 31, 2011. Non-accrual loans at March 31, 2012 totaled $52.3 million, a 23.6% decrease from $68.4 million reported at the end of the first quarter of 2011.

At March 31, 2012, OREO (excluding covered OREO) totaled $40.0 million, compared to $62.3 million at March 31, 2011. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. The Company has found that with a marketing window of 3-6 months, the liquidation of properties varies from 85% to 100% of current book value. Certain properties, mostly raw land and subdivision lots, have extended marketing periods because of excessive inventory and record low home building activity. At the end of the first quarter of 2012, total non-performing assets decreased to 3.03% of total assets compared to 4.48% at March 31, 2011. Management continues to aggressively identify and resolve problem assets while seeking quality credits to grow the loan portfolio.

Net charge-offs on loans during the first quarter of 2012 increased to $19.1 million, or 5.79% of loans on an annualized basis, compared to $6.2 million, or 1.88% of loans, in the first quarter of 2011. The increased level of charge-offs is due to the Company’s bulk sale of non-performing loans during the first quarter of 2012. Excluding amounts charged-off in the bulk sale, the Company’s net charge-offs would have been $8.7 million, or 2.65% of loans on an annualized basis. The Company’s allowance for loan losses at March 31, 2012 was $28.7 million, or 2.17% of total loans, compared to $35.4 million, or 2.63% of total loans, at March 31, 2011.

Non-interest Income

Total non-interest income for the first quarter of 2012 increased to $27.3 million from $6.2 million in the first quarter of 2011. Excluding the gain on acquisition, non-interest income increased $1.1 million to $7.3 million in the first three months of 2012. Income from mortgage related activities continued to increase due to the Company’s increased number of mortgage bankers and higher level of productions. Service charges on deposit accounts in the first quarter of 2012 increased slightly to $4.4 million, compared to $4.3 million in the first quarter of 2011.

Non-interest Expense

Total non-interest expense for the first quarter of 2012 increased to $34.2 million, compared to $21.2 million at the same time in 2011. Salaries and employee benefits increased from $9.8 million in the first quarter of 2011 and $10.7 million in the fourth quarter of 2011 to $11.4 million in the first quarter of 2012. The majority of the increase is due to the reinstatement of foregone compensation (including incentive accruals and board fees) totaling approximately $433,000 and approximately $225,000 of compensation associated with the recently acquired Central Bank of Georgia. Occupancy and equipment expense increased during the quarter from $2.7 million in the first quarter of 2011 to $3.3 million in the first quarter of 2012. Increases in occupancy and equipment over the same period in 2011 relate to eight additional branches acquired in FDIC transactions over the past year. These increases were mostly offset by decreases in data processing and telecommunications expense that resulted from renegotiation of the Company’s contract with its core service provider as well as other synergies from recent conversions. Total data processing and telecommunications expense in the first quarter of 2012 was $1.9 million, compared to $2.4 million in the first quarter of 2011. Credit related expenses in the first quarter of 2012 totaled $12.7 million, a significant increase from the same quarter in 2011. The majority of the non-provision credit costs related to the Company’s bulk sale in the first quarter of 2012.

Income taxes

Income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the first quarter of 2012, the Company reported income tax expense of $2.5 million compared to $824,000 in the same period of 2011. The Company’s effective tax rate for the three months ended March 31, 2012 and 2011 was 31.8% and 37.4%, respectively.

Balance Sheet Comparison

Securities

Debt securities with readily determinable fair values are classified as available for sale and recorded at fair value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Equity securities, including restricted equity securities, are classified as other investment securities and are recorded at their fair market value.

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the settlement date. Declines in the fair value of securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.

In determining whether other-than-temporary impairment losses exist, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Substantially all of the unrealized losses on debt securities are related to changes in interest rates and do not affect the expected cash flows of the issuer or underlying collateral. All unrealized losses are considered temporary because each security carries an acceptable investment grade and the Company does not intend to sell these investment securities at an unrealized loss position at March 31, 2012, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at March 31, 2012, these investments are not considered impaired on an other-than temporary basis.

The following table illustrates certain information regarding the Company’s investment portfolio with respect to yields, sensitivities and expected cash flows over the next twelve months assuming constant prepayments and maturities:


	Book Value		Fair Value		Yield			Modified Duration		Estimated Cash Flows 12 months
	Dollars in Thousands

March 31, 2012:
U.S. government agencies	$	28,634	$	28,848		1.55	%		1.42	$	18,000
State, county and municipal securities	$	78,440	$	81,997		4.59	%		6.04	$	6,017
Corporate debt securities	$	11,639	$	11,385		6.80	%		7.20	$	1,350
Mortgage-backed securities	$	244,232	$	249,561		2.88	%		2.82	$	75,992

Total debt securities	$	362,945	$	371,791		3.28	%		3.54	$	101,359


March 31, 2011:
U.S. government agencies	$	33,137	$	33,545		1.58	%		2.16	$	9,165
State, county and municipal securities	$	55,971	$	56,898		4.84	%		5.65	$	1,462
Corporate debt securities	$	12,150	$	9,749		6.89	%		6.33	$	512
Mortgage-backed securities	$	202,204	$	205,428		4.08	%		3.72	$	46,174

Total debt securities	$	303,462	$	305,620		4.06	%		4.01	$	57,313

Loans and Allowance for Loan Losses

At March 31, 2012, gross loans outstanding (including covered loans) were $1.98 billion, an increase of $105.2 million, or 5.6%, compared to balances at March 31, 2011. Covered loans increased $127.4 million, from $526.0 million at March 31, 2011 to $653.4 million at March 31, 2012. This increase in covered loans is due to the FDIC-assisted transactions completed during 2011. The Company’s participation in FDIC-assisted acquisitions was integral to being able to maintain a certain level of loans because management does not feel that enough loan opportunities with acceptable quality and profitability exist in our current market areas to stabilize and increase. The amount of non-covered loans did not decrease as rapidly as in prior periods, with non-covered loans decreasing by only $22.1 million, or 1.6%, from $1.35 billion at March 31, 2011 to $1.32 billion at March 31, 2012.

The slower decline in loans reflects increased economic activity compared to 2009 and 2010, offset by management’s focus on reducing higher risk loans within the Bank’s loan portfolio. 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, financial and agricultural; (2) residential real estate; (3) commercial and farmland real estate; (4) construction and development related real estate; and (5) consumer. The Company’s management has strategically located its branches in select markets in south and southeast Georgia, north Florida, southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.

The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past due loan analysis. This analysis process serves as a tool 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 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 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 also considers 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.

For the three month period ended March 31, 2012, the Company recorded net charge-offs totaling $19.1 million, compared to $6.2 million for the period ended March 31, 2011. The provision for loan losses for the three months ended March 31, 2012 increased to $12.6 million compared to $7.1 million during the three month period ended March 31, 2011. Increased levels of charge-offs and provision expense relates almost entirely to the Company’s bulk sale of non-performing loans during the first quarter of 2012. At the end of the first quarter of 2012, the allowance for loan losses totaled $28.7 million, or 2.17% of total loans, compared to $35.2 million, or 2.64% of total loans, at December 31, 2011 and $35.4 million, or 2.63% of total loans, at March 31, 2011.

The following table presents an analysis of the allowance for loan losses for the three month periods ended March 31, 2012 and March 31, 2011:


(Dollars in Thousands)	March 31, 2012			March 31, 2011
Balance of allowance for loan losses at beginning of period	$	35,156		$	34,576
Provision charged to operating expense		12,600			7,092
Charge-offs:
Commercial, financial and agricultural		155			1,113
Real estate – residential		2,123			809
Real estate – commercial and farmland		12,964			2,557
Real estate – construction and development		3,930			2,425
Consumer installment		165			163
Other		—			—

Total charge-offs		19,337			7,067


Recoveries:
Commercial, financial and agricultural		48			20
Real estate – residential		141			14
Real estate – commercial and farmland		16			2
Real estate – construction and development		17			772
Consumer installment		48			34
Other		—			—

Total recoveries		270			842


Net charge-offs		19,067			6,225


Balance of allowance for loan losses at end of period	$	28,689		$	35,443


Net annualized charge-offs as a percentage of average loans		5.79	%		1.88	%
Allowance for loan losses as a percentage of loans at end of period		2.17	%		2.63	%

Assets Covered by Loss-Sharing Agreements with the FDIC

Loans that were acquired in FDIC-assisted transactions that are covered by the loss-sharing agreements with the FDIC (“covered loans”) totaled $653.4 million, $571.5 million and $526.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively. OREO that is covered by the loss- sharing agreements with the FDIC totaled $85.8 million, $78.6 million and $59.8 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively. The loss-sharing agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value on the acquisition dates. The FDIC loss-share receivable reported at March 31, 2012, December 31, 2011 and March 31, 2011 was $220.0 million, $242.4 million and $167.2 million, respectively.

The Company recorded the loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company is confident in its estimation of credit risk and its adjustments to the carrying balances of the acquired loans. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. During the three months ended March 31, 2012, the year ended December 31, 2011 and the three months ended March 31, 2011, the Company recorded provision for loan loss expense of $282,000, $776,000 and $76,000, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively.

Covered loans are shown below according to loan type as of the end of the periods shown:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	43,157	$	41,867	$	45,954
Real estate – construction and development		93,430		77,077		89,356
Real estate – commercial and farmland		350,244		321,257		242,153
Real estate – residential		162,768		127,644		140,239
Consumer installment		3,778		3,644		8,310

	$	653,377	$	571,489	$	526,012

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 owned. 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. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. 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.

For the quarter ended March 31, 2012, nonaccrual or impaired loans totaled $52.3 million, a decrease of approximately $18.6 million since December 31, 2011. The decrease in nonaccrual loans is due to the bulk sale of problem assets during the first quarter of 2012, the success in the foreclosure and resolution process , and a significant slowdown in the formation of new problem credits. Non-performing assets as a percentage of total assets were 3.03%, 4.05% and 4.48% at March 31, 2012, December 31, 2011 and March 31, 2011, respectively.

Non-performing assets at March 31, 2012, December 31, 2011 and March 31, 2011 were as follows:


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Total nonaccrual loans	$	52,258	$	70,823	$	68,391
Accruing loans delinquent 90 days or more		—		—		—
Other real estate owned and repossessed collateral		40,035		50,301		62,258

Total non-performing assets	$	92,293	$	121,124	$	130,649

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. The following table presents the amount of accruing troubled debt restructurings by loan class at March 31, 2012 and December 31, 2011.


	March 31,2012				December 31, 2011
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		6	$	1,305		6	$	1,774
Real estate – commercial & farmland		18		17,765		14		9,622
Real estate – residential		22		7,778		19		6,555

Total		46	$	26,848		39	$	17,951

Commercial Lending Practices

On December 12, 2006, the Federal Bank Regulatory Agencies released guidance on Concentration in Commercial Real Estate Lending. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans for owner occupied CRE are generally excluded from the CRE guidance.

The CRE guidance is applicable when either:

(1)

total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or

(2)

total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital.

Banks that are subject to the CRE guidance’s criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.

As of March 31, 2012, the Company exhibited a concentration in CRE loans based on Federal Reserve Call codes. The primary risks of CRE lending are:

(1)

within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;

(2)

on average, CRE loan sizes are generally larger than non-CRE loan types; and

(3)

certain construction and development loans may be less predictable and more difficult to evaluate and monitor.

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of March 31, 2012 and December 31, 2011. The loan categories and concentrations below are based on Federal Reserve Call codes and include covered loans.


(Dollars in Thousands)	March 31, 2012					December 31, 2011
	Balance		% of Total Loans			Balance		% of Total Loans
Construction and development loans	$	215,761		11	%	$	207,347		11	%
Multi-family loans		58,627		3	%		60,247		3	%
Nonfarm non-residential loans		824,266		42	%		806,176		42	%

Total CRE Loans	$	1,098,654		56	%	$	1,073,770		56	%
All other loan types		878,567		44	%		829,805		44	%


Total Loans	$	1,977,221		100	%	$	1,903,575		100	%

The following table outlines the percent of total CRE loans, net owner occupied loans to total risk-based capital, and the Company’s internal concentration limits as of March 31, 2012 and December 31, 2011.


	Internal Limit	March 31, 2012	December 31, 2011
	Internal Limit	Actual	Actual
Construction and development	100%	73%	71%
Commercial real estate	300%	233%	228%

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest bearing balances. At March 31, 2012, the Company’s short-term investments were $194.2 million, compared to $229.0 million and $264.5 million at December 31, 2011 and March 31, 2011, respectively. At March 31, 2012, approximately 85.5% of the balance was comprised of interest bearing balances, the majority of which were at the FHLB.

Derivative Instruments and Hedging Activities

The Company had cash flow hedges with notional amounts totaling $35.0 million at March 31, 2011, for the purpose of converting floating rate loans to fixed rate. The Company had a cash flow hedge with notional amount of $37.1 million at March 31, 2012, December 31, 2011 and March 31, 2011 for the purpose of converting the variable rate on the junior subordinated debentures to fixed rate. The fair value of these instruments amounted to a liability of approximately $2.1 million and $2.0 million at March 31, 2012 and December 31, 2011, respectively, and an asset of approximately $598,099 at March 31, 2011. No hedge ineffectiveness from cash flow hedges was recognized in the statement of operations. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

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 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 regulatory capital standards are defined by the following three key measurements:

The “Leverage Ratio” is defined as Tier 1 capital to average assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a leverage ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a leverage ratio greater than or equal to 5.00%.

The “Core Capital Ratio” is defined as Tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a core capital ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a core capital ratio greater than or equal to 6.00%.

The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00%. For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.

As of March 31, 2011, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of Ameris at March 31, 2012, December 31, 2011 and March 31, 2011.


	March 31, 2012			December 31, 2011			March 31, 2011
Leverage Ratio(tier 1 capital to average assets)
Consolidated		11.01	%		10.76	%		10.34	%
Ameris Bank		10.93			10.62			10.15
Core Capital Ratio(tier 1 capital to risk weighted assets)
Consolidated		19.12			18.80			18.11
Ameris Bank		19.01			18.61			17.69
Total Capital Ratio(total capital to risk weighted assets)
Consolidated		20.38			20.05			19.37
Ameris Bank		20.27			19.87			18.95

Capital Purchase Program

On November 21, 2008, the Company, elected to participate in the Capital Purchase Program (“CPP”) established under the Emergency Economic Stabilization Act of 2008 (“EESA”). Accordingly, on such date, the Company issued and sold to the United States Treasury (“Treasury”), for an aggregate cash purchase price of $52 million, (i) 52,000 shares (the “Preferred Shares”) of the Company’s fixed rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant (the “Warrant”) to purchase up to 679,443 shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), at an exercise price of $11.48 per share. The issuance and sale of these securities was a private placement exempt from registration pursuant to Section 4(2) of the Securities Act.

Cumulative dividends on the Preferred Shares will accrue on the liquidation preference at a rate of 5% per annum for the first five years and at a rate of 9% per annum thereafter, but such dividends will be paid only if, as and when declared by the Company’s Board of Directors. The Preferred Shares have no maturity date and rank senior to the Common Stock (and pari passu with the Company’s other authorized preferred stock, of which no shares are currently designated or outstanding) with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company. Subject to the approval of the Board of Governors of the Federal Reserve System, the Preferred Shares are redeemable at the option of the Company at 100% of their liquidation preference.

The Purchase Agreement pursuant to which the Preferred Shares and the Warrant were sold contains limitations on the payment of dividends on the Common Stock (including with respect to the payment of cash dividends in excess of $0.05 per share, which was the amount of the last regular dividend declared by the Company prior to October 14, 2008) and on the Company’s ability to repurchase its Common Stock, and subjects the Company to certain of the executive compensation limitations included in the EESA.

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. The ALCO Committee 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 FHLB stock for the purpose of establishing credit lines with the FHLB. 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, 2012, there were $3.8 million outstanding borrowings with the Company’s correspondent banks, compared to $20.0 million at December 31, 2011. There were no outstanding borrowings with the Company’s correspondent banks at March 31, 2011.

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:


	March 31, 2012			December 31, 2011			September 30, 2011			June 30, 2011			March 31, 2011
Investment securities available for sale to total deposits		13.95	%		13.12	%		12.97	%		13.31	%		11.76	%
Loans (net of unearned income) to total deposits⁽¹⁾		49.67	%		51.40	%		52.07	%		54.16	%		52.32	%
Interest-earning assets to total assets		84.06	%		82.96	%		82.23	%		83.97	%		83.63	%
Interest-bearing deposits to total deposits		83.32	%		84.74	%		86.52	%		87.34	%		87.71	%

(1)	Loans exclude covered assets where appropriate

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, 2012 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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, 2012, the Company had one effective LIBOR rate swap with a notional amount of $37.1 million. The LIBOR rate swap exchanges fixed rate payments of 4.15% for floating rate payments based on the three month LIBOR and matures December 2018. 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 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, 2012, there was no 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. Legal Proceedings

Nothing to report with respect to the period covered by this report.

Item 1A. Risk Factors

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, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits required to be furnished with this report are listed on the exhibit index attached hereto.

SIGNATURE

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.


Date: May 10, 2012		AMERIS BANCORP

		/s/ Dennis J. Zember Jr.
		Dennis J. Zember Jr., Executive Vice President and Chief Financial Officer (duly authorized signatory and principal accounting and 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 with the Commission on August 14, 1987).

3.2		Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1.1 to Ameris Bancorp’s Form 10-K filed with the Commission on March 28, 1996).

3.3		Amendment to Amended Articles of Incorporation of Ameris Bancorp (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 of Ameris Bancorp (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 of Ameris Bancorp (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 of Ameris Bancorp (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 of Ameris Bancorp (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		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on November 21, 2008).

3.9		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on June 1, 2011).

3.10		Amended and Restated Bylaws of Ameris Bancorp (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