XNAS:ABCB Ameris Bancorp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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Table of Contents

 

 

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

OR

 

¨ 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):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if smaller reporting company)    Smaller reporting company   ¨

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.

 

 

 


Table of Contents

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   

 

2


Table of Contents

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

 

3


Table of Contents

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

 

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Table of Contents

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.

 

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Table of Contents

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

 

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Table of Contents

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.

 

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Table of Contents

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.

 

8


Table of Contents

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).

 

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Table of Contents

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         —           —     

 

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Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


Table of Contents

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   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

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
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

14


Table of Contents

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   
  

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

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   
  

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

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       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19


Table of Contents
     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   
  

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

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.

 

22


Table of Contents

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

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