XNAS:ABCB Ameris Bancorp Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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FORM 10-Q
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 June 30, 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 a 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 23,819,144 shares of Common Stock outstanding as of July 27, 2012.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

          Page  
PART I – FINANCIAL INFORMATION   
Item 1.    Financial Statements.   
   Consolidated Balance Sheets at June 30, 2012, December 31, 2011 and June 30, 2011      1   
  

Consolidated Statements of Operations and Comprehensive Income for the Three and Six Month Periods Ended June 30, 2012 and 2011

     2   
  

Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June  30, 2012 and 2011

     3   
   Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011      4   
   Notes to Consolidated Financial Statements      5   
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.      32   
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.      44   
Item 4.    Controls and Procedures.      44   
PART II – OTHER INFORMATION   
Item 1.    Legal Proceedings.      45   
Item 1A.    Risk Factors.      45   
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.      45   
Item 3.    Defaults Upon Senior Securities.      45   
Item 4.    Mine Safety Disclosures.      45   
Item 5.    Other Information.      45   
Item 6.    Exhibits.      45   

Signatures

     45   


Table of Contents

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

 

     June 30,
2012
    December 31,
2011
    June 30,
2011
 
     (Unaudited)     (Audited)     (Unaudited)  

Assets

      

Cash and due from banks

   $ 60,126      $ 65,528      $ 68,552   

Federal funds sold and interest bearing accounts

     111,251        229,042        218,330   

Investment securities available for sale, at fair value

     366,980        339,967        334,376   

Other investments

     7,884        9,878        10,354   

Mortgage loans held for sale

     19,659        11,563        —     

Loans

     1,365,489        1,332,086        1,360,063   

Covered loans

     601,737        571,489        486,489   

Less: allowance for loan losses

     26,198        35,156        34,523   
  

 

 

   

 

 

   

 

 

 

Loans, net

     1,941,028        1,868,419        1,812,029   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     40,018        50,301        61,533   

Covered other real estate owned

     83,467        78,617        63,583   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned

     123,485        128,918        125,116   
  

 

 

   

 

 

   

 

 

 

FDIC indemnification asset

     203,801        242,394        160,927   

Premises and equipment, net

     75,192        73,124        65,925   

Intangible assets, net

     3,767        3,250        3,745   

Goodwill

     956        956        956   

Other assets

     6,182        21,268        56,927   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,920,311      $ 2,994,307      $ 2,857,237   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 429,113      $ 395,347      $ 318,004   

Interest-bearing

     2,115,559        2,196,219        2,193,359   
  

 

 

   

 

 

   

 

 

 

Total deposits

     2,544,672        2,591,566        2,511,363   

Securities sold under agreements to repurchase

     19,800        37,665        17,136   

Other borrowings

     3,810        20,000        —     

Other liabilities

     8,821        9,037        9,311   

Subordinated deferrable interest debentures

     42,269        42,269        42,269   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     2,619,372        2,700,537        2,580,079   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

      

Stockholders’ Equity

      

Preferred stock, stated value $1,000; 5,000,000 shares authorized; 52,000 shares issued

     51,044        50,727        50,419   

Common stock, par value $1; 100,000,000 shares authorized; 25,155,318, 25,087,468 and 25,102,218 issued

     25,155        25,087        25,102   

Capital surplus

     166,685        166,639        166,170   

Retained earnings

     61,081        54,852        38,888   

Accumulated other comprehensive income

     7,805        7,296        7,410   

Treasury stock, at cost, 1,336,174 shares

     (10,831     (10,831     (10,831
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     300,939        293,770        277,158   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,920,311      $ 2,994,307      $ 2,857,237   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

1


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Interest income

        

Interest and fees on loans

   $ 30,334      $ 32,876      $ 59,816      $ 61,847   

Interest on taxable securities

     2,187        2,574        4,496        5,232   

Interest on nontaxable securities

     374        314        739        634   

Interest on deposits in other banks and federal funds sold

     112        159        238        347   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     33,007        35,923        65,289        68,060   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

        

Interest on deposits

     3,635        6,828        7,719        14,200   

Interest on other borrowings

     491        351        962        906   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     4,126        7,179        8,681        15,106   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     28,881        28,747        56,608        52,954   

Provision for loan losses

     7,225        9,115        20,107        16,158   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     21,656        19,632        36,501        36,796   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

        

Service charges on deposit accounts

     4,770        4,665        9,156        8,932   

Mortgage banking activity

     3,006        376        4,481        826   

Other service charges, commissions and fees

     322        273        713        515   

Gain on acquisitions

     —          —          20,037        —     

Gain on sale of securities

     —          14        —          238   

Other noninterest income

     777        646        1,752        1,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     8,875        5,974        36,139        12,167   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

        

Salaries and employee benefits

     12,125        9,421        23,571        19,264   

Equipment and occupancy expenses

     2,880        2,752        6,215        5,482   

Amortization of intangible assets

     412        242        632        505   

Data processing and telecommunications expenses

     2,905        2,452        4,830        4,848   

Advertising and marketing expenses

     364        149        713        312   

Other non-interest expenses

     7,937        7,580        24,908        13,340   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     26,623        22,596        60,869        43,751   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

     3,908        3,010        11,771        5,212   

Applicable income tax expense

     1,413        896        3,911        1,720   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 2,495      $ 2,114      $ 7,860      $ 3,492   
  

 

 

   

 

 

   

 

 

   

 

 

 

Preferred stock dividends

     817        807        1,632        1,605   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

   $ 1,678      $ 1,307      $ 6,228      $ 1,887   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

        

Unrealized holding gain arising during period on investment securities available for sale, net of tax

     1,934        2,250        1,244        1,988   

Reclassification adjustment for gains included in net loss, net of tax

     —          (8     —          (154

Unrealized loss on cash flow hedges arising during period, net of tax

     (642     (574     (736     (628
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     1,292        1,668        508        1,206   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,970      $ 2,975      $ 6,736      $ 3,093   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and Diluted earnings per share

   $ 0.07      $ 0.06      $ 0.26      $ 0.08   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares Outstanding

        

Basic

     23,819        23,449        23,791        23,445   

Diluted

     23,973        23,508        23,945        23,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

2


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

 

     Six Months Ended     Six Months Ended  
     June 30, 2012     June 30, 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

     —           317        —          298   
  

 

 

    

 

 

   

 

 

   

 

 

 

Issued at end of period

     52,000       $ 51,044        52,000      $ 50,419   

COMMON STOCK

         

Issued at beginning of period

     25,087,468       $ 25,087        24,982,911      $ 24,983   

Issuance of restricted shares

     67,450         67        125,075        125   

Cancellation of restricted shares

     —           —          (7,000     (7

Proceeds from exercise of stock options

     400         1        1,232        1   
  

 

 

    

 

 

   

 

 

   

 

 

 

Issued at end of period

     25,155,318       $ 25,155        25,102,218      $ 25,102   

CAPITAL SURPLUS

         

Balance at beginning of period

      $ 166,639        $ 165,930   

Stock-based compensation

        111          349   

Proceeds from exercise of stock options

        2          9   

Issuance of restricted shares

        (67       (125

Cancellation of restricted shares

        —            7   
     

 

 

     

 

 

 

Balance at end of period

      $ 166,685        $ 166,170   

RETAINED EARNINGS

         

Balance at beginning of period

      $ 54,852        $ 37,000   

Net income

        7,860          3,492   

Dividends on preferred shares

        (1,314       (1,306

Accretion of fair value of warrant

        (317       (298
     

 

 

     

 

 

 

Balance at end of period

      $ 61,081        $ 38,888   

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX

         

Unrealized gains on securities and derivatives:

         

Balance at beginning of period

      $ 7,296        $ 6,204   

Other comprehensive income

        509          1,206   
     

 

 

     

 

 

 

Balance at end of period

      $ 7,805        $ 7,410   

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

      $ 300,939        $ 277,158   

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

 

     Six Months Ended
June 30,
 
     2012     2011  

Cash Flows From Operating Activities:

    

Net income

   $ 7,860      $ 3,492   

Adjustments reconciling net income to net cash provided by operating activities:

    

Depreciation

     2,331        2,168   

Net gains on sale or disposal of premises and equipment

     (1     (139

Net losses or write-downs on sale of other real estate owned

     8,065        3,570   

Provision for loan losses

     20,107        16,158   

Gain on acquisitions

     (23,037     —     

Amortization of intangible assets

     632        505   

Net change in mortgage loans held for sale

     (8,096     —     

Net gains on securities available for sale

     —          (238

Change in other prepaids, deferrals and accruals, net

     14,163        (15,659
  

 

 

   

 

 

 

Net cash provided by operating activities

     25,024        9,857   
  

 

 

   

 

 

 

Cash Flows From Investing Activities, net of effect of business combinations:

    

Net (increase)/decrease in federal funds sold and interest bearing deposits

     117,791        42,932   

Proceeds from maturities of securities available for sale

     52,737        37,430   

Purchase of securities available for sale

     (63,757     (85,556

Proceeds from sales of securities available for sale

     28,923        39,388   

Net decrease in loans

     1,691        33,819   

Proceeds from sales of other real estate owned

     33,920        21,361   

Proceeds from sales of premises and equipment

     346        1,105   

Purchases of premises and equipment

     (4,744     (2,459

Decrease in FDIC indemnification asset

     91,247        16,260   

Net cash proceeds received from FDIC-assisted acquisitions

     65,050        —     
  

 

 

   

 

 

 

Net cash provided by investing activities

     323,204        104,280   
  

 

 

   

 

 

 

Cash Flows From Financing Activities, net of effect of business combinations:

    

Net decrease in deposits

     (307,930     (24,063

Net decrease in securities sold under agreements to repurchase

     (17,865     (51,048

Decrease in other borrowings

     (26,524     (43,495

Dividends paid—preferred stock

     (1,314     (1,305

Proceeds from exercise of stock options

     3        —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (353,630     (119,911
  

 

 

   

 

 

 

Net decrease in cash and due from banks

   $ (5,402   $ (5,774

Cash and due from banks at beginning of period

     65,528        74,326   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 60,126      $ 68,552   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid/(received) during the period for:

    

Interest

   $ 9,928      $ 16,044   

Income taxes

   $ 48      $ 902   

See notes to unaudited consolidated financial statements.

 

4


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 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 June 30, 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 their unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended June 30, 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.

 

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Table of Contents

The Company has elected to record mortgage loans held-for-sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held-for-sale is recorded on an accrual basis in the consolidated statement of income under the heading “Interest income – interest and fees on loans”. The servicing value is included in the fair value of the Interest Rate Lock Commitments (“IRLCs”) with borrowers. The mark to market adjustments related to loans held-for-sale and the associated economic hedges are captured in mortgage banking activities.

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 and Due From Banks, Federal Funds Sold and Interest-Bearing Accounts: The carrying amount of cash and due from banks, federal funds sold and interest-bearing accounts 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 investments at its original cost basis, as cost approximates fair value and there is no ready market for such investments.

Mortgage Loans Held-for-Sale: The fair value of mortgage loans held-for-sale is determined on outstanding commitments from third party investors in the secondary markets and are classified within Level 2 of the valuation hierarchy.

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 estimated based on discounted expected future 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 loan 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.

 

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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 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 June 30, 2012, December 31, 2011 and June 30, 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.

 

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Table of Contents

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 June 30, 2012 Using:  
     Carrying
Amount
     Level 1      Level 2      Level 3      Total  
     (Dollars in Thousands)  

Financial assets:

              

Loans, net

   $ 1,941,028       $ —         $ 1,975,541       $ —         $ 1,975,541   

Financial liabilities:

              

Deposits

     2,544,672         —           2,546,740         —           2,546,740   

Other borrowings

     3,810         3,835         —           —           3,835   

 

     December 31, 2011      June 30, 2011  
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 
     (Dollars in Thousands)  

Financial assets:

           

Loans, net

   $ 1,868,419       $ 1,877,320       $ 1,812,029       $ 1,818,152   

Financial liabilities:

           

Deposits

     2,591,566         2,593,113         2,511,363         2,513,459   

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 June 30, 2012 and 2011 and December 31, 2011 (dollars in thousands):

 

     Fair Value Measurements on a Recurring Basis
As of June 30, 2012
 
     Fair Value     Level 1      Level 2     Level 3  

U.S. government agencies

   $ 8,898      $ —         $ 8,898      $ —     

State, county and municipal securities

     100,327        5,432         94,895        —     

Corporate debt securities

     11,506        250         9,256        2,000   

Mortgage backed securities

     246,249        5,086         241,163        —     

Mortgage loans held for sale

     19,659        —           19,659        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total recurring assets at fair value

   $ 386,639      $ 10,768       $ 373,871      $ 2,000   
  

 

 

   

 

 

    

 

 

   

 

 

 

Derivative financial instruments

   $ 2,970      $ —         $ 2,970        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total recurring liabilities at fair value

   $ 2,970      $ —         $ 2,970      $ —     
  

 

 

   

 

 

    

 

 

   

 

 

 
     Fair Value Measurements on a Recurring Basis
As of December 31, 2011
 
     Fair Value     Level 1      Level 2     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 June 30, 2011
 
     Fair Value     Level 1      Level 2     Level 3  

U.S. government agencies

   $ 24,259      $ —         $ 24,259      $ —     

State, county and municipal securities

     60,546        2,367        58,179        —     

Corporate debt securities

     9,722        —           7,722        2,000   

Mortgage backed securities

     239,849        8,153         231,696        —     

Derivative financial instruments

     243        —           243        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total recurring assets at fair value

   $ 334,619      $ 10,520       $ 322,099      $ 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 June 30, 2012 and 2011 and December 31, 2011 (dollars in thousands):

 

     Fair Value Measurements on a Nonrecurring Basis
As of June 30, 2012
 
     Fair Value      Level 1      Level 2      Level 3  

Impaired loans carried at fair value

   $ 60,277       $ —         $ 60,277       $ —     

Other real estate owned

     40,018         —           —           40,018   

Covered loans

     601,737         —           —           601,737   

Covered other real estate owned

     83,467         —           —           83,467   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-recurring assets at fair value

   $ 785,499       $ —         $ 60,277       $ 725,222   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2011
 
     Fair Value      Level 1      Level 2      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 June 30, 2011
 
     Fair Value      Level 1      Level 2      Level 3  

Impaired loans carried at fair value

   $ 60,545       $ —         $ 60,545       $ —     

Other real estate owned

     61,533         —           —           61,533   

Covered loans

     486,489         —           —           486,489   

Covered other real estate owned

     63,583         —           —           63,583   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 672,150       $ —         $ 60,545       $ 611,605   
  

 

 

    

 

 

    

 

 

    

 

 

 

Below is the Company’s reconciliation of Level 3 assets as of June 30, 2012 (dollars in thousands):

 

     Investment
Securities
Available
for Sale
     Other Real
Estate
Owned
    Covered
Loans
    Covered
Other Real
Estate
 

Beginning balance January 1, 2012

   $ 2,000       $ 50,301      $ 571,489      $ 78,617   

Total gains/(losses) included in net income

     —           (8,065     —          —     

Purchases, sales, issuances, and settlements, net

     —           (12,609     50,232        (15,134

Transfers in or out of Level 3

     —           10,391        (19,984     19,984   
  

 

 

    

 

 

   

 

 

   

 

 

 

Ending balance June 30, 2012

   $ 2,000       $ 40,018      $ 601,737      $ 83,467   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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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 June 30, 2012, December 31, 2011 and June 30, 2011 are presented below:

 

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

June 30, 2012:

          

U. S. government agencies

   $ 8,602       $ 296       $ —        $ 8,898   

State, county and municipal securities

     95,354         5,047         (74     100,327   

Corporate debt securities

     11,792         231         (517     11,506   

Mortgage-backed securities

     239,412         7,032         (195     246,249   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 355,160       $ 12,606       $ (786   $ 366,980   
  

 

 

    

 

 

    

 

 

   

 

 

 

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 securities

   $ 330,060       $ 10,551       $ (644   $ 339,967   
  

 

 

    

 

 

    

 

 

   

 

 

 

June 30, 2011:

          

U. S. government agencies

   $ 24,056       $ 203       $ —        $ 24,259   

State, county and municipal securities

     58,636         1,950         (40     60,546   

Corporate debt securities

     11,637         242         (2,157     9,722   

Mortgage-backed securities

     234,437         5,979         (567     239,849   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 328,766       $ 8,374       $ (2,764   $ 334,376   
  

 

 

    

 

 

    

 

 

   

 

 

 

The amortized cost and fair value of available-for-sale securities at June 30, 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

   $ 9,306       $ 9,320   

Due from one year to five years

     18,553         19,264   

Due from five to ten years

     51,174         54,892   

Due after ten years

     36,715         37,255   

Mortgage-backed securities

     239,412         246,249   
  

 

 

    

 

 

 
   $ 355,160       $ 366,980   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $201.2 million serve as collateral to secure public deposits and other purposes required or permitted by law at June 30, 2012.

 

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Table of Contents

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2012, December 31, 2011 and June 30, 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)  

June 30, 2012:

               

U. S. government agencies

   $ —         $ —        $ —         $ —        $ —         $ —     

State, county and municipal securities

     10,342         (73     —           —          10,342         (73

Corporate debt securities

     —           —          6,562         (518     6,562         (518

Mortgage-backed securities

     31,680         (167     5,040         (28     36,720         (195
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 42,022       $ (240   $ 11,602       $ (546   $ 53,624       $ (786
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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 temporarily impaired securities

   $ 31,163       $ (238   $ 6,681       $ (406   $ 37,844       $ (644
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

June 30, 2011:

               

U. S. government agencies

   $ —         $ —        $ —         $ —        $ —         $ —     

State, county and municipal securities

     3,844         (39     203         (1     4,047         (40

Corporate debt securities

     100         (1     4,936         (2,156     5,036         (2,157

Mortgage-backed securities

     60,926         (567     —           —          60,926         (567
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 64,870       $ (607   $ 5,139       $ (2,158   $ 70,009       $ (2,764
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

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.

 

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Table of Contents

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)

   June 30,
2012
     December 31,
2011
     June 30,
2011
 

Commercial, financial and agricultural

   $ 174,903       $ 142,960       $ 150,377   

Real estate – construction and development

     124,556         130,270         143,684   

Real estate – commercial and farmland

     675,404         672,765         681,228   

Real estate – residential

     332,124         330,727         336,485   

Consumer installment

     41,431         37,296         35,584   

Other

     17,071         18,068         12,705   
  

 

 

    

 

 

    

 

 

 
   $ 1,365,489       $ 1,332,086       $ 1,360,063   
  

 

 

    

 

 

    

 

 

 

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 $601.7 million, $571.5 million and $486.5 million at June 30, 2012, December 31, 2011 and June 30, 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)

   June 30,
2012
     December 31,
2011
     June 30,
2011
 

Commercial, financial and agricultural

   $ 41,372       $ 41,867       $ 42,494   

Real estate – construction and development

     83,991         77,077         79,540   

Real estate – commercial and farmland

     322,393         321,257         229,924   

Real estate – residential

     150,683         127,644         129,721   

Consumer installment

     3,298         3,644         4,810   
  

 

 

    

 

 

    

 

 

 
   $ 601,737       $ 571,489       $ 486,489   
  

 

 

    

 

 

    

 

 

 

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)

   June 30,
2012
     December 31,
2011
     June 30,
2011
 

Commercial, financial and agricultural

   $ 4,968       $ 3,987       $ 5,439   

Real estate – construction and development

     8,979         15,020         13,714   

Real estate – commercial and farmland

     13,728         35,385         24,205   

Real estate – residential

     15,542         15,498         16,625   

Consumer installment

     1,204         933         562   
  

 

 

    

 

 

    

 

 

 
   $ 44,421       $ 70,823       $ 60,545   
  

 

 

    

 

 

    

 

 

 

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

 

(Dollars in Thousands)

   June 30,
2012
     December 31,
2011
     June 30,
2011
 

Commercial, financial and agricultural

   $ 13,406       $ 11,952       $ 11,809   

Real estate – construction and development

     28,225         30,977         31,131   

Real estate – commercial and farmland

     71,271         75,458         55,771   

Real estate – residential

     37,669         41,139         36,129   

Consumer installment

     654         473         705   
  

 

 

    

 

 

    

 

 

 
   $ 151,225       $ 159,999       $ 135,545   
  

 

 

    

 

 

    

 

 

 

 

12


Table of Contents

The following table presents an analysis of non-covered past due loans as of June 30, 2012, December 31, 2011 and June 30, 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 June 30, 2012:

                    

Commercial, financial & agricultural

   $ 531       $ 701       $ 4,371       $ 5,603       $ 169,300       $ 174,903       $ —     

Real estate – construction & development

     1,986         2,119         7,855         11,960         112,596         124,556         —     

Real estate – commercial & farmland

     5,282         6,930         8,597         20,809         654,595         675,404         —     

Real estate – residential

     5,665         3,885         14,782         24,332         307,792         332,124         —     

Consumer installment loans

     545         220         1,117         1,883         39,548         41,431         1   

Other

     —           —           —           —           17,071         17,071         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,009       $ 13,855       $ 36,722       $ 64,587       $ 1,300,902       $ 1,365,489       $ 1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 June 30, 2011:

                    

Commercial, financial & agricultural

   $ 653       $ 282       $ 5,334       $ 6,269       $ 144,108       $ 150,377       $ —     

Real estate – construction & development

     1,551         1,243         13,194         15,988         127,696         143,684         —     

Real estate – commercial & farmland

     8,494         807         23,898         33,199         648,029         681,228         —     

Real estate – residential

     5,086         2,729         14,539         22,354         314,131         336,485         —     

Consumer installment loans

     525         178         493         1,196         34,388         35,584         —     

Other

     —           —           —           —           12,705         12,705         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 16,309       $ 5,239       $ 57,458       $ 79,006       $ 1,281,057       $ 1,360,063       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

13


Table of Contents

The following table presents an analysis of covered past due loans as of June 30, 2012, December 31, 2011 and June 30, 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 June 30, 2012:

                    

Commercial, financial & agricultural

   $ 851       $ 754       $ 12,703       $ 14,308       $ 27,064       $ 41,372       $ 298   

Real estate – construction & development

     2,688         3,007         25,021         30,716         53,275         83,991         —     

Real estate – commercial & farmland

     12,452         7,656         60,879         80,987         241,406         322,393         891   

Real estate – residential

     5,366         3,180         31,607         40,153         110,530         150,683         78   

Consumer installment loans

     70         40         430         540         2,758         3,298         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 21,427       $ 14,637       $ 130,640       $ 166,704       $ 435,033       $ 601,737       $ 1,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 June 30, 2011:

                    

Commercial, financial & agricultural

   $ 1,201       $ 635       $ 11,047       $ 12,883       $ 29,611       $ 42,494       $ 313   

Real estate – construction & development

     1,424         1,068         28,531         31,023         48,517         79,540         75   

Real estate – commercial & farmland

     3,941         6,075         52,287         62,303         167,621         229,924         2,223   

Real estate – residential

     2,445         3,403         33,354         39,202         90,519         129,721         444   

Consumer installment loans

     76         47         645         768         4,042         4,810         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,087       $ 11,228       $ 125,864       $ 146,179       $ 340,310       $ 486,489       $ 3,055   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

14


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  
     June 30,
2012
     December 31,
2011
     June 30,
2011
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 44,421       $ 70,823       $ 60,545   

Troubled debt restructurings not included above

     22,970         17,951         21,756   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 67,391       $ 88,774       $ 82,301   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ 67,391       $ 88,774       $ 82,301   
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ 7,136       $ 18,478       $ 15,328   
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 78,432       $ 88,320       $ 76,136   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 153       $ 637       $ 150   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 332       $ 613       $ 249   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to non-covered impaired loans as of June 30, 2012, December 31, 2011 and June 30, 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 June 30, 2012:

                 

Commercial, financial & agricultural

   $ 8,116       $ —         $ 4,968       $ 4,968       $ 692       $ 4,936   

Real estate – construction & development

     18,805         —           10,184         10,184         1,070         12,611   

Real estate – commercial & farmland

     32,265         —           27,021         27,021         2,081         37,111   

Real estate – residential

     27,069         —           24,014         24,014         3,254         22,637   

Consumer installment loans

     1,331         —           1,204         1,204         39         1,137   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 87,586       $ —         $ 67,391       $ 67,391       $ 7,136       $ 78,432   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

15


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 June 30, 2011:

                 

Commercial, financial & agricultural

   $ 9,229       $ —         $ 3,853       $ 3,853       $ 1,586       $ 4,391   

Real estate – construction & development

     26,562         —           12,198         12,198         3,695         16,113   

Real estate – commercial & farmland

     42,445         —           33,045         33,045         5,096         38,738   

Real estate – residential

     24,118         —           17,456         17,456         4,810         16,451   

Consumer installment loans

     732         —           421         421         141         443   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 103,086       $ —         $ 66,973       $ 66,973       $ 15,328       $ 76,136   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     As of and For the Period Ended  
     June 30,
2012
     December 31,
2011
     June 30,
2011
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 151,225       $ 159,999       $ 135,545   

Troubled debt restructurings not included above

     14,842         19,884         9,312   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 166,067       $ 179,883       $ 144,857   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ 166,067       $ 179,883       $ 144,857   
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 178,130       $ 138,950       $ 119,950   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 628       $ 526       $ 287   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 482       $ 202       $ 122   
  

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

The following table presents an analysis of information pertaining to impaired covered loans as of June 30, 2012, December 31, 2011 and June 30, 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 June 30, 2012:

                 

Commercial, financial & agricultural

   $ 22,616       $ 13,464       $ —         $ 13,464       $ —         $ 13,250   

Real estate – construction & development

     46,439         30,586         —           30,586         —           34,260   

Real estate – commercial & farmland

     110,388         81,330         —           81,330         —           85,639   

Real estate – residential

     58,645         40,033         —           40,033         —           44,393   

Consumer installment loans

     1,034         654         —           654         —           588   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 239,122       $ 166,067       $ —         $ 166,067       $ —         $ 178,130   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 June 30, 2011:

                 

Commercial, financial & agricultural

   $ 23,421       $ 11,866       $ —         $ 11,866       $ —         $ 8,943   

Real estate – construction & development

     75,282         31,131         —           31,131         —           28,435   

Real estate – commercial & farmland

     101,453         57,422         —           57,422         —           44,234   

Real estate – residential

     71,421         43,733         —           43,733         —           37,233   

Consumer installment loans

     807         705         —           705         —           1,105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 272,384       $ 144,857       $ —         $ 144,857       $ —         $ 119,950   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

17


Table of Contents

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 June 30, 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

   $ 20,395       $ 17       $ 230       $ 414       $ 7,226       $ —         $ 28,282   

15

     11,909         3,628         158,608         75,752         1,260         —           251,157   

20

     79,985         39,077         287,874         93,018         23,537         17,071         540,562   

23

     —           6,691         9,578         13,839         23         —           30,131   

25

     54,072         57,266         170,342         109,269         7,035         —           397,984   

30

     1,404         4,018         17,870         12,461         554         —           36,307   

40

     7,137         13,703         30,902         27,306         1,776         —           80,824   

50

     1         156         —           65         20         —           242   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 174,903       $ 124,556       $ 675,404       $ 332,124       $ 41,431       $ 17,071       $ 1,365,489   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

The following table presents the non-covered loan portfolio by risk grade as of June 30, 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

   $ 13,799       $ 213       $ 329       $ 109       $ 5,926       $ —         $ 20,376   

15

     11,307         3,483         151,047         35,416         899         —           202,152   

20

     61,543         36,007         274,185         128,581         21,477         12,705         534,498   

23

     1,614         7,360         8,484         12,346         29         —           29,833   

25

     54,635         67,615         157,862         121,094         5,927         —           407,133   

30

     1,477         6,071         44,388         13,028         564         —           65,528   

40

     5,362         22,659         44,933         25,911         747         —           99,612   

50

     640         276         —           —           6         —           922   

60

  

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