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 March 31, 2014

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 25,158,183 shares of Common Stock outstanding as of April 30, 2014.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

     Page  

PART I – FINANCIAL INFORMATION

  
Item 1.    Financial Statements   
   Consolidated Balance Sheets at March 31, 2014, December 31, 2013 and March 31, 2013      3   
   Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 31, 2014 and 2013      4   
   Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2014 and 2013      5   
   Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013      6   
   Notes to Consolidated Financial Statements      7   
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      52   
Item 3.    Quantitative and Qualitative Disclosures About Market Risk      64   
Item 4.    Controls and Procedures      64   

PART II – OTHER INFORMATION

  
Item 1.    Legal Proceedings      65   
Item 1A.    Risk Factors      65   
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      65   
Item 3.    Defaults Upon Senior Securities      65   
Item 4.    Mine Safety Disclosures      65   
Item 5.    Other Information      65   
Item 6.    Exhibits      65   

Signatures

     65   

 

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Table of Contents
Item 1. Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

 

     March 31,
2014
    December 31,
2013
    March 31,
2013
 
     (Unaudited)     (Audited)     (Unaudited)  

Assets

      

Cash and due from banks

   $ 71,387      $ 62,955      $ 50,487   

Federal funds sold and interest-bearing accounts

     48,677        204,984        81,205   

Investment securities available for sale, at fair value

     456,713        486,235        324,029   

Other investments

     9,322        16,828        5,528   

Mortgage loans held for sale

     51,693        67,278        42,332   

Loans, net of unearned income

     1,695,382        1,618,454        1,492,753   

Purchased loans not covered by FDIC loss share agreements (“purchased non-covered loans”)

     437,269        448,753        —     

Purchased loans covered by FDIC loss share agreements (“covered loans”)

     372,694        390,237        460,724   

Less: allowance for loan losses

     22,744        22,377        23,382   
  

 

 

   

 

 

   

 

 

 

Loans, net

     2,482,601        2,435,067        1,930,095   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     33,839        33,351        40,434   

Purchased, non-covered other real estate owned

     3,864        4,276        —     

Covered other real estate owned

     42,636        45,893        77,915   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned

     80,339        83,520        118,349   
  

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     87,430        103,188        72,340   

FDIC loss-share receivable

     53,181        65,441        160,979   

Intangible assets

     5,477        6,009        2,676   

Goodwill

     35,049        35,049        956   

Cash value of bank owned life insurance

     49,738        49,432        45,832   

Other assets

     56,377        51,663        26,843   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,487,984      $ 3,667,649      $ 2,861,651   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 698,866      $ 668,531      $ 490,961   

Interest-bearing

     2,311,781        2,330,700        1,999,012   
  

 

 

   

 

 

   

 

 

 

Total deposits

     3,010,647        2,999,231        2,489,973   

Securities sold under agreements to repurchase

     49,974        83,516        22,919   

Other borrowings

     59,677        194,572        —     

Other liabilities

     12,028        18,165        22,768   

Subordinated deferrable interest debentures

     55,628        55,466        42,269   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     3,187,954        3,350,950        2,577,929   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

      

Stockholders’ Equity

      

Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0, 28,000 and 28,000 shares issued and outstanding

     —          28,000        27,753   

Common stock, par value $1; 100,000,000 shares authorized; 26,535,571, 26,461,769 and 25,238,635 shares issued

     26,536        26,462        25,239   

Capital surplus

     190,513        189,722        165,078   

Retained earnings

     92,055        83,991        70,554   

Accumulated other comprehensive income (loss)

     2,374        (294     6,274   

Treasury stock, at cost, 1,376,498, 1,363,342 and 1,362,955 shares

     (11,448     (11,182     (11,176
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     300,030        316,699        283,722   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,487,984      $ 3,667,649      $ 2,861,651   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements

 

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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,
 
     2014     2013  

Interest income

    

Interest and fees on loans

   $ 34,469      $ 28,716   

Interest on taxable securities

     2,985        1,697   

Interest on nontaxable securities

     335        375   

Interest on deposits in other banks

     79        85   

Interest on federal funds sold

     5        —     
  

 

 

   

 

 

 

Total interest income

     37,873        30,873   
  

 

 

   

 

 

 

Interest expense

    

Interest on deposits

     2,183        2,226   

Interest on other borrowings

     1,206        309   
  

 

 

   

 

 

 

Total interest expense

     3,389        2,535   
  

 

 

   

 

 

 

Net interest income

     34,484        28,338   

Provision for loan losses

     1,726        2,923   
  

 

 

   

 

 

 

Net interest income after provision for loan losses

     32,758        25,415   
  

 

 

   

 

 

 

Noninterest income

    

Service charges on deposit accounts

     5,586        4,837   

Mortgage origination fees

     5,068        4,464   

Other service charges, commissions and fees

     652        329   

Gain on sale of securities

     6        172   

Other

     1,442        1,558   
  

 

 

   

 

 

 

Total noninterest income

     12,754        11,360   
  

 

 

   

 

 

 

Noninterest expense

    

Salaries and employee benefits

     17,394        13,806   

Occupancy and equipment expense

     4,064        2,931   

Advertising and marketing expense

     710        255   

Amortization of intangible assets

     533        364   

Data processing and communications costs

     3,454        2,570   

Other operating expenses

     7,084        8,958   
  

 

 

   

 

 

 

Total noninterest expense

     33,239        28,884   
  

 

 

   

 

 

 

Income before income tax expense

     12,273        7,891   

Applicable income tax expense

     3,923        2,606   
  

 

 

   

 

 

 

Net income

     8,350        5,285   
  

 

 

   

 

 

 

Preferred stock dividends

     286        441   
  

 

 

   

 

 

 

Net income available to common stockholders

     8,064        4,844   
  

 

 

   

 

 

 

Other comprehensive income (loss)

    

Unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax

     2,938        (429

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

     (4     (112

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

     (266     209   
  

 

 

   

 

 

 

Other comprehensive income (loss)

     2,668        (332
  

 

 

   

 

 

 

Comprehensive income

   $ 11,018      $ 4,953   
  

 

 

   

 

 

 

Basic and diluted earnings per share

   $ 0.32      $ 0.20   
  

 

 

   

 

 

 

Weighted average common shares outstanding

    

Basic

     25,144        23,868   

Diluted

     25,573        24,246   

See notes to unaudited consolidated financial statements

 

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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, 2014     March 31, 2013  
     Shares     Amount     Shares     Amount  

PREFERRED STOCK

        

Balance at beginning of period

     28,000      $ 28,000        28,000      $ 27,662   

Repurchase of preferred stock

     (28,000     (28,000     —          —     

Accretion of fair value of warrant

     —          —          —          91   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     —        $ —          28,000      $ 27,753   

COMMON STOCK

        

Balance at beginning of period

     26,461,769      $ 26,462        25,154,818      $ 25,155   

Issuance of restricted shares

     68,047        68        81,400        81   

Proceeds from exercise of stock options

     5,755        6        2,417        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     26,535,571      $ 26,536        25,238,635      $ 25,239   

CAPITAL SURPLUS

        

Balance at beginning of period

     $ 189,722        $ 164,949   

Stock-based compensation

       795          197   

Issuance of restricted shares

       (68       (81

Proceeds from exercise of stock options

       64          13   
    

 

 

     

 

 

 

Balance at end of period

     $ 190,513        $ 165,078   

RETAINED EARNINGS

        

Balance at beginning of period

     $ 83,991        $ 65,710   

Net income

       8,350          5,284   

Dividends on preferred shares

       (286       (349

Accretion of fair value warrant

       —            (91
    

 

 

     

 

 

 

Balance at end of period

     $ 92,055        $ 70,554   

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX

        

Unrealized gains on securities and derivatives:

        

Balance at beginning of period

     $ (294     $ 6,607   

Other comprehensive income (loss) during the period

       2,668          (333
    

 

 

     

 

 

 

Balance at end of period

     $ 2,374        $ 6,274   

TREASURY STOCK

        

Balance at beginning of period

     (1,363,342   $ (11,182     (1,355,050   $ (11,066

Purchase of treasury shares

     (13,156     (266     (7,905     (110
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (1,376,498   $ (11,448     (1,362,955   $ (11,176
    

 

 

     

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     $ 300,030        $ 283,722   
    

 

 

     

 

 

 

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,
 
     2014     2013  

Cash flows from operating activities:

    

Net income

   $ 8,350      $ 5,285   

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

    

Depreciation

     1,871        1,246   

Stock based compensation expense

     795        197   

Net (gains) losses on sale or disposal of premises and equipment

     (18     6   

Net gains on securities available for sale

     (6     (172

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

     921        3,047   

Provision for loan losses

     1,726        2,923   

Amortization of intangible assets

     532        364   

Net change in mortgage loans held for sale

     15,585        6,454   

Other prepaids, deferrals and accruals, net

     2,489        11,570   
  

 

 

   

 

 

 

Net cash provided by operating activities

     32,245        30,920   
  

 

 

   

 

 

 

Cash flows from investing activities, net of effects of business combinations:

    

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

     156,307        112,472   

Proceeds from maturities of securities available for sale

     11,834        20,746   

Purchase of securities available for sale

     (46,690     (25,328

Purchase of bank owned life insurance

     —          (28,674

Decrease in restricted equity securities, net

     7,506        1,304   

Proceeds from sales of securities available for sale

     68,899        26,802   

Net change in loans

     (56,807     (13,805

Proceeds from sales of other real estate owned

     8,932        10,140   

Proceeds from sales of premises and equipment

     55        713   

(Increase) decrease in FDIC indemnification asset

     12,260        (1,255

Purchases of premises and equipment

     (464     (1,470
  

 

 

   

 

 

 

Net cash provided by investing activities

     161,832        101,645   
  

 

 

   

 

 

 

Cash flows from financing activities, net of effects of business combinations:

    

Net (decrease) increase in deposits

     11,416        (134,690

Net decrease in securities sold under agreements to repurchase

     (33,542     (27,201

Proceeds from other borrowings

     29,963        —     

Repayment of other borrowings

     (165,000     —     

Redemption of preferred stock

     (28,000     —     

Dividends paid—preferred stock

     (286     (349

Purchase of treasury shares

     (266     (110

Proceeds from exercise of stock options

     70        16   
  

 

 

   

 

 

 

Net cash used in financing activities

     (185,645     (162,334
  

 

 

   

 

 

 

Net decrease in cash and due from banks

     8,432        (29,769

Cash and due from banks at beginning of period

     62,955        80,256   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 71,387      $ 50,487   
  

 

 

   

 

 

 

SUPPLEMNTAL DISCLOSURES OF NON-CASH INFORMATION

    

Cash paid during the period for:

    

Interest

   $ 3,463      $ 2,805   

Income taxes

   $ —        $ 780   

Loans transferred to other real estate owned

   $ 7,547      $ 15,541   

See notes to unaudited consolidated financial statements

 

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AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(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, 2014 the Bank operated 68 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. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our 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, 2014 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, 2013.

Newly Adopted Accounting Pronouncements

ASU 2014-04 – Receivables – Troubled Debt Restructurings by Creditors (“ASU 2014-04”). ASU 2014-04 clarifies when a creditor should reclassify mortgage loans collateralized by residential real estate from loans to other real estate owned. It defines when an in-substance repossession or foreclosure has occurred and when a creditor is considered to have received physical possession of residential real estate collateralizing a mortgage loan. ASU 2014-04 is effective for fiscal years beginning after December 31, 2014, and early adoption is permitted. It can be applied either prospectively or using a modified retrospective transition method. The Company is evaluating the impact this standard may have on the Company’s results of operations, financial position or disclosures.

ASU 2013-11 – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. However, if a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of these revisions did not have a material impact on the Company’s results of operations, financial position or disclosures.

 

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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: 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 contractual 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 ASC 310-10, Accounting by Creditors for Impairment of a Loan, 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 3 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.

 

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Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.

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

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

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

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

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

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

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

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

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

Although the Company has determined that the majority of the inputs used to value its derivatives 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 counterparties. However, as of March 31, 2014 and 2013, 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 adjustments are 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.

 

9


Table of Contents

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

 

            Fair Value Measurements at March 31, 2014 Using:  
     Carrying
Amount
     Level 1      Level 2      Level 3      Total  
     (Dollars in Thousands)  

Financial assets:

              

Loans, net

   $ 2,482,601       $ —         $ 1,651,409       $ 851,216       $ 2,502,625   

Financial liabilities:

              

Deposits

     3,010,647         —           3,011,383         —           3,011,383   

Other borrowings

     59,677         —           59,677         —           59,677   
            Fair Value Measurements at December 31, 2013 Using:  
     Carrying
Amount
     Level 1      Level 2      Level 3      Total  
     (Dollars in Thousands)  

Financial assets:

              

Loans, net

   $ 2,435,067       $ —         $ 1,565,919       $ 881,536       $ 2,447,455   

Financial liabilities:

              

Deposits

     2,999,231         —           3,000,061         —           3,000,061   

Other borrowings

     194,572         —           194,572         —           194,572   
            Fair Value Measurements at March 31, 2013 Using:  
     Carrying
Amount
     Level 1      Level 2      Level 3      Total  
     (Dollars in Thousands)  

Financial assets:

              

Loans, net

   $ 1,930,095       $ —         $ 1,458,604       $ 501,874       $ 1,960,478   

Financial liabilities:

              

Deposits

     2,489,973         —           2,491,282         —           2,491,282   

 

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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, 2014, December 31, 2013 and March 31, 2013 (dollars in thousands):

 

                                                                           
     Fair Value Measurements on a Recurring Basis
As of March 31, 2014
 
     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

   $ 14,145       $ —         $ 14,145       $ —     

State, county and municipal securities

     111,574         —           111,574         —     

Corporate debt securities

     10,383         —           8,383         2,000   

Mortgage-backed securities

     320,611         —           320,611         —     

Mortgage loans held for sale

     51,693         —           51,693         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 508,406       $ —         $ 506,406       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

   $ 675       $ —         $ 675       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring liabilities at fair value

   $ 675       $ —         $ 675       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Recurring Basis
As of December 31, 2013
 
     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

   $ 13,926       $ —         $ 13,926       $ —     

State, county and municipal securities

     112,754         —           112,754         —     

Collateralized debt obligations

     1,480         1,480         —           —     

Corporate debt securities

     10,325         —           8,325         2,000   

Mortgage-backed securities

     347,750         182,461         165,289         —     

Mortgage loans held for sale

     67,278         —           67,278         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 553,513       $ 183,941       $ 367,572       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

   $ 370       $ —         $ 370       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring liabilities at fair value

   $ 370       $ —         $ 370       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Recurring Basis
As of March 31, 2013
 
     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

   $ 5,015       $ —         $ 5,015       $ —     

State, county and municipal securities

     115,532         —           115,532         —     

Corporate debt securities

     10,297         —           8,297         2,000   

Mortgage-backed securities

     193,185         4,054         189,131         —     

Mortgage loans held for sale

     42,332         —           42,332         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring assets at fair value

   $ 366,361       $ 4,054       $ 360,307       $ 2,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

   $ 2,553       $ —         $ 2,553       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring liabilities at fair value

   $ 2,553       $ —         $ 2,553       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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, 2014, December 31, 2013 and March 31, 2013 (dollars in thousands):

 

     Fair Value Measurements on a Nonrecurring Basis
As of March 31, 2014
 
     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

   $ 41,253       $ —         $ —         $ 41,253   

Other real estate owned

     33,839         —           —           33,839   

Purchased, non-covered loans

     437,269         —           —           437,269   

Purchased, non-covered other real estate owned

     3,864         —           —           3,864   

Covered loans

     372,694         —           —           372,694   

Covered other real estate owned

     42,636         —           —           42,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 931,555       $ —         $ —         $ 931,555   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2013
 
     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

   $ 42,546       $ —         $ —         $ 42,546   

Other real estate owned

     33,351         —           —           33,351   

Purchased, non-covered loans

     448,753         —           —           448,753   

Purchased, non-covered other real estate owned

     4,276         —           —           4,276   

Covered loans

     390,237         —           —           390,237   

Covered other real estate owned

     45,893         —           —           45,893   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 965,056       $ —         $ —         $ 965,056   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurements on a Nonrecurring Basis
As of March 31, 2013
 
     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

   $ 51,150       $ —         $ —         $ 51,150   

Other real estate owned

     40,434         —           —           40,434   

Covered loans

     460,724         —           —           460,724   

Covered other real estate owned

     77,915         —           —           77,915   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring assets at fair value

   $ 630,223       $ —         $ —         $ 630,223   
  

 

 

    

 

 

    

 

 

    

 

 

 

The inputs used to determine estimated fair value of impaired loans and covered loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of other real estate owned and covered other real estate owned include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

 

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Table of Contents

For the three months ended March 31, 2014 and 2013, there was not a change in the methods and significant assumptions used to estimate fair value.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities.

 

Measurements

   Fair Value at
March 31, 2014
     Valuation
Technique
   Unobservable Inputs    Range
     (Dollars in Thousands)          

Nonrecurring:

           

Impaired loans

   $ 41,253       Third party appraisals and
discounted cash flows
   Collateral discounts and
discount rates
   4.00% - 60.00%

Other real estate owned

   $ 33,839       Third party appraisals    Collateral discounts and
estimated costs to sell
   10.00% - 74.00%

Purchased, non-covered loans

   $ 437,269       Third party appraisals and
discounted cash flows
   Collateral discounts and
discount rates
   1.00% - 40.00%

Purchased non-covered other real estate owned

   $ 3,864       Third party appraisals    Collateral discounts and
estimated costs to sell
   15.00% - 57.00%

Covered loans

   $ 372,694       Third party appraisals and
discounted cash flows
   Collateral discounts and

discount rate

   1.75% - 75.00%

Covered real estate owned

   $ 42,636       Third party appraisals    Collateral discounts and
estimated costs to sell
   10.00% - 87.00%

Recurring:

           

Investment securities available for sale

   $ 2,000       Discounted par values    Credit quality of
underlying issuer
   0.00%

The transfers between the fair value hierarchy levels during the three months ended March 31, 2014 and 2013 involved the transferring of loans to impaired loans, impaired loans to other real estate owned and covered loans to covered other real estate owned. These transfers are reflected in the Company’s reconciliation of Level 3 assets below.

 

     Investment
securities
available
for
sale
     Impaired
loans
carried at
fair value
    Other real
estate owned
    Purchased,
non-covered
loans
    Purchased,
non-covered
other real
estate owned
    Covered
loans
    Covered
other
real estate
owned
 
           (Dollars in Thousands)        

Beginning balance, January 1, 2014

   $ 2,000       $ 42,546      $ 33,351      $ 448,753      $ 4,276      $ 390,237     $ 45,893   

Total gains (losses) included in net income

     —           —          (750     —          (46     —          (219

Purchases, sales, issuances, and settlements, net

     —           —          (1,316     (11,416     (529     (12,617     (7,964

Transfers in or out of Level 3

     —           —          1,261        —          95        —         —     

Asset reclassification, within Level 3

     —           (1,293     1,293        (68     68        (4,926     4,926   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance, March 31, 2014

   $ 2,000       $ 41,253      $ 33,839      $ 437,269      $ 3,864      $ 372,694      $ 42,636   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Investment
Securities
Available
for
Sale
     Impaired
Loans
Carried at
Fair Value
    Other Real
Estate
Owned
    Covered
Loans
    Covered
Other
Real Estate
Owned
 
     (Dollars in Thousands)  

Beginning balance, January 1, 2013

   $ 2,000       $ 52,514      $ 39,850      $ 507,712      $ 88,273   

Total gains/(losses) included in net income

     —           —          (15     —          (3,032

Purchases, sales, issuances, and settlements, net

     —           —          (2,027     (31,449     (22,865

Transfers in to Level 3

     —           1,262        —          —         —     

Asset reclassification, within Level 3

     —           (2,626     2,626        (15,539     15,539   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance March 31, 2013

   $ 2,000       $ 51,150      $ 40,434      $ 460,724      $ 77,915   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

NOTE 2 – PENDING MERGER AND ACQUISITION

On March 10, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Coastal Bankshares, Inc. (“Coastal”), a bank holding company headquartered in Savannah, Georgia. The Coastal Bank is a wholly owned banking subsidiary of Coastal that has a total of six banking locations in Chatham, Liberty and Effingham Counties, Georgia. As of December 31, 2013, Coastal reported assets of $433 million, loans of $295 million and deposits of $364 million. Under the terms of the Merger Agreement, Coastal will merge with and into Ameris, with Ameris as the surviving entity in the merger. In addition, The Coastal Bank will be merged with and into the Bank, with the Bank as the surviving entity.

Pursuant to the terms of the Merger Agreement, Coastal shareholders will receive 0.4671 shares of the Company’s common stock in exchange for each share of Coastal common stock they hold. Based on the closing price of the Company’s common stock on February 28, 2014, the transaction would be valued at approximately $37.3 million, which represents 169% of Coastal’s tangible book value as of December 31, 2013. The purchase price will be allocated among the assets of Coastal acquired as appropriate, with the remaining balance being reported as goodwill.

Consummation of the merger is subject to customary conditions, including, among others, approval of the Merger Agreement by Coastal’s shareholders and the receipt of required regulatory approvals. The transaction is expected to close during the third quarter of 2014.

NOTE 3 – BUSINESS COMBINATIONS

On December 23, 2013, the Company completed its acquisition of The Prosperity Banking Company (“Prosperity”), a bank holding company headquartered in Saint Augustine, Florida. Upon consummation of the acquisition, Prosperity was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Prosperity’s wholly owned banking subsidiary, Prosperity Bank, was also merged with and into the Bank. Prosperity Bank had a total of 12 banking locations, with the majority of the franchise concentrated in northeast Florida. Prosperity’s common shareholders were entitled to elect to receive either 3.125 shares of the Company’s common stock or $41.50 in cash in exchange for each share of Prosperity’s voting common stock. As a result of Prosperity shareholders’ elections, the Company issued 1,168,918 common shares at a fair value of $24.6 million.

The acquisition of Prosperity was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.

 

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Table of Contents

The following table presents the assets acquired and liabilities of Prosperity assumed as of December 23, 2013 and their initial fair value estimates:

 

(Dollars in Thousands)    As Recorded by
Prosperity
    Fair Value
Adjustments
    As Recorded
by Ameris
 

Assets

      

Cash and cash equivalents

   $ 4,285      $ —        $ 4,285   

Federal funds sold and interest-bearing balances

     21,687        —          21,687   

Investment securities

     151,863        411 (a)      152,274   

Other investments

     8,727        —          8,727   

Loans

     487,358        (37,662 )(b)      449,696   

Less allowance for loan losses

     (6,811     6,811 (c)      —     
  

 

 

   

 

 

   

 

 

 

Loans, net

     480,547        (30,851     449,696   

Other real estate owned and repossessed assets

     6,883        (1,260 )(d)      5,623   

Premises and equipment

     36,293        —          36,293   

Intangible assets

     174        4,383 (e)      4,557   

Other assets

     26,600        1,192 (f)      27,792   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 737,059      $ (26,125   $ 710,934   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 149,242      $ —        $ 149,242   

Interest-bearing

     324,441        —          324,441   
  

 

 

   

 

 

   

 

 

 

Total deposits

     473,683        —          473,683   

Federal funds purchased and securities sold under agreements to repurchase

     21,530        —          21,530   

Other borrowings

     185,000        12,313 (g)      197,313   

Other liabilities

     14,058        455 (h)      14,513   

Subordinated deferrable interest debentures

     29,500        (16,303 )(i)      13,197   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     723,771        (3,535     720,236   
  

 

 

   

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     13,288        (22,590     (9,302

Goodwill

     —          34,093        34,093   
  

 

 

   

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ 13,288      $ 11,503      $ 24,791   
  

 

 

   

 

 

   

 

 

 

Consideration:

      

Ameris Bancorp common shares issued

     1,168,918       

Purchase price per share of the Company’s common stock

   $ 21.07       
  

 

 

     

Company common stock issued

     24,629       

Cash exchanged for shares

     162       
  

 

 

     

Fair value of total consideration transferred

   $ 24,791       
  

 

 

     

 

 

Explanation of fair value adjustments

 

(a) Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.
(c) Adjustment reflects the elimination of Prosperity’s allowance for loan losses.
(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.
(e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(f) Adjustment reflects the adjustment to write-off the non-realizable portion of Prosperity’s deferred tax asset of ($6.644 million), to record the deferred tax asset generated by purchase accounting adjustments of $8.435 million and to record the fair value adjustment of other assets of ($0.599 million) at the acquisition date.
(g) Adjustment reflects the fair value adjustment (premium) to the FHLB borrowings of $12.741 million and the fair value adjustment to the subordinated debt of $0.428 million.
(h) Adjustment reflects the fair value adjustment of other liabilities at the acquisition date.
(i) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

 

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Table of Contents

NOTE 4 – INVESTMENT SECURITIES

The Company’s 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. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s 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, 2014, December 31, 2013 and March 31, 2013 are presented below:

 

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

March 31, 2014:

          

U. S. government agencies

   $ 14,948       $ —         $ (803   $ 14,145   

State, county and municipal securities

     110,331         2,724         (1,481     111,574   

Corporate debt securities

     10,307         285         (209     10,383   

Mortgage-backed securities

     319,216         4,244         (2,849     320,611   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 454,802       $ 7,253       $ (5,342   $ 456,713   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2013:

          

U. S. government agencies

   $ 14,947       $ —         $ (1,021   $ 13,926   

State, county and municipal securities

     112,659         2,269         (2,174     112,754   

Corporate debt securities

     10,311         275         (261     10,325   

Collateralized debt obligations

     1,480         —           —          1,480   

Mortgage-backed securities

     349,441         2,347         (4,038     347,750   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 488,838       $ 4,891       $ (7,494   $ 486,235   
  

 

 

    

 

 

    

 

 

   

 

 

 

March 31, 2013:

          

U. S. government agencies

   $ 5,000       $ 15       $ —        $ 5,015   

State, county and municipal securities

     110,628         5,051         (147     115,532   

Corporate debt securities

     10,542         355         (600     10,297   

Mortgage-backed securities

     188,492         5,342         (649     193,185   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 314,662       $ 10,763       $ (1,396   $ 324,029   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

16


Table of Contents

The amortized cost and fair value of available-for-sale securities at March 31, 2014 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

   $ 3,088       $ 3,110   

Due from one year to five years

     41,430         43,038   

Due from five to ten years

     65,798         65,210   

Due after ten years

     25,270         24,744   

Mortgage-backed securities

     319,216         320,611   
  

 

 

    

 

 

 
   $ 454,802       $ 456,713   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $295.7 million serve as collateral to secure public deposits and for other purposes required or permitted by law at March 31, 2014.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of the continuous unrealized loss position at March 31, 2014, December 31, 2013 and March 31, 2013.

 

     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, 2014:

               

U. S. government agencies

   $ 9,353       $ (595   $ 4,792       $ (208   $ 14,145       $ (803

State, county and municipal securities

     38,937         (1,238     3,612         (243     42,549         (1,481

Corporate debt securities

     —           —          4,871         (209     4,871         (209

Mortgage-backed securities

     55,103         (1,219     31,184         (1,630     86,287         (2,849
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 103,393       $ (3,052   $ 44,459       $ (2,290   $ 147,852       $ (5,342
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2013:

               

U. S. government agencies

   $ 13,926       $ (1,021   $ —         $ —        $ 13,926       $ (1,021

State, county and municipal securities

     47,401         (1,882     3,794         (292     51,195         (2,174

Corporate debt securities

     —           —          4,826         (261     4,826         (261

Collateralized debt obligations

     —           —          —           —          —           —     

Mortgage-backed securities

     94,989         (2,493     23,388         (1,545     118,377         (4,038
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 156,316       $ (5,396   $ 32,008       $ (2,098   $ 188,324       $ (7,494
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

March 31, 2013:

               

U. S. government agencies

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

State, county and municipal securities

     19,159         (138     505         (9     19,664         (147

Corporate debt securities

     244         (6     4,506         (594     4,750         (600

Mortgage-backed securities

     55,189         (648     1,120         (1     56,309         (649
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 74,592       $ (792   $ 6,131       $ (604   $ 80,723       $ (1,396
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

17


Table of Contents

NOTE 5 – 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 the 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 the Company’s 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, 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 loan categories are presented in the following table:

 

                                                        

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 270,571       $ 244,373       $ 180,888   

Real estate – construction and development

     149,543         146,371         130,161   

Real estate – commercial and farmland

     836,230         808,323         766,227   

Real estate – residential

     393,001         366,882         367,056   

Consumer installment

     32,345         34,249         37,335   

Other

     13,692         18,256         11,086   
  

 

 

    

 

 

    

 

 

 
   $ 1,695,382       $ 1,618,454       $ 1,492,753   
  

 

 

    

 

 

    

 

 

 

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the FDIC. Purchased non-covered loans totaling $437.3 million and $448.8 million at March 31, 2014 and December 31, 2013, respectively, are not included in the above schedule.

Purchased non-covered loans are shown below according to major loan type as of the end of the periods shown:

 

                                                        

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 30,810       $ 32,141       $ —     

Real estate – construction and development

     31,820         31,176         —     

Real estate – commercial and farmland

     174,281         179,898         —     

Real estate – residential

     196,078         200,851         —     

Consumer installment

     4,280         4,687         —     
  

 

 

    

 

 

    

 

 

 
   $     437,269       $ 448,753       $ —     
  

 

 

    

 

 

    

 

 

 

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 $372.7 million, $390.2 million and $460.7 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively, are not included in the above schedules.

 

18


Table of Contents

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

 

                                               

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 24,813       $ 26,550       $ 28,568   

Real estate – construction and development

     41,434         43,179         57,114   

Real estate – commercial and farmland

     214,649         224,451         260,159   

Real estate – residential

     91,372         95,173         113,668   

Consumer installment

     426         884         1,215   
  

 

 

    

 

 

    

 

 

 
   $ 372,694       $ 390,237       $ 460,724   
  

 

 

    

 

 

    

 

 

 

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 against interest income. Interest payments on nonaccrual 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. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. 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 loans accounted for on a nonaccrual basis, excluding purchased non-covered and covered loans:

 

                                               

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 3,008       $ 4,103       $ 3,756   

Real estate – construction and development

     4,080         3,971         9,390   

Real estate – commercial and farmland

     8,550         8,566         9,798   

Real estate – residential

     10,631         12,152         13,840   

Consumer installment

     460         411         692   
  

 

 

    

 

 

    

 

 

 
   $     26,729       $ 29,203       $     37,476   
  

 

 

    

 

 

    

 

 

 

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

 

                                               

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 117       $ 11       $ —     

Real estate – construction and development

     1,131         325         —     

Real estate – commercial and farmland

     6,829         1,653         —     

Real estate – residential

     7,208         4,658         —     

Consumer installment

     33         12         —     
  

 

 

    

 

 

    

 

 

 
   $     15,318       $ 6,659       $     —     
  

 

 

    

 

 

    

 

 

 

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

 

                                               

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 10,025       $ 7,257       $ 8,718   

Real estate – construction and development

     14,780         14,781         18,956   

Real estate – commercial and farmland

     24,285         33,495         47,580   

Real estate – residential

     10,558         13,278         23,018   

Consumer installment

     133         341         243   
  

 

 

    

 

 

    

 

 

 
   $     59,781       $ 69,152       $     98,515   
  

 

 

    

 

 

    

 

 

 

 

19


Table of Contents

The following table presents an analysis of loans, excluding purchased non-covered and covered past due loans as of March 31, 2014, December 31, 2013 and March 31, 2013:

 

     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, 2014:

                    

Commercial, financial & agricultural

   $ 1,083       $ 386       $ 2,956       $ 4,425       $ 266,146       $ 270,571       $ —     

Real estate – construction & development

     1,304         249         3,919         5,472         144,071         149,543         —     

Real estate – commercial & farmland

     2,255         1,650         7,622         11,527         824,703         836,230         —     

Real estate – residential

     3,657         1,541         10,298         15,496         377,505         393,001         —     

Consumer installment loans

     474         68         345         887         31,458         32,345         —     

Other

     —           —           —           —           13,692         13,692         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,773       $ 3,894       $ 25,140       $ 37,807       $ 1,657,575       $ 1,695,382       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                    

Commercial, financial & agricultural

   $ 10,893       $ 272       $ 4,081       $ 15,246       $ 229,127       $ 244,373       $ —     

Real estate – construction & development

     1,026         69         3,935         5,030         141,341         146,371         —     

Real estate – commercial & farmland

     3,981         1,388         7,751         13,120         795,203         808,323         —     

Real estate – residential

     5,422         1,735         11,587         18,744         348,138         366,882         —     

Consumer installment loans

     568         197         305         1,070         33,179         34,249         —     

Other

     —           —           —           —           18,256         18,256         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 21,890       $ 3,661       $ 27,659       $ 53,210       $ 1,565,244       $ 1,618,454       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                    

Commercial, financial & agricultural

   $ 1,797       $ 149       $ 3,729       $ 5,675       $ 175,213       $ 180,888       $ —     

Real estate – construction & development

     1,538         1,538         8,312         11,388         118,773         130,161         —     

Real estate – commercial & farmland

     11,115         3,220         9,352         23,687         742,540         766,227         —     

Real estate – residential

     7,686         1,719         11,699         21,104         345,952         367,056         —     

Consumer installment loans

     745         169         563         1,477         35,858         37,335         —     

Other

     —           —           —           —           11,086         11,086         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 22,881       $ 6,795       $ 33,655       $ 63,331       $ 1,429,422       $ 1,492,753       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

The following table presents an analysis of purchased non-covered past due loans as of March 31, 2014 and December 31, 2013:

 

     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, 2014:

                    

Commercial, financial & agricultural

   $ 291       $ —         $ 117       $ 408       $ 30,402       $ 30,810       $ —     

Real estate – construction & development

     680         661         867         2,208         29,612         31,820         —     

Real estate – commercial & farmland

     3,956         5,126         2,550         11,632         162,649         174,281         —     

Real estate – residential

     5,187         1,816         6,503         13,506         182,572         196,078         —     

Consumer installment loans

     12         11         30         53         4,227         4,280         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,126       $ 7,614       $ 10,067       $ 27,807       $ 409,462       $ 437,269       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                    

Commercial, financial & agricultural

   $ 370       $ 70       $ 11       $ 451       $ 31,690       $ 32,141       $ —     

Real estate – construction & development

     1,008         89         325         1,422         29,754         31,176         —     

Real estate – commercial & farmland

     6,851         2,064         1,516         10,431         169,467         179,898         —     

Real estate – residential

     4,667         1,074         3,428         9,169         191,682         200,851         —     

Consumer installment loans

     7         17         9         33         4,654         4,687         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 12,903       $ 3,314       $ 5,289       $ 21,506       $ 427,247       $ 448,753       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

The following table presents an analysis of covered past due loans as of March 31, 2014, December 31, 2013 and March 31, 2013:

 

     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, 2014:

                    

Commercial, financial & agricultural

   $ 688       $ 55       $ 8,976       $ 9,719       $ 15,094       $ 24,813       $ —     

Real estate – construction & development

     4,248         302         14,472         19,022         22,412         41,434         —     

Real estate – commercial & farmland

     15,732         3,722         17,680         37,134         177,515         214,649         —     

Real estate – residential

     3,579         1,585         9,752         14,916         76,456         91,372         1,396   

Consumer installment loans

     2         50         103         155         271         426         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 24,249       $ 5,714       $ 50,983       $ 80,946       $ 291,748       $ 372,694       $ 1,396   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                    

Commercial, financial & agricultural

   $ 3,966       $ 12       $ 6,165       $ 10,143       $ 16,407       $ 26,550       $ —    

Real estate – construction & development

     843         144         14,055         15,042         28,137         43,179         —    

Real estate – commercial & farmland

     8,482         4,350         26,428         39,260         185,191         224,451         346  

Real estate – residential

     7,648         1,914         10,244         19,806         75,367         95,173         —    

Consumer installment loans

     51         14         305         370         514         884         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 20,990       $ 6,434       $ 57,197       $ 84,621       $ 305,616       $ 390,237       $ 346  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                    

Commercial, financial & agricultural

   $ 756       $ 314       $ 7,270       $ 8,340       $ 20,228       $ 28,568       $ 98   

Real estate – construction & development

     3,971         876         17,415         22,262         34,852         57,114         —     

Real estate – commercial & farmland

     10,227         2,837         42,464         55,528         204,631         260,159         —     

Real estate – residential

     5,608         345         18,895         24,848         88,820         113,668         48   

Consumer installment loans

     41         11         205         257         958         1,215         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 20,603       $ 4,383       $ 86,249       $ 111,235       $ 349,489       $ 460,724       $ 146   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


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 impaired loans, excluding purchased non-covered and covered loans:

 

     As of and For the Period Ended  
     March 31,
2014
     December 31,
2013
     March 31,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 26,729       $ 29,203       $ 37,476   

Troubled debt restructurings not included above

     18,848         17,214         18,513   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 45,577       $ 46,417       $ 55,989   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ 45,577       $ 46,417       $ 55,989   
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ 4,324       $ 3,871       $ 4,839   
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 45,997       $ 51,721       $ 56,808   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 20       $ 522       $ 78   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 246       $ 418       $ 54   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of March 31, 2014, December 31, 2013 and March 31, 2013:

 

     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, 2014:

                 

Commercial, financial & agricultural

   $ 5,421       $ —         $ 3,719       $ 3,719       $ 394       $ 4,169   

Real estate – construction & development

     10,636         —           6,033         6,033         736         5,950   

Real estate – commercial & farmland

     19,983         —           17,282         17,282         1,972         16,380   

Real estate – residential

     21,307         —           17,996         17,996         1,211         18,983   

Consumer installment loans

     688         —           547         547         11         515   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 58,035       $ —         $ 45,577       $ 45,577       $ 4,324       $ 45,997   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


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, 2013:

                 

Commercial, financial & agricultural

   $ 6,240       $ —         $ 4,618       $ 4,618       $ 435       $ 4,844   

Real estate – construction & development

     11,363         —           5,867         5,867         512         8,341   

Real estate – commercial & farmland

     18,456         —           15,479         15,479         1,443         17,559   

Real estate – residential

     24,342         —           19,970         19,970         1,472         20,335   

Consumer installment loans

     623         —           483         483         9         642   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 61,024       $ —         $ 46,417       $ 46,417       $ 3,871       $ 51,721   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                 

Commercial, financial & agricultural

   $ 7,818       $ —         $ 4,555       $ 4,555       $ 740       $ 4,747   

Real estate – construction & development

     20,633         —           11,273         11,273         922         11,144   

Real estate – commercial & farmland

     22,996         —           18,676         18,676         1,816         19,793   

Real estate – residential

     24,777         —           20,792         20,792         1,344         20,320   

Consumer installment loans

     920         —           693         693         17         804   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 77,144       $ —         $ 55,989       $ 55,989       $ 4,839       $ 56,808   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     As of and For the Period Ended  
     March 31,
2014
     December 31,
2013
     March 31,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 15,318       $ 6,659       $ —     

Troubled debt restructurings not included above

     5,191         5,938         —     
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 20,509       $ 12,597       $ —     
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ 20,509       $ 12,597       $ —     
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 16,553       $ 242       $ —     
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 563       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

The following table presents an analysis of information pertaining to impaired purchased non-covered loans as of March 31, 2014 and December 31, 2013:

 

     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, 2014:

                 

Commercial, financial & agricultural

   $ 233       $ 117       $ —         $ 117       $ —         $ 64   

Real estate – construction & development

     6,173         3,574         —           3,574         —           3,631   

Real estate – commercial & farmland

     12,966         7,790         —           7,790         —           5,336   

Real estate – residential

     15,524         8,987         —           8,987         —           7,483   

Consumer installment loans

     240         41         —           41         —           39   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 35,136       $ 20,509       $ —         $ 20,509       $ —         $ 16,553   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                 

Commercial, financial & agricultural

   $ 19       $ 11       $ —         $ 11       $ —         $ —     

Real estate – construction & development

     5,719         3,690         —           3,690         —           71   

Real estate – commercial & farmland

     4,563         2,881         —           2,881         —           55   

Real estate – residential

     9,612         5,978         —           5,978         —           115   

Consumer installment loans

     57         37         —           37         —           1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 19,970       $ 12,597       $ —         $ 12,597       $ —         $ 242   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     As of and For the Period Ended  
     March 31,
2014
     December 31,
2013
     March 31,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 59,781       $ 69,152       $ 98,515   

Troubled debt restructurings not included above

     22,775         22,243         21,592   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 82,556       $ 91,395       $ 120,107   
  

 

 

    

 

 

    

 

 

 

Impaired loans not requiring a related allowance

   $ 82,556       $ 91,395       $ 120,107   
  

 

 

    

 

 

    

 

 

 

Impaired loans requiring a related allowance

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Allowance related to impaired loans

   $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Average investment in impaired loans

   $ 86,976       $ 110,830       $ 127,507   
  

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans

   $ 155       $ 968       $ 169   
  

 

 

    

 

 

    

 

 

 

Foregone interest income on impaired loans

   $ 10       $ 330       $ 147   
  

 

 

    

 

 

    

 

 

 

 

25


Table of Contents

The following table presents an analysis of information pertaining to impaired covered loans as of March 31, 2014, December 31, 2013 and March 31, 2013:

 

     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, 2014:

                 

Commercial, financial & agricultural

   $ 12,143       $ 10,039       $ —         $ 10,039       $ —         $ 8,655   

Real estate – construction & development

     20,704         18,034         —           18,034         —           18,036   

Real estate – commercial & farmland

     36,664         31,746         —           31,746         —           36,247   

Real estate – residential

     25,230         22,604         —           22,604         —           23,801   

Consumer installment loans

     167         133         —           133         —           237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 94,908       $ 82,556       $ —         $ 82,556       $ —         $ 86,976   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                 

Commercial, financial & agricultural

   $ 9,680       $ 7,270       $ —         $ 7,270       $ —         $ 8,696   

Real estate – construction & development

     20,915         18,037         —           18,037         —           21,794   

Real estate – commercial & farmland

     46,612         40,749         —           40,749         —           51,584   

Real estate – residential

     29,089         24,998         —           24,998         —           28,452   

Consumer installment loans

     394         341         —           341         —           304   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 106,690       $ 91,395       $ —         $ 91,395       $ —         $ 110,830   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2013:

                 

Commercial, financial & agricultural

   $ 24,301       $ 8,754       $ —         $ 8,754       $ —         $ 9,778   

Real estate – construction & development

     78,421         23,978         —           23,978         —           23,607   

Real estate – commercial & farmland

     139,197         55,822         —           55,822         —           60,026   

Real estate – residential

     54,422         31,310         —           31,310         —           33,823   

Consumer installment loans

     324         243         —           243         —           273   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 296,665       $ 120,107       $ —         $ 120,107       $ —         $ 127,507   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

26


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. The 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 and 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 and 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 credit worthiness 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.

 

27


Table of Contents

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of March 31, 2014:

 

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

   $ 86,688       $ —         $ 259       $ 478       $ 6,380       $ —         $ 93,805   

15

     26,730         5,483         153,285         57,119         1,346         —           243,963   

20

     90,692         48,872         454,292         192,492         17,678         13,692         817,718   

23

     120         9,111         9,784         11,765         276         —           31,056   

25

     55,827         76,962         178,174         100,634         5,580         —           417,177   

30

     5,386         2,889         15,324         14,440         201         —           38,240   

40

     5,001         6,226         25,112         16,063         884         —           53,286   

50

     127         —           —           10         —           —           137   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 270,571       $ 149,543       $ 836,230       $ 393,001       $ 32,345       $ 13,692       $ 1,695,382   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2013:

 

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

   $ 66,983       $ —         $ 265       $ 419       $ 6,714       $ —         $ 74,381   

15

     24,789         4,655         147,157         52,335         1,276         —           230,212   

20

     93,852         45,195         431,790         165,339         18,619         18,256         773,051   

23

     127         8,343         10,219         12,641         274         —           31,604   

25

     50,373         78,736         181,645         103,427         6,310         —           420,491   

30

     2,111         2,876         11,849         13,558         197         —           30,591   

40

     6,011         6,566         25,398         19,153         859         —           57,987   

50

     127         —           —           10         —           —           137   

60

     —          —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244,373       $ 146,371       $ 808,323       $ 366,882       $ 34,249       $ 18,256       $ 1,618,454   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of March 31, 2013:

 

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

   $ 32,223       $ —         $ 304       $ 500       $ 7,241       $ —         $ 40,268   

15

     11,569         4,794         146,563         68,212         1,635         —           232,773   

20

     75,503         34,947         385,984         138,634         19,623         11,086         665,777   

23

     45         6,606         8,970         13,662         120         —           29,403   

25

     52,631         66,012         187,567         112,096         7,340         —           425,646   

30

     3,324         6,004         12,334         10,573         250         —           32,485   

40

     5,494         11,643         24,505         23,379         1,126         —           66,147   

50

     99         155         —           —           —           —           254   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 180,888       $ 130,161       $ 766,227       $ 367,056       $ 37,335       $ 11,086       $ 1,492,753   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

28


Table of Contents

The following table presents the purchased non-covered loan portfolio by risk grade as of March 31, 2014:

 

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

   $ 1,932       $ —         $ —         $ 287       $ 328       $ —         $ 2,547   

15

     4,408         52         12,422         14,231         679         —           31,792   

20

     4,596         3,907         43,132         33,553         1,218         —           86,406   

23

     —           —           —           —           —           —           —     

25

     19,213         22,780         102,918         134,653         1,965         —           281,529   

30

     235         697         3,387         2,660         20         —           6,999   

40

     426         4,384         12,422         10,694         70         —           27,996   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 30,810       $ 31,820       $ 174,281       $ 196,078       $ 4,280       $ —         $ 437,269   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2013:

 

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

   $ 1,865       $ —         $ —         $ 289       $ 451       $ —         $ 2,605   

15

     4,606         7         12,998         16,160         703         —           34,474   

20

     5,172         3,960         43,802         34,576         1,383         —           88,893   

23

     —           —           —           —           —           —           —     

25

     19,638         20,733         102,260         129,923         1,888         —           274,442   

30

     576         1,760         9,554         10,878         194         —           22,962   

40

     284         4,716         11,284         9,025         68         —           25,377   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 32,141       $ 31,176       $ 179,898       $ 200,851       $ 4,687       $ —         $ 448,753   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

29


Table of Contents

The following table presents the covered loan portfolio by risk grade as of March 31, 2014:

 

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

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

15

     —           10         1,024         650         —           —           1,684   

20

     1,769         7,760         35,625         19,613         151         —           64,918   

23

     139         978         17,416         4,870         51         —           23,454   

25

     6,921         9,182         101,948         38,140         42         —           156,233   

30

     5,106         1,185         17,625         7,025         3         —           30,944   

40

     10,878         22,319         41,011         21,074         179         —           95,461   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 24,813       $ 41,434       $ 214,649       $ 91,372       $ 426       $ —         $ 372,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of December 31, 2013:

 

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

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

15

     —           16         1,048         638         —           —           1,702   

20

     2,184         8,549         34,674         21,363         193         —           66,963   

23

     134         1,085         17,037         4,748         51         —           23,055   

25

     7,508         9,611         101,657         38,427         235         —           157,438   

30

     5,125         2,006         21,297         6,979         17         —           35,424   

40

     11,599         21,912         48,738         23,018         388         —           105,655   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 26,550       $ 43,179       $ 224,451       $ 95,173       $ 884       $ —         $ 390,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of March 31, 2013:

 

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

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

15

     —           34         1,598         638         —           —           2,270   

20

     3,117         11,106         36,020         27,547         266         —           78,056   

23

     75         1,248         9,153         1,946         —           —           12,422   

25

     8,135         10,184         110,985         40,863         508         —           170,675   

30

     2,979         4,457         35,601         8,784         50         —           51,871   

40

     14,262         30,085         66,802         33,890         391         —           145,430   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 28,568       $ 57,114       $ 260,159       $ 113,668       $ 1,215       $ —         $ 460,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

30


Table of Contents

Troubled Debt Restructurings

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

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

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

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first three months of 2014 and 2013 totaling $6.3 million and $27.4 million, respectively, under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

As of March 31, 2014, December 31, 2013 and March 31, 2013, the Company had a balance of $21.2 million, $20.9 million and $23.3 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $2.3 million, $2.1 million and $2.6 million in previous charge-offs on such loans at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $422,000, $432,000 and $591,000 at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. At March 31, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings

 

31


Table of Contents

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013:

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     4       $ 711         2       $ 40   

Real estate – construction & development

     11         1,953         1         29   

Real estate – commercial & farmland

     19         8,733         5         1,316   

Real estate – residential

     35         7,364         8         961   

Consumer installment

     11         87         2         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     80       $ 18,848         18       $ 2,365   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     4       $ 515         3       $ 525   

Real estate – construction & development

     8         1,896         2         32   

Real estate – commercial & farmland

     17         6,913         4         2,273   

Real estate – residential

     37         7,818         8         834   

Consumer installment

     6         72         3         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     72       $ 17,214         20       $ 3,683   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     5       $ 799         —         $ —     

Real estate – construction & development

     5         1,883         1         43   

Real estate – commercial & farmland

     16         8,878         3         3,595   

Real estate – residential

     26         6,953         3         1,111   

Consumer installment

     —           —           1         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     52       $ 18,513         8       $ 4,755   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

32


Table of Contents

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at March 31, 2014, December 31, 2013 and March 31, 2013:

 

As of March 31, 2014    Loans Currently Paying
Under Restructured
Terms
     Loans that have Defaulted
Under Restructured
Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     4       $ 268         2       $ 482   

Real estate – construction & development

     10         1,916         2         66   

Real estate – commercial & farmland

     19         8,733         5         1,316   

Real estate – residential

     30         6,365         13         1,961   

Consumer installment

     11         80         2         26   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     74       $ 17,362         24       $ 3,851   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Loans Currently Paying
Under Restructured
Terms
     Loans that have Defaulted
Under Restructured
Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     4       $ 515         3       $ 525   

Real estate – construction & development

     8         1,896         2         32   

Real estate – commercial & farmland

     16         6,396         5         2,789   

Real estate – residential

     32         6,699         13         1,953   

Consumer installment

     7         90         2         2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     67       $ 15,596         25       $ 5,301   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of March 31, 2013    Loans Currently Paying
Under Restructured
Terms
     Loans that have Defaulted
Under Restructured
Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     5       $ 799         —         $ —     

Real estate – construction & development

     5         1,883         1         43   

Real estate – commercial & farmland

     16         8,878         3         3,595   

Real estate – residential

     26         6,953         3         1,111   

Consumer installment

     —           —           1         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     52       $ 18,513         8       $ 4,755   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

33


Table of Contents

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by types of concessions made, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013:

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     8       $ 1,933         4       $ 300   

Forgiveness of Principal

     4         1,957         1         516   

Payment Modification Only

     —           —           1         149   

Rate Reduction Only

     13         6,782         4         1,134   

Rate Reduction, Forbearance of Interest

     38         5,489         6         230   

Rate Reduction, Forbearance of Principal

     17         2,687         1         7   

Rate Reduction, Payment Modification

     —           —           1         29   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     80       $ 18,848         18       $ 2,365   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     10       $ 2,170         2       $ 97   

Forgiveness of Principal

     3         1,467         1         145   

Payment Modification Only

     1         280         1         88   

Rate Reduction Only

     14         7,069         3         913   

Rate Reduction, Forbearance of Interest

     26         3,252         12         2,411   

Rate Reduction, Forbearance of Principal

     18         2,976         —           —     

Rate Reduction, Payment Modification

     —           —           1         29   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     72       $ 17,214         20       $ 3,683   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     2       $ 1,843         —         $ —     

Forgiveness of Principal

     3         1,504         1         207   

Payment Modification Only

     2         376         —           —     

Rate Reduction Only

     10         7,033         2         182   

Rate Reduction, Forbearance of Interest

     17         4,046         2         3,100   

Rate Reduction, Forbearance of Principal

     18         3,711         1         255   

Rate Reduction, Payment Modification

     —           —           2         1,011   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     52       $ 18,513         8       $ 4,755   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

34


Table of Contents

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by collateral types, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013:

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     4       $ 1,345         2       $ 586   

Raw Land

     5         1,298         1         29   

Agriculture

     1         311         1         66   

Hotel & Motel

     3         2,154         —           —     

Office

     4         1,652         1         149   

Retail, including Strip Centers

     6         2,905         1         516   

1-4 Family Residential

     42         8,027         9         978   

Church

     1         365         —           —     

Automobile/Equipment/Inventory

     13         548         3         41   

Unsecured

     1         243         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     80       $ 18,848         18       $ 2,365   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     4       $ 1,346         2       $ 592   

Raw Land

     11         2,345         2         32   

Hotel & Motel

     3         2,185         —           —     

Office

     4         1,909         —           —     

Retail, including Strip Centers

     4         1,095         2         1,680   

1-4 Family Residential

     36         7,747         9         852   

Life Insurance Policy

     1         250         —           —     

Automobile/Equipment/Inventory

     8         92         4         479   

Unsecured

     1         245         1         48   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     72       $ 17,214         20       $ 3,683   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     3       $ 1,689         1       $ 176   

Raw Land

     1         1,285         1         43   

Hotel & Motel

     3         2,273         —           —     

Office

     4         2,095         1         2,450   

Retail, including Strip Centers

     6         2,821         1         969   

1-4 Family Residential

     30         7,550         3         1,111   

Life Insurance Policy

     1         250         —           —     

Automobile/Equipment/Inventory

     3         500         1         6   

Unsecured

     1         50         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     52       $ 18,513         8       $ 4,755   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

35


Table of Contents

As of March 31, 2014 and December 31, 2013, the Company had a balance of $6.5 million and $7.2 million, respectively, in troubled debt restructurings included in purchased non-covered loans. The Company has recorded $345,000 in previous charge-offs on such loans at March 31, 2014. The Company had not recorded any previous charge-offs on such loans at December 31, 2013. At March 31, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and non-accrual at March 31, 2014 and December 31, 2013.

 

                                                                                       
As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     —         $ —           1       $ 6   

Real estate – construction & development

     7         2,443         2         264   

Real estate – commercial & farmland

     2         961         2         726   

Real estate – residential

     12         1,779         4         255   

Consumer installment

     1         8         2         17   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22       $ 5,191         11       $ 1,268   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     —         $ —           1       $ 6   

Real estate – construction & development

     10         3,364         —           —     

Real estate – commercial & farmland

     3         1,228         1         468   

Real estate – residential

     8         1,321         8         738   

Consumer installment

     3         25         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24       $ 5,938         10       $ 1,212   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at March 31, 2014 and December 31, 2013.

 

                                                                                       
As of March 31, 2014    Loans Currently Paying
Under Restructured Terms
     Loans that have Defaulted
Under Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     —         $ —           1       $ 6   

Real estate – construction & development

     6         2,244         3         463   

Real estate – commercial & farmland

     —           —           4         1,687   

Real estate – residential

     8         1,187         8         847   

Consumer installment

     1         8         2         17   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     15       $ 3,439         18       $ 3,020   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Loans Currently Paying
Under Restructured Terms
     Loans that have Defaulted
Under Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     —         $ —           1       $ 6   

Real estate – construction & development

     1         8         2         17   

Real estate – commercial & farmland

     8         3,068         2         296   

Real estate – residential

     —           —           4         1,696   

Consumer installment

     7         1,153         9         906   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     16       $ 4,229         18       $ 2,921   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

36


Table of Contents

The following table presents the amount of troubled debt restructurings included in purchased non-covered loans, by types of concessions made, classified separately as accrual and non-accrual at March 31, 2014 and December 31, 2013.

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Principal

     1       $ 299         —         $ —     

Forgiveness of Principal

     1         164         1         259   

Payment Modification Only

     1         61         1         13   

Rate Reduction Only

     12         2,354         7         491   

Rate Reduction, Forbearance of Principal

     7         2,313         2         505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22       $ 5,191         11       $ 1,268   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     1       $ 300         —         $ —     

Forgiveness of Principal

     2         425         —           —     

Payment Modification Only

     2         75         —           —     

Rate Reduction Only

     11         2,170         8         707   

Rate Reduction, Forbearance of Principal

     8         2,968         2         505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24       $ 5,938         10       $ 1,212   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of troubled debt restructurings included in purchased non-covered loans, by collateral types, classified separately as accrual and non-accrual at March 31, 2014 and December 31, 2013.

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     —         $ —           1       $ 467   

Raw Land

     5         1,988         —           —     

Office

     1         798         —           —     

Retail, including Strip Centers

     1         164         1         259   

1-4 Family Residential

     15         2,241         6         519   

Automobile/Equipment/Inventory

     —           —           3         23   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22       $ 5,191         11       $ 1,268   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     —         $ —           1       $ 468   

Raw Land

     6         2,640         —           —     

Office

     1         803         —           —     

Retail, including Strip Centers

     2         425         —           —     

1-4 Family Residential

     13         2,053         8         738   

Automobile/Equipment/Inventory

     2         17         1         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24       $ 5,938         10       $ 1,212   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

37


Table of Contents

As of March 31, 2014, December 31, 2013 and March 31, 2013, the Company had a balance of $22.8 million, $27.3 million and $27.6 million, respectively, in troubled debt restructurings included in covered loans. The Company has recorded $3.2 million, $1.6 million and $6.6 million in previous charge-offs on such loans at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. At March 31, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013.

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 14         5       $ 68   

Real estate – construction & development

     3         3,254         5         49   

Real estate – commercial & farmland

     14         7,461         7         3,872   

Real estate – residential

     85         12,046         9         1,031   

Consumer installment

     —           —           1         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     103       $ 22,775         27       $ 5,025   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 13         5       $ 71   

Real estate – construction & development

     3         3,256         4         52   

Real estate – commercial & farmland

     13         7,255         5         3,946   

Real estate – residential

     83         11,719         8         942   

Consumer installment

     —           —           2         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     100       $ 22,243         24       $ 5,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 36         1       $ —     

Real estate – construction & development

     8         5,022         3         788   

Real estate – commercial & farmland

     13         6,438         6         4,984   

Real estate – residential

     53         8,266         9         2,016   

Consumer installment

     —           —           1         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     75       $ 19,762         20       $ 7,794   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

38


Table of Contents

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at March 31, 2013, December 31, 2013 and March 31, 2013.

 

                                                                                       
As of March 31, 2014    Loans Currently Paying
Under Restructured Terms
     Loans that have Defaulted
Under Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     5       $ 43         1       $ 40   

Real estate – construction & development

     2         374         6         2,928   

Real estate – commercial & farmland

     18         6,962         3         4,370   

Real estate – residential

     75         9,576         19         3,502   

Consumer installment

     1         5         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     101       $ 16,960         29       $ 10,840   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of December 31, 2013    Loans Currently Paying
Under Restructured Terms
     Loans that have Defaulted
Under Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     5       $ 45         1       $ 40   

Real estate – construction & development

     5         3,273         2         34   

Real estate – commercial & farmland

     15         7,543         3         3,658   

Real estate – residential

     68         9,206         23         3,455   

Consumer installment

     2         10         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     95       $ 20,077         29       $ 7,187   
  

 

 

    

 

 

    

 

 

    

 

 

 
As of March 31, 2013    Loans Currently Paying
Under Restructured Terms
     Loans that have Defaulted
Under Restructured Terms
 

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 36         1       $ —     

Real estate – construction & development

     8         5,022         3         788   

Real estate – commercial & farmland

     14         6,603         5         4,819   

Real estate – residential

     52         8,373         10         1,909   

Consumer installment

     1         6         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     76       $ 20,040         19       $ 7,516   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

39


Table of Contents

The following table presents the amount of troubled debt restructurings included in covered loans, by types of concessions made, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013.

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     —         $ —           4       $ 127   

Forgiveness of Principal

     —           —           —           —     

Payment Modification Only

     —           —           —           —     

Rate Reduction Only

     90         18,578         10         1,043   

Rate Reduction, Forbearance of Interest

     3         88         8         471   

Rate Reduction, Forbearance of Principal

     9         3,259         5         3,384   

Rate Reduction, Payment Modification

     1         850         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     103       $ 22,775         27       $ 5,025   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     —         $ —           3       $ 98   

Forgiveness of Principal

     —           —           —           —     

Payment Modification Only

     —           —           —           —     

Rate Reduction Only

     89         18,687         9         953   

Rate Reduction, Forbearance of Interest

     3         88         8         478   

Rate Reduction, Forbearance of Principal

     7         2,613         4         3,492   

Rate Reduction, Payment Modification

     1         855         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     100       $ 22,243         24       $ 5,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Type of Concession:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Forbearance of Interest

     3       $ 232         6       $ 1,077   

Forgiveness of Principal

     —           —           1         —     

Payment Modification Only

     —           —           —           —     

Rate Reduction Only

     61         15,897         8         1,820   

Rate Reduction, Forbearance of Interest

     4         456         2         1,362   

Rate Reduction, Forbearance of Principal

     6         2,322         3         3,535   

Rate Reduction, Payment Modification

     1         855         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     75       $ 19,762         20       $ 7,794   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

40


Table of Contents

The following table presents the amount of troubled debt restructurings included in covered loans, by collateral types, classified separately as accrual and non-accrual at March 31, 2014, December 31, 2013 and March 31, 2013.

 

As of March 31, 2014    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     —         $ —           2       $ 486   

Raw Land

     1         374         5         59   

Hotel & Motel

     7         4,867         —           —     

Office

     2         1,342         1         73   

Retail, including Strip Centers

     5         3,819         3         3,287   

1-4 Family Residential

     87         12,359         11         1,052   

Automobile/Equipment/Inventory

     —           —           5         68   

Unsecured

     1         14         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     103       $ 22,775         27       $ 5,025   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     —         $ —           1       $ 377   

Raw Land

     1         375         3         37   

Hotel & Motel

     6         5,118         1         155   

Office

     1         855         1         78   

Retail, including Strip Centers

     6         3,853         2         3,337   

1-4 Family Residential

     85         12,029         11         966   

Automobile/Equipment/Inventory

     —           —           5         71   

Unsecured

     1         13         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     100       $ 22,243         24       $ 5,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of March 31, 2013    Accruing Loans      Non-Accruing Loans  

Collateral type:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Warehouse

     1       $ 379         —         $ —     

Raw Land

     4         2,496         2         772   

Hotel & Motel

     6         3,650         1         166   

Office

     1         855         1         87   

Retail, including Strip Centers

     7         3,769         4         4,732   

1-4 Family Residential

     54         8,563         11         2,037   

Automobile/Equipment/Inventory

     1         36         1         —     

Unsecured

     1         14         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     75       $ 19,762         20       $ 7,794   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

41


Table of Contents

Allowance for Loan Losses

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

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

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

During the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013, the Company recorded provision for loan loss expense of $225,000, $1.5 million and $320,000, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards above and below but are reflected in the Company’s Consolidated Statements of Earnings.

 

42


Table of Contents

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2014

   $ 1,823      $ 5,538      $ 8,393      $ 6,034      $ 589      $ 22,377   

Provision for loan losses

     1,090        337        622        (656     108        1,501   

Loans charged off

     (743     (65     (533     (181     (84     (1,606

Recoveries of loans previously charged off

     49        108        143        83        89        472   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2014

   $ 2,219      $ 5,918      $ 8,625      $ 5,280      $ 702      $ 22,744   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 318      $ 631      $ 1,994      $ 1,133      $ —        $ 4,076   

Loans collectively evaluated for impairment

     1,901        5,287        6,631        4,147        702        18,668   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 2,219      $ 5,918      $ 8,625      $ 5,280      $ 702      $ 22,744   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

            

Individually evaluated for impairment

   $ 2,837      $ 3,817      $ 16,832      $ 14,602      $ —        $ 38,088   

Collectively evaluated for impairment

     267,734        145,726        819,398        378,399        46,037        1,657,294   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 270,571      $ 149,543      $ 836,230      $ 393,001      $ 46,037      $ 1,695,382   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2013

   $ 2,439      $ 5,343      $ 9,157      $ 5,898      $ 756      $ 23,593   

Provision for loan losses

     711        1,742        2,777        4,463        254        9,947   

Loans charged off

     (1,759     (2,020     (3,571     (5,215     (719     (13,284

Recoveries of loans previously charged off

     432        473        30        888        298        2,121   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2013

   $ 1,823      $ 5,538      $ 8,393      $ 6,034      $ 589      $ 22,377   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 356      $ 407      $ 1,427      $ 1,395      $ —        $ 3,585   

Loans collectively evaluated for impairment

     1,467        5,131        6,966        4,639        589        18,792   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,823      $ 5,538      $ 8,393      $ 6,034      $ 589      $ 22,377   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

            

Individually evaluated for impairment

   $ 3,457      $ 3,581      $ 15,240      $ 16,925      $ —        $ 39,203   

Collectively evaluated for impairment

     240,916        142,790        793,083        349,957        52,505        1,579,251   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 244,373      $ 146,371      $ 808,323      $ 366,882      $ 52,505      $ 1,618,454   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
     Commercial,
financial &
agricultural
    Real estate -
construction &
development
    Real estate -
commercial &
farmland
    Real estate -
residential
    Consumer
installment
loans and
Other
    Total  
     (Dollars in thousands)  

Balance, January 1, 2013

   $ 2,439      $ 5,343      $ 9,157      $ 5,898      $ 756      $ 23,593   

Provision for loan losses

     254        1,467        696        339        (153     2,603   

Loans charged off

     (410     (655     (1,025     (779     (167     (3,036

Recoveries of loans previously charged off

     84        2        3        85        48        222   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2013

   $ 2,367      $ 6,157      $ 8,831      $ 5,543      $ 484      $ 23,382   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end amount allocated to:

            

Loans individually evaluated for impairment

   $ 675      $ 641      $ 1,890      $ 1,203      $ —        $ 4,409   

Loans collectively evaluated for impairment

     1,692        5,516        6,941        4,340        484        18,973   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 2,367      $ 6,157      $ 8,831      $ 5,543      $ 484      $ 23,382   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

            

Individually evaluated for impairment

   $ 3,334      $ 8,281      $ 19,545      $ 14,069      $ —        $ 45,229   

Collectively evaluated for impairment

     177,554        121,880        746,682        352,987        48,421        1,447,524   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 180,888      $ 130,161      $ 766,227      $ 367,056      $ 48,421      $ 1,492,753   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

NOTE 6 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

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

 

Bank Acquired

  

Location

  

Branches

  

Date Acquired

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

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

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

 

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Table of Contents

The following table summarizes components of all covered assets at March 31, 2014, December 31, 2013 and March 31, 2013 and their origin:

 

     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less: Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification
asset
 
As of March 31, 2014:    (Dollars in thousands)  

AUB

   $ 13,629       $ 220       $ —         $ 13,409       $ 4,264       $ —         $ 4,264       $ 17,673       $ 1,190   

USB

     15,668         935         —           14,733         3,366         135         3,231         17,964         535   

SCB

     33,896         1,274         —           32,622         3,122         303         2,819         35,441         2,781   

FBJ

     24,281         2,768         —           21,513         1,850         253         1,597         23,110         3,034   

DBT

     100,909         13,138         —           87,771         12,250         1,092         11,158         98,929         14,947   

TBC

     31,576         2,119         —           29,457         4,681         761         3,920         33,377         3,425   

HTB

     61,560         6,596         34         54,930         7,263         2,349         4,914         59,844         8,540   

OGB

     55,569         4,564         89         50,916         8,169         2,984         5,185         56,101         6,815   

CBG

     77,767         10,364         60         67,343         7,127         1,579         5,548         72,891         11,914   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 414,855       $ 41,978       $ 183       $ 372,694       $ 52,092       $ 9,456       $ 42,636       $ 415,330       $ 53,181   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less: Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification
asset
 
As of December 31, 2013:    (Dollars in thousands)  

AUB

   $ 15,787       $ 231       $ —         $ 15,556       $ 4,264       $ —         $ 4,264       $ 19,820       $ 1,452   

USB

     18,504         1,427         —           17,077         2,865         141         2,724         19,801         889   

SCB

     34,637         1,483         —           33,154         3,461         303         3,158         36,312         3,175   

FBJ

     25,891         3,730         —           22,161         1,880         242         1,638         23,799         3,689   

DBT

     105,157         17,819         —           87,338         17,023         1,282         15,741         103,079         18,724   

TBC

     32,590         2,340         14         30,236         4,844         745         4,099         34,335         3,721   

HTB

     67,126         7,321         38         59,767         6,374         2,304         4,070         63,837         9,325   

OGB

     58,512         4,969         98         53,445         7,506         2,984         4,522         57,967         9,645   

CBG

     85,118         13,535         80         71,503         7,610         1,933         5,677         77,180         14,821   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 443,322       $ 52,855       $ 230       $ 390,237       $ 55,827       $ 9,934       $ 45,893       $ 436,130       $ 65,441   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     Covered loans      Less: Credit
risk
adjustments
     Less:
Liquidity
and rate
adjustments
     Total
covered
loans
     OREO      Less: Fair
value
adjustments
     Total
covered
OREO
     Total
covered
assets
     FDIC
indemnification
asset
 

As of March 31, 2013:

   (Dollars in thousands)  

AUB

   $ 25,001       $ 2,508       $ —         $ 22,493       $ 8,079       $ 100       $ 7,979       $ 30,472       $ 4,176   

USB

     25,921         3,879         —           22,042         5,379         139         5,240         27,282         9,932   

SCB

     40,008         3,189         —           36,819         6,670         299         6,371         43,190         8,189   

FBJ

     31,479         5,662         11         25,806         1,450         93         1,357         27,163         6,840   

DBT

     146,178         35,461         83         110,634         25,990         1,895         24,095         134,729         37,333   

TBC

     42,302         4,450         133         37,719         10,478         1,814         8,664         46,383         8,050   

HTB

     82,202         14,068         49         68,085         14,823         3,445         11,378         79,463         21,423   

OGB

     73,279         14,877         127         58,275         10,384         4,144         6,240         64,515         18,687   

CBG

     109,596         30,605         140         78,851         8,424         1,833         6,591         85,442         46,349   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 575,966       $ 114,699       $ 543       $ 460,724       $ 91,677       $ 13,762       $ 77,915       $ 538,639       $ 160,979   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

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

 

Total Amounts

   March 31,
2014
     December 31,
2013
     March 31,
2013
 
     (Dollars in thousands)  

Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)

   $ 5,622       $ 51,003       $ 4,052   

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

     1,125         7,695         1,600   

 

Amounts reflected in the Company’s Statement of Earnings

   March 31,
2014
     December 31,
2013
     March 31,
2013
 
     (Dollars in thousands)  

Adjustments needed where the Company’s initial estimate of cash flows were underestimated: (recorded with a reclassification from non-accretable difference to accretable discount)

   $ 1,124       $ 10,201       $ 810  

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

     225         1,539         320  

A rollforward of acquired loans with deterioration of credit quality for the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013 is shown below:

 

(Dollars in Thousands)

   March 31,
2014
    December 31,
2013
    March 31,
2013
 

Balance, January 1

   $ 217,047      $ 282,737      $ 282,737   

Change in estimate of cash flows, net of charge-offs or recoveries

     4,659        35,306        (5,391

Additions due to acquisitions

     —          —          —     

Other (loan payments, transfers, etc.)

     (16,505     (100,996     (22,279
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 205,201      $ 217,047      $ 255,067   
  

 

 

   

 

 

   

 

 

 

A rollforward of acquired loans without deterioration of credit quality for the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013 is shown below:

 

(Dollars in Thousands)

   March 31,
2014
    December 31,
2013
    March 31,
2013
 

Balance, January 1

   $ 173,190      $ 228,602      $ 228,602   

Change in estimate of cash flows, net of charge-offs or recoveries

     2,571        13,471        (2,625

Additions due to acquisitions

     —          —          —     

Other (loan payments, transfers, etc.)

     (8,268     (68,883     (20,229
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 167,493      $ 173,190      $ 205,748   
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

The following is a summary of changes in the accretable discounts of acquired loans during the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013:

 

(Dollars in Thousands)

   March 31,
2014
    December 31,
2013
    March 31,
2013
 

Balance, January 1

   $ 25,493      $ 16,698      $ 16,698   

Additions due to acquisitions

     —          —          —     

Accretion

     (15,024     (42,208     (7,218

Other activity, net

     5,622        51,003        4,052   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 16,091      $ 25,493      $ 13,532   
  

 

 

   

 

 

   

 

 

 

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. Changes in the FDIC shared-loss receivable for the three months ended March 31, 2014, for the year ended December 31, 2013 and for the three months ended March 31, 2013 are as follows:

 

(Dollars in Thousands)

   March 31,
2014
    December 31,
2013
    March 31,
2013
 

Balance, January 1

   $ 65,441      $ 159,724      $ 159,724   

Indemnification asset recorded in acquisitions

     —          —          —     

Payments received from FDIC

     (6,773     (68,822     (6,324

Effect of change in expected cash flows on covered assets

     (5,487     (25,461     7,579   
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 53,181      $ 65,441      $ 160,979   
  

 

 

   

 

 

   

 

 

 

NOTE 7 – WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings per share have been computed based on the following weighted average number of common shares outstanding:

 

     For the Three
Months
Ended March 31,
 
     2014      2013  
     (share data in
thousands)
 

Basic shares outstanding

     25,144         23,868   

Plus: Dilutive effect of ISOs

     95         63   

Plus: Dilutive effect of Restricted Grants

     334         315   
  

 

 

    

 

 

 

Diluted shares outstanding

     25,573         24,246   
  

 

 

    

 

 

 

For the quarters ended March 31, 2014 and 2013, the Company has excluded 268,000 and 408,000, respectively, potential common shares with strike prices that would cause them to be anti-dilutive.

 

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Table of Contents

NOTE 8 – OTHER BORROWINGS

The Company has, from time to time, utilized certain borrowing arrangements with various financial institutions to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At March 31, 2014 and December 31, 2013, there were $59.7 million and $194.6 million, respectively, outstanding borrowings with the Company’s correspondent banks. At March 31, 2013, there were no outstanding borrowings with the Company’s correspondent banks.

Other borrowings consist of the following:

 

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Daily Rate Credit from Federal Home Loan Bank with a fixed interest rate of 0.36%

   $ 25,000       $ —         $ —     

Advance from Federal Home Loan Bank with a fixed interest rate of 0.17%, due January 24, 2014

     —           165,000         —     

Advances under revolving credit agreement with a regional bank with interest at 90-day LIBOR plus 4.00% (4.24% at March 31, 2014) due in August 2016, secured by subsidiary bank stock

     10,000         10,000         —     

Advance from correspondent bank with a fixed interest rate of 4.50%, due November 27, 2017, secured by subsidiary bank loan receivable

        —           —     

Subordinated debt issued by Prosperity Bank due June 2016 with an interest rate of 90-day LIBOR plus 1.60% (1.84% at March 31, 2014)

     5,000         5,000         —     

Subordinated debt issued by The Prosperity Banking Company due September 2016 with an interest rate of 90-day LIBOR plus 1.75% (1.98% at March 31, 2014)

     14,714         14,572         —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 59,677       $ 194,572       $ —     
  

 

 

    

 

 

    

 

 

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as are used for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Company issues standby letters of credit, which are conditional commitments issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and expire in decreasing amounts with varying terms. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary.

The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held may include accounts receivable, inventory, property, plant and equipment, residential real estate and income-producing commercial properties.

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

 

(Dollars in Thousands)

   March 31, 2014      December 31, 2013      March 31, 2013  

Commitments to extend credit

   $ 271,072       $ 257,195       $ 190,813   

Standby letters of credit

   $ 7,961       $ 7,665       $ 6,747   

 

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NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and interest rate swap derivatives. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of March 31, 2014 and 2013.

 

(Dollars in Thousands)

   Unrealized Gain (Loss)
on Derivatives
    Unrealized Gain (Loss)
on Securities
    Accumulated Other
Comprehensive Income
(Loss)
 

Balance, January 1, 2014

   $ 1,397      $ (1,691   $ (294

Reclassification for gains included in net income

     —          (4     (4

Current year changes

     (266     2,938        2,672   
  

 

 

   

 

 

   

 

 

 

Balance, March 31, 2014

   $ 1,131      $ 1,243      $ 2,374   
  

 

 

   

 

 

   

 

 

 

 

(Dollars in Thousands)

   Unrealized Gain (Loss)
on Derivatives
    Unrealized Gain (Loss)
on Securities
    Accumulated Other
Comprehensive Income
(Loss)
 

Balance, January 1, 2013

   $ (23   $ 6,630      $ 6,607   

Reclassification for gains included in net income

     —          (112     (112

Current year changes

     208        (429     (221
  

 

 

   

 

 

   

 

 

 

Balance, March 31, 2013

   $ 185      $ 6,089      $ 6,274   
  

 

 

   

 

 

   

 

 

 

NOTE 11 – SEGMENT REPORTING

The following tables present selected financial information with respect to the Company’s reportable business segments for the three- month periods ended March 31, 2014 and 2013.

 

     Three Months Ended
March 31, 2014
     Three Months Ended
March 31, 2013
 
     Retail
Banking
     Mortgage
Banking
     Total      Retail
Banking
     Mortgage
Banking
     Total  
     (Dollars in Thousands)  

Net interest income

   $ 33,384       $ 1,100       $ 34,484       $ 27,766       $ 572       $ 28,338   

Provision for loan losses

     1,726         —           1,726         2,923         —           2,923   

Noninterest income

     7,590         5,164         12,754         6,896         4,464         11,360   

Noninterest expense:

                 

Salaries and employee benefits

     13,826         3,568         17,394         11,037         2,769         13,806   

Equipment and occupancy expenses

     3,762         302         4,064         2,765         166         2,931   

Data processing and telecommunications expenses

     3,332         122         3,454         2,471         99         2,570   

Other expenses

     7,512         815         8,327         8,890         687         9,577   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noninterest expense

     28,432         4,807         33,239         25,163         3,721         28,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     10,816         1,457         12,273         6,576         1,315         7,891   

Income tax expense

     3,413         510         3,923         2,146         460         2,606   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     7,403         947         8,350         4,430         855         5,285   

Less preferred stock dividends

     286         —           286         441         —           441   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholders

   $ 7,117       $ 947       $ 8,064       $ 3,989       $ 855       $ 4,844   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 3,359,912       $ 128,072       $ 3,487,984       $ 2,784,883       $ 76,768       $ 2,861,651   

Stockholders’ equity

     296,978         3,052         300,030         282,851         871         283,722   

 

 

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

Cautionary Note Regarding Any Forward-Looking Statements

Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, legislative and regulatory initiatives; additional competition in our markets; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by us; state and federal banking regulations; changes in or application of environmental and other laws and regulations to which we are subject; political, legal and economic conditions and developments; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather, natural disasters and other catastrophic events; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.

 

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Selected Financial Data

The following table sets forth unaudited selected financial data for the previous five quarters. This data should be read in conjunction with the consolidated financial statements and the notes thereto and the information contained in this Item 2.

 

     2014     2013  

(in thousands, except share data, taxable equivalent)

   First
Quarter
    Fourth
Quarter
    Third
Quarter
    Second
Quarter
    First
Quarter
 

Results of Operations:

          

Net interest income

   $ 34,484      $ 29,051      $ 29,320      $ 29,476      $ 28,338   

Net interest income (tax equivalent)

     34,808        29,325        29,542        29,666        28,695   

Provision for loan losses

     1,726        1,478        2,920        4,165        2,923   

Non-interest income

     12,754        11,517        12,288        11,384        11,360   

Non-interest expense

     33,239        37,624        28,749        26,688        28,884   

Income tax expense

     3,923        88        3,262        3,329        2,606   

Preferred stock dividends

     286        412        443        442        441   

Net income available to common shareholders

     8,064        966        6,234        6,236        4,844   

Selected Average Balances:

          

Mortgage loans held for sale

   $ 49,397      $ 65,683      $ 61,249      $ 48,890      $ 32,639   

Loans, net of unearned income

     1,639,672        1,602,942        1,564,311        1,523,654        1,455,687   

Purchased non-covered loans

     441,138        43,900        —          —          —     

Covered loans

     379,460        401,045        427,482        444,616        491,691   

Investment securities

     462,343        327,993        312,541        321,582        340,564   

Earning assets

     3,091,546        2,625,178        2,439,771        2,397,834        2,428,720   

Assets

     3,521,588        2,937,434        2,806,799        2,820,863        2,875,274   

Deposits

     2,975,305        2,552,819        2,439,150        2,448,171        2,511,511   

Common shareholders’ equity

     290,462        248,429        246,489        251,240        251,214   

Period-End Balances:

          

Mortgage loans held for sale

   $ 51,693      $ 67,278      $ 69,634      $ 62,580      $ 42,332   

Loans, net of unearned income

     1,695,382        1,618,454        1,589,267        1,555,827        1,492,753   

Purchased non-covered loans

     437,269        448,753        —          —          —     

Covered loans

     372,694        390,237        417,649        443,517        460,724   

Earning assets

     3,062,428        3,215,941        2,462,697        2,421,996        2,401,043   

Total assets

     3,487,984        3,667,649        2,818,502        2,808,675        2,861,651   

Deposits

     3,010,647        2,999,231        2,443,421        2,443,103        2,489,973   

Common shareholders’ equity

     300,030        288,699        262,418        259,932        255,969   

Per Common Share Data:

          

Earnings per share – Basic

   $ 0.32      $ 0.04      $ 0.26      $ 0.26      $ 0.20   

Earnings per share – Diluted

     0.32        0.04        0.26        0.26        0.20   

Common book value per share

     11.93        11.50        10.98        10.88        10.72   

End of period shares

outstanding

     25,159,073        25,098,427        23,907,509        23,894,327        23,875,680   

Weighted average shares outstanding

          

Basic

     25,144,342        24,021,447        23,900,665        23,878,898        23,867,691   

Diluted

     25,573,320        24,450,619        24,315,821        24,287,628        24,246,346   

Market Data:

          

High closing price

   $ 24.00      $ 21.42      $ 19.79      $ 16.94      $ 14.51   

Low closing price

     19.86        17.69        17.35        13.16        12.79   

Closing price for quarter

     23.30        21.11        18.38        16.85        14.35   

Average daily trading volume

     103,279        94,636        75,545        53,403        51,887   

Cash dividends per share

     —          —          —          —          —     

Stock dividend

     —          —          —          —          —     

Closing price to book value

     1.95        1.84        1.67        1.55        1.34   

Performance Ratios:

          

Return on average assets

     0.96     0.19     0.94     0.95     0.75

Return on average common equity

     11.66     2.20     10.75     10.66     8.53

Average loan to average deposits

     84.35     82.79     84.17     82.39     78.84

Average equity to average assets

     9.04     9.41     9.78     9.93     9.70

Net interest margin (tax equivalent)

     4.57     4.43     4.80     4.96     4.79

Efficiency ratio (tax equivalent)

     70.36     92.74     69.09     65.32     72.76

 

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Overview

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of March 31, 2014, as compared to December 31, 2013, and operating results for the three month periods ended March 31, 2014 and 2013. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

Results of Operations for the Three Months Ended March 31, 2014

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $8.1 million, or $0.32 per diluted share, for the quarter ended March 31, 2014, compared to $4.8 million, or $0.20 per diluted share, for the same quarter in 2013. The Company’s return on average assets and average stockholders’ equity in the first quarter of 2014 were 0.96% and 11.66%, respectively, compared to 0.75% and 8.53%, respectively, in the first quarter of 2013. The Company’s mortgage banking activities have had a significant impact on the overall financial results of the Company. Below is a more detailed analysis of the retail banking activities and mortgage banking activities of the Company.

 

     Retail Banking      Mortgage Banking      Total  
     (in thousands)  

As of March 31, 2014:

        

Net interest income

   $ 33,384       $ 1,100       $ 34,484   

Provision for loan losses

     1,726         —           1,726   

Non-interest income

     7,590         5,164         12,754   

Non-interest expense

        

Salaries and employee benefits

     13,826         3,568         17,394   

Occupancy

     3,762         302         4,064   

Data Processing

     3,332         122         3,454   

Other expenses

     7,512         815         8,327   
  

 

 

    

 

 

    

 

 

 

Total non-interest expense

     28,432         4,807         33,239   
  

 

 

    

 

 

    

 

 

 

Income before income taxes

     10,816         1,457         12,273   

Income tax expense

     3,413         510         3,923   

Net income

     7,403         947         8,350   

Preferred stock dividends

     286         —           286   
  

 

 

    

 

 

    

 

 

 

Net income available to common Shareholders

   $ 7,117       $ 947       $ 8,064   
  

 

 

    

 

 

    

 

 

 
     Retail Banking      Mortgage Banking      Total  
     (in thousands)  

As of March 31, 2013:

        

Net interest income

   $ 27,766       $ 572       $ 28,338   

Provision for loan losses

     2,923         —           2,923   

Non-interest income

     6,896         4,464         11,360   

Non-interest expense

        

Salaries and employee benefits

     11,037         2,769         13,806   

Occupancy

     2,765         166         2,931   

Data Processing

     2,471         99         2,570   

Other expenses

     8,890         687         9,577   
  

 

 

    

 

 

    

 

 

 

Total non-interest expense

     25,163         3,721         28,884   
  

 

 

    

 

 

    

 

 

 

Income before income taxes

     6,576         1,315         7,891   

Income tax expense

     2,146         460         2,606   

Net income

     4,430         855         5,285   

Preferred stock dividends

     441         —           441   
  

 

 

    

 

 

    

 

 

 

Net income available to common Shareholders

   $ 3,989       $ 855       $ 4,844   
  

 

 

    

 

 

    

 

 

 

 

 

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Net Interest Income and Margins

On a tax equivalent basis, net interest income for the first quarter of 2014 was $34.8 million, an increase of $6.4 million compared to the same quarter in 2013. The higher net interest income is a result of the acquisition of The Prosperity Banking Company during the fourth quarter of 2013, along with steady yields on the loan portfolio, lower levels of excess liquidity than in previous quarters and steady decreases in the Company’s cost of funds. The Company’s net interest margin decreased during the first quarter of 2014 to 4.57%, compared to 4.74% during the first quarter of 2013, but increased compared to 4.43% reported in the fourth quarter of 2013.

Total interest income, on a tax equivalent basis, during the first quarter of 2014 was $38.2 million compared to $30.9 million in the same quarter of 2013. Yields on earning assets fell slightly to 5.01%, compared to 5.17% reported in the first quarter of 2013. During the first quarter of 2014, loans comprised 81.2% of earning assets, compared to 81.5% in the same quarter of 2013. Increased lending activities have provided opportunities to grow the legacy loan portfolio. Yields on legacy loans decreased to 5.11% in the first quarter of 2014, compared to 5.46% in the same period of 2013. Covered loan yields remained stable at 7.23% in the first quarter of 2014 and 2013. The yield on purchased non-covered loans was 6.31% for the first quarter of 2014. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.

Total funding costs increased slightly to 0.43% in the first quarter of 2014, compared to 0.40% during the first quarter of 2013. Deposit costs decreased from 0.36% in the first quarter of 2013 to 0.30% in the first quarter of 2014. Continued shifts in the funding mix toward noninterest-bearing demand and other lower cost deposit categories was the primary reason for the decline. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 75.1% of total deposits in the first quarter of 2014, compared to 72.1% during the first quarter of 2013. Lower costs on deposits were realized due mostly to the lower rate environment and the Company’s ability to be less competitive on higher priced CDs due to its larger than normal position in short-term assets. Further opportunity to realize savings on deposits exists but may be limited due to current costs. Average balances of interest-bearing deposits and their respective costs for the first quarter of 2014 and 2013 are shown below:

 

(Dollars in Thousands)    March 31, 2014     March 31, 2013  
     Average
Balance
     Average
Cost
    Average
Balance
     Average
Cost
 

NOW

   $ 675,199         0.17   $ 633,313         0.19

MMDA

     749,150         0.37     592,842         0.36

Savings

     143,109         0.10     102,380         0.11

Retail CDs < $100,000

     373,523         0.53     313,191         0.64

Retail CDs > $100,000

     361,861         0.72     368,577         0.78

Brokered CDs

     5,970         3.26     19,448         3.52
  

 

 

    

 

 

   

 

 

    

 

 

 

Interest-bearing deposits

   $ 2,308,812         0.38   $ 2,029,751         0.44
  

 

 

      

 

 

    

Provision for Loan Losses and Credit Quality

The Company’s provision for loan losses during the first quarter of 2014 amounted to $1.7 million, compared to $1.5 million in the fourth quarter of 2013 and to $2.9 million in the first quarter of 2013. Although the Company has experienced improving trends in criticized and classified assets for several quarters, provision for loan losses has still been required to account for loan growth and slight devaluation of real estate collateral. At March 31, 2014, classified loans still accruing totaled $39.7 million, compared to $28.6 million at March 31, 2013. This increase is predominately due to the addition of classified loans in the Prosperity Bank acquisition. Nonaccrual loans, excluding purchased non-covered and covered loans, totaled $26.7 million at March 31, 2014, a 28.7% decrease from $37.5 million reported at the end of the first quarter of 2013. Nonaccrual purchased non-covered loans totaled $15.3 million at March 31, 2014.

At March 31, 2014, OREO (excluding purchased non-covered and covered OREO) totaled $33.8 million, compared to $40.4 million at March 31, 2013. Purchased non-covered OREO totaled $3.9 million at March 31, 2014. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. The Company has found that with a marketing window of 3-6 months, the liquidation of properties varies from 85% to 100% of current book value. Certain properties, mostly raw land and subdivision lots, have extended marketing periods because of excessive inventory and record low home building activity. At the end of the first quarter of 2014, total non-covered non-performing assets decreased to 2.29% of total assets compared to 2.72% at March 31, 2013. Management continues to aggressively identify and resolve problem assets while seeking quality credits to grow the loan portfolio.

Net charge-offs on loans during the first quarter of 2014 decreased to $1.1 million, or 0.27% of loans on an annualized basis, compared to $2.8 million, or 0.76% of loans, in the first quarter of 2013. The Company’s allowance for loan losses at March 31, 2014 was $22.7 million, or 1.34% of total loans, compared to $23.4 million, or 1.57% of total loans, at March 31, 2013.

 

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Noninterest Income

Total noninterest income for the first quarter of 2014 was $12.8 million, compared to $11.4 million in the first quarter of 2013. Income from mortgage related activities continued to increase as a result of the Company’s increased number of mortgage bankers and higher level of productions. Service charges on deposit accounts in the first quarter of 2014 increased to $5.6 million, compared to $4.8 million in the first quarter of 2013. This increase was driven by the growth of core accounts through the acquisition of Prosperity Bank during the fourth quarter of 2013, along with higher balances in accounts subject to service charges.

Noninterest Expense

Total noninterest expense for the first quarter of 2014 increased to $33.2 million, compared to $28.9 million at the same time in 2013. Increases in noninterest expenses were primarily the result of the acquisition of Prosperity Bank during the fourth quarter of 2013 and additional expenses related to increases in mortgage volume. Salaries and employee benefits increased from $13.8 million in the first quarter of 2013 to $17.4 million in the first quarter of 2014. Occupancy and equipment expense increased during the quarter from $2.9 million in the first quarter of 2013 to $4.1 million in the first quarter of 2014. Total data processing and telecommunications expense in the first quarter of 2014 was $3.5 million, compared to $2.6 million in the first quarter of 2013. Credit related expenses, including problem loan and OREO expense and OREO write-downs and losses, decreased to $2.2 million in the first quarter of 2014, compared to $4.8 million in the first quarter of 2013 due to improved economic conditions.

Income taxes

Income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the first quarter of 2014, the Company reported income tax expense of $3.9 million, compared to $2.6 million in the same period of 2013. The Company’s effective tax rate for the three months ended March 31, 2014 and 2013 was 32.0% and 33.0%, respectively.

Balance Sheet Comparison

Securities

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

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

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

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Substantially all of the unrealized losses on debt securities are related to changes in interest rates and do not affect the expected cash flows of the issuer or underlying collateral. All unrealized losses are considered temporary because each security carries an acceptable investment grade and the Company does not intend to sell these investment securities at an unrealized loss position at March 31, 2014, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at March 31, 2014, these investments are not considered impaired on an other-than temporary basis.

 

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

 

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

March 31, 2014:

             

U.S. government agencies

   $ 14,948       $ 14,145         1.85     5.56       $ —     

State, county and municipal securities

   $ 110,331       $ 111,574         3.61     5.34       $ 4,566   

Corporate debt securities

   $ 10,307       $ 10,383         6.52     7.23       $ —     

Mortgage-backed securities

   $ 319,216       $ 320,611         2.58     4.05       $ 51,282   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 454,802       $ 456,713         3.53     4.48       $ 55,848   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

March 31, 2013:

             

U.S. government agencies

   $ 5,000       $ 5,015         1.50     0.82       $ 5,000   

State, county and municipal securities

   $ 110,628       $ 115,532         3.77     5.75       $ 8,698   

Corporate debt securities

   $ 10,542       $ 10,297         6.63     7.42       $ —     

Mortgage-backed securities

   $ 188,492       $ 193,185         2.44     3.41       $ 42,921   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total debt securities

   $ 314,662       $ 324,029         3.04     4.33       $ 56,619   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Loans and Allowance for Loan Losses

At March 31, 2014, gross loans outstanding (including purchased non-covered and covered loans and mortgage loans held for sale) were $2.56 billion, a slight increase compared to the $2.52 billion reported at December 31, 2013. Mortgage loans held for sale decreased from $67.3 million at December 31, 2013 to $51.7 million at March 31, 2014. Legacy loans (excluding purchased non-covered and covered loans) increased $76.9 million, from $1.62 billion at December 31, 2013 to $1.70 billion at March 31, 2014. Purchased non-covered loans decreased $11.5 million, from $448.8 million at December 31, 2013 to $437.3 million at March 31, 2014. Covered loans decreased $17.5 million, from $390.2 million at December 31, 2013 to $372.7 million at March 31, 2014.

The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loan losses in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) residential real estate; (3) commercial and farmland real estate; (4) construction and development related real estate; and (5) consumer. The Company’s management has strategically located its branches in select markets in south and southeast Georgia, north Florida, southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.

The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis and (4) problem and past due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged-off.

The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the risk of loss inherent in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors. The review that management has developed primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

 

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The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the bank president or lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the Company’s corporate loan review system; and other factors management deems appropriate.

For the three month period ended March 31, 2014, the Company recorded net charge-offs totaling $1.1 million, compared to $2.8 million for the period ended March 31, 2013. The provision for loan losses for the three months ended March 31, 2014 decreased to $1.5 million, compared to $2.6 million during the three month period ended March 31, 2013. At the end of the first quarter of 2014, the allowance for loan losses totaled $22.7 million, or 1.34% of total loans, compared to $22.4 million, or 1.38% of total loans, at December 31, 2013 and $23.4 million, or 1.57% of total loans, at March 31, 2013.

The following table presents an analysis of the allowance for loan losses for the three month periods ended March 31, 2014 and March 31, 2013:

 

(Dollars in Thousands)

   March 31,
2014
    March 31,
2013
 

Balance of allowance for loan losses at beginning of period

   $ 22,377      $ 23,593   

Provision charged to operating expense

     1,501        2,603   

Charge-offs:

    

Commercial, financial and agricultural

     743        410   

Real estate – residential

     181        779   

Real estate – commercial and farmland

     533        1,025   

Real estate – construction and development

     65        655   

Consumer installment

     84        167   

Other

     —          —     
  

 

 

   

 

 

 

Total charge-offs

     1,606        3,036   
  

 

 

   

 

 

 

Recoveries:

    

Commercial, financial and agricultural

     49        84   

Real estate – residential

     83        85   

Real estate – commercial and farmland

     143        3   

Real estate – construction and development

     108        2   

Consumer installment

     89        48   

Other

     —          —     
  

 

 

   

 

 

 

Total recoveries

     472        222   
  

 

 

   

 

 

 

Net charge-offs

     1,134        2,814   
  

 

 

   

 

 

 

Balance of allowance for loan losses at end of period

   $ 22,744      $ 23,382   
  

 

 

   

 

 

 

Net annualized charge-offs as a percentage of average loans

     0.27     0.76

Allowance for loan losses as a percentage of loans at end of period

     1.34     1.57

Assets Covered by Loss-Sharing Agreements with the FDIC

Loans that were acquired in FDIC-assisted transactions that are covered by the loss-sharing agreements with the FDIC (“covered loans”) totaled $372.7 million, $390.2 million and $460.7 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. OREO that is covered by the loss- sharing agreements with the FDIC totaled $42.6 million, $45.9 million and $77.9 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. The loss-sharing agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value on the acquisition dates. The FDIC loss-share receivable reported at March 31, 2014, December 31, 2013 and March 31, 2013 was $53.2 million, $65.4 million and $161.0 million, respectively.

 

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The Company recorded the loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company is confident in its estimation of credit risk and its adjustments to the carrying balances of the acquired loans. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. During the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013, the Company recorded provision for loan loss expense of $225,000, $1.5 million and $320,000, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively.

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

 

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Commercial, financial and agricultural

   $ 24,813       $ 26,550       $ 28,568   

Real estate – construction and development

     41,434         43,179         57,114   

Real estate – commercial and farmland

     214,649         224,451         260,159   

Real estate – residential

     91,372         95,173         113,668   

Consumer installment

     426         884         1,215   
  

 

 

    

 

 

    

 

 

 
   $ 372,694       $ 390,237       $ 460,724   
  

 

 

    

 

 

    

 

 

 

Non-Performing Assets

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate owned. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

At March 31, 2014, nonaccrual legacy loans (excluding purchased non-covered and covered loans) totaled $26.7 million, a decrease of approximately $2.5 million since December 31, 2013. This decrease in nonaccrual loans is due to the sale of problem assets during the first quarter of 2014 and a slowdown in the formation of new problem credits At March 31, 2014, nonaccrual purchased non-covered loans totaled $15.3 million, an increase of approximately $8.7 million since December 31, 2013. This increase in nonaccrual purchased non-covered loans is caused by the Company downgrading certain assets acquired with the acquisition of Prosperity Bank in an effort to force borrower actions on assets that were well collateralized. Non-performing assets as a percentage of total assets were 2.29%, 2.00% and 2.72% at March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

Non-performing assets at March 31, 2014, December 31, 2013 and March 31, 2013 were as follows:

 

(Dollars in Thousands)

   March 31,
2014
     December 31,
2013
     March 31,
2013
 

Total nonaccrual loans (excluding purchased non-covered and covered loans)

   $ 26,729       $ 29,203       $ 37,476   

Nonaccrual purchased non-covered loans

     15,318         6,659         —     

Accruing loans delinquent 90 days or more

     —           —           —     

Foreclosed assets (excluding purchased assets)l

     33,839         33,351         40,434   

Purchased, non-covered other real estate owned

     3,864         4,276         —     
  

 

 

    

 

 

    

 

 

 

Total non-performing assets

   $ 79,750       $ 73,489       $ 77,910   
  

 

 

    

 

 

    

 

 

 

 

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The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. The following table presents the amount of accruing troubled debt restructurings by loan class (excluding purchased non-covered and covered loans) at March 31, 2014, December 31, 2013 and March 31, 2013:

 

     March 31,2014      December 31,2013      March 31, 2013  
     (in thousands)  

Loan class:

   #      Balance      #      Balance      #      Balance  

Commercial, financial & agricultural

     4       $ 711         4       $ 515         5       $ 799   

Real estate – construction & development

     11         1,953         8         1,896         5         1,883   

Real estate – commercial & farmland

     19         8,733         17         6,913         16         8,878   

Real estate – residential

     35         7,364         37         7,818         26         6,953   

Consumer installment

     11         87         6         72         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     80       $ 18,848         72       $ 17,214         52       $ 18,513   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of accruing troubled debt restructurings by loan class of purchased non-covered loans at March 31, 2014, December 31, 2013 and March 31, 2013:

 

     March 31,2014      December 31,2013      March 31, 2013  
     (in thousands)  

Loan class:

   #      Balance      #      Balance      #      Balance  

Commercial, financial & agricultural

     —         $ —           —         $ —           —         $ —     

Real estate – construction & development

     7         2,443         10         3,364         —           —     

Real estate – commercial & farmland

     2         961         3         1,228         —           —     

Real estate – residential

     12         1,779         8         1,321         —           —     

Consumer installment

     1         8         3         25         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22       $ 5,191         24       $ 5,938         —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of accruing troubled debt restructurings by loan class of covered loans at March 31, 2014, December 31, 2013 and March 31, 2013:

 

     March 31,2014      December 31,2013      March 31, 2013  
     (in thousands)  

Loan class:

   #      Balance      #      Balance      #      Balance  

Commercial, financial & agricultural

     1       $ 14         1       $ 13         1       $ 36   

Real estate – construction & development

     3         3,254         3         3,256         8         5,022   

Real estate – commercial & farmland

     14         7,461         13         7,255         13         6,438   

Real estate – residential

     85         12,046         83         11,719         53         8,266   

Consumer installment

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     103       $ 22,775         100       $ 22,243         75       $ 19,762   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Commercial Lending Practices

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

The CRE guidance is applicable when either:

 

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

 

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

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

As of March 31, 2014, the Company exhibited a concentration in CRE loans based on Federal Reserve Call codes. The primary risks of CRE lending are:

 

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

 

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

 

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

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of March 31, 2014 and December 31, 2013. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased non-covered and covered loans.

 

(Dollars in Thousands)    March 31, 2014     December 31, 2013  
     Balance      % of Total
Loans
    Balance      % of Total
Loans
 

Construction and development loans

   $ 222,797         9   $ 220,726         9

Multi-family loans

     72,926         3     67,607         3

Nonfarm non-residential loans

     1,152,234         46     1,145,065         46
  

 

 

    

 

 

   

 

 

    

 

 

 

Total CRE Loans

   $ 1,447,957         58   $ 1,433,398         58

All other loan types

     1,057,388         42     1,024,046         42
  

 

 

    

 

 

   

 

 

    

 

 

 

Total Loans

   $ 2,505,345         100   $ 2,457,444         100
  

 

 

    

 

 

   

 

 

    

 

 

 

The following table outlines the percent of total CRE loans, net owner occupied loans to total risk-based capital, and the Company’s internal concentration limits as of March 31, 2014 and December 31, 2013.

 

     Internal
Limit
    March 31, 2014     December 31, 2013  
       Actual     Actual  

Construction and development

     100     74     70

Commercial real estate

     300     251     232

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest-bearing balances. At March 31, 2014, the Company’s short-term investments were $48.7 million, compared to $205.0 million and $81.2 million at December 31, 2013 and March 31, 2013, respectively. At March 31, 2014, all of the balance was comprised of interest-bearing balances, the majority of which were at the Federal Reserve Bank of Atlanta.

 

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Derivative Instruments and Hedging Activities

The Company had a cash flow hedge with a notional amount of $37.1 million at March 31, 2014, December 31, 2013 and March 31, 2013 for the purpose of converting the variable rate on the junior subordinated debentures to fixed rate. The fair value of these instruments amounted to a liability of approximately $675,000, $370,000 and $2.6 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively. The Company also had forward contracts with a fair value of approximately $1.7 million, $1.2 million and $1.6 million at March 31, 2014, December 31, 2013, and March 31, 2014 respectively, to hedge changes in the value of the mortgage inventory due to changes in market interest rates. No hedge ineffectiveness from cash flow hedges was recognized in the statement of operations. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

Capital

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia Department of Banking and Finance (the “GDBF”), and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.

The FRB, the FDIC and the GDBF have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure. The regulatory capital standards are defined by the following three key measurements:

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

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

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

As of March 31, 2014, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of Ameris at March 31, 2014, December 31, 2013 and March 31, 2013.

 

    March 31,
2014
    December 31,
2013
    March 31,
2013
 

Leverage Ratio (tier 1 capital to average assets)

     

Consolidated

    8.91     11.33     10.93

Ameris Bank

    9.43        11.93        10.88   

Core Capital Ratio (tier 1 capital to risk weighted assets)

     

Consolidated

    13.30        14.35        17.49   

Ameris Bank

    14.09        15.06        17.43   

Total Capital Ratio (total capital to risk weighted assets)

     

Consolidated

    14.28        15.32        18.74   

Ameris Bank

    15.06        16.03        18.68   

Capital Purchase Program

On November 21, 2008, the Company, pursuant to the Capital Purchase Program established in connection with the Troubled Asset Relief Program, issued and sold to the U.S. Treasury, for an aggregate cash purchase price of $52 million, (i) 52,000 shares (the “Preferred Shares”) of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant (the “Warrant”) to purchase up to 679,443 shares of our common stock at an exercise price of $11.48 per share. On June 14, 2012, the Preferred Shares were sold by the Treasury through a registered public offering. On August 22, 2012, the Company repurchased the Warrant from the Treasury for $2.67 million. In December 2012, the Company repurchased 24,000 outstanding Preferred Shares, and in March 2014, the Company redeemed the remaining 28,000 outstanding Preferred Shares.

 

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Table of Contents

Interest Rate Sensitivity and Liquidity

The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the Asset and Liability Committee (the “ALCO Committee”). The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.

The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.

The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to decrease no more than 5.00% given a change in selected interest rates of 200 basis points over any 24-month period.

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term investments at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 20% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At March 31, 2014 and December 31, 2013, there were $59.7 million and $194.6 million, respectively, outstanding borrowings with the Company’s correspondent banks. There were no outstanding borrowings with the Company’s correspondent banks at March 31, 2013.

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

 

    March 31,
2014
    December 31,
2013
    September 30,
2013
    June 30,
2013
    March 31,
2013
 

Investment securities available for sale to total deposits

    15.17     16.21     12.78     12.94     13.01

Loans (net of unearned income) to total deposits

    83.22     81.94     82.14     81.84     78.45

Interest-earning assets to total assets

    87.80     87.68     87.38     86.23     83.90

Interest-bearing deposits to total deposits

    76.79     77.71     80.54     80.54     80.28

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at March 31, 2014 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

 

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Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and are part of the Company’s program to manage interest rate sensitivity. At March 31, 2014, the Company had one effective LIBOR rate swap with a notional amount of $37.1 million. The LIBOR rate swap exchanges fixed rate payments of 4.15% for floating rate payments based on the three month LIBOR and matures December 2018. The Company also had forward contracts with a fair value of approximately $1.7 million at March 31, 2014 to hedge changes in the value of the mortgage inventory due to changes in market interest rates. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk.” The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “gap management.”

The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected to a gradual 200 basis point increase or decrease in market rates on net interest income and is monitored on a quarterly basis.

Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.

 

Item 4. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

During the quarter ended March 31, 2014, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

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

 

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. of Part 1 in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

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

None.

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

None.

 

Item 6. Exhibits

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

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    AMERIS BANCORP

Date: May 9, 2014

   
    /s/ Dennis J. Zember Jr.
    Dennis J. Zember Jr.,
    Executive Vice President and Chief Financial Officer
    (duly authorized signatory and principal accounting and financial officer)

 

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EXHIBIT INDEX

 

Exhibit
No.

  

Description

    2.1    Agreement and Plan of Merger dated as of March 10, 2014 by and between Ameris Bancorp and Coastal Bankshares, Inc. (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on March 11, 2014).
    3.1    Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the Commission on August 14, 1987).
    3.2    Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1.1 to Ameris Bancorp’s Form 10-K filed with the Commission on March 28, 1996).
    3.3    Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 4.3 to Ameris Bancorp’s Registration Statement on Form S-4 filed with the Commission on July 17, 1996).
    3.4    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.5 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 25, 1998).
    3.5    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 26, 1999).
    3.6    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 31, 2003).
    3.7    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on December 1, 2005).
    3.8    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on November 21, 2008).
    3.9    Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on June 1, 2011).
    3.10    Amended and Restated Bylaws of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on March 14, 2005).
  31.1    Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer
  31.2    Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer
  32.1    Section 1350 Certification by the Company’s Chief Executive Officer
  32.2    Section 1350 Certification by the Company’s Chief Financial Officer
101    The following financial statements from Ameris Bancorp’s Form 10-Q for the quarter ended March 31, 2014, formatted as interactive data files in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Earnings and Comprehensive Income; (iii) Consolidated Statements of Changes in Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

 

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