UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
quarterly period ended June 30, 2007
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Commission
File Number: 001-13901
|
AMERIS
BANCORP
|
|
(Exact
name of registrant as specified in its
charter)
|
|
GEORGIA
|
58-1456434
|
|
|
(State
of incorporation)
|
(IRS
Employer ID No.)
|
|
24
SECOND AVE., SE MOULTRIE,
GA 31768
|
|
(Address
of principal executive offices)
|
|
(229)
890-1111
|
|
(Registrant’s
telephone number)
|
Indicate
by check mark whether the
registrant (1) has filed all reports required to be filed
by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to
file
such reports), and (2) has been subject to such filing requirements for the
past
90 days.Yes xNo o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities
Exchange Act. (Check one):
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Indicate
by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Securities
Exchange Act).Yes oNo x
There
were 13,541,576 shares of Common
Stock outstanding as of August 3, 2007.
-1-
AMERIS
BANCORP
|
PART
I - FINANCIAL INFORMATION
|
Page
|
|
|
Item
1.
|
||
|
3
|
||
|
4
|
||
|
5
|
||
|
6
|
||
|
Item
2.
|
12
|
|
|
Item
3.
|
23
|
|
|
Item
4.
|
23
|
|
|
PART
II - OTHER INFORMATION
|
||
|
Item
1.
|
24
|
|
|
Item
1A.
|
24
|
|
|
Item
2.
|
24
|
|
|
Item
3.
|
24
|
|
|
Item
4.
|
24
|
|
|
Item
5.
|
24
|
|
|
Item
6.
|
24
|
|
|
Exhibits:
|
||
|
Exhibit
31.1 Certification of Chief Executive Officer
|
||
|
Exhibit
31.2 Certification of Chief Financial Officer
|
||
|
Exhibit
32.1 Certification of Chief Executive Officer pursuant to Section
906 of
Sarbanes-Oxley Act
|
||
|
Exhibit
32.2 Certification of Chief Financial Officer pursuant to Section
906 of
Sarbanes-Oxley Act
|
||
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||||||||
|
(dollars
in thousands)
|
||||||||||||
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
||||||||||
|
June
30
|
December
31
|
June
30
|
||||||||||
|
2007
|
2006
|
2006
|
||||||||||
|
Assets
|
||||||||||||
|
Cash
and due from banks
|
$ |
50,328
|
$ |
66,856
|
$ |
63,894
|
||||||
|
Federal
funds sold & interest bearing deposits
|
16,342
|
135,232
|
26,642
|
|||||||||
|
Securities
available for sale, at fair value
|
300,642
|
283,192
|
257,283
|
|||||||||
|
Loans
|
1,556,862
|
1,442,951
|
1,330,713
|
|||||||||
|
Less:
allowance for loan losses
|
25,032
|
24,863
|
23,366
|
|||||||||
|
Loans,
Net
|
1,531,831
|
1,418,088
|
1,307,347
|
|||||||||
|
Premises
and equipment, net
|
52,385
|
46,604
|
40,625
|
|||||||||
|
Intangible
assets, net
|
5,450
|
6,099
|
5,971
|
|||||||||
|
Goodwill
|
54,629
|
54,365
|
42,933
|
|||||||||
|
Other
assets
|
37,466
|
37,106
|
38,649
|
|||||||||
|
Total
assets
|
$ |
2,049,073
|
$ |
2,047,542
|
$ |
1,783,344
|
||||||
|
Liabilities
and Stockholders' Equity
|
||||||||||||
|
Deposits:
|
||||||||||||
|
Noninterest-bearing
demand
|
$ |
200,849
|
$ |
221,592
|
$ |
201,489
|
||||||
|
Interest-bearing
demand
|
576,309
|
545,564
|
418,310
|
|||||||||
|
Savings
|
60,243
|
63,255
|
71,873
|
|||||||||
|
Time
deposits
|
857,785
|
879,752
|
754,456
|
|||||||||
|
Total
deposits
|
1,695,185
|
1,710,163
|
1,446,128
|
|||||||||
|
Federal
funds purchased & securities sold under agreements to
repurchase
|
6,966
|
15,933
|
3,769
|
|||||||||
|
Other
borrowings
|
105,500
|
75,500
|
124,094
|
|||||||||
|
Other
liabilities
|
15,054
|
24,945
|
15,629
|
|||||||||
|
Subordinated
deferrable interest debentures
|
42,269
|
42,269
|
40,722
|
|||||||||
|
Total
liabilities
|
1,864,974
|
1,868,810
|
1,630,342
|
|||||||||
|
Stockholders'
Equity
|
||||||||||||
|
Common
stock, par value $1; 30,000,000 shares authorized;14,867,934,
14,850,237 and 14,339,975 shares issued at June 30, 2007, December
31,
2006 and June 30, 2006, respectively
|
14,868
|
14,850
|
14,340
|
|||||||||
|
Capital
surplus
|
82,019
|
81,481
|
67,352
|
|||||||||
|
Retained
earnings
|
102,124
|
95,523
|
87,466
|
|||||||||
|
Accumulated
other comprehensive income
|
(4,231 | ) | (2,529 | ) | (5,675 | ) | ||||||
|
194,780
|
189,325
|
163,483
|
||||||||||
|
Treasury
stock, at cost, 1,326,458, 1,322,717 and 1,314,430 shares at June
30,
2007, December 31, 2006 and June 30, 2006, respectively
|
(10,681 | ) | (10,593 | ) | (10,481 | ) | ||||||
|
Total
stockholders' equity
|
184,099
|
178,732
|
153,002
|
|||||||||
|
Total
liabilities and stockholders' equity
|
$ |
2,049,073
|
$ |
2,047,542
|
$ |
1,783,344
|
||||||
See
notes to unaudited consolidated financial statements.
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||||||||||||
|
(dollars
in thousands, except per share data)
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Interest
income
|
||||||||||||||||
|
Interest
and fees on loans
|
$ |
31,573
|
$ |
26,355
|
$ |
62,332
|
$ |
49,831
|
||||||||
|
Interest
on taxable securities
|
3,434
|
2,950
|
6,771
|
5,692
|
||||||||||||
|
Interest
on nontaxable securities
|
176
|
127
|
355
|
225
|
||||||||||||
|
Interest
on deposits in other banks
|
659
|
390
|
1,700
|
1,057
|
||||||||||||
|
Interest
on federal funds sold
|
1
|
-
|
92
|
158
|
||||||||||||
|
Total
Interest Income
|
35,842
|
29,822
|
71,251
|
56,963
|
||||||||||||
|
Interest
expense
|
||||||||||||||||
|
Interest
on deposits
|
15,540
|
9,979
|
30,744
|
18,607
|
||||||||||||
|
Interest
on federal funds purchased and securities sold under agreements
to
repurchase
|
34
|
48
|
93
|
81
|
||||||||||||
|
Interest
on other borrowings
|
1,939
|
2,122
|
3,665
|
4,210
|
||||||||||||
|
Total
Interest Expense
|
17,512
|
12,149
|
34,503
|
22,898
|
||||||||||||
|
Net
interest income
|
18,330
|
17,673
|
36,748
|
34,065
|
||||||||||||
|
Provision
for loan losses
|
936
|
901
|
1,444
|
1,411
|
||||||||||||
|
Net
interest income after provision for loan losses
|
17,394
|
16,772
|
35,304
|
32,654
|
||||||||||||
|
Other
income
|
||||||||||||||||
|
Service
charges on deposit accounts
|
3,066
|
2,926
|
5,936
|
5,557
|
||||||||||||
|
Mortgage
banking activities
|
799
|
494
|
1,482
|
948
|
||||||||||||
|
Other
|
769
|
430
|
1,742
|
1,230
|
||||||||||||
|
Gain
(loss) on sale of securities
|
8
|
(314 | ) |
8
|
(305 | ) | ||||||||||
|
Total
Other Income
|
4,643
|
3,536
|
9,168
|
7,430
|
||||||||||||
|
Other
expense
|
||||||||||||||||
|
Salaries
and employee benefits
|
7,492
|
6,042
|
15,224
|
12,666
|
||||||||||||
|
Equipment
and occupancy expense
|
1,718
|
1,544
|
3,394
|
2,897
|
||||||||||||
|
Amortization
of intangible assets
|
324
|
232
|
649
|
441
|
||||||||||||
|
Other
operating expenses
|
4,245
|
4,476
|
8,956
|
8,375
|
||||||||||||
|
Total
Other Expense
|
13,780
|
12,294
|
28,224
|
24,379
|
||||||||||||
|
Income
before income taxes
|
8,257
|
8,014
|
16,248
|
15,705
|
||||||||||||
|
Applicable
income taxes
|
2,884
|
2,699
|
5,852
|
5,290
|
||||||||||||
|
Net
income
|
$ |
5,373
|
$ |
5,315
|
$ |
10,397
|
$ |
10,415
|
||||||||
|
Other
comprehensive income, net of tax:
|
||||||||||||||||
|
Unrealized
holding losses arising during period, net of tax
|
(2,487 | ) | (2,440 | ) | (1,702 | ) | (3,251 | ) | ||||||||
|
Reclassification
for gains included in net income
|
-
|
207
|
-
|
201
|
||||||||||||
| $ |
2,886
|
$ |
3,082
|
$ |
8,695
|
$ |
7,365
|
|||||||||
|
Income
per common share-Basic
|
$ |
0.40
|
$ |
0.41
|
$ |
0.77
|
$ |
0.80
|
||||||||
|
Income
per common share-Diluted
|
$ |
0.39
|
$ |
0.40
|
$ |
0.76
|
$ |
0.79
|
||||||||
|
Dividends
declared per share
|
$ |
0.14
|
$ |
0.14
|
$ |
0.28
|
$ |
0.28
|
||||||||
|
Average
shares outstanding
|
13,443,850
|
12,951,765
|
13,665,050
|
13,118,881
|
||||||||||||
|
AMERIS
BANCORP AND SUBSIDIARIES
|
||||||||
|
SIX
MONTHS ENDED JUNE 30, 2007 AND 2006
|
||||||||
|
(dollars
in thousands)
|
||||||||
|
(Unaudited)
|
||||||||
|
2007
|
2006
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
Income
|
$ |
10,397
|
$ |
10,415
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
1,556
|
1,341
|
||||||
|
Provision
for loan losses
|
1,444
|
1,411
|
||||||
|
Amortization
of intangible assets
|
649
|
441
|
||||||
|
Other
prepaids, deferrals and accruals, net
|
(10,796 | ) | (2,792 | ) | ||||
|
Net
cash provided by operating activities
|
3,250
|
10,816
|
||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Net
decrease in federal funds sold and interest bearing
deposits
|
118,890
|
2,285
|
||||||
|
Proceeds
from maturities of securities available for sale
|
17,771
|
19,703
|
||||||
|
Purchase
of securities available for sale
|
(38,521 | ) | (61,665 | ) | ||||
|
Proceeds
from sales of securities available for sale
|
982
|
15,212
|
||||||
|
Net
increase in loans
|
(113,911 | ) | (144,451 | ) | ||||
|
Purchases
of premises and equipment
|
(7,337 | ) | (2,360 | ) | ||||
|
Net
cash used in investing activities
|
(22,126 | ) | (171,276 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Net
increase/(decrease) in deposits
|
(14,978
|
) |
70,896
|
|||||
|
Net
decrease in federal funds purchased and securities sold under agreements
to repurchase
|
(8,967 | ) | (6,538 | ) | ||||
|
Increase
in other borrowings
|
30,000
|
18,702
|
||||||
|
Dividends
declared
|
(3,844 | ) | (3,633 | ) | ||||
|
Proceeds
from exercise of stock options
|
137
|
283
|
||||||
|
Net
cash provided by (used in) by financing activities
|
2,348
|
79,080
|
||||||
|
Net
decrease in cash and due from banks
|
$ | (16,528 | ) | $ | (81,380 | ) | ||
|
Cash
and due from banks at beginning of period
|
66,856
|
145,274
|
||||||
|
Cash
and due from banks at end of period
|
$ |
50,328
|
$ |
63,894
|
||||
See
notes to unaudited consolidated financial statements.
June
30, 2007
(Unaudited)
Note
1 - Basis of Presentation & Accounting Policies
Ameris
Bancorp, (the “Company” or “Ameris”) is a financial holding company
headquartered in Moultrie, Georgia. Ameris conducts the majority of
its operations through its wholly owned banking subsidiary, Ameris Bank
(the
“Bank”). Ameris Bank currently operates 46 branches in Georgia,
Alabama, Northern Florida and South Carolina. Our business model
capitalizes on the efficiencies of a billion dollar financial services
company
while still providing the community with the personalized banking service
expected by our customers. We manage our Bank through a balance of
decentralized management responsibilities and efficient centralized operating
systems, products and loan underwriting standards. Ameris’ board of
directors and senior managers establish corporate policy, strategy and
administrative policies. Within Ameris’ established guidelines and
policies, each advisory board and senior managers make lending and
community-specific decisions. This approach allows the banker closest
to the customer to respond to the differing needs and demands of their
unique
market.
The
accompanying unaudited consolidated financial statements for Ameris have
been
prepared in accordance with accounting principles generally accepted in
the
United States of America for interim financial information and Regulation
S-X.
Accordingly, the financial statements do not include all of the information
and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statement presentation. The
interim consolidated financial statements included herein are unaudited,
but
reflect all adjustments which, in the opinion of management, are necessary
for a
fair presentation of the consolidated financial position and results of
operations for the interim periods presented. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the six months and
quarter ended June 30, 2007 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,
2006.
Certain
amounts reported as of December 31, 2006 or the period ended June 30, 2006
have been reclassified to conform with the presentation for June 30,
2007. These reclassifications had no effect on previously reported
net income or stockholders' equity.
Note
2 – Recent Business Combinations
On
December 29, 2006, Ameris acquired 100 percent of the outstanding common
shares of Islands Bancorp and its banking subsidiary, Islands Community
Bank, NA
(collectively, “Islands”). Islands was headquartered in Beaufort,
South Carolina where it operated a single branch with satellite loan production
offices in Bluffton, South Carolina and Charleston, South
Carolina. The consideration for the acquisition was a combination of
cash and common stock with an aggregate purchase price of approximately
$19,055,000. The total consideration consisted of $5,121,000 in cash,
and approximately 494,000 shares of Ameris Bancorp common stock with a
value of
approximately $13,934,000. The value of the shares of common stock
issued of $28.18 was based on the average closing price of Ameris common
stock
for the 10 trading days immediately preceding the merger. Islands
results of operations for 2006 are not included in Ameris’ consolidated
financial results as the merger date occurred after close of business on
the
last day of the fiscal year.
Note
3 - Investment Securities
Ameris’
investment policy blends the needs of the Company’s liquidity and interest rate
risk with its desire to improve income and provide funds for expected growth
in
loans. Under this policy, the Company generally invests in
obligations of the United States Treasury or other governmental or
quasi-governmental agencies. Ameris’ portfolio and investing
philosophy concentrate activities in obligations where the credit risk
is
limited. For a small portion of Ameris’ portfolio that has been found
to present credit risk, the Company has reviewed the investments and financial
performance of the obligors and believes the credit risk to be
acceptable.
The
amortized cost and estimated fair value of investment securities available
for
sale at June 30, 2007, December 31, 2006 and June 30, 2006 are presented
below:
|
June
30, 2007
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsered agencies
|
$ |
112,316
|
$ |
3
|
$ | (1,653 | ) | $ |
110,666
|
|||||||
|
State
and municipal securities
|
18,708
|
3
|
(452 | ) |
18,259
|
|||||||||||
|
Corporate
debt securities
|
9,808
|
16
|
(252 | ) |
9,572
|
|||||||||||
|
Mortgage
backed securities
|
165,126
|
46
|
(3,815 | ) |
161,357
|
|||||||||||
|
Marketable
equity securities
|
788
|
-
|
-
|
788
|
||||||||||||
| $ |
306,746
|
$ |
68
|
$ | (6,172 | ) | $ |
300,642
|
||||||||
|
December
31, 2006
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsered agencies
|
$ |
103,207
|
$ |
31
|
$ | (1,375 | ) | $ |
101,863
|
|||||||
|
State
and municipal securities
|
19,364
|
42
|
(472 | ) |
18,934
|
|||||||||||
|
Corporate
debt securities
|
9,852
|
40
|
(63 | ) |
9,829
|
|||||||||||
|
Mortgage-backed
securities
|
153,768
|
194
|
(2,144 | ) |
151,818
|
|||||||||||
|
Marketable
equity securities
|
788
|
-
|
(40 | ) |
748
|
|||||||||||
| $ |
286,979
|
$ |
307
|
$ | (4,094 | ) | $ |
283,192
|
||||||||
|
June
30, 2006
|
||||||||||||||||
|
(dollars
in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
|
U.
S. Government sponsered agencies
|
$ |
101,168
|
$ |
-
|
$ | (3,031 | ) | $ |
98,137
|
|||||||
|
State
and municipal securities
|
16,439
|
9
|
(668 | ) |
15,780
|
|||||||||||
|
Corporate
debt securities
|
5,284
|
13
|
(119 | ) |
5,178
|
|||||||||||
|
Mortgage-backed
securities
|
142,423
|
9
|
(4,748 | ) |
137,684
|
|||||||||||
|
Marketable
equity securities
|
567
|
-
|
(64 | ) |
504
|
|||||||||||
| $ |
265,808
|
$ |
32
|
$ | (8,630 | ) | $ |
257,283
|
||||||||
Note
4 - Loans
The
Company engages in a full complement of lending activities, including real
estate-related loans, agriculture-related loans, commercial and financial
loans
and consumer installment loans. Ameris concentrates the majority of
its lending activities on real estate loans where the historical loss
percentages have been low. While risk of loss in the Company’s
portfolio is primarily tied to the credit quality of the various borrowers,
risk
of loss may increase due to factors beyond Ameris’ control, such as local,
regional and/or national economic downturns. General conditions in
the real estate market may also impact the relative risk in the real estate
portfolio. Of the target areas of lending activities, commercial and
financial loans are generally considered to have a greater risk of loss
than
real estate loans or consumer installment loans.
The
Company evaluates loans for impairment when a loan is risk rated as substandard
or doubtful. The Company measures impairment based upon the present
value of the loan’s expected future cash flows discounted at the loan’s
effective interest rate, except where foreclosure or liquidation is probable
or
when the primary source of repayment is provided by real estate
collateral. In these circumstances, impairment is measured based upon
the estimated fair value of the collateral. In addition, in certain
circumstances, impairment may be based on the loan’s observable estimated fair
value. Impairment with regard to substantially all of Ameris’
impaired loans has been measured based on the estimated fair value of the
underlying collateral. The Company’s policy for recognizing interest
income on impaired loans is consistent with its nonaccrual policy. At
the time the contractual payments on a loan are deemed to be uncollectible,
Ameris’ policy is to record a charge-off against the allowance for loan
losses.
Nonperforming
assets include loans classified as nonaccrual or renegotiated and foreclosed
assets. It is the general policy of the Company to stop accruing
interest income and place the recognition of interest on a cash basis when
any
commercial, industrial or commercial real estate loan is 90 days or more
past
due as to principal or interest and/or the ultimate collection of either
is in
doubt, unless collection of both principal and interest is assured by way
of
collateralization, guarantees or other security. When a loan is
placed on nonaccrual status, any interest previously accrued but not collected
is reversed against current income unless the collateral for the loan is
sufficient to cover the accrued interest or a guarantor assures payment
of
interest.
Loans
are
stated at unpaid balances, net of unearned income and deferred loan fees.
Balances within the major loans receivable categories are represented in
the
following table:
|
(dollars
in thousands)
|
June
30, 2007
|
December
31, 2006
|
June
30, 2006
|
|||||||||
|
Commercial
and financial
|
$ |
158,628
|
$ |
174,852
|
$ |
155,485
|
||||||
|
Agricultural
|
46,279
|
33,980
|
40,731
|
|||||||||
|
Real
estate-construction
|
380,617
|
340,325
|
300,534
|
|||||||||
|
Real
estate-mortgage, farmland
|
96,834
|
91,650
|
84,282
|
|||||||||
|
Real
estate-mortgage, commercial
|
465,208
|
397,837
|
363,402
|
|||||||||
|
Real
estate-mortgage, residential
|
347,644
|
339,843
|
320,822
|
|||||||||
|
Consumer
installment loans
|
56,419
|
59,422
|
60,467
|
|||||||||
|
Other
|
5,233
|
5,042
|
4,990
|
|||||||||
| $ |
1,556,862
|
$ |
1,442,951
|
$ |
1,330,713
|
|||||||
Note
5 - Allowance for Loan Losses
Activity
in the allowance for loan losses for the six months ended June 30, 2007,
for the
year ended December 31, 2006 and for the six months ended June 30, 2006
is as
follows:
|
(dollars
in thousands)
|
June
30, 2007
|
December
31, 2006
|
June
30, 2006
|
|||||||||
|
Balance,
January 1
|
$ |
24,863
|
$ |
22,294
|
$ |
22,294
|
||||||
|
Provision
for loan losses charged to expense
|
1,444
|
2,837
|
1,411
|
|||||||||
|
Loans
charged off
|
(2,113 | ) | (3,198 | ) | (1,758 | ) | ||||||
|
Recoveries
of loans previously charged off
|
838
|
1,906
|
1,419
|
|||||||||
|
Allowance
for loan losses of acquired subsidiary
|
-
|
1,024
|
-
|
|||||||||
|
Ending
balance
|
$ |
25,032
|
$ |
24,863
|
$ |
23,366
|
||||||
Note
6 - Weighted Average Shares Outstanding
Earnings
per share have been computed based on the following weighted average
number of
common shares outstanding for the three months and six months ended June
30,
2007 and 2006:
|
For
the Three Months Ended June 30,
|
For
the Six Months Ended June 30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
(share
data in thousands)
|
(share
data in thousands)
|
|||||||||||||||
|
Basic
shares outstanding
|
13,486
|
12,985
|
13,465
|
12,969
|
||||||||||||
|
Plus:
Dilutive effect of ISOs
|
170
|
154
|
182
|
150
|
||||||||||||
|
Plus:
Dilutive effect of Restricted Grants
|
7
|
0
|
18
|
0
|
||||||||||||
|
Diluted
shares outstanding
|
13,663
|
13,139
|
13,665
|
13,119
|
||||||||||||
Note
7 – Commitments and Contingencies
The
Company is a party to financial instruments with off-balance-sheet risk
in the
normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized
in
the consolidated balance sheets.
The
contract amounts of those instruments reflect the extent of involvement
the
Company has in particular classes of financial instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as are used for on-balance-sheet instruments.
Commitments
to extend credit are agreements to lend to a customer as long as there
is no
violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and
may
require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
The
Company issues standby letters of credit, which are conditional commitments
issued to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and
private borrowing arrangements and expire in decreasing amounts with
terms
ranging from one to four years. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loan
facilities to customers. The Company holds various assets as
collateral supporting those commitments for which collateral is deemed
necessary.
The
Company evaluates each customer’s creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management’s credit evaluation of
the borrower. Collateral held may include accounts receivable,
inventory, property, plant and equipment, residential real estate, and
income-producing commercial properties on those commitments for which
collateral
is deemed necessary.
The
following represent the Company’s commitments to extend credit and standby
letters of credit:
|
(dollars
in thousands)
|
June
30, 2007
|
June
30, 2006
|
||||||
|
Commitments
to extend credit
|
$ |
206,590
|
$ |
198,384
|
||||
|
Standby
letters of credit
|
6,719
|
7,178
|
||||||
Certain
of the statements made in this report are “forward-looking statements” within
the meaning of, and subject to the protections of, Section 27A of the
Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934,
as amended (the “Exchange Act”). Forward-looking statements include
statements with respect to our beliefs, plans, objectives, goals, expectations,
anticipations, assumptions, estimates, intentions and future performance
and
involve known and unknown risks, uncertainties and other factors, many
of which
may be beyond our control and which may cause the actual results, performance
or
achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements.
All
statements other than statements of historical fact are statements that
could be
forward-looking statements. You can identify these forward-looking
statements through our use of words such as “may,” “will,” “anticipate,”
“assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,”
“estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,”
“intend,” “target,” “potential” and other similar words and expressions of the
future. These forward-looking statements may not be realized due to a
variety of factors, including, without limitation, legislative and regulatory
initiatives; additional competition in Ameris’ markets; potential business
strategies, including acquisitions or dispositions of assets or internal
restructuring, that may be pursued by Ameris; state and federal banking
regulations; changes in or application of environmental and other laws
and
regulations to which Ameris is subject; political, legal and economic
conditions
and developments; financial market conditions and the results of financing
efforts; changes in commodity prices and interest rates; weather, natural
disasters and other catastrophic events; and other factors discussed
in Ameris’
filings with the Securities and Exchange Commission under the Exchange
Act.
All
written or oral forward-looking statements that are made by or are attributable
to us are expressly qualified in their entirety by this cautionary
notice. Our forward-looking statements apply only as of the date of
this report or the respective date of the document from which they are
incorporated herein by reference. We have no obligation and do not
undertake to update, revise or correct any of the forward-looking statements
after the date of this report, or after the respective dates on which
such
statements otherwise are made, whether as a result of new information,
future
events or otherwise.
Overview
The
following is management’s discussion and analysis of certain significant factors
which have affected the financial condition and results of operations
of the
Company as reflected in the unaudited consolidated statement of condition
as of
June 30, 2007 as compared to December 31, 2006 and operating results
for the
three-month and six-month periods ended June 30, 2007 as compared to
the
three-month and six-month periods ended June 30, 2006. These comments
should be read in conjunction with the Company’s unaudited consolidated
financial statements and accompanying notes appearing elsewhere
herein.
The
Company’s total assets increased $1.5 million from December 31, 2006 to
$2.05 billion. Earning assets increased $12.5 million or 0.67% during
the same period. Short term assets (federal funds sold and interest
bearing deposits in banks) decreased $118.9 million due to an increase
in loan
demand and purchases of investment securities. Loans increased 7.9%,
or $113.9 million, since December 2006, while the investment portfolio
increased
$17.5 million or 6.2%. Total deposits decreased by 0.88%, or $15.0
million, due primarily to decreases in brokered deposits that matured
and were
not replaced.
The
growth in the balance sheet and earning assets contributed to solid growth
in
net interest income. Net interest income for the three months ended
June 30, 2007 increased $657,000 or 3.7%, to $18.3 million compared to
the three
months ended June 30, 2006. Net interest income for the six months ended
June 30, 2007 increased 7.9% to $36.7 million from $34.1 million for the
six months ended June 30, 2006. This increase in net interest income
is the result of several factors, the most significant of which are the
internal
growth in earning assets, effective management of yields on earning assets
and
efforts to control the Company’s cost of funds.
Return
on
average equity for the six months ended June 30, 2007 and 2006 was 11.43%
and
13.78% respectively, on average equity of $185.2 million and $151.2 million,
respectively. Return on average assets for the six months ended June
30, 2007 and 2006 was 1.04% and 1.21%, respectively. Decreases in
profitability levels are mostly attributable to lower net interest
margins.
The
following table sets forth unaudited selected financial data for the
previous
five quarters and for the six-month periods ending June 30, 2007 and
2006. This data should be read in conjunction with the consolidated
financial statements and the notes thereto and the information contained
in this
Item 2.
|
2007
|
2006
|
|||||||||||||||||||
|
(in
thousands, except share data, taxable equivalent)
|
Second
Quarter
|
First
Quarter
|
Fourth
Quarter
|
Third
Quarter
|
Second
Quarter
|
|||||||||||||||
|
Results
of Operations:
|
||||||||||||||||||||
|
Net
interest income
|
$ |
18,330
|
$ |
18,419
|
$ |
17,913
|
$ |
17,897
|
$ |
17,673
|
||||||||||
|
Net
interest income (tax equivalent)
|
18,722
|
18,565
|
18,065
|
18,046
|
17,716
|
|||||||||||||||
|
Provision
for loan losses
|
936
|
507
|
713
|
713
|
901
|
|||||||||||||||
|
Non-interest
income
|
4,643
|
4,525
|
7,022
|
5,252
|
3,536
|
|||||||||||||||
|
Non-interest
expense
|
13,780
|
14,444
|
15,625
|
13,481
|
12,294
|
|||||||||||||||
|
Net
income
|
5,373
|
5,024
|
5,758
|
5,954
|
5,315
|
|||||||||||||||
|
Selected
Average Balances:
|
||||||||||||||||||||
|
Loans,
net of unearned income
|
$ |
1,511,333
|
$ |
1,458,725
|
$ |
1,377,824
|
$ |
1,351,601
|
$ |
1,289,354
|
||||||||||
|
Investment
securities
|
301,848
|
292,979
|
272,769
|
266,450
|
270,842
|
|||||||||||||||
|
Earning
assets
|
1,862,381
|
1,837,001
|
1,776,925
|
1,682,425
|
1,585,473
|
|||||||||||||||
|
Assets
|
2,030,018
|
2,014,040
|
1,946,772
|
1,851,073
|
1,733,204
|
|||||||||||||||
|
Deposits
|
1,693,020
|
1,688,885
|
1,627,188
|
1,529,441
|
1,418,742
|
|||||||||||||||
|
Shareholders’
equity
|
185,177
|
181,645
|
169,135
|
155,922
|
152,329
|
|||||||||||||||
|
Period-End
Balances:
|
||||||||||||||||||||
|
Loans,
net of unearned income
|
$ |
1,556,862
|
$ |
1,475,869
|
$ |
1,442,951
|
$ |
1,373,071
|
$ |
1,330,713
|
||||||||||
|
Earning
assets
|
1,873,846
|
1,870,687
|
1,861,375
|
1,787,735
|
1,614,638
|
|||||||||||||||
|
Total
assets
|
2,049,073
|
2,036,413
|
2,047,542
|
1,945,904
|
1,783,344
|
|||||||||||||||
|
Deposits
|
1,695,185
|
1,712,507
|
1,710,163
|
1,640,966
|
1,446,128
|
|||||||||||||||
|
Long-term
obligations
|
142,769
|
117,769
|
112,769
|
118,556
|
164,816
|
|||||||||||||||
|
Shareholders’
equity
|
184,099
|
182,764
|
178,732
|
160,440
|
153,002
|
|||||||||||||||
|
Per
Common Share Data:
|
||||||||||||||||||||
|
Earnings
per share-Basic
|
$ |
0.40
|
$ |
0.37
|
$ |
0.44
|
$ |
0.46
|
$ |
0.41
|
||||||||||
|
Earnings
per share – Diluted
|
0.39
|
0.37
|
0.43
|
0.45
|
0.40
|
|||||||||||||||
|
Book
value per share
|
13.60
|
13.51
|
13.24
|
12.31
|
11.75
|
|||||||||||||||
|
End
of period shares outstanding
|
13,541,476
|
13,527,520
|
13,553,002
|
13,033,193
|
13,021,510
|
|||||||||||||||
|
Weighted
average shares outstanding
|
||||||||||||||||||||
|
Basic
|
13,485,683
|
13,443,850
|
13,044,493
|
13,022,400
|
12,985,424
|
|||||||||||||||
|
Diluted
|
13,663,072
|
13,667,509
|
13,269,289
|
13,226,055
|
13,139,130
|
|||||||||||||||
|
Market
Price:
|
||||||||||||||||||||
|
High
Closing Price
|
25.58
|
28.15
|
28.99
|
27.77
|
23.01
|
|||||||||||||||
|
Low
Closing Price
|
21.76
|
23.11
|
25.77
|
20.99
|
20.03
|
|||||||||||||||
|
Closing
Price for Quarter
|
22.47
|
24.33
|
28.18
|
27.07
|
22.91
|
|||||||||||||||
|
Trading
volume (avg. daily)
|
38,941
|
41,130
|
23,016
|
36,957
|
21,949
|
|||||||||||||||
|
Cash
dividends per share
|
0.14
|
0.14
|
0.14
|
0.14
|
0.14
|
|||||||||||||||
|
Price
to earnings
|
14.40
|
16.54
|
16.38
|
14.79
|
14.11
|
|||||||||||||||
|
Price
to book value
|
1.65
|
1.81
|
2.13
|
2.21
|
1.97
|
|||||||||||||||
|
Performance
Ratios:
|
||||||||||||||||||||
|
Return
on average assets
|
1.06 | % | 1.01 | % | 1.17 | % | 1.28 | % | 1.23 | % | ||||||||||
|
Return
on average equity
|
11.64 | % | 11.22 | % | 13.51 | % | 15.15 | % | 14.00 | % | ||||||||||
|
Avg.
loans as % of avg. deposits
|
89.27 | % | 86.18 | % | 84.68 | % | 88.37 | % | 90.88 | % | ||||||||||
|
Net
interest margin (tax equivalent)
|
4.03 | % | 4.10 | % | 4.03 | % | 4.26 | % | 4.48 | % | ||||||||||
|
Average
equity to average assets
|
9.12 | % | 9.02 | % | 8.69 | % | 8.42 | % | 8.74 | % | ||||||||||
|
Efficiency
ratio
|
59.98 | % | 62.95 | % | 62.66 | % | 58.24 | % | 57.97 | % | ||||||||||
Results
of Operations for the Three Months Ended June 30, 2007 and
2006
Interest
Income
Interest
income for the three months ended June 30, 2007 was $35.8 million, an
increase of $6.0 million, or 20.2%, compared to $29.8 million for the
same
period in 2006. Average earning assets for the three month period
increased $276.9 million, or 17.5%, to $1.86 billion as of June 30, 2007,
compared to $1.59 billion as of June 30, 2006. Yield on average
earning assets increased to 7.80% from 7.58% for the quarters ended June
30,
2007 and 2006, respectively. The Company’s increase in interest income is
primarily attributable to higher levels in prevailing interest rates as
well as continued growth from both internal sources and the acquisition
of
Islands Bancorp on December 31, 2006.
Interest
Expense
Interest
expense on deposits for the three months ended June 30, 2007 was $15.5
million,
an increase of $5.6 million from the three months ended June 30, 2006.
Total funding costs for the Company (deposits and wholesale borrowings)
increased $5.4 million, or 44.1%, to $17.5 million for the three months
ended
June 30, 2007, compared to $12.1 million for the three months ended June
30,
2006. Total cost of funding for the Company increased substantially to
3.84% from 3.10% during the second quarter of 2006. The increase in
the cost of funding relates mostly to an aggressive effort by the Company
to
seize market share in larger, metro markets. This aggressive position
on pricing new deposits periodically influences existing balances and
raises the cost of funding by more than just incremental inflows of
deposits. The Company’s focus has been largely centered on demand deposits
(interest-bearing and non interest-bearing) which have increased to $777.2
million or 25.4% from June 30, 2006.
Net
Interest Income
Net
interest income for the three months ended June 30, 2007 increased $657,000
or
3.7%, to $18.3 million compared to the same quarter in 2006. The
Company’s net interest margin decreased over the same period from 4.50% during
the second quarter of 2006 to 4.03% in the second quarter of
2007. The increase in net interest income relates to continued double
digit growth in earning assets, offset somewhat by the lower net interest
margins. Net interest margins in the second quarter of 2006 were
unusually high for the Company as interest rates continued to move higher
during
the quarter and the Company’s balance sheet had higher levels of asset
sensitivity. During
the last half of 2006 and continuing into the first part of 2007 management
took
steps to remove excess levels of asset sensitivity and while current
margins are
lower than historical levels, management believes these levels are less
volatile.
Provision
for Loan Losses
The
provision for loan losses was $936,000 for the three months ended June
30, 2007,
compared to $901,000 for the same quarter in 2006. The amount of provision
for loan losses is determined using the Company’s methodology that grades each
loan and determines the reserve necessary for the portfolio based on
those
grades. Management believes that the present allowance for loan
losses is adequate at June 30, 2007.
Non-interest
Income
Non-interest
income was $4.6 million for the three months ended June 30, 2007, an
increase of
$1.1 million from the amount reported in the second quarter of
2006. Service charges on deposit accounts increased 4.8% to $3.1
million due to higher levels of demand deposits and higher fee structures
implemented during the second half of 2006. Income from mortgage
banking activities increased 61.8% to $799,000 during the second quarter of
2007 when compared to the same quarter in 2006. This increase in
mortgage income relates mostly to the placement of additional mortgage
loan
officers in many of the Company’s markets and increased sales effectiveness from
existing mortgage officers from sales training and referral activity
in the
Bank.
Non-interest
Expense
Non-interest
expenses for the second quarter of 2007 were $13.8 million, an increase
of $1.5
million from the second quarter of 2006. Salaries and employee
benefits increased $1.5 million to $7.5 million during the quarter due
to the
recent acquisition of Islands Bancorp on December 31, 2006 as well as
additional
new hires across the Company’s other growth markets. Occupancy
increased slightly to $1.7 million during the second quarter of 2007
from $1.5
million during the same quarter in 2006. New offices opened during
the last half of 2006, as well as expenses associated with office remodeling,
have contributed to higher levels of occupancy and equipment
expenses. Other non-interest expenses decreased approximately
$231,000 to $4.2 million in the second quarter of 2007 compared to the
second
quarter in 2006. These decreases relate mostly to tighter controls
over discretionary spending in response to lower levels of net interest
margin.
Income
Taxes
The
amount of income tax expense is influenced by the amount of taxable income
and
the amount of tax-exempt income. For the three months ended June 30,
2007 and 2006, the provision for taxes was $2.9 million and $2.7 million,
respectively. The effective tax rates for the three months ended June
30, 2007 and 2006 was 34.9% and 33.7%, respectively.
Results
of Operations for the Six Months Ended June 30, 2007 and
2006
Interest
Income
Interest
income for the six months ended June 30, 2007 was $71.3 million, an increase
of
$14.3 million, or 25.1%, compared to $57.0 million for the same period in
2006. Average earning assets for the six- month period increased $276.9
million, or 17.5%, to $1.86 billion as of June 30, 2007 compared
to $1.59 billion as of June 30, 2006. Yield on average earning assets
increased 64 basis points to 7.83% from 7.36% for the six months ended
June 30,
2007 and 2006, respectively.
Interest
Expense
Interest
expense on deposits and other borrowings for the six months ended June 30,
2007 was $34.5 million, an $11.6 million, or 50.7%, increase from June
30, 2006. While average interest bearing liabilities increased $261.4
million, or 19.1% to $1.63 billion for the six months ended June 30,
2007 compared to $1.37 billion for the six months ended June 30,
2006, the yield on average interest bearing liabilities increased 89
basis
points to 4.27% from 3.38% as of June 30, 2007 and 2006, respectively.
The
increases in interest expense are driven primarily by a higher
interest rate environment and a more aggressive stance on deposit
sales.
Net
Interest Income
Net
interest income for the six months ended June 30, 2007 increased $2.7
million,
or 7.9%, to $36.7 million compared to $34.0 million for the same period
ending June 30, 2006. The Company’s net interest margin decreased to 4.07%
for the six months ended June 30, 2007 compared to 4.41% as of June 30,
2006.
Provision
for Loan Losses
The
provision for loan losses was unchanged at $1.4 million for the six months
ended
June 30, 2007 as compared to the same period in 2006. Total non-performing
assets increased to $18.3 million at June 30, 2007 from $9.3 million
at June 30,
2006. For the six month period ending June 30, 2007, Ameris had net
charge-offs of $1.3 million compared to $339,000 for the same period
in
2006. Changes in credit quality are discussed further under the heading
"Loans and Allowance for Loan Losses".
Non-interest
Income
Non-interest
income for the first six months of 2007 was up $1.7 million, or 23.4%,
compared to the same time period a year ago. Service charges on deposit
accounts increased 6.8%, or $379,000 due to higher number of deposit
accounts. Mortgage banking activities include origination fees, service
release premiums and the gain on the sales of mortgage loans held-for-sale.
Mortgage banking activities for the six months ended June 30, 2007 totaled
$1.5
million, an increase of $534,000 or 56.4%, compared to $948,000 in the
six
months ended June 30, 2006. During the second quarter of 2006, the
Company recognized a $315,000 loss on the sale of securities to restructure
a
portion of the investment portfolio with no similar gain or loss during
2007.
Non-interest
Expense
Non-interest
expense for the first six months of 2007 was $28.2 million. This
represents a $3.8 million increase over the prior year period which totaled
$24.4 million. The increase in non-interest expense is attributable to
salaries and employee benefits increasing $2.6 million, net occupancy
and
equipment increasing $497,000, amortization expense increasing $208,000
and
other expense increasing $581,000.
At
June
30, 2007, Ameris had 604 full-time equivalent employees compared to 585
full-time equivalent employees at June 30, 2006. The Company continues to
be successful in its efforts to hire seasoned professionals in production
and
management positions. Recruiting efforts were successful in Jacksonville,
Florida with the hiring of commercial lending and mortgage bankers to
staff the
Company’s new branch that opened December 1, 2006. Initial efforts also were
successful in South Carolina as Ameris hired several very seasoned bankers
to
lead the Company’s efforts in both the greater Columbia and Charleston markets.
The Company is also continuing its efforts to expand production capacity
and
build greater market share in its larger, more metropolitan markets while
reducing the number of back office and non-customer contact roles.
Salaries
and employee benefits for the six months ended June 30, 2007 were $2.6
million
higher than during the same period in 2006. The majority of this increase
is attributable to the acquisition of Islands Bancorp on December 31,
2006, as
well as additional new hires across the Company’s other growth
markets.
Occupancy
and equipment expense increased $497,000 to $3.4 million for the six months
ended June 30, 2007 as compared to the same period of 2006. New offices
opened
during the last half of 2006, as well as limited remodeling expenses,
contributed to higher levels of occupancy and equipment expenses.
Other
expenses for the six months ended June 30, 2007 increased $581,000 when
compared
to the same time period for 2006. Most of this increase is attributable to
additional expenses related to the new presence in South Carolina.
The
Company’s efficiency ratio (operating expenses as a percent of total revenue)
increased to 59.98% for the six months ended June 30, 2007 from 58.75%
for the
six months ended June 30, 2006.
Income
Taxes
The
amount of income tax expense is influenced by the amount of taxable income
and
the amount of tax-exempt income. For the six months ended June 30, 2007
and
2006, the provision for taxes was $5.9 million and $5.3 million, respectively.
The effective tax rate for the six months ended June 30, 2007 was 36.0%
compared
to 33.7% for the same period in 2006.
Capital
Capital
management consists of providing equity to support both current and anticipated
future operations. The Company is subject to capital adequacy
requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia
Department of Banking and Finance (the “GDBF”), and the Bank is subject to
capital adequacy requirements imposed by the Federal Deposit Insurance
Corporation (the “FDIC”), and the GDBF.
The
FRB,
the FDIC, and the GDBF have adopted risk-based capital requirements for
assessing bank holding company and bank capital adequacy. These
standards define and establish minimum capital requirements in relation
to
assets and off-balance sheet exposure, adjusted for credit risk. The
risk-based capital standards currently in effect are designed to make
regulatory
capital requirements more sensitive to differences in risk profiles among
bank
holding companies and banks and to account for off-balance sheet
exposure.
The
minimum requirements established by the regulators are set forth in the
table
below, along with the actual ratios at June 30, 2007 and 2006.
|
Well
Capitalized Requirement
|
Adequately
Capitalized Requirement
|
June
30, 2007 Actual
|
June
30, 2006 Actual
|
|||||||
|
Tier
1 Capital (to Average Assets)
|
≥5%
|
≥4%
|
8.59 | % | 8.63 | % | ||||
|
Tier
1 Capital (to Risk Weighted Assets)
|
≥6%
|
≥4%
|
10.74 | % | 10.75 | % | ||||
|
Total
Capital (to Risk Weighted Assets)
|
≥10%
|
≥8%
|
11.99 | % | 12.01 | % | ||||
Management
believes that the Company and the Bank met all capital requirements to
which they are subject as of June 30, 2007.
Loans
and Allowance for Loan Losses
At
June
30, 2007, gross loans outstanding were $1.56 billion, an increase of
$226.1
million, or 17.0%, over gross loans at June 30, 2006. The growth in the
loan portfolio was attributable to a consistent focus on quality loan
production
and expansion into faster growing markets over the past couple
years. The Company constantly 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 primarily focuses on the following loan categories: (1) commercial
and
financial, (2) real estate construction, (3) residential mortgage,
(4)
commercial real estate, (5) agricultural and farmland related, and
(6) consumer
loans. The Company’s management has strategically located its
branches in Georgia, Florida, Alabama and South Carolina and has taken
advantage of the growth in these areas.
The
allowance for loan losses is a reserve established through charges
to earnings
in the form of a provision for loan losses. The provision for loan
losses is based on management’s evaluation of the size and composition of the
loan portfolio, the level of non-performing and past due loans, historical
trends of charged-off loans and recoveries, prevailing economic conditions
and
other factors management deems appropriate. The Company’s management
has established an allowance for loan losses which it believes is adequate
for
the risk of loss inherent in the loan portfolio. Based on a credit
evaluation of the loan portfolio, management presents a monthly review
of the
allowance for loan losses to the Company’s Board of Directors. The
review that management has developed primarily focuses on risk by evaluating
the
level of loans in certain risk categories that management quantifies
through the
use of eight loan grades. By grading the loan portfolio in this
manner the Company’s management is able to effectively evaluate the portfolio by
risk, which management believes is the most effective way to analyze
the loan
portfolio and thus analyze the adequacy of the allowance for loan
losses.
The
Company’s risk management processes include a loan review program designed
to
evaluate the credit risk in the loan portfolio and insure credit grade
accuracy. Through the loan review process, the Company maintains a
loan portfolio summary analysis, charge-off and recoveries analysis,
trends in
accruing problem loan analysis, and problem and past due loan analysis
which
serve as tools to assist management in assessing the overall quality
of the loan
portfolio and the adequacy of the allowance for loan losses. Loans
classified as “substandard” are loans which are inadequately protected by the
current sound worth and paying capacity of the borrower or of the collateral
pledged. These assets exhibit a well-defined weakness or are
characterized by the distinct possibility that the Company will sustain
some
loss if the deficiencies are not corrected. These weaknesses may be
characterized by past due performance, operating losses and/or questionable
collateral values. Loans classified as “doubtful” are those loans
that have characteristics similar to substandard loans but have an
increased
risk of loss. Loans classified as “loss” are those loans which are
considered uncollectible and are in the process of being
charged-off.
The
allowance for loan losses is established by examining (1) the large
classified
loans, nonaccrual loans and loans considered impaired and evaluating
them
individually to determine the specific reserve allocation, and (2)
the remainder
of the loan portfolio to allocate a portion of the allowance based
on past loss
experience and the economic conditions for the particular loan
category. The Company will also consider other factors such as
changes in lending policies and procedures; changes in national, regional,
and/or local economic and business conditions; changes in the nature
and volume
of the loan portfolio; changes in the experience, ability and debt
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
necessary. Historically, we believe our estimates of the level of
allowance for loan losses required have been appropriate and our expectation
is that the primary factors considered in the provision calculation will
continue to be consistent with prior trends.
For
the
six month period ending June 30, 2007, the Company recorded net
charge-offs totaling $1.3 million for the period compared to $339,000 for
the same period in 2006. The
majority of the charge-offs recorded during the first six months of
2007 relate
to loans where management had previously identified a problem and accrued
certain specific reserves through the provision for loan losses.
The provision for loan losses was $1.4 million for both the
six month
periods ended June 30, 2007 and 2006. The allowance for loan losses
totaled $25.0 million, or 1.61% of total loans at June 30, 2007, compared
to $23.4 million, or 1.76% of total loans, at June 30, 2006.
The
following table presents an analysis of the allowance for loan losses
for the
six month periods ended June 30, 2007 and 2006:
|
(dollars
in thousands)
|
June
30, 2007
|
June
30, 2006
|
||||||
|
Balance
of allowance for loan losses at beginning of period
|
$ |
24,863
|
$ |
22,294
|
||||
|
Provision
charged to operating expense
|
1,444
|
1,411
|
||||||
|
Charge-offs:
|
||||||||
|
Commercial
|
1,312
|
334
|
||||||
|
Installment
|
228
|
330
|
||||||
|
Real
estate
|
573
|
1,019
|
||||||
|
Agriculture
|
0
|
3
|
||||||
|
Other
|
0
|
72
|
||||||
|
Total
charge-offs
|
2,113
|
1,758
|
||||||
|
Recoveries:
|
||||||||
|
Commercial
|
549
|
691
|
||||||
|
Installment
|
221
|
309
|
||||||
|
Real
estate
|
68
|
362
|
||||||
|
Agriculture
|
0
|
32
|
||||||
|
Other
|
0
|
25
|
||||||
|
Total
recoveries
|
838
|
1,419
|
||||||
|
Net
charge-offs (recoveries)
|
1,275
|
339
|
||||||
|
Balance
of allowance for loan losses at end of period
|
$ |
25,032
|
$ |
23,366
|
||||
|
Net
annualized (charge-offs) recoveries as a percentage of average
loans
|
0.16 | % | 0.05 | % | ||||
|
Reserve
for loan losses as a percentage of loans at end of period
|
1.61 | % | 1.76 | % | ||||
Non-Performing
Assets
Non-performing
assets include nonaccrual loans, accruing loans contractually past
due 90 days
or more, repossessed personal property, and other real estate. Loans
are placed on nonaccrual status when management has concerns relating
to the
ability to collect the principal and interest and generally when such
loans are
90 days or more past due. A loan is considered impaired when it is
probable that not all principal and interest amounts will be collected
according
to the loan contract. When a loan is placed on nonaccrual status, any
interest previously accrued but not collected is reversed against current
income.
Non-performing
assets increased to $18.3 million at June 30, 2007 from $8.7 million
at December
31, 2006. The majority of this increase involves two loan relationships
that
management believes are reserved for adequately based on exhaustive
reviews of
borrower strength and collateral values.
|
(dollars
in thousands)
|
June
30, 2007
|
December
31, 2006
|
||||||
|
Total
nonaccrual loans
|
$ |
16,201
|
$ |
6,877
|
||||
|
Accruing
loans delinquent 90 days or more
|
-
|
-
|
||||||
|
Other
real estate owned and repossessed collateral
|
2,084
|
1,838
|
||||||
|
Total
non-performing assets
|
$ |
18,285
|
$ |
8,715
|
||||
Interest
Rate Sensitivity and Liquidity
The
Company’s primary market risk exposures are credit, interest rate risk and
to a
lesser degree, liquidity risk. The Bank operates under an Asset
Liability Management Policy approved by the Company’s Board of Directors and the
Asset and Liability Committee (the “ALCO Committee”). The policy
outlines limits on interest rate risk in terms of changes in net interest
income
and changes in the net market values of assets and liabilities over
certain
changes in interest rate environments. These measurements are made
through a simulation model which projects the impact of changes in
interest
rates on the Bank’s assets and liabilities. The policy also outlines
responsibility for monitoring interest rate risk, and the process for
the
approval, implementation and monitoring of interest rate risk strategies
to
achieve the Bank’s interest rate risk objectives.
The
ALCO
Committee is comprised of senior officers of Ameris and two outside
members of
the Company’s Board of Directors. The ALCO Committee monitors
strategic decisions with respect to the sources and uses of funds that
may
affect net interest income, including net interest spread and net interest
margin. The objective of the ALCO Committee is to identify the
interest rate, liquidity and market value risks of the Company’s balance sheet
and use reasonable methods approved by the Company’s board and executive
management to minimize those identified risks.
The
normal course of business activity exposes the Company to interest
rate
risk. Interest rate risk is managed within an overall asset and
liability framework for the Company. The principal objectives of
asset and liability management are to predict the sensitivity of net
interest
spreads to potential changes in interest rates, control risk and enhance
profitability. Funding positions are kept within predetermined limits
designed to properly manage risk and liquidity. The Company employs
sensitivity analysis in the form of a net interest income simulation
to help
characterize the market risk arising from changes in interest
rates. In addition, fluctuations in interest rates usually result in
changes in the fair market value of the Company’s financial instruments, cash
flows and net interest income. The Company’s interest rate risk
position is monitored 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 Federal Home Loan Bank stock for
the purpose of establishing credit lines with the Federal Home Loan
Bank. The credit availability to the Bank is equal to 20% of the
Bank’s total assets as reported on the most recent quarterly financial
information submitted to the regulators subject to the pledging of
sufficient
collateral. At June 30, 2007, there were $101.4 million in advances
outstanding with the Federal Home Loan Bank.
The
following liquidity ratios compare certain assets and liabilities to
total
deposits or total assets:
|
June
30,
2007
|
March
31,
2007
|
December
31, 2006
|
September
30, 2006
|
June
30,
2006
|
||||||||||||||||
|
Total
securities to total deposits
|
17.74 | % | 17.54 | % | 16.55 | % | 16.24 | % | 17.79 | % | ||||||||||
|
Total
loans (net of unearned income) to total deposits
|
91.84 | % | 86.18 | % | 84.37 | % | 83.67 | % | 92.02 | % | ||||||||||
|
Interest-earning
assets to total assets
|
91.44 | % | 91.86 | % | 90.90 | % | 91.87 | % | 90.54 | % | ||||||||||
|
Interest-bearing
deposits to total deposits
|
88.15 | % | 88.45 | % | 87.04 | % | 86.17 | % | 86.07 | % | ||||||||||
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 June
30, 2007 were considered satisfactory. The Company is aware of no
events or trends likely to result in a material change in
liquidity.
The
Company is exposed only to U. S. dollar interest rate changes, and,
accordingly,
the Company manages exposure by considering the possible changes in
the net
interest margin. The Company does not have any trading instruments
nor does it classify any portion of the investment portfolio as held
for
trading. The Company’s hedging activities are limited to cash flow
hedges and are part of the Company’s program to manage interest rate
sensitivity. At June 30, 2007, the Company had two effective interest
rate floors with notional amounts totaling $70 million. These floors
are hedging specific cash flows associated with certain variable rate
loans and
have strike rates of 7.00%. Maturities range from September 2009 to
September 2011. Finally, the Company has no exposure to foreign
currency exchange rate risk, commodity price risk and other market
risks.
Interest
rates play a major part in the net interest income of a financial
institution. The sensitivity to rate changes is known as “interest
rate risk”. The repricing of interest-earning assets and interest-bearing
liabilities can influence the changes in net interest income. As part
of the Company’s asset/liability management program, the timing of repriced
assets and liabilities is referred to as "Gap management".
The
Company uses simulation analysis to monitor changes in net interest
income due
to changes in market interest rates. The simulation of rising,
declining and flat interest rate scenarios allows management to monitor
and
adjust interest rate sensitivity to minimize the impact of market interest
rate
swings. The analysis of the impact on net interest income over a
twelve-month period is subjected to a gradual 200 basis point increase or
decrease in market rates on net interest income and is monitored on
a quarterly
basis.
Additional
information required by Item 305 of Regulation S-K is set forth under
Item 2 of
this report.
Item
4. Controls and Procedures
The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated
the
Company’s disclosure controls and procedures (as such term is defined in Rules
13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act
of 1934, as
amended (the “Exchange Act”)), as of the end of the period covered by this
report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the
Exchange
Act. Based on such evaluation, such officers have concluded that, as
of the end of the period covered by this report, the Company’s disclosure
controls and procedures are effective.
During
the quarter ended June 30, 2007, there was not any change in the Company’s
internal control over financial reporting identified in connection
with the
evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the
Exchange
Act that has materially affected, or is reasonably likely to materially
affect,
the Company’s internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
None.
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, 2007.
year ended December 31, 2007.
None.
No
matter was
submitted to a vote of our security holders by solicitation of proxies
or
otherwise during the second quarter of 2007.
Item
5. Other Information
None.
Item
6. Exhibits
The
following are filed with this report.
|
|
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
|
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: August
9, 2007
|
|
| /s/Dennis J. Zember, Jr. | |
|
Dennis
J. Zember, Jr.,
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
(duly
authorized signatory and principal financial
officer)
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
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
|