Ameris Bancorp Announces Third Quarter 2012 Financial Results

MOULTRIE, Ga., Oct. 23, 2012 /PRNewswire/ -- AMERIS BANCORP (NASDAQ-GS: ABCB), today reported net income of $1.1 million, or $0.04 per diluted share, for the quarter ended September 30, 2012, compared to $15.6 million, or $0.66 per diluted share, for the quarter ended September 30, 2011.  For the year to date period ending September 30, 2012, the Company reported net income available to common shareholders of $7.3 million, or $0.30 per diluted share, compared to $17.5 million, or $0.74 per diluted share, for the same period in 2011.  Income in the third quarter of 2011 included an after-tax gain of $17.5 million related to an FDIC-assisted acquisition. 

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Highlights of the results of the third quarter of 2012 include:

  • Legacy loans increased $74.4 million during the third quarter, representing a 21.7% annualized growth rate.
  • The Company completed its tenth FDIC-assisted transaction during the third quarter of 2012.
  • The Company's net interest margin remained strong, at 4.52% during the third quarter of 2012.
  • Total revenue (excluding gains and non-recurring adjustments) increased to $38.1 million in the third quarter of 2012, compared to $37.8 million in the second quarter of 2012.
  • Non-performing assets declined 35% from December 31, 2011.
  • Legacy classified loans decreased $28.6 million, or 28%, from December 31, 2011.
  • Annualized net charge-offs for the current quarter declined to 1.65% of total loans, compared to 2.23% for the year ended December 31, 2011.
  • "In-migration" of new legacy problem loans amounted to $9.7 million, compared to $9.4 million in the second quarter of 2012 and $12.5 million in the first quarter of 2012.

Operating Results

Net income in the third quarter of 2012 totaled $1.9 million before preferred dividends, a decrease when compared to the same quarter in 2011, resulting from the $26.9 million pre-tax gain on acquisitions recorded in the third quarter of 2011.  For the year to date period, the Company's earnings before preferred dividends were $9.8 million, compared to $20.0 million in the year to date period in 2011. 

Net Interest Income and Net Interest Margin

Net interest income during the third quarter of 2012 totaled $28.2 million, an increase of $436,000, or 1.57%, compared to the $27.8 million reported for the third quarter of 2011.  During the third quarter of 2012, the Company's net interest margin increased to 4.52%, compared to 4.44% during the same quarter of 2011.  Lower yields on most earning asset classes have been offset by lower funding costs and better allocation of earning assets.

Earning assets totaled $2.44 billion at the end of the third quarter of 2012, compared to $2.48 billion at the end of the third quarter of 2011.  Although earning assets declined by 1.7% during the current year, loans and investment securities increased.  Loans comprised 81.3% of total earning assets in the current quarter, compared to 79.1% in the same quarter in 2011, while investment securities have grown from 14.2% of total earning assets at September 30, 2011 to 15.1% at September 30, 2012.

Legacy loan yields continued to show little dilution, averaging 5.64% in the current quarter, compared to 5.34% in the same quarter of 2011.  Covered loan yields declined from 9.04% in the third quarter of 2011 to 6.19% in the third quarter of 2012.  The decline in covered loan yields relates mostly to one-time adjustments made during the third quarter of 2011 associated with certain fair value determinations.

The Company has offset the declines in earning asset yields with corresponding declines in funding costs.  Deposit costs, the Company's largest funding expense, declined from 0.97% in the third quarter of 2011, to 0.46% in the third quarter of 2012.  This decline relates to continued shifts in deposit mix, favoring lower cost transaction accounts and non-interest bearing balances, as well as lower market rates in our communities.  The Company anticipates a continued downward trend on funding costs, albeit at a slower pace.

Non-Interest Income

Recurring non-interest income (excluding gains on acquisitions) totaled $9.83 million during the third quarter of 2012, compared to $7.08 million during the third quarter of 2011, representing a 38.9% increase.  The Company's mortgage operations contributed significantly to the increase in non-interest income, growing $2.8 million when compared to the same quarter in 2011.  Higher volumes, mostly from growth in staffing levels over the past twelve months, led to the increase.  During the third quarter, the Company recruited a talented correspondent mortgage team to Ameris Bank and accelerated the process of delivering wholesale mortgage services to banks, credit unions and select mortgage brokers.  Mortgage pipelines continued to grow throughout the quarter, with a majority of the business from purchase transactions rather than refinance transactions.

Service charges increased to $5.12 million during the third quarter of 2012, compared to $4.67 million in the third quarter of 2011.  This 9.8% increase was driven by higher balances in accounts subject to service charges, as well as continued growth of core accounts through the Company's FDIC-assisted acquisition strategy.

Non-Interest Expense

Non-interest expenses totaled $28.8 million in the third quarter of 2012, a decline from $29.5 million reported for the third quarter of 2011.  The decrease in total operating expenses was primarily the result of declining credit related expenses, which fell to $3.7 million in the current quarter, compared to $9.0 million in the third quarter of 2011. Excluding credit related expenses, non-interest expense totaled $25.1 million in the third quarter of 2012, compared to $20.5 million in the third quarter of 2011. 

Trends in operating expenses have been heavily influenced by several factors.  First, the Company's mortgage strategy began in earnest in the second quarter of 2011 and has been growing steadily since that time.  As noted above, mortgage revenue has increased substantially during 2012, growing from $903,000 in the third quarter of 2011 to $3.7 million in the current period.  Costs associated with this strategy have increased as well.  Mortgage related costs, much of which are compensation costs, increased by $1.9 million in the third quarter of 2012 to $2.9 million.  Management expects continued growth in revenue from this strategy with moderating growth rates in expenses, as the platform is substantially in place and able to be leveraged.

In addition, the Company's consistent participation in failed bank transactions has caused faster growth in branches and branch operations than desired and contractual agreements with the FDIC restrict the Company's ability to consolidate branches acquired in FDIC-assisted transactions for a period of one year from the date of acquisition.  Current period numbers include $3.2 million of year to date total expenses ($1.6 million of which is compensation) related to the two transactions completed this year that is not included in prior periods. 

During the third quarter of 2012, the Company identified several branches for consolidation beginning in the fourth quarter with estimated annual expense reductions totaling approximately $2.0 million.  Additionally, other efficiencies resulting from re-engineered processes or redistribution of work duties were identified that the Company anticipates will result in $2.5 million of savings beginning in the latter part of the fourth quarter of 2012.  Further assessment of the Company's operations and branch infrastructure is underway in an effort to prepare for an extended low rate environment and to deliver higher shareholder returns.

Balance Sheet Trends

At September 30, 2012, the Company reported total assets of $2.95 billion, a slight decrease from the $3.0 billion reported at September 30, 2011.  Total loans at September 30, 2012 increased to $1.99 billion, compared to $1.96 billion at September 30, 2011.  Legacy loans, including mortgage loans held for sale, have increased 9.3% since December 31, 2011, surpassing management's estimate of 5% to 8% loan growth for 2012.  During the most recent linked quarter, legacy loans increased $74.4 million, or 21.7% on an annualized basis, to $1.44 billion

Management expects continued growth in loan balances, sufficient to offset declines in covered and non-performing assets.  Growth from core operations, as well as certain lines of business, in the coming year is anticipated to be similar to or slightly higher than year to date growth rates seen in 2012.

Total deposits increased $35.4 million during the third quarter of 2012, from $2.54 billion at June 30, 2012 to $2.58 billion at September 30, 2012.  The majority of the deposit growth was seen in non-interest bearing deposits, while interest bearing deposits remained stable at $2.12 billion.  Non-interest bearing deposits increased to $464.5 million, from $354.4 million at the same time in 2011.  Growth in non-interest bearing balances of 31.1% over the last year has resulted from continued acquisition of deposits related to FDIC-assisted acquisitions and the consistent efforts of the Company's business deposit sales teams.

Shareholders' equity was $299.2 million at the end of the third quarter of 2012, an increase of $5.4 million when compared to balances at December 31, 2011.  At September 30, 2012, the Company's tangible common equity to tangible assets was 8.27%, compared to 7.99% at December 31, 2011.  Tangible book value increased to $10.23 per share at the end of the third quarter of 2012 compared to $10.06 at December 31, 2011.

During the third quarter of 2012, the Company repurchased the warrant providing for the purchase of approximately 700,000 common shares, issued as part of the Company's participation in the United States Treasury's Capital Purchase Program in 2008, for $2.67 million.  As previously reported, the Company's preferred stock issued to the Treasury in 2008 was auctioned to private investors for approximately 93.1% of par value in June of this year.  The Company continues to evaluate repayment strategies to potentially retire the preferred stock before the dividend rate increases to 9.0% in February 2014.  No increase in outstanding shares is needed to retire this preferred stock.

Credit Quality

Non-performing assets at the end of the third quarter of 2012 declined to $75.9 million, compared to $117.5 million at December 31, 2011.  Non-performing loans declined to $38.2 million at September 30, 2012, compared to $70.8 million at the end of 2011.

Net charge-offs on loans during the third quarter of 2012 were $6.0 million, or 1.65% annualized as a percentage of legacy loans, compared to $8.6 million during the second quarter of 2012 and $6.8 million during the third quarter of 2011.  The Company's provision for loan losses during the third quarter of 2012 amounted to $6.5 million, a decrease of $1.0 million as compared to the $7.5 million posted in the third quarter of 2011.  Approximately $850,000 of the current quarter's provision for loan losses related to decreases in expected cash flows from recent FDIC-assisted transactions.  At September 30, 2012, the Company's loan loss allowance totaled $25.9 million, or 1.80% of legacy loans, compared to $35.2 million, or 2.64% of legacy loans, at the end of 2011. 

Ameris Bancorp is headquartered in Moultrie, Georgia, and at the end of the most recent quarter had 66 locations in Georgia, Alabama, northern Florida and South Carolina.

This news release contains certain performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management of Ameris Bancorp (the "Company") uses these non-GAAP measures in its analysis of the Company's performance. These measures are useful when evaluating the underlying performance and efficiency of the Company's operations and balance sheet. The Company's management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company's management believes that investors may use these non-GAAP financial measures to evaluate the Company's financial performance without the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.