Edgar Filing: Ameris Bancorp

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Form 10-Q

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, 2011

¨	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 ¨ 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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ¨ No x

There were 23,766,044 shares of Common Stock outstanding as of April 30, 2011.

AMERIS BANCORP

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION		Page

Item 1.	Financial Statements.

	Consolidated Balance Sheets at March 31, 2011, December 31, 2010 and March 31, 2010		3

	Consolidated Statements of Operations and Comprehensive Income/(Loss) for the Three Month Period Ended March 31, 2011 and 2010		4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2011 and 2010		5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		37

Item 4.	Controls and Procedures.		37

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.		38

Item 1A.	Risk Factors.		38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		38

Item 3.	Defaults Upon Senior Securities.		38

Item 4.	(Removed and Reserved).		38

Item 5.	Other Information.		38

Item 6.	Exhibits.		38

Signatures			39

Item 1.

Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	March 31, 2011			December 31, 2010			March 31, 2010
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	88,386		$	74,326		$	68,851
Federal funds sold and interest bearing accounts		264,508			261,262			200,942
Investment securities available for sale, at fair value		305,620			322,581			248,013
Other investments		12,436			12,440			7,260

Loans		1,345,981			1,374,757			1,536,528
Covered loans		526,012			554,991			120,364
Less: allowance for loan losses		35,443			34,576			33,563

Loans, net		1,836,550			1,895,172			1,623,329


Other real estate owned		62,258			57,915			34,683
Covered other real estate owned		59,757			54,931			17,863

Total other real estate owned		122,015			112,846			52,546


Premises and equipment, net		66,359			66,589			66,523
FDIC loss-share receivable		167,176			177,187			45,827
Intangible assets		3,973			4,261			3,364
Goodwill		956			956			—
Other assets		50,444			44,548			34,995

Total assets	$	2,918,423		$	2,972,168		$	2,351,650


Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	316,060		$	301,971		$	222,454
Interest-bearing		2,256,629			2,233,455			1,865,852

Total deposits		2,572,689			2,535,426			2,088,306
Securities sold under agreements to repurchase		20,257			68,184			20,640
Other borrowings		—			43,495			2,000
Other liabilities		9,351			9,387			5,082
Subordinated deferrable interest debentures		42,269			42,269			42,269

Total liabilities		2,644,566			2,698,761			2,158,297

Commitments and contingencies

Stockholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 52,000 shares issued and outstanding		50,269			50,121			49,691
Common stock, par value $1; 30,000,000 shares authorized; 25,102,218, 24,982,911 and 15,486,187 issued		25,102			24,983			15,486
Capital surplus		165,995			165,930			89,419
Retained earnings		37,580			37,000			41,893
Accumulated other comprehensive income		5,742			6,204			7,676
Treasury stock, at cost, 1,336,174, 1,336,174 and 1,334,234 shares		(10,831	)		(10,831	)		(10,812	)

Total stockholders’ equity		273,857			273,407			193,353

Total liabilities and stockholders’ equity	$	2,918,423		$	2,972,168		$	2,351,650

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
Interest income
Interest and fees on loans	$	28,971		$	25,156
Interest on taxable securities		2,658			2,462
Interest on nontaxable securities		320			304
Interest on deposits in other banks		175			57
Interest on federal funds sold		13			12

Total interest income		32,137			27,991


Interest expense
Interest on deposits		7,375			7,332
Interest on other borrowings		555			246

Total interest expense		7,930			7,578


Net interest income		24,207			20,413
Provision for loan losses		7,043			10,770

Net interest income after provision for loan losses		17,164			9,643


Noninterest income
Service charges on deposit accounts		4,267			3,439
Mortgage origination fees		450			554
Other service charges, commissions and fees		239			213
Gain on sale of securities		224			200
Other		1,013			479

Total noninterest income		6,193			4,885


Noninterest expense
Salaries and employee benefits		9,843			7,826
Occupancy and equipment expense		2,730			2,027
Advertising and marketing expense		163			159
Amortization of intangible assets		263			271
Data processing and communications costs		2,396			1,763
Other operating expenses		5,760			4,885

Total noninterest expense		21,155			16,931


Income (loss) before income tax expense (benefit)		2,202			(2,403	)
Applicable income tax expense (benefit)		824			(869	)

Net income (loss)	$	1,378		$	(1,534	)

Preferred stock dividends		798			796

Net income (loss) available to common stockholders	$	580		$	(2,330	)


Other comprehensive income (loss)
Unrealized holding gain/(loss) arising during period on investment securities available for sale, net of tax		(262	)		699
Unrealized loss on cash flow hedges arising during period , net of tax		(54	)		(133	)
Reclassification adjustment for gains included in net income, net of tax		(146	)		(130	)

Other comprehensive income (loss)	$	(462	)	$	436

Comprehensive income (loss)	$	118		$	(1,894	)

Basic and Diluted earnings/(loss) per share	$	0.02		$	(0.17	)

Weighted average common shares outstanding
Basic		23,440			13,840
Diluted		23,474			13,840

See notes to unaudited consolidated financial statements

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, 2011						March 31, 2010
	Shares			Amount			Shares			Amount
PREFERRED STOCK
Balance at beginning of period		52,000		$	50,121			52,000		$	49,552
Accretion of fair value of warrant		—			148			—			139

*Balance at end of period*		52,000		$	50,269			52,000		$	49,691

COMMON STOCK
Balance at beginning of period		24,982,911		$	24,983			15,379,131		$	15,379
Issuance of restricted shares		125,075			125			113,800			114
Cancellation of restricted shares		(7,000	)		(7	)		(7,500	)		(8	)
Proceeds from exercise of stock options		1,232			1			756			1

*Balance at end of period*		25,102,218		$	25,102			15,486,187		$	15,486

CAPITAL SURPLUS
Balance at beginning of period				$	165,930					$	89,389
Stock-based compensation					174						136
Proceeds from exercise of stock options					9						—
Issuance of restricted shares					(125	)					(114	)
Cancellation of restricted shares					7						8

*Balance at end of period*				$	165,995					$	89,419

RETAINED EARNINGS
Balance at beginning of period				$	37,000					$	44,216
Net income/(loss)					1,378						(1,534	)
Dividends on preferred shares					(650	)					(650	)
Accretion of fair value warrant					(148	)					(139	)

*Balance at end of period*				$	37,580					$	41,893

ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Unrealized gains (losses) on securities and derivatives:
Balance at beginning of period				$	6,204					$	7,240
Accumulated other comprehensive income					(462	)					436

*Balance at end of period*				$	5,742					$	7,676

TREASURY STOCK
Balance at beginning of period				$	10,831					$	10,812
Purchase of treasury shares					—						—

*Balance at end of period*				$	10,831					$	10,812

*TOTAL STOCKHOLDERS’ EQUITY*				$	273,857					$	193,353

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	1,378		$	(1,534	)
Adjustments reconciling net loss to net cash provided by operating activities:
Depreciation		1,112			943
Net gains on sale or disposal of premises and equipment		(189	)		(249	)
Net losses or write-downs on sale of other real estate owned		33			1,072
Provision for loan losses		7,043			10,770
Amortization of intangible assets		288			222
Net gains on securities available for sale		(224	)		(200	)
Other prepaids, deferrals and accruals, net		(187	)		(2,156	)

Net cash provided by operating activities		9,254			8,868


Cash flows from investing activities:
Net (increase) decrease in federal funds sold and interest bearing deposits		(3,246	)		19,421
Proceeds from maturities of securities available for sale		12,922			14,392
Purchase of securities available for sale		(19,869	)		(22,174	)
Proceeds from sales of securities available for sale		23,503			6,145
Net decrease in loans		37,682			26,540
Proceeds from sales of other real estate owned		9,306			4,253
Proceeds from sales of premises and equipment		344			772
Purchases of premises and equipment		(1,037	)		(352	)

Net cash provided by investing activities		59,605			48,997


Cash Flows From Financing Activities:
Net increase (decrease) in deposits		37,263			(34,810	)
Net increase (decrease) in securities sold under agreements to repurchase		(47,927	)		(34,614	)
Repayment of other borrowings		(43,495	)		—
Dividends paid - preferred stock		(650	)		(650	)
Proceeds from exercise of stock options		10			—

Net cash used in financing activities		(54,799	)		(70,074	)


Net increase (decrease) in cash and due from banks	$	14,060		$	(12,209	)

Cash and due from banks at beginning of period		74,326			81,060


Cash and due from banks at end of period	$	88,386		$	68,851

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

(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, 2011 the Bank operated 59 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. Ameris’ Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within Ameris’ established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of their unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended March 31, 2011 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, 2010.

Certain amounts reported for the periods ended December 31, 2010 and March 31, 2010 have been reclassified to conform to the presentation as of March 31, 2011. These reclassifications had no effect on previously reported net income or stockholders’ equity.

Newly Adopted Accounting Pronouncements

ASU 2010-18 – Effect of a Loan Modification When the Loan is Part of a Pool that is Accounted for as a Single Asset (“ASU 2010-18”). ASU 2010-18 provides guidance on the accounting for loan modifications when the loan is part of a pool of loans accounted for as a single asset such as acquired loans that have evidence of credit deterioration upon acquisition that are accounted for under the guidance in ASC 310-30. ASU 2010-18 addresses diversity in practice on whether a loan that is part of a pool of loans accounted for as a single asset should be removed from that pool upon a modification that would constitute a troubled debt restructuring or remain in the pool after modification. ASU 2010-18 clarifies that modifications of loans that are accounted for within a pool under ASC 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if the expected cash flows for the pool change. The amendments in this update do not require any additional disclosures and are effective for modifications of loans accounted for within pools under ASC 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. ASU 2010-18 will not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2010-20 – Disclosures about the Credit Quality of Financing Receivable and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 amends existing disclosure guidance to require an entity to provide a greater level of disaggregated information about the credit quality of its financing receivables and its allowance for credit losses. ASU 2010-20 is effective for fiscal and interim periods ending after December 15, 2010. ASU 2010-20 did not have a material impact on the Company’s results of operations or financial position but had a significant impact on the disclosures found in Note 3.

ASU 2010-28 – When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 requires entities with reporting units with zero or negative carrying amounts to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In doing so, entities should consider whether there are any adverse qualitative factors indicating that an impairment may exist. For public companies this guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2010-29 – Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”). ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-01 – Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (“ASU 2011-01”). ASU 2011-01 temporarily delays the effective date of the disclosures surrounding troubled debt restructurings in Update 2010-20 for public companies. The FASB is deliberating on what constitutes a troubled debt restructuring and will coordinate that guidance with the effective date of the new disclosures, which is anticipated to be effective for interim and annual periods ending after June 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position, or disclosures.

Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The accounting standard for disclosures about 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.

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 accounting standards and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 2 assets due to the extensive use of market appraisals. To the extent that market appraisals or other methods do not produce reliable determinations of fair value, these assets are deemed to be Level 3.

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

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

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.

Repurchase Agreements and/or 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 derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of March 31, 2011, December 31, 2010 and March 31, 2010, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

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


	March 31, 2011				December 31, 2010				March 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,836,550	$	1,845,963	$	1,895,172	$	1,905,346	$	1,623,329	$	1,633,788

Financial liabilities:
Deposits		2,572,689		2,576,253		2,535,426		2,542,767		2,088,306		2,090,633
Other borrowings		—		—		43,495		43,685		2,000		2,012

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, 2011, December 31, 2010 and March 31, 2010 (dollars in thousands):


	Fair Value Measurements on a Recurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	33,545	$	—	$	33,545	$	—
State, county and municipal securities		56,898		—		56,898		—
Corporate debt securities		9,749		—		7,749		2,000
Mortgage-backed securities		205,428		12,764		192,664		—
Derivative financial instruments		598		—		598		—

Total recurring assets at fair value	$	306,218	$	12,764	$	291,454	$	2,000


	Fair Value Measurements on a Recurring Basis As of December 31, 2010
	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	$	35,468	$	—	$	35,468	$	—
State, county and municipal securities		57,696		—		54,951		2,745
Corporate debt securities		10,786		—		8,786		2,000
Mortgage-backed securities		218,631		—		218,631		—
Derivative financial instruments		936		—		936		—

Total recurring assets at fair value	$	323,517	$	—	$	318,772	$	4,745


	Fair Value Measurements on a Recurring Basis As of March 31, 2010
	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	$	34,234	$	—	$	34,234	$	—
State, county and municipal securities		42,314		—		42,314		—
Corporate debt securities		9,133		—		7,133		2,000
Mortgage-backed securities		162,332		—		162,332		—
Derivative financial instruments		1,758		—		1,758		—

Total recurring assets at fair value	$	249,771	$	—	$	247,771	$	2,000

The following table is a description 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, 2011, December 31, 2010 and March 31, 2010 (dollars in thousands):


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans carried at fair value	$	68,391	$	—	$	68,391	$	—
Other real estate owned		62,258		—		—		62,258
Covered loans		524,105		—		—		524,105
Covered other real estate owned		59,757		—		—		59,757

Total nonrecurring assets at fair value	$	714,511	$	—	$	68,391	$	646,120


	Fair Value Measurements on a Nonrecurring Basis As of December 31, 2010
	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	$	79,289	$	—	$	79,289	$	—
Other real estate owned		57,915		—		—		57,915
Covered loans		554,991		—		—		554,991
Covered other real estate owned		54,931		—		—		54,931

Total nonrecurring assets at fair value	$	747,126	$	—	$	79,289	$	667,837


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2010
	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	$	89,649	$	—	$	89,649	$	—
Other real estate owned		32,800		—				32,800
Covered loans		120,364		—				120,364
Covered other real estate owned		17,863		—		—		17,863

Total nonrecurring assets at fair value	$	260,676	$	—	$	89,649	$	171,027

Below is the Company’s reconciliation of Level 3 assets as of March 31, 2011. Gains or losses on impaired loans are recorded in the provision for loan losses.


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

Beginning balance January 1, 2011	$	4,745		$	57,915		$	554,991		$	54,931
Total gains/(losses) included in net income		—			(2,325	)		—			2,292
Purchases, sales, issuances, and settlements, net		—			(5,727	)		(29,384	)		1,032
Transfers in or out of Level 3		(2,745	)		12,395			(1,502	)		1,502

Ending balance March 31, 2011	$	2,000		$	62,258		$	524,105		$	59,757

NOTE 2 – INVESTMENT SECURITIES

Ameris’ investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. Ameris’ portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of Ameris’ portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale at March 31, 2011, December 31, 2010 and March 31, 2010 are presented below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
March 31, 2011:
U. S. government agencies	$	33,137	$	455	$	(47	)	$	33,545
State, county and municipal securities		55,971		1,310		(383	)		56,898
Corporate debt securities		12,150		168		(2,569	)		9,749
Mortgage-backed securities		202,204		5,143		(1,919	)		205,428

Total debt securities	$	303,462	$	7,076	$	(4,918	)	$	305,620


December 31, 2010:
U. S. government agencies	$	35,128	$	448	$	(108	)	$	35,468
State, county and municipal securities		57,385		928		(617	)		57,696
Corporate debt securities		13,540		123		(2,877	)		10,786
Mortgage-backed securities		213,737		6,732		(1,838	)		218,631

Total securities	$	319,790	$	8,231	$	(5,440	)	$	322,581


March 31, 2010:
U. S. government agencies	$	33,818	$	416	$	—		$	34,234
State, county and municipal securities		41,060		1,257		(3	)		42,314
Corporate debt securities		12,370		67		(3,304	)		9,133
Mortgage-backed securities		154,926		7,595		(189	)		162,332

Total securities	$	242,174	$	9,335	$	(3,496	)	$	248,013

The amortized cost and fair value of available-for-sale securities at March 31, 2011 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	$	1,285	$	1,296
Due from one year to five years		39,238		39,690
Due from five to ten years		38,284		39,167
Due after ten years		22,451		20,039
Mortgage-backed securities		202,204		205,428

	$	303,462	$	305,620

Securities with a carrying value of approximately $209.7 million serve as collateral to secure public deposits and other purposes required or permitted by law at March 31, 2011.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at March 31, 2011, December 31, 2010 and March 31, 2010.


	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, 2011:
U. S. government agencies	$	11,037	$	(47	)	$	—	$	—		$	11,037	$	(47	)
State, county and municipal securities		12,171		(383	)		—		—			12,171		(383	)
Corporate debt securities		413		(26	)		5,067		(2,543	)		5,480		(2,569	)
Mortgage-backed securities		75,721		(1,919	)		—		—			75,721		(1,919	)

Total debt securities	$	99,342	$	(2,375	)	$	5,067	$	(2,543	)	$	104,409	$	(4,918	)


December 31, 2010:
U. S. government agencies	$	25,017	$	(108	)	$	—	$	—		$	25,017	$	(108	)
State, county and municipal securities		17,563		(617	)		—		—			17,563		(617	)
Corporate debt securities		1,048		(20	)		5,078		(2,857	)		6,126		(2,877	)
Mortgage-backed securities		64,549		(1,838	)		15		—			64,564		(1,838	)

Total debt securities	$	108,177	$	(2,583	)	$	5,093	$	(2,857	)	$	113,270	$	(5,440	)


March 31, 2010:
U. S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities		1,132		(3	)		—		—			1,132		(3	)
Corporate debt securities		870		(130	)		4,935		(3,174	)		5,805		(3,304	)
Mortgage-backed securities		3,249		(33	)		1,417		(156	)		4,666		(189	)

Total debt securities	$	5,251	$	(166	)	$	6,352	$	(3,330	)	$	11,603	$	(3,496	)

NOTE 3 - LOANS

The Company engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans. Ameris concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond Ameris’ control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table:


(Dollars in Thousands)	March 31, 2011		December 31, 2010		March 31, 2010
Commercial, financial and agricultural	$	142,826	$	142,312	$	166,470
Real estate – construction and development		152,863		162,594		214,410
Real estate – commercial and farmland		672,212		683,974		738,232
Real estate – residential		336,755		344,830		371,427
Consumer installment		33,698		34,293		38,586
Other		7,627		6,754		7,403

	$	1,345,981	$	1,374,757	$	1,536,528

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 $526.0 million, $555.0 million and $120.4 million at March 31, 2011, December 31, 2010 and March 31, 2010, respectively, are not included in the above schedule.

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


(Dollars in Thousands)	March 31, 2011		December 31, 2010		March 31, 2010
Commercial, financial and agricultural	$	45,954	$	47,309	$	18,923
Real estate – construction and development		89,356		89,781		19,057
Real estate – commercial and farmland		242,153		257,428		54,044
Real estate – residential		140,239		149,226		22,306
Consumer installment		8,310		11,247		6,034

	$	526,012	$	554,991	$	120,364

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

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


(Dollars in Thousands)	March 31, 2011		December 31, 2010		March 31, 2010
Commercial, financial and agricultural	$	5,966	$	8,648	$	5,440
Real estate – construction and development		17,893		7,887		38,225
Real estate – commercial and farmland		28,313		55,170		25,560
Real estate – residential		15,557		6,376		19,704
Consumer installment		662		1,208		720

	$	68,391	$	79,289	$	89,649

The following table presents an analysis of past due loans as of March 31, 2011 and December 31, 2010.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	848	$	695	$	5,923	$	7,466	$	135,360	$	142,826	$	—
Real estate – construction & development		2,324		1,864		16,011		20,199		132,664		152,863		—
Real estate – commercial & farmland		7,127		7,315		17,883		32,325		639,887		672,212		—
Real estate – residential		4,314		2,732		13,480		20,526		316,229		336,755		—
Consumer installment loans		409		177		444		1,030		32,668		33,698		—
Other		—		—		—		—		7,627		7,627		—

Total	$	15,022	$	12,783	$	53,741	$	81,546	$	1,264,435	$	1,345,981	$	—


	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 31, 2010:
Commercial, financial & agricultural	$	898	$	120	$	6,746	$	7,764	$	134,548	$	142,312	$	—
Real estate – construction & development		2,121		2,039		19,458		23,618		138,976		162,594		—
Real estate – commercial & farmland		1,740		3,725		25,914		31,379		652,595		683,974		—
Real estate – residential		3,384		3,066		14,393		20,843		323,987		344,830		—
Consumer installment loans		493		142		475		1,110		33,183		34,293		3
Other		—		—		—		—		6,754		6,754		—

Total	$	8,636	$	9,092	$	66,986	$	84,714	$	1,290,043	$	1,374,757	$	3

There were no material amount of loans past due ninety days or more and still accruing interest at March 31, 2010.

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. Impaired loans include loans on nonaccrual status and troubled debt restructurings. 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:


	As of and For the Period Ended
	March 31, 2011		December 31, 2010		March 31, 2010
	(Dollars in Thousands)
Nonaccrual loans	$	68,391	$	79,289	$	89,649
Troubled debt restructurings not included above		25,832		21,972		15,259

Total impaired loans	$	94,223	$	101,261	$	104,908


Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	94,223	$	101,261	$	104,908

Allowance related to impaired loans	$	16,821	$	16,688	$	8,404

Average investment in impaired loans	$	88,761	$	86,849	$	107,824

Interest income recognized on impaired loans	$	75	$	545	$	22

Foregone interest income on impaired loans	$	389	$	3,828	$	575

The following table presents an analysis of information pertaining to impaired loans as of March 31, 2011 and December 31, 2010.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	9,419	$	—	$	3,972	$	3,972	$	2,425	$	5,872
Real estate – construction & development		33,590		—		16,547		16,547		4,254		20,052
Real estate – commercial & farmland		51,874		—		40,147		40,147		5,584		44,281
Real estate – residential		23,440		—		16,227		16,227		4,405		18,026
Consumer installment loans		890		—		509		509		153		530

Total	$	119,213	$	—	$	77,402	$	77,402	$	16,821	$	88,761


	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, 2010:
Commercial, financial & agricultural	$	9,983	$	—	$	5,336	$	5,336	$	1,649	$	5,411
Real estate – construction & development		38,060		—		19,462		19,462		4,023		30,226
Real estate – commercial & farmland		57,224		—		43,831		43,831		6,795		33,882
Real estate – residential		22,819		—		15,547		15,547		4,085		16,785
Consumer installment loans		738		—		397		397		136		545

Total	$	128,824	$	—	$	84,573	$	84,573	$	16,688	$	86,849

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage, interim losses); (ii)adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire, divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 28 – 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 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the loan portfolio by risk grade as of March 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	14,048	$	220	$	1,104	$	111	$	5,451	$	—	$	20,934
15		11,087		2,395		137,897		36,377		907		—		188,663
20		50,300		38,200		267,341		115,189		18,573		7,627		497,230
25		55,843		69,541		165,089		137,846		7,460		—		435,779
28		2,244		7,775		8,533		8,167		30		—		26,749
30		1,913		7,568		41,089		14,129		573		—		65,272
40		7,386		26,889		51,158		24,936		672		—		111,041
50		5		275		—		—		6		—		286
60		—		—		1		—		26		—		27

Total	$	142,826	$	152,863	$	672,212	$	336,755	$	33,698	$	7,627	$	1,345,981

The following table presents the loan portfolio by risk grade as of December 31, 2010.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	17,739	$	211	$	1,109	$	110	$	5,507	$	—	$	24,676
15		11,191		3,006		145,376		40,783		858		—		201,214
20		48,738		39,407		274,817		118,179		18,566		6,754		506,461
25		53,957		73,589		168,273		137,416		8,261		—		441,496
28		2,246		7,696		9,159		6,197		31		—		25,329
30		998		6,437		29,029		17,069		273		—		53,806
40		6,633		32,009		56,090		25,076		791		—		120,599
50		810		239		120		—		6		—		1,175
60		—		—		1		—		—		—		1

Total	$	142,312	$	162,594	$	683,974	$	344,830	$	34,293	$	6,754	$	1,374,757

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 fine tune 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 Senior 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 percent 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.

Activity in the allowance for loan losses for the three months ended March 31, 2011, for the year ended December 31, 2010 and for the three months ended March 31, 2010 is as follows:


(Dollars in Thousands)	March 31, 2011			December 31, 2010			March 31, 2010
Balance, January 1	$	34,576		$	35,762		$	35,762
Provision for loan losses charged to expense		7,092			48,839			10,770
Loans charged off		(7,067	)		(52,623	)		(13,246	)
Recoveries of loans previously charged off		842			2,598			277

Ending balance	$	35,443		$	34,576		$	33,563

During the three months ended March 31, 2011 and the year ended December 31, 2010, the Company recorded provision for loan loss expense of $76,000 and $1.7 million, 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 Operations.

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2011 and the year ended December 31, 2010. 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, 2011	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576
Provision for loan losses		2,078			1,477			2,387			1,015			135			7,092
Loans charged off		(1,113	)		(2,425	)		(2,557	)		(809	)		(163	)		(7,067	)
Recoveries of loans previously charged off		20			772			2			14			34			842

Balance, March 31, 2011	$	3,764		$	7,529		$	14,803		$	8,884		$	463		$	35,443


Period-end amount allocated to:
Loans individually evaluated for impairment	$	2,012		$	3,513		$	6,282		$	2,484		$	1		$	14,292
Loans collectively evaluated for impairment		1,752			4,016			8,521			6,400			462			21,151

Ending balance	$	3,764		$	7,529		$	14,803		$	8,884		$	463		$	35,443


Loans:
Individually evaluated for impairment	$	4,752		$	18,054		$	48,594		$	12,448		$	18		$	83,866
Collectively evaluated for impairment		138,074			134,809			623,618			324,307			41,307			1,262,115

Ending balance	$	142,826		$	152,863		$	672,212		$	336,755		$	41,325		$	1,345,981


	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, 2010	$	3,428		$	13,098		$	11,296		$	7,391		$	549		$	35,762
Provision for loan losses		4,265			13,776			18,937			11,178			683			48,839
Loans charged off		(5,481	)		(19,853	)		(16,108	)		(10,091	)		(1,090	)		(52,623	)
Recoveries of loans previously charged off		567			684			846			186			315			2,598

Balance, December 31, 2010	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576


Period-end amount allocated to:
Loans individually evaluated for impairment	$	677		$	3,554		$	6,300		$	2,554		$	—		$	13,085
Loans collectively evaluated for impairment		2,102			4,151			8,671			6,110			457			21,491

Ending balance	$	2,779		$	7,705		$	14,971		$	8,664		$	457		$	34,576


Loans:
Individually evaluated for impairment	$	3,930		$	22,838		$	50,179		$	14,740		$	—		$	91,687
Collectively evaluated for impairment		138,382			139,756			633,795			330,090			41,047			1,283,070

Ending balance	$	142,312		$	162,594		$	683,974		$	344,830		$	41,047		$	1,374,757

NOTE 4 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

Since October 2009, the Company has participated in six FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include:


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

The determination of the initial fair value of loans at the acquisition and the initial fair value of the related FDIC indemnification asset involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification asset 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 valuse reflected in these financial statements, 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 asset 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, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, the Company records a provision for loan loss in its consolidated statement of operations. During the three months ended March 31, 2011 and the year ended December 31, 2010, the Company recorded provision for loan loss expense of $76,000 and $1.7 million, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions.

On the acquisition date, the preliminary estimates of the contractually required payments receivable for all ASC 310 loans acquired in the acquisitions totaled $505.1 million and the estimated fair values of the loans totaled $273.1 million, net of an accretable yield of $38.8 million, the difference between the value of the loans on the Company’s balance sheet and the cash flows they are expected to produce. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments.

The following table summarizes components of all covered assets at March 31, 2011 and December 31, 2010 and their origin:


	SCB		FBJ		TBC		DBT		AUB		USB		Total

As of March 31, 2011:	(Dollars in thousands)

Covered loans	$	68,655	$	46,990	$	107,458	$	360,610	$	51,845	$	74,470	$	710,028

Less adjustments related to credit risk		7,177		9,847		25,456		128,975		4,332		5,609		181,396

Less adjustments related to liquidity and yield		464		135		398		1,075		150		398		2,620


Total Covered Loans	$	61,014	$	37,008	$	81,604	$	230,560	$	47,363	$	68,463	$	526,012


OREO	$	7,700	$	2,997	$	4,151	$	36,190	$	12,816	$	10,664	$	74,518

Less fair value adjustments		550		1,616		1,281		11,101		139		74		14,761


Covered OREO	$	7,150	$	1,381	$	2,870	$	25,089	$	12,677	$	10,590	$	59,757


Total covered assets	$	68,164	$	38,389	$	84,474	$	255,649	$	60,040	$	79,053	$	585,769


FDIC loss share receivable	$	10,120	$	10,839	$	27,659	$	108,091	$	3,769	$	6,698	$	167,176


	SCB		FBJ		TBC		DBT		AUB		USB		Total

As of December 31, 2010:	(Dollars in thousands)

Covered loans	$	76,472	$	48,632	$	113,283	$	380,238	$	53,203	$	77,188	$	749,016

Less adjustments related to credit risk		12,336		10,532		25,388		130,769		4,332		7,593		190,950

Less adjustments related to liquidity and yield		506		151		458		1,199		214		547		3,075


Total Covered Loans	$	63,630	$	37,949	$	87,437	$	248,270	$	48,657	$	69,048	$	554,991


OREO	$	8,311	$	2,799	$	4,178	$	42,724	$	13,207	$	11,473	$	82,692

Less fair value adjustments		1,373		2,500		2,031		21,000		783		74		27,761


Covered OREO	$	6,938	$	299	$	2,147	$	21,724	$	12,424	$	11,399	$	54,931


Total covered assets	$	70,568	$	38,248	$	89,584	$	269,994	$	61,081	$	80,447	$	609,922


FDIC loss share receivable	$	14,333	$	11,944	$	27,436	$	112,404	$	4,208	$	6,862	$	177,187

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, 2011		December 31, 2010		March 31, 2010
	(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 yield)	$	4,435	$	30,448	$	—

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)		380		8,410		—

Amounts reflected in the Company’s Statement of Operations	March 31, 2011		December 31, 2010		March 31, 2010
	(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 yield)	$	848	$	4,245	$	—

Adjustments needed where the Company’s initial estimate of cash flows were overstated: (recorded through a provision for loan losses)		76		1,682		—

A rollforward of acquired loans with deterioration of credit quality for the three months ended March 31, 2011, the year ended December 31, 2010 and the three months ended March 31, 2010 is shown below:


(Dollars in Thousands)	March 31, 2011			December 31, 2010			March 31, 2010
Balance, January 1	$	252,535		$	56,793		$	56,793
Change in estimate of cash flows, net of charge-offs or recoveries		(2,092	)		(8,081	)		(189	)
Additions due to acquisitions		—			214,500			—
Other (loan payments, transfers, etc.)		(4,033	)		(10,677	)		(1,214	)

Ending balance	$	246,410		$	252,535		$	55,390

The following is a summary of changes in the accretable yields of acquired loans during the three months ended March 31, 2011, the year ended December 31, 2010 and the three months ended March 31, 2010.


(Dollars in Thousands)	March 31, 2011			December 31, 2010			March 31, 2010
Balance, January 1	$	37,383		$	3,550		$	3,550
Additions due to acquisitions		—			35,245			—
Transfers from nonaccretable difference to accretable yield		887			6,090			—
Accretion		(4,454	)		(7,502	)		(1,228	)

Ending balance	$	33,816		$	37,383		$	2,322

The loss-sharing agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value of $168.9 million and $45.8 million on the 2010 and 2009 acquisition dates, respectively. Changes in the FDIC loss-share receivable for the three months ended March 31, 2011, for the year ended December 31, 2010 and for the three months ended March 31, 2010 are as follows:


(Dollars in Thousands)	March 31, 2011			December 31, 2010			March 31, 2010
Balance, January 1	$	177,187		$	45,840		$	45,840
Indemnification asset recorded in acquisitions		—			168,918			—
Payments received from FDIC		(4,071	)		(26,522	)
Effect of change in expected cash flows on covered assets		(5,940	)		(11,049	)		(13	)

Ending balance	$	167,176		$	177,187		$	45,827

NOTE 5 – WEIGHTED AVERAGE SHARES OUTSTANDING

Due to the net loss reported for the quarter ending March 31, 2010, the Company has excluded the effects of potential common shares as these would have been anti-dilutive. Earnings per share have been computed based on the following weighted average number of common shares outstanding:


	For the Three Months Ended March 31,
	2011		2010
	(share data in thousands)
Basic shares outstanding		23,440		13,840
Plus: Dilutive effect of ISOs		34		—
Plus: Dilutive effect of Restricted Grants		—		—

Diluted shares outstanding		23,474		13,840

NOTE 6 – 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, 2011, there were no outstanding borrowings with the Company’s correspondent banks, compared to $43.5 million at December 31, 2010 and $2.0 million at March 31, 2010. The Company’s success with attracting and retaining retail deposits has allowed for very low dependence on more volatile non-deposit funding.

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 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, 2011		December 31, 2010		March 31, 2010

Commitments to extend credit	$	163,442	$	166,845	$	149,613

Standby letters of credit	$	7,531	$	7,874	$	3,967

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 SEC 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.

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.


	2011			2010
(in thousands, except share data, taxable equivalent)	First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Results of Operations:
Net interest income	$	24,207		$	23,006		$	21,999		$	23,859		$	20,413
Net interest income (tax equivalent)		24,418			23,245			22,220			24,588			20,644
Provision for loan losses		7,043			11,404			9,739			18,608			10,770
Non-interest income		6,193			12,303			5,011			13,049			4,885
Non-interest expense		21,155			21,946			18,928			23,383			16,931
Income tax (benefit)/expense		824			98			(760	)		(1,664	)		(869	)
Preferred stock dividends		798			811			807			799			796
Net (loss)/income available to common Shareholders		580			1,050			(1,704	)		(4,218	)		(2,330	)
Selected Average Balances:
Loans, net of unearned income	$	1,361,964		$	1,416,254		$	1,503,149		$	1,528,220		$	1,563,307
Covered loans		540,127			374,282			187,556			155,302			120,211
Investment securities		301,572			284,066			235,057			245,182			245,895
Earning assets		2,453,040			2,378,065			2,184,676			2,223,743			2,133,864
Assets		2,949,943			2,872,207			2,429,709			2,444,425			2,377,348
Deposits		2,548,509			2,310,372			2,088,997			2,111,612			2,101,780
Shareholders’ equity		222,675			225,088			224,656			217,042			193,278
Period-End Balances:
Loans, net of unearned income	$	1,345,981		$	1,374,757		$	1,455,853		$	1,493,126		$	1,536,528
Covered loans		526,012			554,991			192,268			191,663			123,771
Earning assets		2,439,190			2,513,812			2,199,928			2,171,262			2,116,513
Total assets		2,918,423			2,972,168			2,434,703			2,421,910			2,351,658
Deposits		2,572,689			2,535,426			2,099,001			2,080,026			2,088,306
Common shareholders’ equity		223,588			223,286			223,993			225,038			143,670
Per Common Share Data:
Earnings per share – Basic	$	0.02		$	0.04		$	(0.07	)	$	(0.20	)	$	(0.17	)
Earnings per share – Diluted		0.02			0.04			(0.07	)		(0.20	)		(0.17	)
Common book value per share		9.41			9.44			9.48			9.57			10.23
End of period shares outstanding		23,766,044			23,647,841			23,625,065			23,627,005			14,041,806
Weighted average shares outstanding
Basic		23,440,201			23,427,393			23,570,929			23,231,367			13,840,231
Diluted		23,474,424			23,579,205			23,570,929			21,231,367			13,840,231
Market Data:
High closing price	$	11.10		$	11.07		$	10.49		$	11.55		$	10.32
Low closing price		9.32			8.73			7.83			9.00			7.36
Closing price for quarter		10.16			10.54			9.35			9.66			9.03
Average daily trading volume		46,618			55,281			75,573			205,388			37,715
Cash dividends per share		—			—			—			—			—
Stock dividend		—			—			—			1 for 210			1 for 130
Price to earnings		N/M			N/M			N/M			N/M			N/M
Closing price to book value		1.09			1.12			0.99			1.01			0.88
Performance Ratios:
Return on average assets		0.08	%		0.15	%		(0.28	%)		(0.68	%)		(0.26	%)
Return on average common equity		1.06	%		1.85	%		(2.46	%)		(6.34	%)		(4.33	%)
Average loan to average deposits		74.64	%		77.50	%		80.93	%		79.73	%		74.86	%
Average equity to average assets		9.25	%		9.58	%		11.25	%		10.99	%		8.13	%
Net interest margin (tax equivalent)		4.04	%		3.88	%		4.04	%		4.43	%		3.92	%
Efficiency ratio (tax equivalent)		69.59	%		62.15	%		70.08	%		63.35	%		66.93	%

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, 2011 as compared to December 31, 2010 and operating results for the three month periods ended March 31, 2011 and 2010. 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, 2011

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $580,000, or $0.02 per diluted share, for the quarter ended March 31, 2011, compared to a net loss for the same quarter in 2010 of $2.3 million, or $0.17 per diluted share. The Company’s return on average assets and average shareholders’ equity increased in the first quarter of 2011 to 0.08% and 1.06%, respectively, compared to (0.26%) and (4.33%) in the first quarter of 2010. The increase in earnings and profitability during the quarter was primarily due to lower levels of loan loss provisions and increased net interest income.

Net Interest Income and Margins

On a tax equivalent basis, net interest income for the first quarter of 2011 was $24.2 million, an increase of $3.5 million compared to the same quarter in 2010. Significant increases in the Company’s net interest margin have been the result of flat yields on all classes of earning assets complemented by steady decreases in the Company’s cost of funds. The Company’s net interest margin increased during the first quarter of 2011 to 4.00% compared to 3.92% during the first quarter of 2010. Increases in earning assets over the past year have been in covered loans with favorable yields compared to the Company’s low cost of funds.

Total interest income during the first quarter of 2011 was $32.1 million compared to $28.0 million in the same quarter of 2010. Yields on earning assets fell to 5.31% compared to 5.36% reported in the first quarter of 2010 due to higher levels of short-term assets at historically low rates. During the first quarter of 2011, short-term assets averaged 9.7% of total earning assets compared to 9.3% in the same quarter in 2010. Current opportunities to invest a portion of the short-term assets in the bond market have been limited by the Company’s inability to maintain certain portfolio characteristics with current yields and structures being offered. Efforts to increase lending activities have been slow to generate increases in outstanding loans due to the current economic conditions in the Company’s markets. Management anticipates improving economic conditions and increased loan demand will provide opportunities to invest a portion of the short-term assets at higher yields.

Total funding costs declined to 1.22% in the first quarter of 2011 compared to 1.41% during the first quarter of 2010. Deposit costs decreased from 1.41% in the first quarter of 2010 to 1.17% in the first quarter of 2011. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 58.6% of total deposits in the first quarter of 2011 compared to 58.3% during the first quarter of 2010. Local customer deposits in the first quarter of 2011 comprised 91.9% of total funding compared to 89.6% of total funding in the same quarter of 2010. 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 2011 and 2010 are shown below:


(Dollars in Thousands)	March 31, 2011					March 31, 2010
	Average Balance		Average Cost			Average Balance		Average Cost
NOW	$	584,338		0.73	%	$	505,566		0.99	%
MMDA		522,009		1.09	%		424,913		1.42	%
Savings		76,341		0.70	%		63,436		0.58	%
Retail CDs < $100,000		427,143		1.66	%		331,294		1.92	%
Retail CDs > $100,000		504,011		1.68	%		393,473		1.94	%
Brokered CDs		124,441		3.09	%		151,333		2.88	%


Interest bearing deposits	$	2,238,283		1.34	%	$	1,870,015		1.59	%

Provision for Loan Losses and Credit Quality

The Company’s provision for loan losses during the first quarter of 2011 amounted to $7.0 million compared to $11.4 million in the fourth quarter of 2010 and to $10.8 million in the first quarter of 2010. Although the Company has experienced improving trends in criticized and classified assets for several quarters, provision for loan losses have still been required to account for continued devaluation of real estate collateral. At March 31, 2011, classified loans still accruing totaled $46.8 million compared to $51.3 million at March 31, 2010. Non-accrual loans at March 31, 2011 totaled $68.4 million, a 23.7% decrease from $89.6 million reported at the end of the first quarter of 2010.

At March 31, 2011, OREO (excluding covered OREO) totaled $62.3 million, compared to $34.7 million at March 31, 2010. 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 10% 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 2011, total non-performing assets decreased to 4.48% of total assets compared to 5.21% at March 31, 2010. 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 2011 decreased to $6.2 million, or 1.88% of loans on an annualized basis, compared to $12.9 million, or 3.12% of loans, in the first quarter of 2010. The Company’s allowance for loan losses at March 31, 2011 was $35.4 million, or 2.63% of total loans, compared to $33.6 million, or 2.18% of total loans, at March 31, 2010.

Non-interest Income

Total non-interest income for the first quarter of 2011 increased slightly to $6.2 million from $4.9 million in the first quarter of 2010. Service charges on deposit accounts in the first quarter of 2011 increased to $4.3 million, compared to $3.4 million in the first quarter of 2010. Increases in service charges related to the recently acquired deposits in FDIC-assisted transactions, along with increased retention of fees related to insufficient funds were the primary reason for the increase over prior year levels. The accretion of the discount of the FDIC indemnification asset also attributed to the increase of non-interest income during the first quarter of 2011, compared to the first quarter of 2010.

Non-interest Expense

Total non-interest expense for the first quarter of 2011 increased to $21.2 million, compared to $16.9 million at the same time in 2010. Salaries and employee benefits reflect the largest increase of $2.0 million; however, this increase is in proportion to the Company’s asset growth. Total assets per full-time-equivalent employee increased from $4.0 million at March 31, 2010 to $4.2 million per employee at March 31, 2011. Occupancy and equipment expenses for the first quarter of 2011 amounted to $2.7 million, representing an increase of $703,000 from the same quarter in 2010. Data processing and telecommunications expenses increased $633,000 to $2.4 million at March 31, 2011 from $1.8 million at March 31, 2010. Both of these increases are directly correlated to the increase in the number of branch locations from the first quarter of 2010 to the first quarter of 2011. Other noninterest expenses in the first quarter of 2011 increased $875,000 million to $5.8 million when compared to $4.9 million reported in the first quarter of 2010.

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 2011, the Company reported income tax expense of $824,000 compared to an income tax benefit of $869,000 in the same period of 2010. The Company’s effective tax rate for the three months ended March 31, 2011 and 2010 was 37.4% and 36.2%, 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 has the intent and ability to hold to maturity. Therefore, at March 31, 2011, these investments are not considered impaired on an other-than temporary basis.

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, 2011:
U.S. government agencies	$	33,137	$	33,545		1.58	%		2.16	$	9,165
State, county and municipal securities	$	55,971	$	56,898		4.84	%		5.65	$	1,462
Corporate debt securities	$	12,150	$	9,749		6.89	%		6.33	$	512
Mortgage-backed securities	$	202,204	$	205,428		4.08	%		3.72	$	46,174

Total debt securities	$	303,462	$	305,620		4.06	%		4.01	$	57,313


March 31, 2010:
U.S. government agencies	$	33,818	$	34,234		3.61	%		2.01	$	17,705
State, county and municipal securities	$	41,060	$	42,314		5.07	%		5.72	$	1,685
Corporate debt securities	$	12,370	$	9,133		6.64	%		7.15	$	0
Mortgage-backed securities	$	154,926	$	162,332		5.10	%		2.74	$	25,450

Total debt securities	$	242,174	$	248,013		4.84	%		3.49	$	44,840

Loans and Allowance for Loan Losses

At March 31, 2011, gross loans outstanding (including covered loans) were $1.87 billion, an increase of $211.7 million, or 12.8%, compared to balances at March 31, 2010. Covered loans increased $402.2 million, from $123.8 million at March 31, 2010 to $526.0 million at March 31, 2011. This increase in covered loans is due to the FDIC-assisted transactions completed during 2010. The Company’s participation in FDIC-assisted acquisitions was integral to being able to maintain a certain level of loans because management does not feel that enough loan opportunities with acceptable quality and profitability exist in our current market areas to stabilize and increase. Decreases in non-covered loans over the past year reflect this trend, with non-covered loans decreasing by $190.5 million, or 12.4%, from $1.54 billion at March 31, 2010 to $1.35 billion at March 31, 2011.

The decline in loans also reflects management’s focus on reducing higher risk loans within the Bank’s loan portfolio as well as the slower economic environment that persisted throughout 2009 and 2010. 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.

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, 2011, the Company recorded net charge-offs totaling $6.2 million compared to $13.0 million for the period ended March 31, 2010. The provision for loan losses for the three months ended March 31, 2011 decreased to $7.1 million compared to $10.8 million during the three month period ended March 31, 2010. At the end of the first quarter of 2011, the allowance for loan losses totaled $35.4 million, or 2.63% of total loans, compared to $34.6 million, or 2.52% of total loans, at December 31, 2010 and $33.6 million, or 2.18% of total loans, at March 31, 2010.

The following table presents an analysis of the allowance for loan losses for the three month periods ended March 31, 2011 and March 31, 2010:


(Dollars in Thousands)	March 31, 2011		March 31, 2010
Balance of allowance for loan losses at beginning of period	$	34,576	$	35,762
Provision charged to operating expense		7,092		10,770
Charge-offs:
Commercial, financial and agricultural		1,113

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