Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13901

 

 

 

LOGO

AMERIS BANCORP

(Exact name of registrant as specified in its charter)

 

 

 

GEORGIA   58-1456434
(State of incorporation)   (IRS Employer ID No.)

310 FIRST STREET, S.E., MOULTRIE, GA 31768

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

There were 32,195,089 shares of Common Stock outstanding as of July 31, 2015.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

         Page  

PART I – FINANCIAL INFORMATION

  

Item 1.

  Financial Statements.   
 

Consolidated Balance Sheets at June 30, 2015, December 31, 2014 and June 30, 2014

     1   
 

Consolidated Statements of Earnings and Comprehensive Income/(Loss) for the Three and Six Month Periods Ended June 30, 2015 and 2014

     2   
 

Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June  30, 2015 and 2014

     3   
 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

     4   
 

Notes to Consolidated Financial Statements

     6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations.      54   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk.      80   

Item 4.

  Controls and Procedures.      80   

PART II – OTHER INFORMATION

  

Item 1.

  Legal Proceedings.      81   

Item 1A.

  Risk Factors.      81   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds.      81   

Item 3.

  Defaults Upon Senior Securities.      81   

Item 4.

  Mine Safety Disclosures.      81   

Item 5.

  Other Information.      81   

Item 6.

  Exhibits.      81   

Signatures

     81   


Table of Contents

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

 

     June 30,
2015
    December 31,
2014
    June 30,
2014
 
     (Unaudited)     (Audited)     (Unaudited)  

Assets

      

Cash and due from banks

   $ 115,413      $ 78,036      $ 80,986   

Federal funds sold and interest-bearing accounts

     239,804        92,323        44,800   

Investment securities available for sale, at fair value

     862,154        541,805        535,630   

Other investments

     9,322        10,275        10,971   

Mortgage loans held for sale, at fair value

     108,829        94,759        81,491   

Loans, net of unearned income

     2,171,600        1,889,881        1,770,059   

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

     808,313        674,239        702,131   

Purchased loan pools not covered by FDIC loss share agreements (“purchased loan pools”)

     268,984        —          —     

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

     209,598        271,279        331,250   

Less: allowance for loan losses related to non-purchased loans

     (21,658     (21,157     (22,254
  

 

 

   

 

 

   

 

 

 

Loans, net

     3,436,837        2,814,242        2,781,186   
  

 

 

   

 

 

   

 

 

 

Other real estate owned, net

     22,567        33,160        35,373   

Purchased, non-covered other real estate owned, net

     13,112        15,585        16,598   

Covered other real estate owned, net

     12,626        19,907        38,426   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned, net

     48,305        68,652        90,397   
  

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     124,916        97,251        99,495   

FDIC loss-share receivable

     14,957        31,351        49,180   

Other intangible assets, net

     19,189        8,221        9,812   

Goodwill

     87,367        63,547        58,903   

Cash value of bank owned life insurance

     59,552        58,867        57,864   

Other assets

     79,089        77,748        72,420   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 5,205,734      $ 4,037,077      $ 3,973,135   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 1,280,174      $ 839,377      $ 790,798   

Interest-bearing

     3,231,373        2,591,772        2,598,237   
  

 

 

   

 

 

   

 

 

 

Total deposits

     4,511,547        3,431,149        3,389,035   

Securities sold under agreements to repurchase

     75,066        73,310        51,109   

Other borrowings

     39,000        78,881        100,293   

Other liabilities

     24,026        22,384        24,457   

Subordinated deferrable interest debentures

     69,325        65,325        64,842   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     4,718,964        3,671,049        3,629,736   
  

 

 

   

 

 

   

 

 

 

Stockholders’ Equity

      

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

     —          —          —     

Common stock, par value $1; 100,000,000 shares authorized; 33,608,866; 28,159,027 and 28,155,317 issued

     33,609        28,159        28,155   

Capital surplus

     336,212        225,015        223,888   

Retained earnings

     126,265        118,412        98,847   

Accumulated other comprehensive income

     3,072        6,098        4,123   

Treasury stock, at cost, 1,413,777; 1,385,164 and 1,383,496 shares

     (12,388     (11,656     (11,614
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     486,770        366,028        343,399   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 5,205,734      $ 4,037,077      $ 3,973,135   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

 

1


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME/(LOSS)

(dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2015     2014     2015     2014  

Interest income

        

Interest and fees on loans

   $ 39,838      $ 35,297      $ 78,456      $ 69,766   

Interest on taxable securities

     3,747        2,953        6,900        5,938   

Interest on nontaxable securities

     462        312        931        647   

Interest on deposits in other banks and federal funds sold

     182        45        310        129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     44,229        38,607        86,597        76,480   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

        

Interest on deposits

     2,264        2,205        4,544        4,388   

Interest on other borrowings

     1,277        1,138        2,533        2,344   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     3,541        3,343        7,077        6,732   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     40,688        35,264        79,520        69,748   

Provision for loan losses

     2,656        1,365        3,725        3,091   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     38,032        33,899        75,795        66,657   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

        

Service charges on deposit accounts

     7,151        5,847        13,580        11,433   

Mortgage banking activity

     9,727        7,002        17,810        12,166   

Other service charges, commissions and fees

     829        662        1,497        1,314   

Gain on sale of securities

     10        —          22        6   

Other noninterest income

     2,909        2,308        5,292        3,654   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     20,626        15,819        38,201        28,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

        

Salaries and employee benefits

     22,465        16,942        43,097        34,336   

Occupancy and equipment

     4,809        4,071        9,363        8,135   

Advertising and marketing expenses

     833        718        1,474        1,428   

Amortization of intangible assets

     630        437        1,260        970   

Data processing and communications costs

     4,214        3,940        8,474        7,394   

Credit resolution-related expenses

     11,240        2,840        14,401        5,030   

Merger and conversion charges

     5,712        2,872        5,727        3,322   

Other noninterest expenses

     6,961        5,498        13,895        9,942   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     56,864        37,318        97,691        70,557   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

     1,794        12,400        16,305        24,673   

Income tax expense

     486        4,270        5,233        8,193   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,308        8,130        11,072        16,480   

Less preferred stock dividends and discount accretion

     —          —          —          286   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

   $ 1,308      $ 8,130      $ 11,072      $ 16,194   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

        

Unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax of $1,901, $1,142, $1,561 and $2,724

     (3,531     2,121        (2,881     5,059   

Reclassification adjustment for gains included in earnings, net of tax of $3, $0, $8 and $2

     (6     —          (14     (4

Unrealized gains (losses) on cash flow hedges arising during period, net of tax of $138, $200, $70 and $344

     256        (372     (131     (638
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (3,281     1,749        (3,026     4,417   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ (1,973   $ 9,879      $ 8,046      $ 20,897   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 0.04      $ 0.32      $ 0.35      $ 0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.04      $ 0.32      $ 0.35      $ 0.63   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.05      $ 0.05      $ 0.10      $ 0.05   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

        

Basic

     32,184        25,181        31,318        25,163   

Diluted

     32,520        25,572        31,653        25,552   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

2


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

 

     Six Months Ended     Six Months Ended  
     June 30, 2015     June 30, 2014  
     Shares     Amount     Shares     Amount  

PREFERRED STOCK

        

Balance at beginning of period

     —        $ —          28,000      $ 28,000   

Repurchase of preferred stock

     —          —          (28,000     (28,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     —        $ —          —        $ —     

COMMON STOCK

        

Balance at beginning of period

     28,159,027      $ 28,159        26,461,769      $ 26,462   

Issuance of common stock

     5,320,000        5,320        1,598,987        1,599   

Proceeds from exercise of stock options

     58,839        59        26,514        26   

Issuance of restricted shares

     71,000        71        68,047        68   
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     33,608,866      $ 33,609        28,155,317      $ 28,155   

CAPITAL SURPLUS

        

Balance at beginning of period

     $ 225,015        $ 189,722   

Stock-based compensation

       760          1,012   

Issuance of common shares, net of issuance costs of $4,811 and $0

       109,569          32,875   

Proceeds from exercise of stock options

       939          347   

Issuance of restricted shares

       (71       (68
    

 

 

     

 

 

 

Balance at end of period

     $ 336,212        $ 223,888   

RETAINED EARNINGS

        

Balance at beginning of period

     $ 118,412        $ 83,991   

Net income

       11,072          16,480   

Dividends on preferred shares

       —            (286

Dividends on common shares

       (3,219       (1,338
    

 

 

     

 

 

 

Balance at end of period

     $ 126,265        $ 98,847   

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX

        

Unrealized gains on securities and derivatives:

        

Balance at beginning of period

     $ 6,098        $ (294

Other comprehensive income (loss) during the period

       (3,026       4,417   
    

 

 

     

 

 

 

Balance at end of period

     $ 3,072        $ 4,123   

TREASURY STOCK

        

Balance at beginning of period

     (1,385,164   $ (11,656     (1,363,342   $ (11,182

Purchase of treasury shares

     (28,613     (732     (20,154     (432
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (1,413,777   $ (12,388     (1,383,496   $ (11,614
    

 

 

     

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     $ 486,770        $ 343,399   
    

 

 

     

 

 

 

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

 

     Six Months Ended
June 30,
 
     2015     2014  

Cash flows from operating activities:

    

Net income

   $ 11,072      $ 16,480   

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

    

Depreciation

     3,950        3,709   

Amortization of intangible assets

     1,260        970   

Net amortization of investment securities available for sale

     2,669        1,525   

Net gains on securities available for sale

     (22     (6

Stock based compensation expense

     760        1,012   

Net losses on sale or disposal of premises and equipment

     98        1   

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

     9,779        1,985   

Provision for loan losses

     3,725        3,091   

Accretion of discount on covered loans

     (6,251     (15,432

Accretion of discount on purchased non-covered loans

     (5,388     (3,153

Changes in FDIC loss-share receivable, net of cash payments received

     3,855        5,685   

Increase in cash surrender value of BOLI

     (685     (620

Originations of mortgage loans held for sale

     (472,660     (316,767

Proceeds from sales of mortgage loans held for sale

     449,570        305,546   

Net gains on sale of mortgage loans held for sale

     (18,244     (11,935

Originations of SBA loans

     (26,684     (24,586

Proceeds from sales of SBA loans

     20,539        11,418   

Net gains on sale of SBA loans

     (2,290     (1,250

Change attributable to other operating activities

     7,683        7,585   
  

 

 

   

 

 

 

Net cash used in operating activities

     (17,264     (14,742
  

 

 

   

 

 

 

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

    

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

     (41,293     176,107   

Purchase of securities available for sale

     (230,226     (68,632

Proceeds from maturities of securities available for sale

     36,544        22,493   

Proceeds from sales of securities available for sale

     30,113        69,768   

Decrease in restricted equity securities, net

     1,825        6,832   

Net increase in loans, excluding purchased non-covered and covered loans

     (257,665     (129,977

Purchases of loan pools

     (268,984     —     

Payments received on purchased non-covered loans

     80,668        27,791   

Payments received on covered loans

     42,103        64,743   

Purchases of premises and equipment

     (6,595     (2,223

Proceeds from sales of premises and equipment

     217        56   

Proceeds from sales of other real estate owned

     27,691        17,420   

Payments received from FDIC under loss-share agreements

     12,539        10,576   

Net cash proceeds received from acquisitions

     567,652        1,099   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (5,411     196,053   
  

 

 

   

 

 

 

 

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Table of Contents

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

    

Net increase in deposits

     27,829        20,780   

Net decrease in securities sold under agreements to repurchase

     (39,832     (37,835

Proceeds from other borrowings

     —          57,463   

Repayment of other borrowings

     (39,881     (174,005

Redemption of preferred stock

     —          (28,000

Dividends paid—preferred stock

     —          (286

Dividends paid—common stock

     (3,220     (1,338

Purchase of treasury shares

     (731     (432

Issuance of common stock

     114,889        —     

Proceeds from exercise of stock options

     998        373   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     60,052        (163,280
  

 

 

   

 

 

 

Net increase in cash and due from banks

     37,377        18,031   

Cash and due from banks at beginning of period

     78,036        62,955   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 115,413      $ 80,986   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid/(received) during the period for:

    

Interest

   $ 7,220      $ 6,740   

Income taxes

   $ 2,659      $ 5,583   

Loans (excluding purchased non-covered and covered loans) transferred to other real estate owned

   $ 8,636      $ 6,400   

Purchased non-covered loans transferred to other real estate owned

   $ 2,039      $ 1,425   

Covered loans transferred to other real estate owned

   $ 6,534      $ 9,083   

Loans provided for the sales of other real estate owned

   $ 1,948      $ 578   

Change in unrealized gain on securities available for sale, net of tax

   $ (2,895   $ 5,055   

Change in unrealized loss on cash flow hedge (interest rate swap), net of tax

   $ (131   $ (638

Issuance of common stock in acquisitions

   $ —        $ 34,474   

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2015

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At June 30, 2015 the Bank operated 103 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended June 30, 2015 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, 2014.

Newly Issued Accounting Pronouncements

ASU 2015-03 – Interest – Imputation of Interest (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. It should be applied on a retrospective basis. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2015-02 – Consolidation (Topic 810)—Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 includes amendments that are intended to improve targeted areas of consolidation for legal entities including reducing the number of consolidation models from four to two and simplifying the FASB Accounting Standards Codification. ASU 2015-02 is effective for annual and interim periods within those annual periods, beginning after December 15, 2015. The amendments may be applied retrospectively in previously issued financial statements for one or more years with a cumulative effect adjustment to retained earnings as of the beginning of the first year restated. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2015-01 – Income Statement – Extraordinary and Unusual Items (“ASU 2015-01”). ASU 2015-01 eliminates the concept of extraordinary items by no longer allowing companies to segregate an extraordinary item from the results of operations, separately present an extraordinary item on the income statement, or disclose income taxes or earnings-per-share data applicable to an extraordinary item. ASU 2015-01 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2014-11 – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”). ASU 2014-11 impacted FASB ASC 860 Transfers and Servicing by changing the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require new disclosures. An entity is required to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. An entity must also provide additional information about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The amendments in this update became effective for interim and annual periods beginning after December 15, 2014 and did not have a material impact on the consolidated financial statements although the required disclosures have been included in Note 7.

ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

 

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NOTE 2 – BUSINESS COMBINATIONS

Branch Acquisition

On June 12, 2015, the Company completed its acquisition of 18 branches from Bank of America, National Association located in Calhoun, Columbia, Dixie, Hamilton, Suwanee and Walton Counties, Florida and Ben Hill, Colquitt, Dougherty, Laurens, Liberty, Thomas, Tift and Ware Counties, Georgia. Under the terms of the Purchase and Assumption Agreement dated January 28, 2015, the Company paid a deposit premium of $20.0 million, equal to 3.00% of the average daily deposits for the 15 calendar day period immediately prior to the acquisition date. In addition, the Company acquired approximately $4.4 million in loans and $11.4 million in premises and equipment.

The acquisition of the 18 branches was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. Management continues to evaluate fair value adjustments related to premises and core deposit intangible assets acquired.

The following table presents the assets acquired and liabilities assumed as of June 12, 2015 and their initial fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

 

(Dollars in Thousands)    As Recorded by
Bank of America
     Fair Value
Adjustments
    As Recorded
by Ameris
 

Assets

       

Cash and cash equivalents

   $ 630,220       $ —        $ 630,220   

Loans

     4,363         —          4,363   

Premises and equipment

     10,348         1,060 (a)      11,408   

Intangible assets

     —           7,651 (b)      7,651   

Other assets

     126           126   
  

 

 

    

 

 

   

 

 

 

Total assets

   $ 645,057       $ 8,711      $ 653,768   
  

 

 

    

 

 

   

 

 

 

Liabilities

       

Deposits:

       

Noninterest-bearing

   $ 149,854       $ —        $ 149,854   

Interest-bearing

     495,110         (215 )(c)      494,895   
  

 

 

    

 

 

   

 

 

 

Total deposits

     644,964         (215     644,749   

Other liabilities

     93         —          93   
  

 

 

    

 

 

   

 

 

 

Total liabilities

     645,057         (215     644,842   
  

 

 

    

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     —           8,926        8,926   

Goodwill

     —           11,076        11,076   
  

 

 

    

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ —         $ 20,002      $ 20,002   
  

 

 

    

 

 

   

 

 

 

Consideration:

       

Cash paid as deposit premium

   $ 20,002        
  

 

 

      

Fair value of total consideration transferred

   $ 20,002        
  

 

 

      

 

Explanation of fair value adjustments

(a) Adjustment reflects the fair value adjustments of the premise and equipment as of the acquisition date.
(b) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(c) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired deposits.

Goodwill of $11.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the branch acquisition and is the result of expected operational synergies and other factors.

In the acquisition, the Company purchased $4.4 million of loans at fair value. Management did not identify any loans that were considered to be credit impaired and are accounted for under ASC Topic 310-30.

 

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Merchants & Southern Banks of Florida, Incorporated

On May 22, 2015, the Company completed its acquisition of all shares of the outstanding common stock of Merchants & Southern Banks of Florida, Incorporated (“Merchants”), a bank holding company headquartered in Gainesville, Florida, for a total purchase price of $50,000,000. Upon consummation of the stock purchase, Merchants was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Merchant’s wholly owned banking subsidiary, Merchants and Southern Bank, was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Merchants and Southern Bank had a total of 13 banking locations in Alachua, Marion and Clay Counties, Florida.

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

The following table presents the assets acquired and liabilities of Merchants assumed as of May 22, 2015 and their initial fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

 

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

Assets

       

Cash and cash equivalents

   $ 7,527       $ —        $ 7,527   

Federal funds sold and interest-bearing balances

     106,188         —          106,188   

Investment securities

     164,421         (553 )(a)      163,868   

Other investments

     872         —          872   

Loans

     199,955         (8,500 )(b)      191,455   

Less allowance for loan losses

     (3,354      3,354 (c)      —     
  

 

 

    

 

 

   

 

 

 

Loans, net

     196,601         (5,146     191,455   

Other real estate owned

     4,082         (1,115 )(d)      2,967   

Premises and equipment

     14,614         (3,680 )(e)      10,934   

Intangible assets

     —           4,577 (f)      4,577   

Other assets

     2,333         2,335 (g)      4,668   
  

 

 

    

 

 

   

 

 

 

Total assets

   $ 496,638       $ (3,582   $ 493,056   
  

 

 

    

 

 

   

 

 

 

Liabilities

       

Deposits:

       

Noninterest-bearing

   $ 121,708       $ —        $ 121,708   

Interest-bearing

     286,112         —          286,112   
  

 

 

    

 

 

   

 

 

 

Total deposits

     407,820         —          407,820   

Federal funds purchased and securities sold under agreements to repurchase

     41,588         —          41,588   

Other liabilities

     2,151         81 (h)      2,232   

Subordinated deferrable interest debentures

     6,186         (2,680 )(i)      3,506   
  

 

 

    

 

 

   

 

 

 

Total liabilities

     457,745         (2,599     455,146   
  

 

 

    

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     38,893         (983     37,910   

Goodwill

     —           12,090        12,090   
  

 

 

    

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ 38,893       $ 11,107      $ 50,000   
  

 

 

    

 

 

   

 

 

 

Consideration:

       

Cash exchanged for shares

   $ 50,000        
  

 

 

      

Fair value of total consideration transferred

   $ 50,000        
  

 

 

      

 

Explanation of fair value adjustments

(a) Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.
(c) Adjustment reflects the elimination of Merchant’s allowance for loan losses.
(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.
(e) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired premises.

 

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(f) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(g) Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
(h) Adjustment reflects the fair value adjustments based on the Company’s evaluation of interest rate swap liabilities.
(i) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

Goodwill of $12.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Merchants acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $191.5 million of loans at fair value, net of $8.5 million, or 4.25%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $17.4 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest

   $ 24,446   

Non-accretable difference

     (3,814
  

 

 

 

Cash flows expected to be collected

     20,632   

Accretable yield

     (3,254
  

 

 

 

Total purchased credit-impaired loans acquired

   $ 17,378   
  

 

 

 

The following table presents the acquired loan data for the Merchants acquisition.

 

     Fair Value of
Acquired Loans
at Acquisition
Date
     Gross
Contractual
Amounts
Receivable at
Acquisition
Date
     Best Estimate
at Acquisition
Date of
Contractual
Cash Flows
Not Expected
to be
Collected
 
     (Dollars in Thousands)  

Acquired receivables subject to ASC 310-30

   $ 17,378       $ 24,446       $ 3,814   

Acquired receivables not subject to ASC 310-30

   $ 174,077       $ 178,763       $ —     

Coastal Bankshares, Inc.

On June 30, 2014, the Company completed its acquisition of The Coastal Bankshares, Inc. (“Coastal”), a bank holding company headquartered in Savannah, Georgia. Upon consummation of the acquisition, Coastal was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Coastal’s wholly owned banking subsidiary, The Coastal Bank (“Coastal Bank”), was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Coastal Bank had a total of six banking locations in Chatham, Liberty and Effingham Counties, Georgia. Coastal’s common shareholders received 0.4671 of a share of the Company’s common stock in exchange for each share of Coastal’s common stock. As a result, the Company issued 1,598,998 common shares at a fair value of $34.5 million and paid $2.8 million cash in exchange for outstanding warrants.

The acquisition of Coastal was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. During the third quarter of 2014 and the second quarter of 2015, management revised its initial estimates regarding the valuation of other real estate owned. In addition, during the third and fourth quarters of 2014 and second quarter of 2015, management continued its assessment and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Sections 382 of the Internal Revenue Code of 1986, as amended.

 

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The following table presents the assets acquired and liabilities of Coastal assumed as of June 30, 2014 and their fair value estimates:

 

(Dollars in Thousands)    As Recorded by
Coastal
     Initial Fair Value
Adjustments
    Subsequent
Fair Value
Adjustments
    As Recorded
by Ameris
 

Assets

         

Cash and cash equivalents

   $ 3,895       $ —        $ —        $ 3,895   

Federal funds sold and interest-bearing balances

     15,923         —          —          15,923   

Investment securities

     67,266         (500 )(a)      —          66,766   

Other investments

     975         —          —          975   

Mortgage loans held for sale

     7,288         —          —          7,288   

Loans

     296,141         (16,700 )(b)      —          279,441   

Less allowance for loan losses

     (3,218      3,218 (c)      —          —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Loans, net

     292,923         (13,482     —          279,441   

Other real estate owned

     14,992         (3,528 )(d)      (3,407 )(g)      8,057   

Premises and equipment

     11,882         —          —          11,882   

Intangible assets

     507         4,266 (e)      (231 )(h)      4,542   

Cash value of bank owned life insurance

     7,812         —          —          7,812   

Other assets

     14,898         —          (601 )(i)      14,297   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 438,361       $ (13,244   $ (4,239   $ 420,878   
  

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities

         

Deposits:

         

Noninterest-bearing

   $ 80,012       $ —        $ —        $ 80,012   

Interest-bearing

     289,012         —          —          289,012   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total deposits

     369,024         —          —          369,024   

Federal funds purchased and securities sold under agreements to repurchase

     5,428         —          —          5,428   

Other borrowings

     22,005         —          —          22,005   

Other liabilities

     6,192         —          —          6,192   

Subordinated deferrable interest debentures

     15,465         (6,413 )(f)      —          9,052   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     418,114         (6,413     —          411,701   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     20,247         (6,831     (4,239     9,177   

Goodwill

     —           23,854        4,239        28,093   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ 20,247       $ 17,023      $ —        $ 37,270   
  

 

 

    

 

 

   

 

 

   

 

 

 

Consideration:

         

Ameris Bancorp common shares issued

     1,598,998          

Purchase price per share of the Company’s common stock

   $ 21.56          
  

 

 

        

Company common stock issued

     34,474          

Cash exchanged for shares

     2,796          
  

 

 

        

Fair value of total consideration transferred

   $ 37,270          
  

 

 

        

 

Explanation of fair value adjustments

(a) Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.
(c) Adjustment reflects the elimination of Coastal’s allowance for loan losses.
(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.
(e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(f) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

 

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(g) Adjustment reflects the additional fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.
(h) Adjustment reflects final recording of core deposit intangible on the acquired core deposit accounts.
(i) Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

Goodwill of $28.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Coastal acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $279.4 million of loans at fair value, net of $16.7 million, or 5.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $29.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest

   $ 38,194   

Non-accretable difference

     (5,632
  

 

 

 

Cash flows expected to be collected

     32,562   

Accretable yield

     (3,282
  

 

 

 

Total purchased credit-impaired loans acquired

   $ 29,280   
  

 

 

 

The results of operations of Merchants and Coastal subsequent to the respective acquisition dates are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on January 1, 2014, unadjusted for potential cost savings (in thousands).

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  

Net interest income and noninterest income

   $ 63,259       $ 60,212       $ 123,308       $ 116,454   

Net income (loss)

   $ (128    $ 6,963       $ 10,739       $ 17,163   

Net income (loss) available to common stockholders

   $ (128    $ 6,963       $ 10,739       $ 16,877   

Income (loss) per common share available to common stockholders – basic

   $ 0.00       $ 0.26       $ 0.34       $ 0.63   

Income (loss) per common share available to common stockholders – diluted

   $ 0.00       $ 0.26       $ 0.34       $ 0.62   

Average number of shares outstanding, basic

     32,184         26,780         31,318         26,762   

Average number of shares outstanding, diluted

     32,520         27,232         31,653         27,214   

A rollforward of purchased non-covered loans for the six months ended June 30, 2015, the year ended December 31, 2014 and the six months ended June 30, 2014 is shown below:

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Balance, January 1

   $ 674,239       $ 448,753       $ 448,753   

Charge-offs, net of recoveries

     (470      (84      —     

Additions due to acquisitions

     195,818         279,441         279,441   

Accretion

     5,388         9,745         3,635   

Transfers to purchased non-covered other real estate owned

     (2,039      (4,160      (1,425

Transfer from covered loans due to loss-share expiration

     15,462         15,475         —     

Payments received

     (80,085      (74,931      (28,273
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ 808,313       $ 674,239       $ 702,131   
  

 

 

    

 

 

    

 

 

 

 

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The following is a summary of changes in the accretable discounts of purchased non-covered loans during the six months ended June 30, 2015, the year ended December 31, 2014 and the six months ended June 30, 2014:

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Balance, January 1

   $ 25,716       $ 26,189       $ 26,189   

Additions due to acquisitions

     4,686         7,799         7,799   

Accretion

     (5,388      (9,745      (3,635

Accretable discounts removed due to charge-offs

     (1,685      —           —     

Transfers between non-accretable and accretable discounts, net

     (1,007      1,473         1,968   
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ 22,322       $ 25,716       $ 32,321   
  

 

 

    

 

 

    

 

 

 

NOTE 3 – INVESTMENT SECURITIES

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

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2015, December 31, 2014 and June 30, 2014 are presented below:

 

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

June 30, 2015:

           

U. S. government agencies

   $ 14,956       $ —         $ (210    $ 14,746   

State, county and municipal securities

     165,070         3,305         (1,003      167,372   

Corporate debt securities

     12,710         184         (58      12,836   

Mortgage-backed securities

     665,274         4,948         (3,022      667,200   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 858,010       $ 8,437       $ (4,293    $ 862,154   
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2014:

           

U. S. government agencies

   $ 14,953       $ —         $ (275    $ 14,678   

State, county and municipal securities

     137,873         3,935         (433      141,375   

Corporate debt securities

     10,812         228         —           11,040   

Mortgage-backed securities

     369,581         6,534         (1,403      374,712   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 533,219       $ 10,697       $ (2,111    $ 541,805   
  

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2014:

           

U. S. government agencies

   $ 14,950       $ —         $ (505    $ 14,445   

State, county and municipal securities

     143,507         3,136         (863      145,780   

Corporate debt securities

     10,805         284         (131      10,958   

Mortgage-backed securities

     361,194         5,435         (2,182      364,447   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 530,456       $ 8,855       $ (3,681    $ 535,630   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


Table of Contents

The amortized cost and fair value of available-for-sale securities at June 30, 2015 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

   $ 7,960       $ 7,999   

Due from one year to five years

     47,037         48,246   

Due from five to ten years

     66,573         67,686   

Due after ten years

     71,166         71,023   

Mortgage-backed securities

     665,274         667,200   
  

 

 

    

 

 

 
   $ 858,010       $ 862,154   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $323.9 million serve as collateral to secure public deposits and for other purposes required or permitted by law at June 30, 2015, compared with $286.6 million and $228.3 million at December 31, 2014 and June 30, 2014, respectively.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2015, December 31, 2014 and June 30, 2014.

 

     Less Than 12 Months     12 Months or More     Total  
Description of Securities    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 
     (Dollars in Thousands)  

June 30, 2015:

               

U. S. government agencies

   $ 9,818       $ (138   $ 4,928       $ (72   $ 14,746       $ (210

State, county and municipal securities

     50,294         (680     10,404         (323     60,698         (1,003

Corporate debt securities

     7,149         (58     —           —          7,149         (58

Mortgage-backed securities

     238,174         (2,046     30,672         (976     268,846         (3,022
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 305,435       $ (2,922   $ 46,004       $ (1,371   $ 351,439       $ (4,293
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2014:

               

U. S. government agencies

   $ —         $ —        $ 14,678       $ (275   $ 14,678       $ (275

State, county and municipal securities

     15,038         (70     19,665         (363     34,703         (433

Corporate debt securities

     —           —          —           —          —           —     

Mortgage-backed securities

     36,760         (221     46,812         (1,182     83,572         (1,403
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 51,798       $ (291   $ 81,155       $ (1,820   $ 132,953       $ (2,111
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

June 30, 2014:

               

U. S. government agencies

   $ —         $ —        $ 14,445       $ (505   $ 14,445       $ (505

State, county and municipal securities

     4,088         (35     29,203         (828     33,291         (863

Corporate debt securities

     —           —          4,945         (131     4,945         (131

Mortgage-backed securities

     25,107         (65     51,039         (2,117     76,146         (2,182
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 29,195       $ (100   $ 99,632       $ (3,581   $ 128,827       $ (3,681
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

As of June 30, 2015, the Company’s security portfolio consisted of 443 securities, 163 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed and state, county and municipal securities, as discussed below.

At June 30, 2015, the Company held 114 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

 

13


Table of Contents

At June 30, 2015, the Company held 40 state, county and municipal securities, three U.S. government-sponsored agency security, and six corporate security that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

During the first six months of 2015 and 2014, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities, except for one security that began deferring interest during the fourth quarter of 2010. The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at June 30, 2015, December 31, 2014 or June 30, 2014.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at June 30, 2015, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at June 30, 2015, these investments are not considered impaired on an other-than-temporary basis.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the six months ended June 30, 2015, year ended December 31, 2014 and six months ended June 30, 2014:

 

     June 30,
2015
     December 31,
2014
     June 30,
2014
 
     (Dollars in Thousands)  

Gross gains on sales of securities

   $ 41       $ 141       $ 8   

Gross losses on sales of securities

     (19      (3      (2
  

 

 

    

 

 

    

 

 

 

Net realized gains on sales of securities available for sale

   $ 22       $ 138       $ 6   
  

 

 

    

 

 

    

 

 

 

Sales proceeds

   $ 30,113       $ 94,051       $ 69,768   
  

 

 

    

 

 

    

 

 

 

 

14


Table of Contents

NOTE 4 – LOANS

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

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank’s market areas.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 373,202       $ 319,654       $ 304,588   

Real estate – construction and development

     205,019         161,507         149,346   

Real estate – commercial and farmland

     1,010,195         907,524         850,000   

Real estate – residential

     537,201         456,106         422,731   

Consumer installment

     30,080         30,782         31,902   

Other

     15,903         14,308         11,492   
  

 

 

    

 

 

    

 

 

 
   $ 2,171,600       $ 1,889,881       $ 1,770,059   
  

 

 

    

 

 

    

 

 

 

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the FDIC. Purchased non-covered loans totaling $808.3 million, $674.2 million and $702.1 million at June 30, 2015, December 31, 2014 and June 30, 2014, respectively, are not included in the above schedule.

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 45,337       $ 38,041       $ 41,583   

Real estate – construction and development

     75,302         58,362         64,084   

Real estate – commercial and farmland

     404,588         306,706         311,748   

Real estate – residential

     276,798         266,342         278,451   

Consumer installment

     6,288         4,788         6,265   
  

 

 

    

 

 

    

 

 

 
   $ 808,313       $ 674,239       $ 702,131   
  

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of June 30, 2015, purchased loan pools totaled $269.0 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $263.8 million and $5.2 million of purchase premium paid at acquisition. At June 30, 2015, all loans included in the purchased loan pools were performing current loans, all risk-rated grade 20. The Company did not have any purchased loan pools at December 31, 2014 or June 30, 2014.

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 $209.6 million, $271.3 million and $331.3 million at June 30, 2015, December 31, 2014 and June 30, 2014, respectively, are not included in the above schedules.

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 17,666       $ 21,467       $ 25,209   

Real estate – construction and development

     15,002         23,447         31,600   

Real estate – commercial and farmland

     111,772         147,627         188,643   

Real estate – residential

     64,982         78,520         85,518   

Consumer installment

     176         218         280   
  

 

 

    

 

 

    

 

 

 
   $ 209,598       $ 271,279       $ 331,250   
  

 

 

    

 

 

    

 

 

 

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest payments on nonaccrual loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 4,067       $ 1,672       $ 1,596   

Real estate – construction and development

     1,594         3,774         3,452   

Real estate – commercial and farmland

     8,938         8,141         8,831   

Real estate – residential

     5,650         7,663         7,795   

Consumer installment

     491         478         437   
  

 

 

    

 

 

    

 

 

 
   $ 20,740       $ 21,728       $ 22,111   
  

 

 

    

 

 

    

 

 

 

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 309       $ 175       $ 143   

Real estate – construction and development

     1,483         1,119         2,273   

Real estate – commercial and farmland

     9,634         10,242         6,647   

Real estate – residential

     5,930         6,644         6,658   

Consumer installment

     88         69         49   
  

 

 

    

 

 

    

 

 

 
   $ 17,444       $ 18,249       $ 15,770   
  

 

 

    

 

 

    

 

 

 

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

 

(Dollars in Thousands)

   June 30,
2015
     December 31,
2014
     June 30,
2014
 

Commercial, financial and agricultural

   $ 7,948       $ 8,541       $ 12,254   

Real estate – construction and development

     3,120         7,601         8,028   

Real estate – commercial and farmland

     13,997         12,584         17,027   

Real estate – residential

     3,712         6,595         8,702   

Consumer installment

     94         91         127   
  

 

 

    

 

 

    

 

 

 
   $ 28,871       $ 35,412       $ 46,138   
  

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

The following table presents an aging analysis of loans, excluding purchased non-covered and covered past due loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2015:

                    

Commercial, financial & agricultural

   $ 840       $ 888       $ 3,891       $ 5,619       $ 367,583       $ 373,202       $ —     

Real estate – construction & development

     1,201         374         1,536         3,111         201,908         205,019         —     

Real estate – commercial & farmland

     1,958         2,823         7,014         11,795         998,400         1,010,195         —     

Real estate – residential

     5,135         1,949         4,727         11,811         525,390         537,201         —     

Consumer installment loans

     293         77         315         685         29,395         30,080         —     

Other

     —           —           —           —           15,903         15,903         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,427       $ 6,111       $ 17,483       $ 33,021       $ 2,138,579       $ 2,171,600       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2014:

                    

Commercial, financial & agricultural

   $ 900       $ 233       $ 1,577       $ 2,710       $ 316,944       $ 319,654       $ —     

Real estate – construction & development

     1,382         286         3,367         5,035         156,472         161,507         —     

Real estate – commercial & farmland

     2,859         635         7,668         11,162         896,362         907,524         —     

Real estate – residential

     3,953         2,334         6,755         13,042         443,064         456,106         —     

Consumer installment loans

     634         158         366         1,158         29,624         30,782         1   

Other

     —           —           —           —           14,308         14,308         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,728       $ 3,646       $ 19,733       $ 33,107       $ 1,856,774       $ 1,889,881       $ 1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2014:

                    

Commercial, financial & agricultural

   $ 1,180       $ 966       $ 1,077       $ 3,223       $ 301,365       $ 304,588       $ —     

Real estate – construction & development

     3,942         296         3,449         7,687         141,659         149,346         —     

Real estate – commercial & farmland

     4,622         1,860         7,404         13,886         836,114         850,000         —     

Real estate – residential

     5,806         3,829         7,197         16,832         405,899         422,731         —     

Consumer installment loans

     345         176         310         831         31,071         31,902         —     

Other

     —           —           —           —           11,492         11,492         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,895       $ 7,127       $ 19,437       $ 42,459       $ 1,727,600       $ 1,770,059       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

The following table presents an analysis of purchased non-covered past due loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2015:

                    

Commercial, financial & agricultural

   $ —         $ 1,101       $ 202       $ 1,303       $ 44,034       $ 45,337       $ —     

Real estate – construction & development

     245         —           1,026         1,271         74,031         75,302         —     

Real estate – commercial & farmland

     2,115         724         9,062         11,901         392,687         404,588         —     

Real estate – residential

     3,848         1,400         5,369         10,617         266,181         276,798         —     

Consumer installment loans

     6         —           84         90         6,198         6,288         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,214       $ 3,225       $ 15,743       $ 25,182       $ 783,131       $ 808,313       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of December 30, 2014:

                    

Commercial, financial & agricultural

   $ 461       $ 90       $ 175       $ 726       $ 37,315       $ 38,041       $ —    

Real estate – construction & development

     790         1,735         1,117         3,642         54,720         58,362         —    

Real estate – commercial & farmland

     2,107         1,194         9,529         12,830         293,876         306,706         —    

Real estate – residential

     6,907         1,401         6,369         14,677         251,665         266,342         —    

Consumer installment loans

     82         —           65         147         4,641         4,788         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,347       $ 4,420       $ 17,255       $ 32,022       $ 642,217       $ 674,239       $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2014:

                    

Commercial, financial & agricultural

   $ 137       $ 26       $ 143       $ 306       $ 41,277       $ 41,583       $ —     

Real estate – construction & development

     712         168         2,165         3,045         61,039         64,084         —     

Real estate – commercial & farmland

     1,263         1,605         6,647         9,515         302,233         311,748         —     

Real estate – residential

     6,952         983         6,144         14,079         264,372         278,451         —     

Consumer installment loans

     23         29         47         99         6,166         6,265         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,087       $ 2,811       $ 15,146       $ 27,044       $ 675,087       $ 702,131       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

The following table presents an aging analysis of covered loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2015:

                    

Commercial, financial & agricultural

   $ 237       $ 240       $ 1,670       $ 2,147       $ 15,519       $ 17,666       $ —     

Real estate – construction & development

     292         31         3,045         3,368         11,634         15,002         143   

Real estate – commercial & farmland

     699         81         9,396         10,176         101,596         111,772         —     

Real estate – residential

     2,690         927         2,122         5,739         59,243         64,982         —     

Consumer installment loans

     —           —           50         50         126         176         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,918       $ 1,279       $ 16,283       $ 21,480       $ 188,118       $ 209,598       $ 143   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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, 2014:

                    

Commercial, financial & agricultural

   $ 451       $ 136       $ 1,878       $ 2,465       $ 19,002       $ 21,467       $ —    

Real estate – construction & development

     238         226         6,703         7,167         16,280         23,447         —    

Real estate – commercial & farmland

     4,371         1,486         7,711         13,568         134,059         147,627         714  

Real estate – residential

     3,464         962         5,656         10,082         68,438         78,520         —    

Consumer installment loans

     10         —           91         101         117         218         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,534       $ 2,810       $ 22,039       $ 33,383       $ 237,896       $ 271,279       $ 714  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Loans
30-59
Days Past
Due
     Loans
60-89
Days
Past Due
     Loans 90
or More
Days Past
Due
     Total
Loans
Past Due
     Current
Loans
     Total
Loans
     Loans 90
Days or
More Past
Due and
Still
Accruing
 
     (Dollars in Thousands)  

As of June 30, 2014:

                    

Commercial, financial & agricultural

   $ 16       $ 467       $ 6,909       $ 7,392       $ 17,817       $ 25,209       $ —     

Real estate – construction & development

     551         459         7,708         8,718         22,882         31,600         —     

Real estate – commercial & farmland

     6,399         139         10,443         16,981         171,662         188,643         —     

Real estate – residential

     2,490         690         5,939         9,119         76,399         85,518         —     

Consumer installment loans

     —           49         56         105         175         280         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,456       $ 1,804       $ 31,055       $ 42,315       $ 288,935       $ 331,250       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19


Table of Contents

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

 

20


Table of Contents

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

 

     As of and For the Period Ended  
     June 30,
2015
     December 31,
2014
     June 30,
2014
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 20,740       $ 21,728       $ 22,111   

Troubled debt restructurings not included above

     12,467         12,759         17,337   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 33,207       $ 34,487       $ 39,448   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 192       $ 237       $ 1,133   
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 344       $ 1,991       $ 1,423   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ 311       $ 323       $ 375   
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 629       $ 1,491       $ 815   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2015:

              

Commercial, financial & agricultural

   $ 6,004       $ 442       $ 3,903       $ 4,345       $ 458       $ 2,819       $ 2,533   

Real estate – construction & development

     3,765         —           2,416         2,416         445         3,245         3,648   

Real estate – commercial & farmland

     18,117         5,960         9,595         15,555         1,243         15,378         15,125   

Real estate – residential

     11,743         1,153         9,199         10,352         1,825         11,555         12,006   

Consumer installment loans

     633         —           539         539         8         494         507   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 40,262       $ 7,555       $ 25,652       $ 33,207       $ 3,979       $ 33,491       $ 33,819   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2014:

              

Commercial, financial & agricultural

   $ 3,387       $ 6       $ 1,956       $ 1,962       $ 395       $ 2,457       $ 3,021   

Real estate – construction & development

     8,325         448         4,005         4,453         771         4,703         5,368   

Real estate – commercial & farmland

     17,514         4,967         9,651         14,618         1,859         15,341         15,972   

Real estate – residential

     15,571         3,514         9,407         12,921         974         14,244         16,317   

Consumer installment loans

     618         —           533         533         9         527         519   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 45,415       $ 8,935       $ 25,552       $ 34,487       $ 4,008       $ 37,272       $ 41,197   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2014:

              

Commercial, financial & agricultural

   $ 3,398       $ —         $ 1,852       $ 1,852       $ 298       $ 2,786       $ 3,397   

Real estate – construction & development

     9,336         —           5,532         5,532         798         5,783         5,811   

Real estate – commercial & farmland

     19,215         —           16,421         16,421         1,629         16,851         16,394   

Real estate – residential

     18,313         —           15,131         15,131         884         16,563         17,698   

Consumer installment loans

     638         —           512         512         10         530         514   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 50,900       $ —         $ 39,448       $ 39,448       $ 3,619       $ 42,513       $ 43,814   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

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

 

     As of and For the Period Ended  
     June 30,
2015
     December 31,
2014
     June 30,
2014
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 17,444       $ 18,249       $ 15,770   

Troubled debt restructurings not included above

     6,792         1,212         —     
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 24,236       $ 19,461       $ 15,770   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 143       $ 64       $ 41   
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 161       $ 132       $ 41   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ 451       $ 521       $ 426   
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 923       $ 1,759       $ 652   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to purchased non-covered impaired loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three
Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2015:

              

Commercial, financial & agricultural

   $ 1,476       $ 309       $ —         $ 309       $ —         $ 254       $ 227   

Real estate – construction & development

     9,656         1,857         —           1,857         —           1,485         1,469   

Real estate – commercial & farmland

     17,043         13,691         —           13,691         —           11,753         11,366   

Real estate – residential

     12,992         8,285         —           8,285         —           7,982         7,718   

Consumer installment loans

     111         94         —           94         —           61         64   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 41,278       $ 24,236       $ —         $ 24,236       $ —         $ 21,535       $ 20,844   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2014:

              

Commercial, financial & agricultural

   $ 1,366       $ 175       $ —         $ 175       $ —         $ 277       $ 165   

Real estate – construction & development

     5,161         1,436         —           1,436         —           2,242         1,643   

Real estate – commercial & farmland

     15,007         10,588         —           10,588         —           11,148         7,484   

Real estate – residential

     12,283         7,191         —           7,191         —           8,447         7,084   

Consumer installment loans

     172         71         —           71         —           124         68   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 33,989       $ 19,461       $ —         $ 19,461       $ —         $ 22,238       $ 16,444   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2014:

              

Commercial, financial & agricultural

   $ 550       $ 143       $ —         $ 143       $ —         $ 130       $ 90   

Real estate – construction & development

     4,649         2,273         —           2,273         —           1,702         1,243   

Real estate – commercial & farmland

     9,848         6,647         —           6,647         —           6,738         5,043   

Real estate – residential

     10,598         6,658         —           6,658         —           6,933         6,175   

Consumer installment loans

     65         49         —           49         —           41         31   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 25,710       $ 15,770       $ —         $ 15,770       $ —         $ 15,544       $ 12,582   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents

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

 

     As of and For the Period Ended  
     June 30,
2015
     December 31,
2014
     June 30,
2014
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 28,871       $ 35,412       $ 46,138   

Troubled debt restructurings not included above

     17,500         22,619         9,221   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 46,371       $ 58,031       $ 55,359   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 219       $ 443       $ 796   
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 431       $ 2,057       $ 1,193   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ 409       $ 571       $ 843   
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 947       $ 3,123       $ 1,892   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to covered impaired loans as of June 30, 2015, December 31, 2014 and June 30, 2014:

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2015:

              

Commercial, financial & agricultural

   $ 14,260       $ 7,951       $ —         $ 7,951       $ —         $ 8,869       $ 8,773   

Real estate – construction & development

     29,895         5,953         —           5,953         —           7,819         8,757   

Real estate – commercial & farmland

     37,426         17,970         —           17,970         —           21,795         21,418   

Real estate – residential

     18,226         14,402         —           14,402         —           16,600         17,084   

Consumer installment loans

     125         95         —           95         —           99         97   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 99,932       $ 46,371       $ —         $ 46,371       $ —         $ 55,179       $ 56,129   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2014:

              

Commercial, financial & agricultural

   $ 14,385       $ 8,582       $ —         $ 8,582       $ —         $ 8,525       $ 9,325   

Real estate – construction & development

     27,289         10,638         —           10,638         —           11,279         13,935   

Real estate – commercial & farmland

     31,309         20,663         —           20,663         —           21,890         28,057   

Real estate – residential

     22,860         18,054         —           18,054         —           18,242         20,776   

Consumer installment loans

     124         94         —           94         —           100         160   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 95,967       $ 58,031       $ —         $ 58,031       $ —         $ 60,036       $ 72,253   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Six Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of June 30, 2014:

              

Commercial, financial & agricultural

   $ 14,694       $ 12,266       $ —         $ 12,266       $ —         $ 11,153       $ 9,858   

Real estate – construction & development

     12,921         11,048         —           11,048         —           14,541         15,706   

Real estate – commercial & farmland

     27,742         24,007         —           24,007         —           27,877         32,167   

Real estate – residential

     21,874         19,793         —           19,793         —           21,199         22,465   

Consumer installment loans

     161         127         —           127         —           130         200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 77,392       $ 67,241       $ —         $ 67,241       $ —         $ 74,899       $ 80,397   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Every loan is assigned a risk rating, with the exception of credit card receivables and overdraft protection loans, which are treated as pools for risk-rating purposes. Relationships greater than $1.0 million and a sample of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department or an independent third party loan review firm. The following is a description of the general characteristics of the grades:

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

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

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

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibit a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

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

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

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current credit quality 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.

 

24


Table of Contents

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2015:

 

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

   $ 173,795       $ 268       $ 150       $ 1,606       $ 6,114       $ —         $ 181,933   

15

     25,447         3,402         127,090         85,812         1,319         —           243,070   

20

     96,169         47,207         592,636         334,999         17,833         15,903         1,104,747   

23

     635         8,071         11,984         6,655         55         —           27,400   

25

     69,304         140,119         248,227         83,207         3,807         —           544,664   

30

     2,566         2,510         11,088         8,612         244         —           25,020   

40

     5,286         3,442         19,020         16,310         708         —           44,766   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 373,202       $ 205,019       $ 1,010,195       $ 537,201       $ 30,080       $ 15,903       $ 2,171,600   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

Risk

Grade

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

10

   $ 121,355       $ 268       $ 155       $ 226       $ 6,573       $ —         $ 128,577   

15

     25,318         4,010         128,170         59,301         1,005         —           217,804   

20

     100,599         47,541         511,198         256,758         17,544         14,308         947,948   

23

     56         8,933         10,507         9,672         37         —           29,205   

25

     62,519         93,514         224,464         102,998         4,692         —           488,187   

30

     3,758         1,474         13,035         7,459         257         —           25,983   

40

     6,049         5,767         19,995         19,692         673         —           52,176   

50

     —           —           —           —           1         —           1   

60

     —          —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 319,654       $ 161,507       $ 907,524       $ 456,106       $ 30,782       $ 14,308       $ 1,889,881   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2014:

 

Risk

Grade

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

10

   $ 103,726       $ —         $ 255       $ 505       $ 6,356       $ —         $ 110,842   

15

     24,620         4,678         141,846         54,388         1,120         —           226,652   

20

     102,278         48,008         460,715         226,149         17,714         11,492         866,356   

23

     123         9,215         9,318         9,479         294         —           28,429   

25

     65,882         77,973         197,381         103,846         5,281         —           450,363   

30

     4,004         2,680         12,914         13,568         194         —           33,360   

40

     3,955         6,792         27,571         14,786         943         —           54,047   

50

     —           —           —           10         —           —           10   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 304,588       $ 149,346       $ 850,000       $ 422,731       $ 31,902       $ 11,492       $ 1,770,059   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Table of Contents

The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2015:

 

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

   $ 9,091       $ —         $ 80       $ —         $ 952       $ —         $ 10,123   

15

     1,377         866         8,710         41,641         626         —           53,220   

20

     12,545         16,979         190,219         139,792         2,769         —           362,304   

23

     —           240         3,792         6,505         —           —           10,537   

25

     18,556         49,070         165,267         65,818         1,700         —           300,411   

30

     2,462         3,409         19,042         9,803         63         —           34,779   

40

     1,276         4,738         17,478         13,217         178         —           36,887   

50

     30         —           —           22         —           —           52   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 45,337       $ 75,302       $ 404,588       $ 276,798       $ 6,288       $ —         $ 808,313   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

Risk

Grade

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

10

   $ 6,624       $ —         $ —         $ 290       $ 480       $ —         $ 7,394   

15

     1,376         552         13,277         14,051         501         —           29,727   

20

     13,657         12,991         116,308         64,083         1,647         —           208,686   

23

     73         —           3,207         3,298         —           —           6,578   

25

     13,753         36,230         144,293         164,959         1,920         —           361,155   

30

     1,618         4,365         12,279         7,444         41         —           25,747   

40

     910         4,254         17,342         12,184         199         —           34,889   

50

     30         —           —           33         —           —           63   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38,041       $ 58,362       $ 306,706       $ 266,342       $ 4,788       $ —         $ 674,239   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2014:

 

Risk

Grade

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

10

   $ 3,494       $ —         $ —         $ 293       $ 557       $ —         $ 4,344   

15

     4,728         245         14,191         15,839         537         —           35,540   

20

     11,567         12,905         94,598         64,937         2,683         —           186,690   

23

     —           —           —           165         —           —           165   

25

     18,251         42,127         175,427         178,523         2,343         —           416,671   

30

     3,162         4,722         16,078         8,326         21         —           32,309   

40

     381         4,085         11,454         10,368         124         —           26,412   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 41,583       $ 64,084       $ 311,748       $ 278,451       $ 6,265       $ —         $ 702,131   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

26


Table of Contents

The following table presents the covered loan portfolio by risk grade as of June 30, 2015:

 

Risk

Grade

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

10

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

15

     —           —           488         125         —           —           613   

20

     580         1,218         17,382         12,571         43         —           31,794   

23

     68         —           5,255         6,083         —           —           11,406   

25

     4,089         8,142         60,682         30,870         37         —           103,820   

30

     4,923         2,409         4,165         5,730         —           —           17,227   

40

     8,006         3,233         23,800         9,603         96         —           44,738   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 17,666       $ 15,002       $ 111,772       $ 64,982       $ 176       $ —         $ 209,598   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

Risk

Grade

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

10

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

15

     —           1         761         525         —           —           1,287   

20

     917         3,184         23,167         14,089         77         —           41,434   

23

     164         537         11,404         6,642         —           —           18,747   

25

     5,181         9,406         80,334         33,124         37         —           128,082   

30

     4,808         2,753         5,302         8,050         —           —           20,913   

40

     10,397         7,566         26,659         16,090         104         —           60,816   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 21,467       $ 23,447       $ 147,627       $ 78,520       $ 218       $ —         $ 271,279   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of June 30, 2014:

 

Risk

Grade

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

10

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

15

     —           2         822         629         —           —           1,453   

20

     1,133         5,524         33,050         17,143         68         —           56,918   

23

     124         555         15,528         5,557         —           —           21,764   

25

     6,569         9,251         94,504         36,507         40         —           146,871   

30

     4,398         4,802         9,959         8,326         2         —           27,487   

40

     12,985         11,466         34,780         17,356         170         —           76,757   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 25,209       $ 31,600       $ 188,643       $ 85,518       $ 280       $ —         $ 331,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

27


Table of Contents

Troubled Debt Restructurings

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

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

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

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first six months of 2015 and 2014 totaling $54.8 million and $8.4 million, respectively, under such parameters.

As of June 30, 2015, December 31, 2014 and June 30, 2014, the Company had a balance of $14.0 million, $15.3 million and $21.1 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $1.6 million, $2.2 million and $3.0 million in previous charge-offs on such loans at June 30, 2015, December 31, 2014 and June 30, 2014, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $210,000, $231,000 and $398,000 at June 30, 2015, December 31, 2014 and June 30, 2014, respectively. At June 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2015 and 2014, the Company modified loans as troubled debt restructurings, excluding purchased non-covered and covered loans, with principal balances of $782,000 and $1.7 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased non-covered and covered loans, which occurred during the six months ending June 30, 2015 and 2014:

 

     June 30, 2015      June 30, 2014  

Loan class:

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

Commercial, financial & agricultural

     3       $ 18         2       $ 16   

Real estate – construction & development

     2         16         4         235   

Real estate – commercial & farmland

     —           —           3         1,037   

Real estate – residential

     15         729         6         328   

Consumer installment

     5         19         11         46   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     25       $ 782         26       $ 1,662   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

28


Table of Contents

Troubled debt restructurings, excluding purchased non-covered and covered loans, with an outstanding balance of $2.2 million and $130,000 defaulted during the six months ended June 30, 2015 and 2014, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the six months ending June 30, 2015 and 2014:

 

     June 30, 2015      June 30, 2014  

Loan class:

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

Commercial, financial & agricultural

     2       $ 35         —         $ —     

Real estate – construction & development

     —           —           1         35   

Real estate – commercial & farmland

     5         1,274         —           —     

Real estate – residential

     10         884         2         72   

Consumer installment

     6         32         1         23   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23       $ 2,225         4       $ 130   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at June 30, 2015, December 31, 2014 and June 30, 2014:

 

As of June 30, 2015    Accruing Loans      Non-Accruing Loans  

Loan class:

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

Commercial, financial & agricultural

     6       $ 278         5       $ 29   

Real estate – construction & development

     11         821         3         57   

Real estate – commercial & farmland

     17         6,617         3         598   

Real estate – residential

     49         4,702         15         783   

Consumer installment

     11         49         17         82   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     94       $ 12,467         43       $ 1,549   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Loan class:

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

Commercial, financial & agricultural

     6       $ 290         2       $ 13   

Real estate – construction & development

     9         679         5         228   

Real estate – commercial & farmland

     19         6,477         3         724   

Real estate – residential

     47         5,258         11         1,485   

Consumer installment

     11         55         11         73   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     92       $ 12,759         32       $ 2,523   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of June 30, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

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

Commercial, financial & agricultural

     3       $ 257         3       $ 465   

Real estate – construction & development

     12         2,080         2         32   

Real estate – commercial & farmland

     19         7,590         4         2,151   

Real estate – residential

     38         7,335         8         1,044   

Consumer installment

     14         75         5         51   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     86       $ 17,337         22       $ 3,743   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

29


Table of Contents

As of June 30, 2015 and December 31, 2014, the Company had a balance of $7.0 million and $1.2 million, respectively, in troubled debt restructurings included in purchased non-covered loans. The Company did not have any troubled debt restructurings included in purchased non-covered loans at June 30, 2014. The Company has recorded $632,000 and $29,000 in previous charge-offs on such loans at June 30, 2015 and December 31, 2014, respectively. At June 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2015, the Company modified purchased non-covered loans as troubled debt restructurings, with principal balances of $1.0 million, and these modifications did not have a material impact on the Company’s allowance for loan loss. The Company did not modify any purchased non-covered loans as troubled debt restructurings during the six months ended June 30, 2014. The Company transferred troubled debt restructurings with principal balances of $4.8 million from the covered loan category to the purchased non-covered loan category during the six months ended June 30, 2015 due to the expiration of the loss-sharing agreements. The following table presents the purchased non-covered loans by class modified as troubled debt restructurings, which occurred during the six months ending June 30, 2015 and 2014:

 

     June 30, 2015      June 30, 2014  

Loan class:

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

Commercial, financial & agricultural

     —         $ —           —         $ —     

Real estate – construction & development

     —           —           —           —     

Real estate – commercial & farmland

     —           —           —           —     

Real estate – residential

     5         1,017         —           —     

Consumer installment

     1         5         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     6       $ 1,022         —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Troubled debt restructurings included in purchased non-covered loans with an outstanding balance of $65,000 defaulted during the six months ended June 30, 2015, and these defaults did not have a material impact on the Company’s allowance for loan loss. There were no troubled debt restructurings included in purchased non-covered loans that defaulted during the six months ended June 30, 2014. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the six months ending June 30, 2015 and 2014:

 

     June 30, 2015      June 30, 2014  

Loan class:

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

Commercial, financial & agricultural

     —         $ —           —         $ —     

Real estate – construction & development

     —           —           —           —     

Real estate – commercial & farmland

     —           —           —           —     

Real estate – residential

     1         65         —           —     

Consumer installment

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1       $ 65         —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and non-accrual at June 30, 2015, December 31, 2014 and June 30, 2014:

 

As of June 30, 2015    Accruing Loans      Non-Accruing Loans  

Loan class:

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

Commercial, financial & agricultural

     —         $ —           1       $ 1   

Real estate – construction & development

     3         374         —           —