fin10ktest.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
T
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2007
or
o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ______________ to_______________.
Commission
File Number
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001-13901
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AMERIS
BANCORP
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(Exact
name of registrant as specified in its
charter)
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GEORGIA
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58-1456434
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(State
of incorporation)
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(IRS
Employer ID No.)
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24
SECOND AVE., SE MOULTRIE, GA 31768
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(Address
of principal executive offices)
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(229)
890-1111
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(Registrant’s
telephone number)
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Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, Par
Value $1 Per Share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes o No
T
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Exchange
Act. Yes o No
T
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 T No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
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.
Large
accelerated filer o
|
Accelerated
filer T
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Non-accelerated
filer o |
Smaller
Reporting Company filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act).
Yes o No
T
As of the
last business day of the registrant’s most recently completed second fiscal
quarter, the aggregate market value of the voting and non-voting common equity
held by nonaffiliates of the registrant was approximately $304.3
million.
As of February 22, 2008, the
registrant had outstanding 13,556,770 shares of common stock, $1.00 par value
per share.
DOCUMENTS
INCORPORATED BY REFERENCE
The
information required by Part III of this Annual Report is incorporated by
reference from the Registrant’s definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this Annual
Report.
AMERIS
BANCORP
PART
I
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Item
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PART
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PART
III
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Item
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PART
IV
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Item
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CAUTIONARY
NOTICE
REGARDING
FORWARD-LOOKING STATEMENTS
Certain
statements contained in this Annual Report on Form 10-K (this “Annual Report”)
under the caption “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” and elsewhere, including information incorporated
herein by reference to other documents, are “forward-looking statements” within
the meaning of, and subject to the protections of, Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking
statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, anticipations, assumptions, estimates, intentions and
future performance and involve known and unknown risks, uncertainties and other
factors, many of which may be beyond our control and which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements.
All
statements other than statements of historical fact are statements that could be
forward-looking statements. You can identify these forward-looking
statements through our use of words such as “may,” “will,” “anticipate,”
“assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,”
“estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,”
“intend,” “target,” “potential” and other similar words and expressions of the
future. These forward-looking statements may not be realized due to a
variety of factors, including, without limitation, those described in Part I,
Item 1A. “Risk Factors,” and elsewhere in this report and those described from
time to time in our future reports filed with the Securities and Exchange
Commission (the “Commission”) under the Exchange Act.
All
written or oral forward-looking statements that are made by or are attributable
to us are expressly qualified in their entirety by this cautionary
notice. Our forward-looking statements apply only as of the date of
this report or the respective date of the document from which they are
incorporated herein by reference. We have no obligation and do not
undertake to update, revise or correct any of the forward-looking statements
after the date of this report, or after the respective dates on which such
statements otherwise are made, whether as a result of new information, future
events or otherwise.
PART
I
As used
in this document, the terms “we,” “us,” “our,” “Ameris Bancorp,” “Ameris” and
the “Company” mean Ameris Bancorp and its subsidiaries (unless the context
indicates another meaning).
GENERAL
OVERVIEW
We are a
financial holding company whose business is conducted primarily through our
wholly-owned banking subsidiary, which provides a full range of banking services
to its retail and commercial customers located primarily in Georgia, Alabama,
northern Florida and South Carolina. Ameris Bancorp (“Ameris” or the
“Company”) was incorporated on December 18, 1980 as a Georgia
corporation. The Company’s executive office is located at 24 2nd
Avenue, S.E., Moultrie, Georgia 31768, its telephone number is (229) 890-1111
and its Internet address is http://www.amerisbank.com. We operate 46
domestic banking offices with no foreign activities. At December 31,
2007, we had approximately $2.11 billion in total assets, $1.61 billion in total
loans, $1.76 billion in total deposits and shareholders’ equity of $191.2
million. Ameris’ deposits are insured, up to applicable limits, by
the Federal Deposit Insurance Corporation.
THE
PARENT COMPANY
Our
primary business as a bank holding company is to manage the business and affairs
of our banking subsidiary, Ameris Bank (the “Bank”). As a bank
holding company, we perform certain shareholder and investor relations functions
and seek to provide financial support, if necessary, to our
subsidiary.
AMERIS
BANK
Our
principal subsidiary is the Bank. The Bank, headquartered in
Moultrie, Georgia, operates branches in Georgia, Alabama, northern Florida and
South Carolina. These branches serve distinct communities in our
business areas with autonomy but do so as one bank, leveraging our favorable
geographic footprint in an effort to acquire more customers.
CAPITAL
TRUST SECURITIES
On
September 20, 2006, Ameris completed a private placement of an aggregate of
$36 million of trust preferred securities. The placement occurred
through a newly formed Delaware statutory trust subsidiary of Ameris, Ameris
Statutory Trust I (the “Trust”). The trust preferred securities carry
a quarterly adjustable interest rate of 1.63% over three-month LIBOR. The trust
preferred securities mature on December 15, 2036 and are redeemable at the
Company’s option beginning September 15, 2011. The terms of the
trust preferred securities are set forth in that certain Amended and Restated
Declaration of Trust dated as of September 20, 2006 among Ameris,
Wilmington Trust Company, as institutional trustee and Delaware trustee, and the
administrators named therein. The payments of distributions on and
redemption or liquidation of the trust preferred securities issued by the Trust
are guaranteed by Ameris pursuant to a Guarantee Agreement dated as of
September 20, 2006 between Ameris and Wilmington Trust Company, as
trustee.
The net
proceeds to Ameris from the placement of the trust preferred securities by the
Trust were primarily used to redeem outstanding trust preferred securities
issued by Ameris on November 8, 2001. These trust preferred
securities were redeemed on September 30, 2006 for $35.6 million.
On
December 16, 2005, Ameris purchased First National Banc, Inc. which had formed
during 2004 First National Banc Statutory Trust I, a subsidiary whose sole
purpose was to issue $5,000,000 principal amount of trust preferred securities
at a rate per annum equal to the 3-Month LIBOR plus 2.80% through a pool
sponsored by a national brokerage firm. These trust preferred
securities have a maturity of 30 years and are redeemable at the Company’s
option on any quarterly interest payment date after five years. There
are certain circumstances (as described in the trust documents) under which the
securities may be redeemed within the first five years at the Company’s
option. See Notes to Ameris’ Consolidated Financial Statements
included in this Annual Report for a further discussion regarding the issuance
of these trust preferred securities.
BUSINESS
STRATEGY
Our
business strategy is to establish Ameris as a major financial institution in
Georgia, Alabama, northern Florida and South Carolina. Management has
pursued this objective through an acquisition-oriented growth strategy and a
prudent operating strategy. Our operating model allows the Company to
put as many resources in front of customers as possible with efforts to minimize
the expense of our operations. We are continuously evaluating our
structure to maximize opportunities to perfect the balance between efficiency
and customer service. Our markets are managed by senior level,
experienced decision makers in a decentralized structure that differentiates us
from our competition. Management believes that this structure, along
with involvement in and knowledge of our local markets, will continue to provide
growth and assist in managing risk throughout our Company.
We have
maintained a long-term focus on a strategy that includes expanding and
diversifying our franchise in terms of revenues, profitability and asset
size. Our growth over the past several years has been enhanced
significantly by bank acquisitions. We expect to continue to take
advantage of the consolidation in the financial services industry and enhance
our franchise through future acquisitions. We intend to grow within
our existing markets, to branch into or acquire financial institutions in
existing markets and to branch into or acquire financial institutions in other
markets consistent with our capital availability and management
abilities.
BANKING
SERVICES
Lending
Activities
General. The
Company maintains a diversified loan portfolio by providing a broad range of
commercial and retail lending services to business entities and
individuals. We provide agricultural loans, commercial business
loans, commercial and residential real estate construction and mortgage loans,
consumer loans, revolving lines of credit and letters of credit. The
Company also originates first mortgage residential mortgage loans and enters
into a commitment to sell these loans in the secondary market. We
make no foreign or energy-related loans.
At
December 31, 2007, Ameris’ loan portfolio totaled $1.61 billion, representing
approximately 76.3% of our total assets of $2.11 billion. For
additional discussion of our loan portfolio, see “Management’s Discussion of
Financial Condition and Results of Operations – Loan Portfolio.”
Commercial Real Estate
Loans. This portion of our loan portfolio has grown
significantly over the past few years and represents the largest portion of our
loan portfolio. These loans are generally extended for acquisition,
development or construction of commercial properties. The loans are
underwritten with an emphasis on the viability of the project, the borrower’s
ability to meet certain minimum debt service requirements and an analysis and
review of the collateral and guarantors.
Residential Real Estate Mortgage
Loans. Ameris originates adjustable and fixed-rate residential
mortgage loans. These mortgage loans are generally originated under
terms and conditions consistent with secondary market
guidelines. Some of these loans will be placed in the Company’s loan
portfolio; however, a majority are sold to the secondary mortgage
market. The residential real estate mortgage loans that are included
in the Company’s loan portfolio are usually owner-occupied and generally
amortized over a 10 to 20 year period with three to five year maturity or
repricing.
Agricultural
Loans. Our agricultural loans are extended to finance crop
production, the purchase of farm-related equipment or farmland and the
operations of dairies and poultry producers. Agricultural loans
typically involve seasonal fluctuations in amounts. Although we
typically look to an agricultural borrower’s cash flow as the principal source
of repayment, agricultural loans are also generally secured by a security
interest in the crops or the farm-related equipment and, in some cases, an
assignment of crop insurance and mortgage on real estate. The lending
officer visits the borrower regularly during the growing season and re-evaluates
the loan in light of the borrower’s updated cash flow projections. A
portion of our agricultural loans are guaranteed by the FSA Guaranteed Loan
Program.
Commercial and Industrial
Loans. General commercial and industrial loans consist of loans made
primarily to manufacturers, wholesalers and retailers of goods, service
companies and other industries. These loans are made for acquisition,
expansion and working capital purposes and may be secured by real estate,
accounts receivable, inventory, equipment, personal guarantees or other
assets. The Company monitors these loans by requesting submission of
corporate and personal financial statements and income tax
returns. The Company has also generated loans which are guaranteed by
the U.S. Small Business Administration (the “SBA”). SBA loans are
generally underwritten in the same manner as conventional loans generated for
the Bank’s portfolio. Periodically, a portion of the loans that are
secured by the guaranty of the SBA will be sold in the secondary
market. Management believes that making such loans helps the local
community and also provides Ameris with a source of income and solid future
lending relationships as such businesses grow and prosper. The
primary repayment risk for commercial loans is the failure of the business due
to economic or financial factors.
Consumer
Loans. Our consumer loans include motor vehicle, home
improvement, home equity, student and signature loans and small personal credit
lines. The terms of these loans typically range from 12 to 60 months
and vary based upon the nature of collateral and size of the
loan. These loans are generally secured by various assets owned by
the consumer.
Credit
Administration
We have
sought to maintain a comprehensive lending policy that meets the credit needs of
each of the communities served by the Bank, including low- and moderate-income
customers, and to employ lending procedures and policies consistent with this
approach. All loans are subject to our corporate loan policy, which
is reviewed annually and updated as needed. The loan policy provides
that lending officers have sole authority to approve loans of various amounts
commensurate with their seniority and experience. Our local market
Presidents have discretion to approve loans in varying principal amounts up to
established limits. Our regional credit officers review and approve
loans that exceed each President’s lending authority.
Individual
lending authorities are assigned by the Company, as is the maximum limit of new
extensions of credit that may be approved in each market. Those
approval limits are reviewed annually by the Company and adjusted as
needed. All extensions of credit in excess of a market’s approval
limit are reviewed by the appropriate Regional Executive. Further
approval by Ameris’ Senior Credit Officer or the Company’s Loan Committee may
also be needed. Under our ongoing loan review program, all loans are
subject to sampling and objective review by an assigned loan reviewer who is
independent of the originating loan officer.
Each
lending officer has authority to make loans only in the market area in which his
or her Bank office is located and its contiguous
counties. Occasionally, Ameris’ Loan Committee will approve a loan
for purposes outside of the market areas of the Bank, provided the Bank has a
previously established relationship with the borrower. Our lending
policy requires analysis of the borrower’s projected cash flow and ability to
service the debt.
We
actively market our services to qualified lending customers in both the
commercial and consumer sectors. Our commercial lending officers
actively solicit the business of new companies entering the market as well as
longstanding members of that market’s business community. Through
personalized professional service and competitive pricing, we have been
successful in attracting new commercial lending customers. At the
same time, we actively advertise our consumer loan products and continually seek
to make our lending officers more accessible.
The Bank
continually monitors its loan portfolio to identify areas of concern and to
enable management to take corrective action when necessary. Local
market Presidents, lending officers and local boards meet periodically to review
all past due loans, the status of large loans and certain other credit or
economic related matters. Individual lending officers are responsible
for collection of past due amounts and monitoring any changes in the financial
status of the borrowers.
Investment
Activities
Our
investment policy is designed to maximize income from funds not needed to meet
loan demand in a manner consistent with appropriate liquidity and risk
objectives. Under this policy, our Company may invest in federal, state and
municipal obligations, corporate obligations, public housing authority bonds,
industrial development revenue bonds, Government Sponsored Entities (“GSEs”)
securities and satisfactorily rated trust preferred
obligations. Investments in our portfolio must satisfy certain
quality criteria. Our Company’s investments must be rated at least
“BAA” by either Moody’s or Standard and Poor’s. Securities rated
below “A” are periodically reviewed for creditworthiness. Our Company
may purchase non-rated municipal bonds only if the issuer of such bonds is
located in the Company’s general market area and such bonds are determined by
the Company to have a credit risk no greater than the minimum ratings referred
to above. Industrial development authority bonds, which normally are not rated,
are purchased only if the issuer is located in the Company’s market area and if
the bonds are considered to possess a high degree of credit
soundness. Traditionally, the Company has purchased and held
investment securities with very high levels of credit quality, favoring
investments backed by direct or indirect guarantees of the U.S.
Government.
While our
investment policy permits our Company to trade securities to improve the quality
of yields or marketability or to realign the composition of the portfolio, the
Bank historically has not done so to any significant extent.
Our
investment committee implements the investment policy and portfolio strategies
and monitors the portfolio. Reports on all purchases, sales, net
profits or losses and market appreciation or depreciation of the bond portfolio
are reviewed by our Boards of Directors each month. Once a year, the
written investment policy is reviewed by the Company’s board of
directors.
The
Company’s securities are kept in safekeeping accounts at correspondent
banks.
Deposits
The
Company provides a full range of deposit accounts and services to both retail
and commercial customers. These deposit accounts have a variety of
interest rates and terms and consist of interest-bearing and noninterest-bearing
accounts, including commercial and retail checking accounts, regular
interest-bearing savings accounts, money market accounts, individual retirement
accounts and certificates of deposit. Our Bank obtains most of its
deposits from individuals and businesses in its market areas.
Our Bank
has not had to attract new or retain old deposits by paying depositors rates of
interest on certificates of deposit, money market and other interest-bearing
accounts significantly above rates paid by other banks in our market
areas. In the future, increasing competition among banks in our
market areas may cause our Bank’s net interest margins to shrink.
Brokered
time deposits are deposits obtained by utilizing an outside broker that is paid
a fee. These deposits usually have a higher interest rate than the
deposits obtained locally. The Bank utilizes the brokered deposits to
accomplish several purposes, such as (1) acquiring a certain maturity and dollar
amount without repricing the Bank’s current customers which could decrease the
overall cost of deposits, and (2) acquiring certain maturities and dollar
amounts to help manage interest rate risk.
Other
Funding Sources
The
Federal Home Loan Bank (“FHLB”) allows the Company to obtain advances through
its credit program. These advances are secured by securities owned by
the Company and held in safekeeping by the FHLB, FHLB stock owned by the Company
and certain qualifying residential mortgages.
The
Company also enters into repurchase agreements. These repurchase
agreements are treated as short term borrowings and are reflected on the balance
sheet as such.
CORPORATE
RESTRUCTURING AND BUSINESS COMBINATIONS
On
December 29, 2006, Ameris acquired by merger Islands Bancorp and its banking
subsidiary, Islands Community Bank, N.A. (collectively,
“Islands”). Islands was headquartered in Beaufort, South Carolina
where it operated a single branch with satellite loan production offices in
Bluffton, South Carolina and Charleston, South Carolina. The
acquisition of Islands was significant to the Company, as Ameris had recruited
senior level talent that would be instrumental in executing a growth strategy
designed to build a meaningful franchise in South Carolina’s top
markets. The consideration for the acquisition was a combination of
cash and Ameris common stock with an aggregate purchase price of approximately
$19.0 million. The total consideration consisted of $5.1 million in
cash and approximately 494,000 shares of Ameris common stock with a value of
approximately $13.9 million. Islands’ results of operations for 2006
are not included in Ameris’ consolidated financial results because the
acquisition’s effective time was after the close of business on the last day of
the fiscal year.
On
December 16, 2005, Ameris acquired all the issued and outstanding common shares
of First National Banc, Inc., the parent company of First National Bank, in St.
Mary’s, Georgia and First National Bank, in Orange Park, Florida (collectively
“FNB”). The acquisition was accounted for using the purchase method
of accounting, and, accordingly, the results from FNB’s operations have been
included in the consolidated financial statements beginning December 17,
2005. The aggregate purchase price for FNB was $35.3 million,
including cash of $13.1 million and the Company’s common stock valued at $22.2
million.
On
November 30, 2004, Ameris acquired Citizens Bancshares, Inc., a $54.3 million
asset holding company headquartered in Crawfordville, Florida
(“Citizens”). Citizens’ banking offices in Crawfordville, Panacea and
Sopchoppy gave the Bank a presence in the panhandle of Florida. Cash
exchanged in this transaction for 100% of the stock of Citizens was $11.5
million.
On August
31, 2005, Ameris announced its intentions to begin consolidating its subsidiary
bank charters across Georgia, Alabama and northern Florida into a single
charter. In addition to the charter consolidation effort, the Company
announced its intentions to re-brand the Company and its surviving bank
subsidiary with a single identity - Ameris Bank. The re-branding
process was completed during 2006. During 2007, the Company
consolidated its loan processing and maintenance functions as well as all
deposit operations into service centers close to our corporate
headquarters. This effort centralized mostly non-customer contact rolls
and allows our banks to focus almost entirely on sales, customer service and
acquisition of new customers.
MARKET
AREAS AND COMPETITION
The
banking industry in general and in the southeastern United States specifically,
is highly competitive and dramatic changes continue to occur throughout the
industry. Our market areas of Georgia, Alabama, northern Florida and
South Carolina have experienced strong economic and population growth over the
past twenty to thirty years. In recent years, intense market demands,
economic pressures, fluctuating interest rates and increased customer awareness
of product and service differences among financial institutions have forced
banks to diversify their services and become more cost effective. Our
Bank faces strong competition in attracting deposits and making
loans. Its most direct competition for deposits comes from other
commercial banks, thrift institutions, mortgage bankers, finance companies,
credit unions and issuers of securities such as brokerage firms. Interest rates,
convenience of office locations and marketing are all significant factors in our
Bank’s competition for deposits.
Competition
for loans comes from other commercial banks, thrift institutions, savings banks,
insurance companies, consumer finance companies, credit unions and other
institutional lenders. Our Bank competes for loan originations
through the interest rates and loan fees charged and the efficiency and quality
of services provided. Competition is affected by the general
availability of lendable funds, general and local economic conditions, current
interest rate levels and other factors that are not readily
predictable.
Competition
among providers of financial products and services continues to increase with
consumers having the opportunity to select from a growing variety of traditional
and nontraditional alternatives. The industry continues to rapidly
consolidate, which affects competition by eliminating some regional and local
institutions, while strengthening the franchise of
acquirers. Management expects that competition will become more
intense in the future due to changes in state and federal laws and regulations
and the entry of additional bank and nonbank competitors. See
“Supervision and Regulation.”
EMPLOYEES
At
December 31, 2007, the Company employed approximately 620 full time equivalent
employees. We consider our relationship with our employees to be
satisfactory.
We have
adopted one retirement plan for our employees, the Ameris Bancorp 401(k) Profit
Sharing Plan. This plan provides deferral of compensation by our
employees and contributions by Ameris. Ameris and our Bank made
contributions for all eligible employees in 2007. We also maintain a
comprehensive employee benefits program providing, among other benefits,
hospitalization and major medical insurance and life
insurance. Management considers these benefits to be competitive with
those offered by other financial institutions in our market
areas. Our employees are not represented by any collective bargaining
group.
RELATED
PARTY TRANSACTIONS
The
Company makes loans to our directors and their affiliates and to banking
officers. These loans are made on substantially the same terms as
those prevailing at the time for comparable transactions and do not involve more
than normal credit risk. At December 31, 2007, we had $1.6 billion in
total loans outstanding of which $6.3 million were outstanding to certain
directors and their affiliates. Company policy provides for no loans
to executive officers.
SUPERVISION
AND REGULATION
General
We are
extensively regulated under federal and state law. Generally, these
laws and regulations are intended to protect depositors and not
shareholders. The following is a summary description of certain
provisions of certain laws that affect the regulation of bank holding companies
and banks. The discussion is qualified in its entirety by reference
to applicable laws and regulations. Changes in such laws and
regulations may have a material effect on our business and
prospects.
Federal
Bank Holding Company Regulation and Structure
As a bank
holding company, we are subject to regulation under the Bank Holding Company Act
and to the supervision, examination and reporting requirements of the Federal
Reserve Board of Governors. Our Bank has a Georgia state charter and
is subject to regulation, supervision and examination by the Federal Deposit
Insurance Corporation (the “FDIC”) and the Georgia Department of Banking and
Finance (the “GDBF”).
The Bank
Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
•
|
it
may acquire direct or indirect ownership or control of any voting shares
of any bank if, after the acquisition, the bank holding company will
directly or indirectly own or control more than 5% of the voting shares of
the bank;
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•
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it
or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any bank;
or
|
•
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it
may merge or consolidate with any other bank holding
company.
|
The Bank
Holding Company Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or that would substantially
lessen competition in the banking business, unless the public interest in
meeting the needs of the communities to be served outweighs the anti-competitive
effects. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding
companies and banks involved and the convenience and needs of the communities to
be served. Consideration of financial resources generally focuses on
capital adequacy, and consideration of convenience and needs issues focuses, in
part, on the performance under the Community Reinvestment Act of 1977, both of
which are discussed in more detail.
The Bank
Holding Company Act generally prohibits a bank holding company from engaging in
activities other than banking; managing or controlling banks or other
permissible subsidiaries and acquiring or retaining direct or indirect control
of any company engaged in any activities other than activities closely related
to banking or managing or controlling banks.
The
activities in which holding companies and their affiliates are permitted to
engage were substantially expanded by the Gramm-Leach-Bliley Act, which was
signed on November 12, 1999. The Gramm-Leach-Bliley Act repeals the
anti-affiliation provisions of the Glass-Steagall Act to permit the common
ownership of commercial banks, investment banks and insurance
companies. The Gramm-Leach-Bliley Act also amends the Bank Holding
Company Act to permit a financial holding company to, among other things, engage
in any activity that the Federal Reserve determines to be (i) financial in
nature or incidental to such financial activity or (ii) complementary to a
financial activity and not a substantial risk to the safety and soundness of
depository institutions or the financial system generally. The
Federal Reserve must consult with the Secretary of the Treasury in determining
whether an activity is financial in nature or incidental to a financial
activity. Holding companies may continue to own companies conducting
activities which had been approved by federal order or regulation on the day
before the Gramm-Leach-Bliley Act was enacted. Effective August 24,
2000, pursuant to a previously-filed election with the Federal Reserve, Ameris
became a financial holding company.
In
determining whether a particular activity is permissible, the Federal Reserve
considers whether performing the activity can be expected to produce benefits to
the public that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Federal Reserve has the power to order a bank
holding company or its subsidiaries to terminate any activity or control of any
subsidiary when the continuation of the activity or control constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company.
Our Bank
is also subject to numerous state and federal statutes and regulations that
affect its business, activities and operations and is supervised and examined by
state and federal bank regulatory agencies. The FDIC and the GDBF
regularly examine the operations of our Bank and are given the authority to
approve or disapprove mergers, consolidations, the establishment of branches and
similar corporate actions. These agencies also have the power to
prevent the continuance or development of unsafe or unsound banking practices or
other violations of law.
Payment
of Dividends and Other Restrictions
Ameris is
a legal entity separate and distinct from its subsidiaries. While
there are various legal and regulatory limitations under federal and state law
on the extent to which our Bank can pay dividends or otherwise supply funds to
Ameris, the principal source of Ameris’ cash revenues is dividends from our
Bank. The prior approval of applicable regulatory authorities is
required if the total dividends declared by the Bank in any calendar year
exceeds 50% of the Bank’s net profits for the previous year. The
relevant federal and state regulatory agencies also have authority to prohibit a
state member bank or bank holding company, which would include Ameris and the
Bank, from engaging in what, in the opinion of such regulatory body, constitutes
an unsafe or unsound practice in conducting its business. The payment
of dividends could, depending upon the financial condition of the subsidiary, be
deemed to constitute an unsafe or unsound practice in conducting its
business.
Under
Georgia law, the prior approval of the GDBF is required before any cash
dividends may be paid by a state bank if: (i) total classified assets at the
most recent examination of such bank exceed 80% of the equity capital (as
defined, which includes the reserve for loan losses) of such bank; (ii) the
aggregate amount of dividends declared or anticipated to be declared in the
calendar year exceeds 50% of the net profits (as defined) for the previous
calendar year; or (iii) the ratio of equity capital to adjusted total assets is
less than 6%.
Retained
earnings of our Bank available for payment of cash dividends under all
applicable regulations without obtaining governmental approval were
approximately $9.1 million as of December 31, 2007.
In
addition, our Bank is subject to limitations under Section 23A of the Federal
Reserve Act with respect to extensions of credit to, investments in and certain
other transactions with Ameris. Furthermore, loans and extensions of credit are
also subject to various collateral requirements.
The
Federal Reserve has issued a policy statement on the payment of cash dividends
by bank holding companies, which expresses the Federal Reserve’s view that a
bank holding company should pay cash dividends only to the extent that the
holding company’s net income for the past year is sufficient to cover both the
cash dividends and a rate of earning retention that is consistent with the
holding company’s capital needs, asset quality and overall financial
condition. The Federal Reserve also indicated that it would be
inappropriate for a holding company experiencing serious financial problems to
borrow funds to pay dividends. Furthermore, under the prompt
corrective action regulations adopted by the Federal Reserve, the Federal
Reserve may prohibit a bank holding company from paying any dividends if one or
more of the holding company’s bank subsidiaries are classified as
undercapitalized.
Bank
holding companies are required to give the Federal Reserve prior written notice
of any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The
Federal Reserve may disapprove such a purchase or redemption if it determines
that the proposal would constitute an unsafe or unsound practice or would
violate any law, regulation, Federal Reserve order or any condition imposed by,
or written agreement with, the Federal Reserve. This notification
requirement does not apply to any company that meets the well-capitalized
standard for commercial banks, has a safety and soundness examination rating of
at least a “2” and is not subject to any unresolved supervisory
issues. As of December 31, 2007, Ameris met these
requirements.
Capital
Adequacy
We must
comply with the Federal Reserve’s established capital adequacy standards, and
our Bank is required to comply with the capital adequacy standards established
by the FDIC. The Federal Reserve has promulgated two basic measures
of capital adequacy for bank holding companies: a risk-based measure and a
leverage measure. A bank holding company must satisfy all applicable
capital standards to be considered in compliance.
The
risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, account for off-balance-sheet exposure and minimize
disincentives for holding liquid assets.
Assets
and off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital
as a percentage of total risk-weighted assets and off-balance-sheet
items.
The
minimum guideline for the ratio of total capital to risk-weighted assets is
8%. At least half of total capital must be comprised of Tier 1
Capital, which is common stock, undivided profits, minority interests in the
equity accounts of consolidated subsidiaries and noncumulative perpetual
preferred stock, less goodwill and certain other intangible
assets. The remainder may consist of Tier 2 Capital, which is
subordinated debt, other preferred stock and a limited amount of loan loss
reserves. Since 2001, our consolidated capital ratios have been
increased due to the issuance of trust preferred securities. At
December 31, 2007, all of our trust preferred securities were included in Tier 1
Capital. At December 31, 2007, Ameris’ total risk-based capital ratio
and its Tier 1 risk-based capital ratio were 11.59% and 10.34%,
respectively.
In
addition, the Federal Reserve has established minimum leverage ratio guidelines
for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3% for bank holding companies that meet specified
criteria. All other bank holding companies generally are required to
maintain a minimum leverage ratio of 4%. Ameris’ ratio at December
31, 2007 was 8.39% and at December 31, 2006 was 8.58%. The guidelines
also provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will
consider a “tangible Tier 1 Capital leverage ratio” and other indicia of capital
strength in evaluating proposals for expansion or new activities. The
Federal Reserve has not advised Ameris of any specific minimum leverage ratio or
tangible Tier 1 Capital leverage ratio applicable to it.
Our Bank
is subject to risk-based and leverage capital requirements adopted by the FDIC
that are substantially similar to those adopted by the Federal Reserve for bank
holding companies. Our Bank was in compliance with applicable minimum
capital requirements as of December 31, 2007.
Neither
Ameris nor its Bank has been advised by any federal banking agency of any
specific minimum capital ratio requirement applicable to it.
In
January 2001, the Basel Committee on Banking Supervision issued a consultative
paper entitled “Proposal for a New Basel Capital Accord” and, subsequently, the
Basel Committee, which is comprised of bank supervisors and central banks from
the major industrialized countries, issued a number of working papers
supplementing various aspects of the 2001 paper (the “New
Accord”). Based on these documents, the New Accord would adopt a
three-pillar framework for addressing capital adequacy. These pillars
would include minimum capital requirements, more emphasis on supervisory
assessment of capital adequacy and greater reliance on market
discipline. Under the New Accord, minimum capital requirements would
be more differentiated based upon perceived distinctions in
creditworthiness. Such requirements would be based either on ratings
assigned by rating agencies or, in the case of a banking organization that met
certain supervisory standards, on the organization’s internal credit
ratings. The minimum capital requirements in the New Accord would
also include a separate capital requirement for operational risk. In
June 2004, the Basel Committee published new international guidelines for
calculating regulatory capital, and since that time the U.S. banking regulators
have published draft guidance of their interpretation of the new
guidelines. At the beginning of 2007, we were required to calculate
regulatory capital under the New Accord, in parallel with the existing capital
rules. In 2008, we will calculate regulatory capital solely under the
New Accord.
Failure
to meet capital guidelines could subject a bank to a variety of enforcement
remedies, including issuance of a capital directive, the termination of deposit
insurance by the FDIC, a prohibition on taking brokered deposits and certain
other restrictions on its business. As described below, the FDIC can
impose substantial additional restrictions upon FDIC-insured depository
institutions that fail to meet applicable capital requirements.
Acquisitions
As an
active acquirer, we must comply with numerous laws related to our acquisition
activity. Under the Bank Holding Company Act, a bank holding company
may not directly or indirectly acquire ownership or control of more than 5% of
the voting shares or substantially all of the assets of any bank or merge or
consolidate with another bank holding company without the prior approval of the
Federal Reserve. Current federal law authorizes interstate
acquisitions of banks and bank holding companies without geographic
limitation. Furthermore, a bank headquartered in one state is
authorized to merge with a bank headquartered in another state, as long as
neither of the states has opted out of such interstate merger authority prior to
such date, and subject to any state requirement that the target bank shall have
been in existence and operating for a minimum period of time, not to exceed five
years, and to certain deposit market-share limitations. After a bank
has established branches in a state through an interstate merger transaction,
the bank may establish and acquire additional branches at any location in the
state where a bank headquartered in that state could have established or
acquired branches under applicable federal or state law.
FDIC
Insurance Assessments
The FDIC
insures the deposits of the Bank up to prescribed limits for each
depositor. The amount of FDIC assessments paid by each Bank Insurance
Fund (BIF) member institution is based on its relative risks of default as
measured by regulatory capital ratios and other
factors. Specifically, the assessment rate is based on the
institution’s capitalization risk category and supervisory subgroup
category. An institution’s capitalization risk category is based on
the FDIC’s determination of whether the institution is well capitalized,
adequately capitalized or less than adequately capitalized. An
institution’s supervisory subgroup category is based on the FDIC’s assessment of
the financial condition of the institution and the probability that FDIC
intervention or other corrective action will be required. The FDIC
may terminate insurance of deposits upon a finding that a institution has
engaged in unsafe and unsound practices, is in an unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, rule, order
or condition imposed by the FDIC.
The
Federal Deposit Insurance Act (or “FDI Act”) requires the federal regulatory
agencies to take “prompt corrective action” if a depository institution does not
meet minimum capital requirements. The FDI Act establishes five
capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”,
“significantly undercapitalized” and “critically undercapitalized”. A
depository institution’s capital tier will depend upon how its capital levels
compare to various relevant capital measures and certain other factors, as
established by regulation.
The
federal bank regulatory agencies have adopted regulations establishing relevant
capital measurers and relevant capital levels applicable to FDIC-insured
banks. The relevant capital measures are the Total Capital ratio,
Tier 1 Capital ratio and the leverage ratio. Under the regulations, a
FDIC-insured bank will be:
·
|
“well
capitalized” if it has a Total Capital ratio of 10% or greater, a Tier 1
Capital ratio of 6% or greater and a leverage ratio of 5% or greater and
is not subject to any order or written directive by the appropriate
regulatory authority to meet and maintain a specific capital level for any
capital measure;
|
·
|
“adequately
capitalized” if it has a Total Capital ratio of 8% or greater, a Tier 1
Capital ratio of 4% or greater and a leverage ratio of 4% or greater (3%
in certain circumstances) and is not “well
capitalized”;
|
·
|
“undercapitalized”
if it has a Total Capital ratio of less than 8%, a Tier 1 Capital ratio of
less than 4% or a leverage ratio of less than 4% (3% in certain
circumstances);
|
·
|
“significantly
undercapitalized” if it has a Total Capital ratio of less than 6%, a Tier
1 Capital ratio of less than 3% or a leverage ratio of less than 3%;
and
|
·
|
“critically
undercapitalized” if its tangible equity is equal to or less than 2% of
average quarterly tangible assets.
|
An
institution may be downgraded to, or deemed to be in, a capital category that is
lower than is indicated by its capital ratios if it is determined to be in an
unsafe or unsound condition or if it receives an unsatisfactory examination
rating with respect to certain matters. As of December 31, 2007, our
Bank had capital levels that qualify as “well capitalized” under such
regulations.
The
Gramm-Leach-Bliley Act allows bank holding companies that are “well managed” and
“well capitalized” and whose depositor subsidiaries have “satisfactory” or
better Community Reinvestment Act ratings to become financial holding companies
that may engage in a substantially broader range of non-banking activities than
is otherwise permissible, including insurance underwriting and securities
activities. As previously stated, Ameris became a financial holding
company effective August 24, 2000.
The FDI
Act generally prohibits an FDIC-insured bank from making a capital distribution
(including payment of a dividend) or paying any management fee to its holding
company if the bank would thereafter be
“undercapitalized.” “Undercapitalized” banks are subject to growth
limitations and are required to submit a capital restoration
plan. The federal regulators may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the bank’s capital. In
addition, for a capital restoration plan to be acceptable, the bank’s parent
holding company must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent
holding company is limited to the lesser of: (i) an amount equal to 5% of the
bank’s total assets at the time it became “undercapitalized”; and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the
plan. If a bank fails to submit an acceptable plan, it is treated as
if it is “significantly undercapitalized.”
“Significantly
undercapitalized” insured banks may be subject to a number of requirements and
restrictions, including orders to sell sufficient voting stock to become
“adequately capitalized”, requirements to reduce total assets and the cessation
of receipt of deposits from correspondent banks. “Critically
undercapitalized” institutions are subject to the appointment of a receiver or
conservator. A bank that is not “well capitalized” is also subject to
certain limitations relating to so-called “brokered” deposits.
Community
Reinvestment Act
The
Community Reinvestment Act requires federal bank regulatory agencies to
encourage financial institutions to meet the credit needs of low- and
moderate-income borrowers in their local communities. An
institution’s size and business strategy determines the type of examination that
it will receive. Large, retail-oriented institutions are examined
using a performance-based lending, investment and service test. Small
institutions are examined using a streamlined approach. All
institutions may opt to be evaluated under a strategic plan formulated with
community input and pre-approved by the bank regulatory agency.
The
Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public
of its right to comment to the institution and its regulator on the
institution’s Community Reinvestment Act performance and to review the
institution’s Community Reinvestment Act public file. Each lending
institution must maintain for public inspection a file that includes a listing
of branch locations and services, a summary of lending activity, a map of its
communities and any written comments from the public on its performance in
meeting community credit needs. The Community Reinvestment Act
requires public disclosure of a financial institution’s written Community
Reinvestment Act evaluations. This promotes enforcement of Community
Reinvestment Act requirements by providing the public with the status of a
particular institution’s community reinvestment record.
The
Gramm-Leach-Bliley Act made various changes to the Community Reinvestment
Act. Among other changes, Community Reinvestment Act agreements with
private parties must be disclosed and annual Community Reinvestment Act reports
must be made available to a bank’s primary federal regulator. A bank
holding company will not be permitted to become a financial holding company and
no new activities authorized under the Gramm-Leach-Bliley Act may be commenced
by a holding company or by a bank financial subsidiary if any of its bank
subsidiaries received less than a “satisfactory” Community Reinvestment Act
rating in its latest Community Reinvestment Act examination.
Consumer
Protection Laws
The Bank
is subject to a number of federal and state laws designed to protect borrowers
and promote lending to various sectors of the economy and
population. These laws include the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage
Disclosure Act, the Real Estate Settlement Procedures Act and state law
counterparts.
Federal
law currently contains extensive customer privacy protection
provisions. Under these provisions, a financial institution must
provide to its customers, at the inception of the customer relationship and
annually thereafter, the institution’s policies and procedures regarding the
handling of customers’ nonpublic personal financial
information. These provisions also provide that, except for certain
limited exceptions, an institution may not provide such personal information to
unaffiliated third parties unless the institution discloses to the customer that
such information may be so provided and the customer is given the opportunity to
opt out of such disclosure. Federal law makes it a criminal offense,
except in limited circumstances, to obtain or attempt to obtain customer
information of a financial nature by fraudulent or deceptive means.
Additional
Legislative and Regulatory Matters
On
October 26, 2001, President Bush signed into law the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (the “USA PATRIOT Act”). Among its other
provisions, the USA PATRIOT Act requires each financial institution: (i) to
establish an anti-money laundering program; (ii) to establish due diligence
policies, procedures and controls with respect to its private banking accounts
involving foreign individuals and certain foreign banks; and (iii) to avoid
establishing, maintaining, administering or managing correspondent accounts in
the United States for, or on behalf of, foreign banks that do not have a
physical presence in any country. The USA PATRIOT Act also requires
the Secretary of the Treasury to prescribe by regulation minimum standards that
financial institutions must follow to verify the identity of customers, both
foreign and domestic, when a customer opens an account. In addition,
the USA PATRIOT Act contains a provision encouraging cooperation among financial
institutions, regulatory authorities and law enforcement authorities with
respect to individuals, entities and organizations engaged in, or reasonably
suspected of engaging in, terrorist acts or money laundering
activities.
On July
30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”), which mandated a variety of reforms intended to address
corporate and accounting fraud. Sarbanes-Oxley also provided for the
establishment of the Public Company Accounting Oversight Board (“PCAOB”), which
enforces auditing, quality control and independence standards for firms that
audit Securities and Exchange Commission (“SEC”) reporting
companies. Sarbanes-Oxley imposes higher standards for auditor
independence and restricts provision of consulting services by auditing firms to
companies they audit and in addition, certain audit partners must be rotated
periodically. Sarbanes-Oxley requires chief executive officers and
chief financial officers, or their equivalents, to certify to the accuracy of
periodic reports filed with the SEC, subject to civil and criminal penalties if
they knowingly or willfully violate this certification
requirement. In addition, under Sarbanes-Oxley, counsel is required
to report specific violations. Directors and executive officers must
report most changes in their ownership of a company’s securities and executives
have restrictions on trading and loans. Sarbanes-Oxley also increases
the oversight and authority of audit committees of publicly traded
companies. Although Ameris has incurred and will continue to incur
additional expense in complying with the provisions of Sarbanes-Oxley and the
related rules, management does not expect that such compliance will have a
material impact on Ameris’ financial condition or results of
operation.
Fiscal
and Monetary Policy
Banking
is a business which depends on interest rate differentials for
success. In general, the difference between the interest paid by a
bank on its deposits and its other borrowings, and the interest received by a
bank on its loans and securities holdings, constitutes the major portion of a
bank’s earnings. Thus, our earnings and growth will be subject to the
influence of economic conditions generally, both domestic and foreign, and also
to the monetary and fiscal policies of the United States and its agencies,
particularly the Federal Reserve. The Federal Reserve regulates the
supply of money through various means, including open market dealings in United
States government securities, the discount rate at which banks may borrow from
the Federal Reserve and the reserve requirements on deposits. The
nature and timing of any changes in such policies and their effect on Ameris
cannot be predicted.
Current
and future legislation and the policies established by federal and state
regulatory authorities will affect our future operations. Banking
legislation and regulations may limit our growth and the return to our investors
by restricting certain of our activities.
In
addition, capital requirements could be changed and have the effect of
restricting our activities or requiring additional capital to be
maintained. We cannot predict what changes, if any, will be made to
existing federal and state legislation and regulations or the effect that such
changes may have on our business.
Federal
Home Loan Bank System
Our
Company has a correspondent relationship with the Federal Home Loan Bank of
Atlanta (“FHLB”), which is one of 12 regional Federal Home Loan Banks (or
“FHLBs”) that administer the home financing credit function of savings
companies. Each FHLB serves as a reserve or central bank for its
members within its assigned region. FHLBs are funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB system
and make loans to members (i.e., advances) in accordance with policies and
procedures, established by the board of directors of the FHLB which are subject
to the oversight of the Federal Housing Finance Board. All advances
from the FHLB are required to be fully secured by sufficient collateral as
determined by the FHLB. In addition, all long-term advances are
required to provide funds for residential home financing.
FHLB
provides certain services to our Company such as processing checks and other
items, buying and selling federal funds, handling money transfers and exchanges,
shipping coin and currency, providing security and safekeeping of funds or other
valuable items and furnishing limited management information and
advice. As compensation for these services, our Company maintains
certain balances with FHLB in interest-bearing accounts.
Under
federal law, the FHLBs are required to provide funds for the resolution of
troubled savings companies and to contribute to low- and moderately-priced
housing programs through direct loans or interest subsidies on advances targeted
for community investment and low- and moderate-income housing
projects.
Title 6
of the Gramm-Leach-Bliley Act, entitled the Federal Home Loan Bank System
Modernization Act of 1999 (called the “FHLB Modernization Act”), amended the
Federal Home Loan Bank Act to allow voluntary membership and modernized the
capital structure and governance of the FHLBs. The capital structure
established under the FHLB Modernization Act sets forth leverage and risk-based
capital requirements based on permanence of capital. It also requires
some minimum investment in the stock of the FHLBs of all member
entities. Capital includes retained earnings and two forms of stock:
Class A stock redeemable within six months upon written notice and Class B stock
redeemable within five years upon written notice. The FHLB
Modernization Act also reduced the period of time in which a member exiting the
FHLB system must stay out of the system.
Real
Estate Lending Evaluations
The
federal regulators have adopted uniform standards for evaluations of loans
secured by real estate or made to finance improvements to real
estate. Banks are required to establish and maintain written internal
real estate lending policies consistent with safe and sound banking practices
and appropriate to the size of the institution and the nature and scope of its
operations. The regulations establish loan to value ratio limitations
on real estate loans. Our Company’s loan policies establish limits on
loan to value ratios that are equal to or less than those established in such
regulations.
Changing
Regulatory Structure
The laws
and regulations affecting banks and bank holding companies are in a state of
change. The rules and the regulatory agencies in this area have
changed significantly over recent years, and there is reason to expect that
similar changes will continue in the future. It is not possible to
predict the outcome of these changes.
One of
the major additional burdens imposed on the banking industry is the increased
authority of federal agencies to regulate the activities of federal and state
banks and their holding companies. The Federal Reserve and the FDIC
have extensive authority to police unsafe or unsound practices and violations of
applicable laws and regulations by depository institutions and their holding
companies. These agencies can assess civil money penalties. Other
laws such as Sarbanes-Oxley have expanded the agencies’ authority in recent
years, and the agencies have not yet fully tested the limits of their
powers. In addition, the GDBF possesses broad enforcement powers to
address violations of Georgia’s banking laws by banks chartered in
Georgia.
Economic
Environment
The
policies of regulatory authorities, including the monetary policy of the Federal
Reserve, have a significant effect on the operating results of bank holding
companies and their subsidiaries. Among the means available to the
Federal Reserve to affect the money supply are open market operations in U.S.
government securities, changes in the discount rate on member bank borrowings
and changes in reserve requirements against member bank
deposits. These means are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits, and
their use may affect interest rates charged on loans or paid on
deposits.
The
Federal Reserve’s monetary policies have materially affected the operating
results of commercial banks in the past and are expected to continue to do so in
the future. The nature of future monetary policies and the effect of
these policies on the business and earnings of our Company cannot be
predicted.
An
investment in the common stock of Ameris is subject to risks inherent in the
Company’s business. The material risks and uncertainties that management
believes affect Ameris are described below. Before making an
investment decision, you should carefully consider the risks and uncertainties
described below, together with all of the other information included or
incorporated by reference in this Annual Report. The risks and uncertainties
described below are not the only ones facing the Company. Additional
risks and uncertainties that management is not aware of or focused on or that
management currently deems immaterial may also impair the Company’s business
operations. This Annual Report is qualified in its entirety by these
risk factors.
If any of
the following risks actually occurs, the Company’s financial condition and
results of operations could be materially and adversely affected. If
this were to happen, the value of the common stock of Ameris could decline
significantly, and you could lose all or part of your investment.
Changes in interest rates could
adversely impact the Company’s financial condition and results of
operations.
The
Company’s earnings and cash flows are largely dependent upon its net interest
income. Net interest income is the difference between interest income
earned on interest-earning assets, such as loans and securities, and interest
expense paid on interest-bearing liabilities, such as deposits and borrowed
funds. Interest rates are highly sensitive to many factors that are
beyond the control of Ameris, including general economic conditions and policies
of various governmental and regulatory agencies and, in particular, the Federal
Reserve Board of Governors. Changes in monetary policy, including
changes in interest rates, could influence not only the interest the Company
receives on loans and securities and the amount of interest it pays on deposits
and borrowings, but such changes could also affect the Company’s ability to
originate loans and obtain deposits, the fair value of the Company’s financial
assets and liabilities and the average duration of the Company’s mortgage-backed
securities portfolio. If the interest rates paid on deposits and
other borrowings increase at a faster rate than the interest rates received on
loans and other investments, the Company’s net interest income and, therefore,
its earnings, could be adversely affected. Earnings could also be adversely
affected if the interest rates received on loans and other investments fall more
quickly than the interest rates paid on deposits and other
borrowings. Although management believes it has implemented effective
asset and liability management strategies to reduce the potential effects of
changes in interest rates on the Company’s results of operations, any
substantial, unexpected, prolonged change in market interest rates could have a
material adverse effect on the Company’s financial condition and results of
operations.
If the Company has higher loan
losses than it has allowed for, its earnings could materially decrease.
The
Company’s loan customers may not repay loans according to their terms, and the
collateral securing the payment of loans may be insufficient to assure
repayment. Ameris may therefore experience significant credit losses
which could have a material adverse effect on its operating
results. Ameris makes various assumptions and judgments about the
collectability of its loan portfolio, including the creditworthiness of
borrowers and the value of the real estate and other assets serving as
collateral for the repayment of loans. In determining the size of the
allowance for loan losses, the Company relies on many factors including
its previous experience and its evaluation of economic
conditions. If assumptions prove to be incorrect, the current
allowance for loan losses may not be sufficient to cover losses inherent in the
loan portfolio and adjustment may be necessary to allow for different economic
conditions or adverse developments in the loan
portfolio. Consequently, a problem with one or more loans could
require the Company to significantly increase the level of its provision for
loan losses. In addition, federal and state regulators periodically
review the Company’s allowance for loan losses and may require it to increase
its provision for loan losses or recognize further loan
charge-offs. Material additions to the allowance would materially
decrease the Company’s net income.
Ameris
has a high concentration of loans secured by real estate and a downturn in the
real estate market, for any reason, could result in losses and materially and
adversely affect business, financial condition, results of operations and future
prospects.
A
significant portion of the Company’s loan portfolio is dependent on real
estate. In addition to the financial strength and cash flow
characteristics of the borrower in each case, often loans are secured with real
estate collateral. At December 31, 2007, approximately 78.2% of loans
have commercial or residential real estate as a component of
collateral. The real estate in each case provides an alternate source
of repayment in the event of default by the borrower and may deteriorate in
value during the time the credit is extended. Further adverse changes
in the economy affecting values of real estate generally or in Ameris’ primary
markets specifically could significantly impair the value of collateral and
ability to sell the collateral upon foreclosure. Furthermore, it is
likely that, in a decreasing real estate market, Ameris would be required to
increase its allowance for loan losses as occurred in 2007, causing material
strain on recurring levels of net income. If the Company is required
to liquidate the collateral securing a loan to satisfy the debt during a period
of reduced real estate values or to increase its allowance for loan losses, its
profitability and financial condition could be adversely
impacted.
Ameris operates in a highly
regulated environment and may be adversely impacted by changes in law and
regulations.
Ameris,
primarily through its Bank, is subject to extensive federal and state regulation
and supervision. Banking regulations are primarily intended to
protect depositors’ funds, federal deposit insurance funds and the banking
system as a whole, not shareholders. These regulations affect the
Company’s lending practices, capital structure, investment practices, dividend
policy and growth, among other things. Congress and federal
regulatory agencies continually review banking laws, regulations and policies
for possible changes. Changes to statutes, regulations or regulatory
policies, including changes in interpretation or implementation of statutes,
regulations or policies, could affect the Company in substantial, unpredictable
and adverse ways. Such changes could subject the Company to
additional costs, limit the types of financial services and products the Company
may offer and/or increase the ability of non-banks to offer competing financial
services and products, among other things. Failure to comply with
laws, regulations or policies could result in sanctions by regulatory agencies,
civil money penalties and/or reputation damage, which could have a material
adverse effect on the Company’s business, financial condition and results of
operations. While the Company has policies and procedures designed to
prevent any such violations, there can be no assurance that such violations will
not occur.
Ameris
relies on dividends from its banking subsidiary for most of its
revenue.
Ameris
Bancorp is a separate and distinct legal entity from its
subsidiaries. It receives substantially all of its revenue from
dividends from the Bank. These dividends are the principal source of
funds to pay dividends on the Company’s common stock and interest and principal
on the Company’s debt. Various federal and/or state laws and
regulations limit the amount of dividends that the Bank may pay to the
Company. Also, the Company’s right to participate in a distribution
of assets upon a subsidiary’s liquidation or reorganization is subject to the
prior claims of the subsidiary’s creditors. In the event the Bank is
unable to pay dividends to the Company, the Company may not be able to service
debt, pay obligations or pay dividends on the Company’s common stock and its
business, financial condition and results of operations may be adversely
affected.
Ameris’
Articles of Incorporation and Bylaws may prevent or delay a takeover by another
company.
Ameris’
Articles of Incorporation permit Ameris’ board of directors to issue preferred
stock without shareowner action. The ability to issue preferred stock
could discourage a company from attempting to obtain control of Ameris by means
of a tender offer, merger, proxy contest or otherwise. Additionally,
Ameris’ Articles of Incorporation and Bylaws divide Ameris’ board of directors
into three classes, as nearly equal in size as possible, with staggered
three-year terms. One class is elected each year. The
classification of Ameris’ board of directors could make it more difficult for a
company to acquire control of Ameris. Ameris is also subject to
certain provisions of the Georgia Business Corporation Code and Ameris’ Articles
of Incorporation which relate to business combinations with interested
shareholders.
Ameris
operates in a highly competitive industry and market areas.
Ameris
faces substantial competition in all areas of its operations from a variety of
different competitors, many of whom are larger and may have more financial
resources. Such competitors primarily include national, regional and
community banks within the various markets in which the Bank
operates. Ameris also faces competition from many other types of
financial institutions, including, without limitation, savings and loan
institutions, credit unions, finance companies, brokerage firms, insurance
companies, factoring companies and other financial
intermediaries. The financial services industry could become even
more competitive as a result of legislative, regulatory and technological
changes and continued consolidation. Banks, securities firms and
insurance companies can merge under the umbrella of a financial holding company,
which can offer virtually any type of financial service, including banking,
securities underwriting, insurance (both agency and underwriting) and merchant
banking. Also, technology has lowered barriers to entry and made it
possible for non-banks to offer products and services traditionally provided by
banks, such as automatic transfer and automatic payment systems. Many
of the Company’s competitors have fewer regulatory constraints and may have
lower cost structures. Additionally, due to their size, many
competitors may be able to achieve economies of scale and, as a result, may
offer a broader range of products and services as well as better pricing for
those products and services than the Company can.
The
Company’s ability to compete successfully depends on a number of factors,
including, among other things:
·
|
the
ability to develop, maintain and build upon long-term customer
relationships based on quality service, high ethical standards and safe,
sound assets;
|
·
|
the
ability to expand the Company’s market
position;
|
·
|
the
scope, relevance and pricing of products and services offered to meet
customer needs and demands;
|
·
|
the
rate at which the Company introduces new products and services relative to
its competitors;
|
·
|
customer
satisfaction with the Company’s level of service;
and
|
·
|
industry
and general economic trends.
|
Failure
to perform in any of these areas could significantly weaken the Company’s
competitive position, which could adversely affect the Company’s growth and
profitability, which, in turn, could have a material adverse effect on the
Company’s financial condition and results of operations.
Potential
acquisitions may disrupt the Company’s business and dilute shareholder
value.
Acquiring
other banks, businesses or branches involves various risks commonly associated
with acquisitions, including, among other things:
·
|
potential
exposure to unknown or contingent liabilities of the target
company;
|
·
|
exposure
to potential asset quality issues of the target
company;
|
·
|
difficulty
and expense of integrating the operations and personnel of the target
company;
|
·
|
potential
disruption to the Company’s
business;
|
·
|
potential
diversion of the Company’s management’s time and
attention;
|
·
|
the
possible loss of key employees and customers of the target
company;
|
·
|
difficulty
in estimating the value of the target company;
and
|
·
|
potential
changes in banking or tax laws or regulations that may affect the target
company.
|
Ameris
has recently acquired other financial institutions and often evaluates
additional merger and acquisition opportunities related to possible transactions
with other financial institutions and financial services
companies. As a result, merger or acquisition discussions and, in
some cases, negotiations may take place and future mergers or acquisitions
involving cash, debt or equity securities of the Company may occur at any
time. Acquisitions typically involve the payment of a premium over
book and market values, and, therefore, some dilution of the Company’s tangible
book value and net income per common share may occur in connection with any
future transaction. Furthermore, failure to realize the expected
revenue increases, cost savings, increases in geographic or product presence
and/or other projected benefits and synergies from an acquisition could have a
material adverse effect on the Company’s financial condition and results of
operations.
Ameris
continually encounters technological change.
The
financial services industry is continually undergoing rapid technological change
with frequent introductions of new technology-driven products and
services. The effective use of technology increases efficiency and
enables financial institutions to better serve customers and to reduce
costs. The Company’s future success depends, in part, upon its
ability to address the needs of its customers by using technology to provide
products and services that will satisfy customer demands, as well as
to create additional efficiencies in the Company’s
operations. Many of the Company’s competitors have substantially
greater resources to invest in technological improvements. The
Company may not be able to effectively implement new technology-driven products
and services or be successful in marketing these products and services to its
customers. Failure to successfully keep pace with technological
change affecting the financial services industry could have a material adverse
impact on the Company’s business and, in turn, the Company’s financial condition
and results of operations.
Ameris
may not be able to attract and retain skilled people.
The
Company’s success depends, in large part, on its ability to attract and retain
key people. Competition for the best people in most activities
engaged in by the Company can be intense and the Company may not be able to hire
people or to retain them. The unexpected loss of services of one or
more of the Company’s key personnel could have a material adverse impact on the
Company’s business because of their skills, knowledge of the Company’s market,
years of industry experience and the difficulty of promptly finding qualified
replacement personnel.
Financial
services companies depend on the accuracy and completeness of information about
customers and counterparties.
In
deciding whether to extend credit or enter into other transactions, the Company
may rely on information furnished by or on behalf of customers and
counterparties, including financial statements, credit reports and other
financial information. The Company may also rely on representations
of those customers, counterparties or other third parties, such as independent
auditors, as to the accuracy and completeness of that
information. Reliance on inaccurate or misleading financial
statements, credit reports or other financial information could have a material
adverse impact on the Company’s business and, in turn, the Company’s financial
condition and results of operations.
None.
Ameris’
corporate headquarters is located at 24 Second Avenue, SE, Moultrie, Georgia
31768. The Company occupies approximately 43,348 square feet at this
location including 3,524 square feet used by the Bank. In addition to
executive offices and the Bank, the corporate headquarters includes mostly
support services for banking operations including credit, sales and operational
support, as well as audit and loan review services.
In
addition to its corporate headquarters, Ameris operates 46 office or branch
locations, of which 39 are owned and seven are subject to either building or
ground leases. At December 31, 2007, there were no significant
encumbrances on the offices, equipment or other operational facilities owned by
Ameris and the Bank.
From time
to time, the Company and the Bank are parties to legal proceedings arising in
the ordinary course of our business operations, including the case described
below. Management, after consultation with legal counsel, does not
anticipate that current litigation will have a material adverse effect on the
Company’s financial position or results of operations or cash
flows.
On June
15, 2006, a Houston County, Alabama jury entered a verdict in a civil action
against Southland Bank, a former subsidiary of the Company that in 2006 was
merged with and into the Bank, and one of Southland Bank’s employees in the
amount of approximately $7.1 million. The plaintiffs in this action
had unsuccessfully applied to Southland Bank for a business loan. The
plaintiffs sued Southland Bank and the employee for actual and punitive damages
alleging a number of purported causes of action, including breach of contract,
negligent failure to provide a loan and fraud, among other things, based on
Southland Bank’s denial of the loan application. The verdict assesses
compensatory damages in the amount of $2.1 million and punitive damages against
Southland Bank in the amount of $5 million. The defendants have filed
post-trial motions with the Supreme Court of the State of Alabama and expect a
ruling during 2008. It is anticipated that any potential financial
obligation that we or our subsidiaries might have to the plaintiffs in this
action will be covered by existing insurance.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF
SHAREHOLDERS
No
matters were submitted to a vote of our shareholders during the fourth quarter
of 2007.
PART
II
ITEM
5. MARKET FOR THE REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market
Price of Common Stock
Ameris’
common stock, $1.00 par value per share (the “Common Stock”), is listed on the
NASDAQ Global Select Market (“NASDAQ”) under the symbol “ABCB”. The
following table sets forth: (i) the high and low bid prices for the
Common Stock as quoted on NASDAQ during 2007 and 2006; and (ii) the amount of
quarterly dividends declared on the Common Stock during the periods
indicated. The high and low bid prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
Quarter
Ended 2007
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
$ |
27.73 |
|
|
$ |
23.11 |
|
|
$ |
24.33 |
|
|
$ |
.14 |
|
June
30
|
|
|
25.58 |
|
|
|
21.76 |
|
|
|
22.47 |
|
|
|
.14 |
|
September
30
|
|
|
23.05 |
|
|
|
17.72 |
|
|
|
18.08 |
|
|
|
.14 |
|
December
31
|
|
|
18.67 |
|
|
|
13.73 |
|
|
|
16.85 |
|
|
|
.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended 2006
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
$ |
22.87 |
|
|
$ |
19.26 |
|
|
$ |
22.87 |
|
|
$ |
.14 |
|
June
30
|
|
|
23.01 |
|
|
|
20.03 |
|
|
|
22.91 |
|
|
|
.14 |
|
September
30
|
|
|
27.77 |
|
|
|
20.99 |
|
|
|
27.07 |
|
|
|
.14 |
|
December
31
|
|
|
28.99 |
|
|
|
25.77 |
|
|
|
28.18 |
|
|
|
.14 |
|
Holders
of Common Stock
As of
February 22, 2007, there were approximately 2,000 holders of record of the
Company’s Common Stock. The Company believes that a portion of Common
Stock outstanding is held either in nominee name or street name brokerage
accounts; therefore, the Company is unable to determine the number of beneficial
owners of the Common Stock.
Performance
Graph
Set forth
below is a line graph comparing the change in the cumulative total shareholder
return on the Common Stock against the cumulative return of the NASDAQ Stock
Market (U.S. Companies) Index and the index of NASDAQ Bank Stocks for the
five-year period commencing December 31, 2002, and ending December 31,
2007. This line graph assumes an investment of $100 on December 31,
2002 and reinvestment of dividends and other distributions to
shareholders.
The
following table presents selected consolidated financial information for Ameris.
The data set forth below is derived from the audited consolidated financial
statements of Ameris. The acquisitions of Citizens on November 30,
2004, FNB on December 15, 2005 and Islands on December 31, 2006 have
significantly affected the comparability of selected financial
data. Specifically, since these acquisitions were accounted for using
the purchase method, the assets of the acquired institutions were recorded at
their fair values, the excess purchase price over the net fair value of the
assets was recorded as goodwill and the results of operations for these
businesses have been included in the Company’s results since the date these
acquisitions were completed. Accordingly, the level of our assets and
liabilities and our results of operations for these acquisitions have
significantly affected the Company’s financial position and results of
operations. Discussion of these acquisitions can be found in the
“Corporate Restructuring and Business Combinations” section of Part 1, Item 1.
of this Annual Report and in Note 3 – Business Combinations in the Notes to
Consolidated Financial Statements. The selected financial data should
be read in conjunction with, and is qualified in its entirety by, the
Consolidated Financial Statements and the Notes thereto and Management’s
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere herein.
|
Year
Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
(Dollars
in Thousands, Except Per Share Data)
|
|
Selected
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,112,063
|
|
|
$
|
2,047,542
|
|
|
$
|
1,697,209
|
|
|
$
|
1,267,993
|
|
|
$
|
1,169,111
|
|
Total
loans
|
|
|
1,614,048
|
|
|
|
1,442,951
|
|
|
|
1,186,601
|
|
|
|
877,074
|
|
|
|
840,539
|
|
Total
deposits
|
|
|
1,757,265
|
|
|
|
1,710,163
|
|
|
|
1,375,232
|
|
|
|
986,224
|
|
|
|
906,524
|
|
Investment
securities
|
|
|
298,729
|
|
|
|
290,207
|
|
|
|
243,742
|
|
|
|
221,741
|
|
|
|
196,289
|
|
Shareholders’
equity
|
|
|
191,249
|
|
|
|
178,732
|
|
|
|
148,703
|
|
|
|
120,939
|
|
|
|
113,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
146,077
|
|
|
$
|
124,111
|
|
|
$
|
79,539
|
|
|
$
|
64,365
|
|
|
$
|
64,479
|
|
Interest
expense
|
|
|
70,999
|
|
|
|
54,150
|
|
|
|
26,934
|
|
|
|
19,375
|
|
|
|
22,141
|
|
Net
interest income
|
|
|
75,078
|
|
|
|
69,961
|
|
|
|
52,605
|
|
|
|
44,990
|
|
|
|
42,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
11,321
|
|
|
|
2,837
|
|
|
|
1,651
|
|
|
|
1,786
|
|
|
|
3,945
|
|
Other
income
|
|
|
17,592
|
|
|
|
19,262
|
|
|
|
13,530
|
|
|
|
13,023
|
|
|
|
14,718
|
|
Other
expenses
|
|
|
58,896
|
|
|
|
53,129
|
|
|
|
43,607
|
|
|
|
36,505
|
|
|
|
35,147
|
|
Income
before tax
|
|
|
22,453
|
|
|
|
33,257
|
|
|
|
20,877
|
|
|
|
19,722
|
|
|
|
17,964
|
|
Income
tax expense
|
|
|
7,300
|
|
|
|
11,129
|
|
|
|
7,149
|
|
|
|
6,621
|
|
|
|
5,954
|
|
Net
income
|
|
$
|
15,153
|
|
|
$
|
22,128
|
|
|
$
|
13,728
|
|
|
$
|
13,101
|
|
|
$
|
12,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income - basic
|
|
$
|
1.12
|
|
|
$
|
1.71
|
|
|
$
|
1.15
|
|
|
$
|
1.12
|
|
|
$
|
1.03
|
|
Net
income – diluted
|
|
|
1.11
|
|
|
|
1.68
|
|
|
|
1.14
|
|
|
|
1.11
|
|
|
|
1.02
|
|
Book
value
|
|
|
14.06
|
|
|
|
13.19
|
|
|
|
11.48
|
|
|
|
10.28
|
|
|
|
9.68
|
|
Tangible
book value
|
|
|
9.67
|
|
|
|
8.73
|
|
|
|
7.64
|
|
|
|
7.9
|
|
|
|
7.76
|
|
Dividends
|
|
|
0.56
|
|
|
|
0.56
|
|
|
|
0.56
|
|
|
|
0.47
|
|
|
|
0.43
|
|
|
Year
Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
(Dollars
in Thousands, Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profitability
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income to average total assets
|
|
|
0.74
|
%
|
|
|
1.22
|
%
|
|
|
1.04
|
%
|
|
|
1.12
|
%
|
|
|
1.04
|
%
|
Net
income to average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders’
equity
|
|
|
8.13
|
|
|
|
13.9
|
|
|
|
10.87
|
|
|
|
11.19
|
|
|
|
10.85
|
|
Net
interest margin
|
|
|
4.02
|
|
|
|
4.25
|
|
|
|
4.31
|
|
|
|
4.15
|
|
|
|
3.96
|
|
Efficiency
ratio
|
|
|
63.55
|
|
|
|
59.55
|
|
|
|
65.94
|
|
|
|
62.93
|
|
|
|
61.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs to total loans
|
|
|
0.53
|
%
|
|
|
0.09
|
%
|
|
|
0.03
|
%
|
|
|
0.22
|
%
|
|
|
0.46
|
%
|
Reserve
for loan losses to total loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
OREO
|
|
|
1.71
|
|
|
|
1.72
|
|
|
|
1.88
|
|
|
|
1.77
|
|
|
|
1.78
|
|
Nonperforming
assets to total loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
OREO
|
|
|
1.6
|
|
|
|
0.61
|
|
|
|
0.9
|
|
|
|
0.7
|
|
|
|
0.95
|
|
Reserve
for loan losses to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nonperforming
loans
|
|
|
145.72
|
|
|
|
361.54
|
|
|
|
232.57
|
|
|
|
274.7
|
|
|
|
231.2
|
|
Reserve
for loan losses to total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nonperforming
assets
|
|
|
106.47
|
|
|
|
281.93
|
|
|
|
207.68
|
|
|
|
253.32
|
|
|
|
187.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
to total deposits
|
|
|
91.85
|
%
|
|
|
84.38
|
%
|
|
|
86.28
|
%
|
|
|
88.93
|
%
|
|
|
92.72
|
%
|
Average
loans to average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings
assets
|
|
|
81.72
|
|
|
|
79.39
|
|
|
|
77.32
|
|
|
|
80.91
|
|
|
|
78.63
|
|
Noninterest-bearing
deposits to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
total
deposits
|
|
|
9.36
|
|
|
|
12.96
|
|
|
|
14.6
|
|
|
|
15.22
|
|
|
|
15.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Adequacy Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stockholders’ equity to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
total
assets
|
|
|
9.06
|
%
|
|
|
8.73
|
%
|
|
|
8.76
|
%
|
|
|
9.54
|
%
|
|
|
9.72
|
%
|
Dividend
payout ratio
|
|
|
50.00
|
|
|
|
32.94
|
|
|
|
48.7
|
|
|
|
41.96
|
|
|
|
41.75
|
|
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND
RESULTS OF OPERATIONS
OVERVIEW
Ameris
Bancorp’s performance in 2007 was highlighted by a number of significant
items. The Bank exceeded forecasts for loans and deposits in South
Carolina in our first year of expansion strategy while at the same time
containing operating expenses despite substantial start-up costs associated with
these expansion efforts. In addition to expansion, the Company
completed consolidation of backroom operations across our four-state footprint
and grew revenue 7.6% despite negative pressures from interest rate environment
and industry trends on service charges. Although the Company made
great strides during the year, an increase in the provision for loan loss was
required due to deteriorating real estate environments along coastal areas of
Florida.
For the
year ended December 31, 2007, Ameris reported net income of $15.2 million, or
$1.11 per diluted share compared to net income in 2006 of $22.1 million, or
$1.68 per diluted share. Net income for the fourth quarter of 2007
was $1.2 million or $0.09 per diluted share compared to $5.8 million or $0.43
per diluted share in the fourth quarter of 2006.
Recurring
total revenue (net interest income and non-interest income) grew 7.6% during
2007 to $92.7 million. The net interest income component of total
revenue grew 7.4% to $75.1 million in 2007. Loan growth of $171.1 million or
11.9% during 2007 was the primary factor behind the growth in net interest
income and more than offset the negative pressures from declining net interest
margins. The Company’s net interest margin in 2007 declined to 4.02%
from 4.27% in 2006 as the industry dealt with historically thin spreads and flat
to inverted interest rate environments.
The
non-interest income component of total revenue grew 8.6% to $17.9 million in
2007 (excluding gains on sales of charters in 2006 and losses on investment
sales in both years). Service charges and fees on deposit accounts grew 7.9% to
$12.5 million as the Company increased certain fees and charges. In
addition, the Company significantly increased the number of low-cost deposit
accounts in every market. Mortgage origination and related fees
increased substantially during 2007 as the Company more than doubled its sales
force, mostly in the last half of 2007. While total revenue from
mortgage related activities increased 40.1% to $3.1 million during 2007,
contribution to net earnings was limited due to various start-up
costs.
Total
operating expenses grew 10.9% in 2007 to $58.9 million compared to $53.1 million
in 2006. Several factors impacted operating expenses in 2007, the
largest factor being the Company’s South Carolina initiative, which accounted
for approximately $4.5 million in incremental costs during 2007. Total net
operating losses associated with the South Carolina strategy in 2007 were $0.10
per share, which compares favorably with the $0.13 per share amount that was
initially forecasted. Equipment and occupancy expenses increased approximately
9.3% to $7.5 million as additional offices in South Carolina and Florida were
opened in 2007. Marketing costs are not expected to moderate or fall in 2008 as
the Company has planned events surrounding openings in several new markets
across its footprint and increased marketing around mortgage and treasury
services.
Decreases
in credit quality, particularly in the second half of 2007, were significant
enough to mitigate improvements elsewhere in the Company. The
majority of the decline, as well as the resulting provisions and net charge-offs
resulted from declines in the values of real estate collateral along the coastal
areas of north Florida. Provisions for loan loss in the fourth
quarter of 2007 amounted to $6.9 million compared to $713,000 in the same
quarter of 2006. For the year, Ameris Bank recorded $11.3 million in
total provision for loan loss, a significant increase over the $2.8 million
recorded in 2006. Net charge-offs in 2007 amounted to 0.53% of
average loans compared to 0.09% in 2006.
At
December 31, 2007, non-performing assets amounted to $26.0 million or 1.60% of
total loans compared to 1.38% of total loans at September 30,
2007. Other real estate increased approximately $4.5 million during
the last quarter as the Company foreclosed on several larger properties which
are being marketed aggressively. The Company’s reserve for loan
losses at December 31, 2007 was $27.6 million or 1.71% of total loans, compared
to $24.9 million and 1.72%, respectively, at December 31, 2006.
CRITICAL
ACCOUNTING POLICIES
Ameris
has established certain accounting and financial reporting policies to govern
the application of accounting principles generally accepted in the United States
of America in the preparation of our financial statements. Our
significant accounting policies are described in the Notes to the Consolidated
Financial Statements. Certain accounting policies involve significant
judgments and assumptions by management which have a material impact on the
carrying value of certain assets and liabilities; management considers these
accounting policies to be critical accounting policies. The judgments
and assumptions used by management are based on historical experience and other
factors which are believed to be reasonable under the
circumstances. Because of the nature of the judgments and assumptions
made by management, actual results could differ from the judgments and estimates
adopted by management which could have a material impact on the carrying values
of assets and liabilities and the results of Ameris’ operations. We
believe the following accounting policies applied by Ameris represent critical
accounting policies.
Allowance
for Loan Losses
We
believe the allowance for loan losses is a critical accounting policy that
requires the most significant judgments and estimates used in the preparation of
our consolidated financial statements. The allowance for loan losses
represents management’s estimate of probable loan losses inherent in the
Company’s loan portfolio. Calculation of the allowance for loan
losses represents a critical accounting estimate due to the significant
judgment, assumptions and estimates related to the amount and timing of
estimated losses, consideration of subjective environmental factors and the
amount and timing of cash flows related to impaired loans.
Management
believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance for loan losses may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination processes, periodically review the Company’s allowance
for loan losses. Such agencies may require the Company to recognize
additions to the allowance for loan losses based on their judgments about
information available to them at the time of their examination.
Considering
current information and events regarding a borrower’s ability to repay its
obligations, management considers a loan to be impaired when the ultimate
collectability of all amounts due, according to the contractual terms of the
loan agreement, is in doubt. When a loan is considered to be impaired, the
amount of impairment is measured based on the present value of expected future
cash flows discounted at the loan’s effective interest rate or if the loan is
collateral-dependent, the fair value of the collateral is used to determine the
amount of impairment. Impairment losses are included in the allowance for loan
losses through a charge to the provision for losses on loans.
Subsequent
recoveries are credited to the allowance for loan losses. Cash
receipts for accruing loans are applied to principal and interest under the
contractual terms of the loan agreement. Cash receipts on impaired
loans for which the accrual of interest has been discontinued are applied first
to principal and then to interest income.
Certain
economic and interest rate factors could have a material impact on the
determination of the allowance for loan losses. An increase in
interest rates by the Federal Reserve would favorably impact our net interest
margin. An improving economy could result in the expansion of
businesses and creation of jobs which would positively affect Ameris’ loan
growth and improve our gross revenue stream. Conversely, certain
factors could result from an expanding economy which could increase our credit
costs and adversely impact our net earnings. A significant rapid rise
in interest rates could create higher borrowing costs and shrinking corporate
profits which could have a material impact on a borrower’s ability to
pay. We will continue to concentrate on maintaining a high quality
loan portfolio through strict administration of our loan policy.
Another
factor that we have considered in the determination of the allowance for loan
losses is loan concentrations to individual borrowers or
industries. We had one credit relationship that exceeded our in-house
credit limit of $10.0 million. The exposure to that credit
relationship was approximately $12.2 million.
A
substantial portion of our loan portfolio is in the commercial real estate and
residential real estate sectors. Those loans are secured by real
estate in Ameris’ primary market area. A substantial portion of other
real estate owned is located in those same markets. Therefore, the
ultimate collectability of a substantial portion of our loan portfolio and the
recovery of a substantial portion of the carrying amount of other real estate
owned are susceptible to changes to market conditions in Ameris’ primary market
area.
Income
Taxes
SFAS No.
109, “Accounting for Income Taxes,” requires the asset and liability approach
for financial accounting and reporting for deferred income taxes. We
use the asset and liability method of accounting for deferred income taxes and
provide deferred income taxes for all significant income tax temporary
differences. See Note 12 to the Notes to Consolidated Financial
Statements for additional details.
As part
of the process of preparing our consolidated financial statements we are
required to estimate our income taxes in each of the jurisdictions in which we
operate. This process involves estimating our actual current tax
exposure together with assessing temporary differences resulting from differing
treatment of items, such as depreciation and the provision for loan losses, for
tax and financial reporting purposes. These differences result in
deferred tax assets and liabilities that are included in our consolidated
balance sheet.
We must
also assess the likelihood that our deferred tax assets will be recovered from
future taxable income, and to the extent we believe that recovery is not likely,
we must establish a valuation allowance. Significant management
judgment is required in determining our provision for income taxes, our deferred
tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. To the extent we establish a valuation allowance
or adjust this allowance in a period, we must include an expense within the tax
provisions in the statement of income.
We have
recorded on our consolidated balance sheet net deferred tax assets of $5.20
million, which includes amounts relating to loss carryforwards. We
believe there will be sufficient taxable income in the future to allow us to
utilize these loss carryforwards in the tax jurisdictions where they
exist.
Long-Lived
Assets, Including Intangibles
In our
financial statements, we have recorded $59.6 million of goodwill and other
intangible assets, which represents the amount by which the price we paid for
acquired businesses exceeds the fair value of tangible assets acquired plus the
liabilities assumed. We evaluate long-lived assets, such as property
and equipment, specifically identifiable intangibles and goodwill, when events
or changes in circumstances indicate that the carrying value of such assets
might not be recoverable. Factors that could trigger impairment
include significant underperformance relative to historical or projected future
operating results, significant changes in the manner of our use of the acquired
assets and significant negative industry or economic trends.
The
determination of whether impairment has occurred is based on an estimate of
undiscounted cash flows attributable to the assets as compared to the carrying
value of the assets. If impairment has occurred, the amount of the
impairment loss recognized would be determined by estimating the fair value of
the assets and recording a loss if the fair value was less than the book
value.
In
determining the existence of impairment factors, our assessment is based on
market conditions, operational performance and legal factors of our
Company. Our review of factors present and the resulting appropriate
carrying value of our goodwill, intangibles and other long-lived assets are
subject to judgments and estimates that management is required to
make. Future events could cause us to conclude that impairment
indicators exist and that our goodwill, intangibles and other long-lived assets
might be impaired. In accordance with accounting rules promulgated by
the Financial Accounting Standards Board (“FASB”), no amount of goodwill was
expensed in 2007, 2006 or 2005.
NET
INCOME AND EARNINGS PER SHARE
In 2007,
we reported net income of $15.2 million, or $1.11 per diluted share,
compared to $22.1 million, or $1.68 per diluted share in 2006 and $13.7 million,
or $1.14 per diluted share, in 2005. Our return on average assets was
0.74%, 1.22% and 1.04% in 2007, 2006 and 2005, respectively. Our
return on average stockholders’ equity was 8.14%, 13.90% and 10.87% in 2007,
2006 and 2005, respectively.
EARNING
ASSETS AND LIABILITIES
Average
earning assets in 2007 increased 14.1% over 2006 levels principally due the
Company’s de novo efforts in South Carolina. The earning asset and
interest-bearing liability mix is consistently monitored to maximize the net
interest margin and therefore increase return on assets and shareholders
equity.
The
following statistical information should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
Operation” and the financial statements and related notes included elsewhere in
this Annual Report and in the documents incorporated herein by
reference.
The
following tables set forth the amount of the our interest income or interest
expense for each category of interest-earning assets and interest-bearing
liabilities and the average interest rate for total interest-earning assets and
total interest-bearing liabilities, net interest spread and net yield on average
interest-earning assets. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 35% federal tax rate.
|
Year
Ended December 31,
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
|
|
|
Interest
|
|
|
Average
|
|
|
Average
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Balance
|
Expense
|
|
|
Rate
Paid
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
Paid
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
Paid
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
1,536,243
|
|
$
|
129,376
|
|
|
|
8.42
|
%
|
|
$
|
1,308,405
|
|
|
$
|
107,809
|
|
|
|
8.24
|
%
|
|
$
|
952,647
|
|
|
$
|
69,238
|
|
|
|
7.27
|
%
|
Investment
securities
|
|
298,036
|
|
|
14,785
|
|
|
|
4.96
|
|
|
|
267,343
|
|
|
|
12,550
|
|
|
|
4.69
|
|
|
|
223,633
|
|
|
|
8,794
|
|
|
|
3.93
|
|
Short-term
assets
|
|
45,634
|
|
|
2,349
|
|
|
|
5.15
|
|
|
|
72,183
|
|
|
|
3,843
|
|
|
|
5.32
|
|
|
|
42,884
|
|
|
|
1,591
|
|
|
|
3.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
earning assets
|
|
1,879,913
|
|
|
146,510
|
|
|
|
7.79
|
|
|
|
1,647,931
|
|
|
|
124,202
|
|
|
|
7.54
|
|
|
|
1,219,164
|
|
|
|
79,623
|
|
|
|
6.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-earning
assets
|
|
175,015
|
|
|
|
|
|
|
|
|
|
|
165,839
|
|
|
|
|
|
|
|
|
|
|
|
103,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
2,054,928
|
|
|
|
|
|
|
|
|
|
$
|
1,813,770
|
|
|
|
|
|
|
|
|
|
|
$
|
1,322,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
and interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
demand
deposits
|
$
|
634,287
|
|
$
|
18,014
|
|
|
|
2.84
|
%
|
|
$
|
521,783
|
|
|
$
|
11,397
|
|
|
|
2.18
|
%
|
|
$
|
393,592
|
|
|
$
|
4,013
|
|
|
|
1.02
|
%
|
Time
deposits
|
|
874,609
|
|
|
44,367
|
|
|
|
5.07
|
|
|
|
773,089
|
|
|
|
34,202
|
|
|
|
4.42
|
|
|
|
498,036
|
|
|
|
15,016
|
|
|
|
3.02
|
|
Other
borrowings
|
|
16,425
|
|
|
722
|
|
|
|
4.40
|
|
|
|
11,910
|
|
|
|
514
|
|
|
|
4.32
|
|
|
|
6,521
|
|
|
|
103
|
|
|
|
1.58
|
|
FHLB
advances
|
|
92,570
|
|
|
4,732
|
|
|
|
5.11
|
|
|
|
91,119
|
|
|
|
4,246
|
|
|
|
4.66
|
|
|
|
100,456
|
|
|
|
4,296
|
|
|
|
4.28
|
|
Trust
preferred securities
|
|
42,269
|
|
|
3,164
|
|
|
|
7.49
|
|
|
|
41,841
|
|
|
|
3,791
|
|
|
|
8.20
|
|
|
|
35,779
|
|
|
|
3,506
|
|
|
|
9.80
|
|
Total
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
1,660,160
|
|
|
70,999
|
|
|
|
3.83
|
|
|
|
1,439,742
|
|
|
|
54,150
|
|
|
|
3.74
|
|
|
|
1,034,084
|
|
|
|
26,934
|
|
|
|
2.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
192,575
|
|
|
|
|
|
|
|
|
|
|
194,150
|
|
|
|
|
|
|
|
|
|
|
|
154,326
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
15,880
|
|
|
|
|
|
|
|
|
|
|
20,684
|
|
|
|
|
|
|
|
|
|
|
|
7,895
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
186,313
|
|
|
|
|
|
|
|
|
|
|
159,194
|
|
|
|
|
|
|
|
|
|
|
|
126,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders’
equity
|
$
|
2,054,928
|
|
|
|
|
|
|
|
|
|
$
|
1,813,770
|
|
|
|
|
|
|
|
|
|
|
$
|
1,322,595
|
|
|
|
|
|
|
|
|
|
Interest
rate spread
|
|
|
|
|
|
|
|
|
3.96
|
%
|
|
|
|
|
|
|
|
|
|
|
3.80
|
%
|
|
|
|
|
|
|
|
|
|
|
3.93
|
%
|
Net
interest income
|
|
|
|
$
|
75,511
|
|
|
|
|
|
|
|
|
|
|
$
|
70,052
|
|
|
|
|
|
|
|
|
|
|
$
|
52,689
|
|
|
|
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
4.02
|
%
|
|
|
|
|
|
|
|
|
|
|
4.25
|
%
|
|
|
|
|
|
|
|
|
|
|
4.32
|
%
|
RESULTS
OF OPERATIONS
Net
Interest Income
Net
interest income represents the amount by which interest income on
interest-bearing assets exceeds interest expense incurred on interest-bearing
liabilities. Net interest income is the largest component of our
income and is affected by the interest rate environment and the volume and
composition of interest-earning assets and interest-bearing
liabilities. Our interest-earning assets include loans, investment
securities, interest-bearing deposits in banks and federal funds
sold. Our interest-bearing liabilities include deposits, other
short-term borrowings, FHLB advances and subordinated debentures.
2007
compared with 2006:
For the
year ended December 31, 2007, interest income was $146.1 million, an increase of
$22.0 million, or 17.7%, compared to the same period in 2006. Average
earning assets increased $232.0 million, or 14.1%, to $1.88 billion for the year
ended December 31, 2007 compared to $1.65 billion as of December 31,
2006. Yield on average earning assets on a taxable equivalent basis
for 2007 increased to 7.79% compared to 7.54% and 6.53% for the years ended
December 31, 2006 and 2005, respectively. The increase in
yields on earning assets during 2007 is primarily attributed to better pricing
opportunities on fixed rate loans with steady levels of benchmark interest rates
for variable rate loans.
Interest
expense on deposits and other borrowings for the year ended December 31, 2007
was $71.0, a $16.9 million increase from the year ended December 31,
2006. Average interest-bearing liabilities increased by $217.9
million, or 13.3% to end the year at $1.85 billion. Rates on average
interest-bearing liabilities rose to 3.83% from 3.29% and 2.60% as of December
31, 2006 and 2005, respectively. Our Company aggressively manages our
cost of funds to achieve a balance between high levels of profitability and
acceptable levels of growth.
On a
taxable-equivalent basis, net interest income for 2007 was $75.5 million
compared to $70.1 million in 2006, an increase of 7.7%. The Company’s
net interest margin, on a tax equivalent basis, decreased to 4.02% for the year
ended December 31, 2007 compared to 4.25% as of December 31, 2006. Opportunities
to improve the net interest margin proved limited during the year due to an
interest rate environment dominated by an inverted yield curve, that gave way to
falling short term rates late in 2007.
2006
compared with 2005:
Interest
income for the year ended December 31, 2006 was $124.2 million, an increase of
$44.6 million, or 56.0%, compared to the same period in 2005. Average
earning assets increased $428.8 million, or 35.2%, to $1.64 billion for the year
ended December 31, 2006 compared to $1.22 billion as of December 31,
2005. Yield on average earning assets on a taxable equivalent basis
for 2006 increased to 7.54% from 6.53% and 5.98% for the years ended December
31, 2005 and 2004, respectively. The Company’s increase in interest
income is equally attributable to both an increase in average earning assets and
a higher rate environment for most of 2006 than what was seen in previous
years.
Interest
expense on deposits and other borrowings for the year ended December 31, 2006
was $54.2 million, a $27.2 million increase from the year ended December 31,
2005. While average interest-bearing liabilities increased
substantially, by $405.7 million, the higher rate environment and, consequently,
higher rates on those liabilities contributed to the higher level of interest
expense. Rates on average interest-bearing liabilities increased to
3.74% from 2.60% and 2.11% as of December 31, 2005 and 2004,
respectively. Our Company aggressively manages our cost of funds to
achieve a balance between high levels of profitability and acceptable levels of
growth.
Net
interest income for 2006, on a taxable-equivalent basis, was $70.1 million
compared to $52.7 million in 2005, an increase of 33.0%. The
Company’s net interest margin, on a tax equivalent basis, decreased slightly to
4.25% for the year ended December 31, 2006 compared to 4.32% as of December 31,
2005.
|
|
Year
Ended December 31,
|
|
|
|
2007
vs. 2006
|
|
|
2006
vs. 2005
|
|
|
|
Increase
|
|
|
Changes
Due To
|
|
|
Increase
|
|
|
Changes
Due To
|
|
|
|
(Decrease)
|
|
|
Rate
|
|
|
Volume
|
|
|
(Decrease)
|
|
|
Rate
|
|
|
Volume
|
|
|
|
(Dollars
in Thousands)
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
21,567 |
|
|
$ |
18,798 |
|
|
$ |
2,769 |
|
|
$ |
38,321 |
|
|
$ |
12,275 |
|
|
$ |
26,046 |
|
Interest
on securities:
|
|
|
2,235 |
|
|
|
1,434 |
|
|
|
801 |
|
|
|
3,992 |
|
|
|
2,038 |
|
|
|
1,954 |
|
Short-term
assets
|
|
|
(1,494 |
) |
|
|
(1,416 |
) |
|
|
(78 |
) |
|
|
2,259 |
|
|
|
1,165 |
|
|
|
1,094 |
|
Total
interest income
|
|
|
22,308 |
|
|
|
18,816 |
|
|
|
3,492 |
|
|
|
44,572 |
|
|
|
15,478 |
|
|
|
29,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
from interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on savings and interest-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bearing
demand deposits
|
|
|
6,617 |
|
|
|
2,444 |
|
|
|
4,173 |
|
|
|
7,384 |
|
|
|
6,077 |
|
|
|
1,307 |
|
Interest
on time deposits
|
|
|
10,164 |
|
|
|
4,484 |
|
|
|
5,680 |
|
|
|
19,186 |
|
|
|
10,879 |
|
|
|
8,307 |
|
Interest
on other borrowings
|
|
|
208 |
|
|
|
195 |
|
|
|
13 |
|
|
|
411 |
|
|
|
335 |
|
|
|
76 |
|
Interest
on FHLB advances
|
|
|
486 |
|
|
|
68 |
|
|
|
418 |
|
|
|
(50 |
) |
|
|
323 |
|
|
|
(373 |
) |
Interest
on trust preferred securities
|
|
|
(627 |
) |
|
|
35 |
|
|
|
(662 |
) |
|
|
285 |
|
|
|
(667 |
) |
|
|
952 |
|
Total
interest expense
|
|
|
16,848 |
|
|
|
7,226 |
|
|
|
9,622 |
|
|
|
27,216 |
|
|
|
16,947 |
|
|
|
10,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
$ |
5,460 |
|
|
$ |
11,590 |
|
|
$ |
(6,130 |
) |
|
$ |
17,356 |
|
|
$ |
(1,469 |
) |
|
$ |
18,825 |
|
Provision
for Loan Losses
The
allowance for loan losses is a reserve established through charges to earnings
in the form of a provision for loan losses. The provision for loan
losses is based on management’s evaluation of the size and composition of the
loan portfolio, the level of non-performing and past due loans, historical
trends of charged-off loans and recoveries, prevailing economic conditions and
other factors management deems appropriate. As these factors change,
the level of loan loss provision may change.
Decreases
in credit quality, particularly in the second half of 2007, were significant
enough to mitigate improvements elsewhere in the Company. The
majority of the decline, as well as the resulting provisions and net charge-offs
resulted from declines in the values of real estate collateral along the coastal
areas of north Florida. Provisions for loan loss in the fourth
quarter of 2007 amounted to $6.9 million compared to $713,000 in the same
quarter of 2006. For the year, Ameris Bank recorded $11.3 million in
total provision for loan loss, a significant increase over the $2.8 million
recorded in 2006. Net charge-offs in 2007 amounted to 0.53% of
average loans compared to 0.10% in 2006 and 0.04% in 2005.
At
December 31, 2007, non-performing assets amounted to $26.0 million or 1.60% of
total loans compared to 0.60% of total loans at December 31,
2006. Other real estate increased approximately $5.7 million during
the year as the Company worked aggressively to resolve several larger
non-performing loans. The Company’s reserve for loan losses at
December 31, 2007 was $27.6 million or 1.71% of total loans, compared to $24.9
million and 1.72%, respectively, at December 31, 2006 and 1.95% at December 31,
2005.
Non-interest
income
Following
is a comparison of non-interest income for 2007, 2006 and 2005.
|
Years
Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
(Dollars
in Thousands)
|
|
Service
charges on deposit accounts
|
|
$ |
12,445 |
|
|
$ |
11,538 |
|
|
$ |
10,428 |
|
Mortgage
banking activities
|
|
|
3,093 |
|
|
|
2,208 |
|
|
|
1,614 |
|
Gain
(loss) on sale of securities
|
|
|
(297 |
) |
|
|
(308 |
) |
|
|
(391 |
) |
Other
income
|
|
|
2,351 |
|
|
|
5,824 |
|
|
|
1,879 |
|
|
|
$ |
17,592 |
|
|
$ |
19,262 |
|
|
$ |
13,530 |
|
2007
compared with 2006:
The
non-interest income component of total revenue grew 8.4% to $17.9 million in
2007 (excluding gains on sales of charters in 2006 and losses on investment
sales in both years). Service charges and fees on deposit accounts grew 7.9% to
$12.5 million as the Company increased certain fees and charges. In
addition to increasing fees, the Company significantly increased the number of
low-cost deposit accounts in virtually every market. Mortgage
origination and related fees increased substantially during 2007 as the Company
more than doubled its sales force, mostly in the last half of
2007. While total revenue from mortgage related activities increased
40.1% to $3.1 million during 2007, contribution to net earnings was limited due
to various start-up costs.
2006
compared with 2005:
Total
non-interest income during 2006 increased substantially to $19.3 million, an
increase of 42.4% over 2005 levels. Service charges on deposit
accounts increased by 10.6% during 2006 to $11.5 million as the Company
experienced strong increases in demand deposits and sought to maximize this area
of income with certain changes to its deposit account fee
structure. Mortgage fees increased by 36.8% during 2006 to $2.2
million as the Company expanded its mortgage production staff in most of its
geographic footprint. Other income during 2006 includes $3.1 million
of gains recognized from the Company’s successful efforts to sell three banking
charters to unrelated parties.
Non-interest
expense
Following
is a comparison of non-interest expense for 2007, 2006 and 2005.
|
|
Years
Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars
in Thousands)
|
|
Salaries
and employee benefits
|
|
$ |
29,844 |
|
|
$ |
27,043 |
|
|
$ |
22,483 |
|
Equipment
and occupancy
|
|
|
7,540 |
|
|
|
6,836 |
|
|
|
4,931 |
|
Amortization
of intangible assets
|
|
|
1,297 |
|
|
|
1,107 |
|
|
|
819 |
|
Data
processing fees
|
|
|
2,579 |
|
|
|
2,136 |
|
|
|
1,899 |
|
Business
restructuring
|
|
|
0 |
|
|
|
1,452 |
|
|
|
2,838 |
|
Other
expense
|
|
|
17,636 |
|
|
|
14,555 |
|
|
|
10,637 |
|
|
|
$ |
58,896 |
|
|
$ |
53,129 |
|
|
$ |
43,607 |
|
2007
compared with 2006:
Total
operating expenses grew 10.9% in 2007 to $58.9 million compared to $53.1 million
in 2006. Several factors impacted operating expenses in 2007, the
largest factor being the Company’s South Carolina initiative, which accounted
for approximately $4.5 million in incremental costs during
2007. Equipment and occupancy expenses increased approximately 10.3%
to $7.5 million as additional offices in South Carolina and Florida were opened
in 2007. Advertising-related expenses in 2007 increased approximately $460,000
to $2.1 million as the Company expanded its marketing in existing markets and
promoted its products in new and existing markets. Marketing costs are not
expected to moderate or fall in 2008 as the Company has planned events
surrounding openings in several new markets across its footprint and increased
marketing around mortgage and treasury services.
Expenses
associated with data processing increased approximately 20.7% during
2007. These expenses fluctuate in proportion to business volumes
(loans and deposits) and branch officers. The Company’s expansion
efforts over the past few years, as well as acquisition activity, have resulted
in higher levels of expense.
2006
compared with 2005:
Non-interest
expense increased during 2006 largely as a result of the FNB
acquisition. Expenses for these two banks were not included in our
results for 2005 as the acquisition was consummated at the end of the
year. The assets assumed in this acquisition amounted to
approximately 18.5% of our total assets at the end of 2005. In
addition to the necessary costs assumed with this acquisition, the Company’s
level of operating costs has been influenced by the need to renovate several
existing offices and efforts to hire talented bankers when the opportunity
exists.
Business
restructuring costs of $1.5 million in 2006 relate to the restructuring
announced during 2005. Additional costs were necessary as the Company
began to streamline it support functions and finalize its efforts to create a
single bank with a uniform and recognizable brand.
Income
Taxes:
Federal
income tax expense is influenced by the amount of taxable income, the amount of
tax-exempt income and the amount of non-deductible expenses. Income
taxes totaled $7.3 million, $11.1 million and $7.1 million in 2007, 2006 and
2005, respectively. The Company’s effective tax rate was 33%, 33% and
34% for the years ended December 31, 2007, 2006 and 2005.
LOANS
Management
believes that our loan portfolio is adequately diversified. The loan portfolio
contains no foreign or energy-related loans or significant concentrations in any
one industry, with the exception of residential and commercial real estate
mortgages, which constituted approximately 54.7% of our loan portfolio as of
December 31, 2007. The amount of loans outstanding at the indicated
dates is shown in the following table according to type of loans.
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars
in Thousands)
|
|
Commercial
and financial
|
|
$ |
164,708 |
|
|
$ |
137,290 |
|
|
$ |
129,612 |
|
|
$ |
100,585 |
|
|
$ |
95,514 |
|
Agricultural
|
|
|
40,433 |
|
|
|
34,614 |
|
|
|
31,438 |
|
|
|
27,718 |
|
|
|
22,242 |
|
Real
estate - construction
|
|
|
174,576 |
|
|
|
157,260 |
|
|
|
73,639 |
|
|
|
39,516 |
|
|
|
26,581 |
|
Real
estate - mortgage, farmland
|
|
|
83,784 |
|
|
|
79,931 |
|
|
|
65,052 |
|
|
|
55,910 |
|
|
|
57,024 |
|
Real
estate - mortgage, commercial
|
|
|
912,727 |
|
|
|
803,652 |
|
|
|
654,315 |
|
|
|
448,425 |
|
|
|
420,896 |
|
Real
estate - mortgage, residential
|
|
|
157,334 |
|
|
|
147,789 |
|
|
|
142,609 |
|
|
|
126,985 |
|
|
|
131,181 |
|
Consumer
installment loans
|
|
|
69,099 |
|
|
|
73,218 |
|
|
|
79,239 |
|
|
|
66,779 |
|
|
|
72,461 |
|
Other
|
|
|
11,381 |
|
|
|
9,197 |
|
|
|
10,646 |
|
|
|
11,157 |
|
|
|
14,640 |
|
|
|
|
1,614,048 |
|
|
|
1,442,951 |
|
|
|
1,186,601 |
|
|
|
877,074 |
|
|
|
840,539 |
|
Less
reserve for possible loan losses
|
|
|
27,640 |
|
|
|
24,863 |
|
|
|
22,294 |
|
|
|
15,493 |
|
|
|
14,963 |
|
Loans,
net
|
|
$ |
1,586,408 |
|
|
$ |
1,418,088 |
|
|
$ |
1,164,307 |
|
|
$ |
861,581 |
|
|
$ |
825,576 |
|
Total
loans as of December 31, 2007 are shown in the following table according to
maturity or repricing opportunities.
|
|
(Dollars
in
|
|
|
|
Thousands)
|
|
Maturity
or Repricing Within:
|
|
|
|
One
year or less
|
|
$ |
725,355 |
|
After
one year through five years
|
|
|
714,869 |
|
After
five years
|
|
|
173,825 |
|
|
|
$ |
1,614,048 |
|
The
following table summarizes loans at December 31, 2007 with due dates after one
year which (1) have predetermined interest rates and (2) have floating or
adjustable interest rates.
|
|
(Dollars
in
|
|
|
|
Thousands)
|
|
|
|
|
|
Predetermined
interest rates
|
|
$ |
495,837 |
|
Floating
or adjustable interest rates
|
|
|
392,857 |
|
|
|
$ |
888,694 |
|
Records
were not available to present the above information in each category listed in
the first paragraph above and could not be reconstructed without undue
burden.
ALLOWANCE
AND PROVISION FOR LOAN LOSSES
The
allowance for loan losses represents a reserve for inherent losses in the loan
portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on non-accruing, past due and other loans that management believes
might be potentially impaired or warrant additional attention. We segregate our
loan portfolio by type of loan and utilize this segregation in evaluating
exposure to risks within the portfolio. In addition, based on internal reviews
and external reviews performed by independent auditors and regulatory
authorities, we further segregate our loan portfolio by loan grades based on an
assessment of risk for a particular loan or group of loans. Certain reviewed
loans are assigned specific allowances when a review of relevant data determines
that a general allocation is not sufficient or when the review affords
management the opportunity to fine tune the amount of exposure in a given
credit. In establishing allowances, management considers historical loan loss
experience but adjusts this data with a significant emphasis on data such as
current loan quality trends, current economic conditions and other factors in
the markets where the Bank operates. Factors considered include among others,
current valuations of real estate in our markets, unemployment rates, the effect
of weather conditions on agricultural related entities and other significant
local economic events, such as major plant closings.
We have
developed a methodology for determining the adequacy of the loan loss reserve
which is monitored by the Company’s Senior Credit Officer and internal audit
staff. Procedures provide for the assignment of a risk rating for every loan
included in our total loan portfolio, with the exception of credit card
receivables and overdraft protection loans which are treated as pools for risk
rating purposes. The risk rating schedule provides eight ratings of which four
ratings are classified as pass ratings and four ratings are classified as
criticized ratings. Each risk rating is assigned a percent factor to be applied
to the loan balance to determine the adequate amount of reserve. Many of the
larger loans require an annual review by an independent loan officer and are
often reviewed by independent third parties. As a result of these loan reviews,
certain loans may be assigned specific reserve allocations. Other loans that
surface as problem loans may also be assigned specific reserves. Past due loans
are assigned risk ratings based on the number of days past due. Risk ratings are
subject to periodic review by internal and external loan review
staff.
The
following table sets forth the breakdown of the allowance for loan losses by
loan category for the periods indicated. Management believes the allowance can
be allocated only on an approximate basis. The allocation of the allowance to
each category is not necessarily indicative of future losses and does not
restrict the use of the allowance to absorb losses in any other
category.
|
|
At
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
|
|
%
of
|
|
|
|
Amount
|
|
|
Total
Loans
|
|
|
Amount
|
|
|
Total
Loans
|
|
|
Amount
|
|
|
Total
Loans
|
|
|
Amount
|
|
|
Total
Loans
|
|
|
Amount
|
|
|
Total
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
financial,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|