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Ameris Bancorp Announces 2011 Financial Results
Posted January 26, 2012
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MOULTRIE, Ga, -- AMERIS BANCORP (NASDAQ-GS: ABCB), today reported net income available to common shareholders of $17.9 million, or $0.76 per diluted share, for the year ended December 31, 2011, compared to a net loss available to common shareholders of $7.2 million, or ($0.35) per diluted share, for 2010. Net income available to common shareholders for the fourth quarter of 2011 was $322,000, or $0.01 per diluted share, compared to net income of $1.1 million, or $0.04 per diluted share, for the quarter ended December 31, 2010.
Highlights of the Company's results for 2011 include the following:
• Tangible common book value increased 9.1% per share to $10.06 per share
• Tangible common equity to tangible assets increased from 7.35% at December 31, 2010 to 7.99% at December 31, 2011
• Total revenue, excluding gains on FDIC transactions, increased $27.3 million, or 19.6%
• Net interest margin improved to 4.57%, up from 4.11% in 2010
• Non-interest bearing deposits increased 30.9%, or $93.4 million
• Legacy classified assets decreased 18.4%, or $34.7 million
• Non-performing assets as a percentage of total assets decreased from 4.62% at December 31, 2010 to 4.05% at December 31, 2011
• The Company successfully completed two FDIC-assisted acquisitions with assets totaling $360.0 million
Increases in Net Interest Income
Net interest income increased in 2011 to $113.5 million, up from $89.3 million reported in 2010. Several factors contributed to this 27.1% increase, including an increase in average earning assets of 13.6%, from $2.2 billion in 2010 to $2.5 billion in 2011. Average loans outstanding benefited from acquisitions in late 2010 and during 2011, increasing 13.8%. Average investment securities increased 30.5% while average short-term assets decreased 5.7%.
The Company's efforts to fund earning asset growth with lower cost transaction accounts were also successful. Growth in deposit accounts costing less than 0.50% amounted to $210.2 million ($101.5 million in non-interest bearing, $93.6 million in NOW accounts and $15.1 million in savings) and funded 70.7% of the growth in earning assets during 2011.
Strong incremental spreads on new business were augmented further by steady yields on earning assets and continued decreases in funding costs. Yields on earning assets increased from 5.47% in 2010 to 5.68% in 2011, due mostly to improvements in the yield on covered loans. As expected cash flow on covered loans improves, a portion of the loan discount that was previously attributable to credit problems is reclassified into interest income. This reclassification occurs over the estimated life of the loan, which sometimes is a very short period of time. The Company has benefitted from these additions to net interest income and expects favorable yields on covered loans to continue into 2012, albeit at lower levels than recorded in the fourth quarter of 2011 when a number of larger loan relationships had events that caused larger amounts to flow through interest income on very short amortization periods.
Non-Interest Income
Despite a challenging environment for growing non-interest revenue, the Company improved its recurring non-interest income by 25.9% in 2011 over amounts reported in 2010. Excluding non-recurring gains on acquisitions, Ameris reported $25.9 million in non-interest income for the year ended December 31, 2011 compared to $20.6 million for the year ended December 31, 2010. Service charges on deposit accounts increased $2.9 million, or 19.4%, to $18.1 million during 2011. Faster growth and higher balances in checking accounts contributed to this increase in service charge revenue. Management believes that continued growth in service charge revenue will be achieved through growth in account balances as opposed to higher individual service charge routines.
Mortgage revenue also increased in 2011, benefitting from staffing hires in 2011 as well as from improvements in the Company's platform that allowed for higher yields and better returns. During 2011, revenue from mortgage banking activities totaled $3.0 million, an increase of 8.1% from amounts reported in 2010. Management expects that continued improvement, potentially at a faster pace than seen in 2011, is possible due to the Company's recruiting opportunities and the historically low rate environment.
Non-Interest Expense
Excluding credit related expenses and non-recurring merger charges, total operating expenses were $77.6 million for the year ended December 31, 2011, compared to $64.8 million for 2010. During the fourth quarter of 2010, the Company completed three acquisitions with assets totaling $658.1 million. Because these occurred late in 2010, the additional expense associated with these acquisitions, as well as the two completed in July 2011, skew the growth in operating expenses. Expressed as a percentage of average assets, total operating expense in 2011 was 2.62%, only a slight increase from 2.55% reported in 2010.
Data processing and telecommunications expense increased during 2011 to $10.3 million, an increase of 34.9% when compared to amounts reported in 2010. During 2011, the Company had approximately $1.6 million of non-recurring charges associated with converting acquired banks. Excluding these amounts, data processing expense would have increased a more reasonable $1.1 million, or 13.9%, during 2011. For 2012, management expects to benefit from a new contract with its core processing vendor that will reduce recurring data processing expenses by approximately 15%.
Balance Sheet Trends
Total assets at December 31, 2011 increased only slightly, growing 0.7% to $2.99 billion, compared to $2.97 billion at December 31, 2010. Average assets for the year reflected higher levels of growth considering the three acquisitions completed in the fourth quarter of 2010. Average assets and average earning assets in 2011 were $2.97 billion and $2.50 billion, respectively, compared to $2.50 billion and $2.20 billion, respectively, for 2010.
Loans outstanding comprise both the legacy portfolio and the covered loan portfolio. Average legacy loans declined $100.1 million, or 6.9%, for the year ended December 31, 2011 as compared to average balances for 2010. Growth in average covered loans more than offset the decline in legacy loans, increasing 140%, or $333.2 million, to $570.7 million at December 31, 2011.
Credit Quality
For the year ended December 31, 2011, nonperforming assets decreased $16.1 million, or 11.7%, to $121.1 million, or 4.05% of total assets, compared to $137.2 million, or 4.62% of total assets, at December 31, 2010. Non-accrual loans declined $8.5 million to $70.8 million at December 31, 2011, compared to $79.3 million at December 31, 2010. The Company's balances in legacy OREO decreased $7.6 million to $50.3 million at December 31, 2011 from $57.9 million at December 31, 2010.
M&A Outlook
During 2011, the Company completed its seventh and eighth FDIC-assisted acquisitions bringing total acquired assets in this strategy to $1.6 billion. Management believes the strategy has been vital at this time in the economic cycle, providing the safest avenue for growth in earning assets. Mr. Hortman commented, "We continue to look at potential failed bank acquisitions and believe that 2012 will provide enough opportunities to realize growth in balances of covered loans. Our covered asset platform is highly scalable and our current focus is heavily centered on continuing to participate as we have in the past." With respect to traditional M&A opportunities, Mr. Hortman added, "Capital levels and asset quality have stabilized at many institutions. Management teams and their boards are increasingly aware of the advantages of partnering and the limited opportunity to create value on a stand-alone basis. Accordingly, we anticipate that traditional M&A will begin to rebound in 2012 and yield opportunities to increase earnings per share with limited or no dilution to tangible book value."
Capital Levels
The Company manages with increasingly high levels of capital. At December 31, 2011, Tier 1 common equity to risk based assets was 13.74%, compared to 12.93% at December 31, 2010, an increase of 6.26%. Tangible common equity as a percentage of tangible assets increased to 7.99% at December 31, 2011, compared to 7.35% at December 31, 2010. Earnings from legacy operations and from acquisitions coupled with mostly static total assets during the year were the primary reasons for the higher capital levels. Additionally, tangible book value per common share increased from $9.22 per share at December 31, 2010 to $10.06 per share at December 31, 2011.
Mr. Hortman spoke concerning the Company's capital levels, saying "Improving capital levels throughout this cycle have allowed us to continue operating with offensive strategies. Coupling these strong capital levels together with our core earnings and our acquisition strategies, we are confident in our ability to repay the Company's TARP obligations in installments before their fifth anniversary. As we have stated before, we do not foresee that any capital raise will be required, and we expect that the repayment of those obligations will be fully accretive to existing shareholders."
Ameris Bancorp is headquartered in Moultrie, Georgia, and at the end of the most recent quarter had 62 locations in Georgia, Alabama, northern Florida and South Carolina.
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