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Ameris Bancorp Reports Second Quarter 2010 Net Loss of $4.2M
MOULTRIE, Ga., July 22 -- AMERIS BANCORP (Nasdaq-GS: ABCB), Moultrie, Georgia, today reported a net loss available to common shareholders of $4.2 million, or $0.20 per diluted share, for the quarter ended June 30, 2010, compared to a net loss of $3.5 million, or $0.25 per diluted share, for the second quarter of 2009. For the first half of 2010, Ameris Bancorp reported a net loss available to common shareholders of $6.5 million, or $0.37 per diluted share, compared to a net loss of $4.8 million, or $0.35 per diluted share, for the first half of 2009. Improvements in the Company's net interest margin and continued strong capital position were overshadowed by larger loan loss provisions.
Highlights of the second quarter of 2010 include the following:
-- Completion of a $90 million public offering, increasing already strong capital ratios
-- Continued increase in pretax, pre-credit related income to $11.9 million per quarter
-- Completion of a third FDIC-assisted transaction
-- Net interest margin of 4.43% for the quarter and 4.19% for the year to date period
-- Completion after quarter end of an asset sale comprising of mostly non-performing assets that when closed would reduce non-performing assets by $13.3 million
Capital Ratios
Early in the second quarter of 2010, the Company completed a public offering for $90 million of the Company's common stock, issuing approximately 9.5 million new shares at $9.50 per share. The Company's tangible common equity ratio increased from 5.65% at June 30, 2009 to 9.17% at June 30, 2010. Ameris Bank's tier one capital and total capital ratios increased as well, from 7.40% at the end of the second quarter of 2009 to 12.36% at the end of the current quarter. Edwin W. Hortman, Jr., President and CEO, commented on the successful capital raise and stated, "The success of the capital raise affirms our decisions early in this downturn to preserve capital through hard decisions that increased our core earnings. Our focus now is on deploying the capital by being in 'do business' mode in our local markets and taking advantage of the consolidation our industry is experiencing."
Core Earnings
The Company's income before taxes and credit costs continue to increase and provide meaningful protection for capital levels during the current economic cycle. In the current period, pre-tax, pre-credit earnings totaled $11.9 million, an increase of 62%, or $4.6 million, when compared to the same quarter in 2009. For the year-to-date period, core earnings increased $9.4 million to $24.1 million. Increases in core earnings have been achieved through higher net interest margins, incremental earnings on acquired banks through FDIC-assisted transactions and reduction in non-credit related operating expenses. "We believe our stretch goal of $50 million of core earnings for 2010 is achievable, despite limited investment opportunities for our large position in short-term assets. Until the economy improves and offers the Company more revenue opportunities, we will benefit from a very attractive deposit mix and the momentum we gained in operating expenses through our successful efforts in 'Project 2010'" said Mr. Hortman.
Completion of Third FDIC-Assisted Acquisition
The Company's results for the quarter include an after-tax gain on the FDIC-assisted acquisition of certain assets and deposits of Satilla Community Bank totaling $5.2 million. As a result of the acquisition, the Company added $68.8 million in loans and $75.8 million in deposits. The Company believes that incremental earnings from this acquisition will be meaningful because of the opportunity for consolidating operations with existing Ameris Bank locations and because the Company is protected from credit losses through the Company's loss share agreements with the FDIC.
Significant Increase in the Company's Net Interest Margin
For the second quarter of 2010, the Company reported a net interest margin of 4.43%, compared to 3.59% for the same quarter in 2009. For the year-to-date period in 2010, the Company reported a net interest margin of 4.19% compared to 3.39% during the first six months of 2009. During the second quarter, the Company recognized $2.35 million of interest income representing certain "accretable differences" relating to the Company's first two FDIC-assisted acquisitions, which were completed in 2009. Excluding the non-recurring portion of these amounts, the Company's net interest margin would have been 4.11% and 4.02% for the second quarter and the first six months of 2010, respectively.
Net interest income (tax equivalent basis) for the second quarter of 2010 totaled $24.6 million, compared to $18.7 million in the same quarter of 2009. Excluding the non-recurring portion of the accretable difference, the Company's interest income would have increased slightly, from $29.3 million in the second quarter of 2009 to $30.0 million in the second quarter of 2010. Improvements in interest expense were more significant, falling to $7.2 million during the current quarter compared to $10.6 million in the same quarter of 2009. The improved deposit mix along with greatly reduced yields on time deposits accounted for the decrease in funding costs.
Yields on earning assets, on a tax equivalent basis and excluding the non-recurring accretable differences, were 5.41% during the second quarter of 2010 compared to 5.60% in the second quarter of 2009. Increases in the concentration of lower yielding short-term assets, from 7.7% of earning assets in the second quarter of 2009 to 12.9% in the second quarter of 2010, along with lower yields on the Company's investment portfolio, were the primary drivers for lower earning asset yields.
Decreases in the yields on earning assets were more than offset with decreases in funding costs for the Company. Total cost of funding for the second quarter of 2010 decreased to 1.34% compared to 2.08% in the same quarter of 2009. The Company attributes continued improvement in deposit mix as the driver for this decrease in funding cost. Average non-CD deposits increased during the past year from 54.4% of total deposits to 58.1% during the second quarter of 2010. In addition, the Company's dependency on retail deposits continues to increase from already high levels. During the second quarter of 2010, 90.8% of the Company's total funding came from retail deposits as compared to 89.4% at the same time in 2009.
Non-Interest Expense
Operating expenses totaled $23.4 million for the second quarter of 2010, an increase over the same quarter in 2009 when the Company reported $17.7 million in total non-interest expense. Credit, merger and other non-recurring costs totaled $7.3 million during the current quarter, compared to $1.4 million in the same quarter in 2009. Excluding these costs, recurring operating expenses decreased slightly to $16.1 million in the current quarter compared to $16.3 million in the same quarter in 2009. Efforts to reduce operating expenses over the past two years have been successful and have allowed the Company to still post lower recurring operating expenses despite absorbing approximately $1.1 million per quarter in operating expenses associated with the FDIC-assisted acquisitions.
Asset Sale and Credit Quality Trends
Subsequent to quarter end, the Company will close a sale of mostly non-performing assets that will result in a reduction of non-performing assets totaling $13.3 million. Included in the second quarter of 2010 results is approximately $8.0 million of charges associated with the sale.
Nonperforming assets totaled $136.0 million or 7.75% of total loans and OREO at June 30, 2010, compared to $122.4 million or 7.16% of total loans and OREO at March 31, 2010. Net charge offs were higher in the current quarter, at 4.21% annualized, of total loans, compared to 1.63% in the same quarter in 2009. Excluding the effects of the note sale, the Company's loan loss provision expense was $11.8 million during the second quarter of 2010 compared to $10.8 million in the first quarter of 2010. Aggressive write downs on non-accrual loans continued during the quarter such that the current carrying value of non-accrual loans is 49.7% of the original appraisal amount.
Ameris Bancorp is headquartered in Moultrie, Georgia, and at the end of the most recent quarter, had 53 locations in Georgia, Alabama, northern Florida and South Carolina.