MOULTRIE, Ga., July 24, 2015 /PRNewswire/ -- AMERIS BANCORP (NASDAQ-GS: ABCB), today reported operating net income of $12.3 million, or $0.38 per diluted share, for the quarter ended June 30, 2015, compared with $10.0 million, or $0.39 per diluted share, for the quarter ended June 30, 2014.  For the year-to-date period ending June 30, 2015, the Company reported operating net income of $22.1 million, or $0.70 per diluted share, compared with $18.4 million, or $0.72 per share, for the same period in 2014.  The earnings per share results for 2015 reflect an additional 5.3 million common shares outstanding.  These shares were issued early in the first quarter of 2015 in the Company's private placement, which was completed for the purposes of capitalizing the Company's acquisitions that closed late in the second quarter of 2015. 

Operating net income for the second quarter of 2015 excluded after-tax merger-related charges totaling approximately $3.7 million, or $0.11 per share, and a non-recurring after tax charge of $7.3 million, or $0.23 per share, related to an aggressive write-down on remaining non-performing assets.  Commenting on the rationale for this credit charge, Edwin W. Hortman, Jr., President and CEO said, "Lingering credit costs have overshadowed the improvements we have made in our operating results for too long and depressed our earnings valuation.  The charge we recorded in the second quarter will allow us to manage the disposition of non-performing assets in an accelerated fashion with credit costs that are commensurate with our peer group.  Deploying the liquidity from the recent deals and achieving the cost savings we have projected will further improve our return on assets and return on equity and I do not want that overshadowed by outsized credit related costs." 

Including the merger and non-recurring credit charges, the Company reported net income of $1.3 million, or $0.04 per share, in the second quarter of 2015, compared with $8.1 million, or $0.32 per share, in the same quarter in 2014, and for the year-to-date period in 2015, the Company's earnings totaled $11.1 million, or $0.35 per share, compared with $16.2 million, or $0.63 per share, in 2014.

Highlights of the Company's performance and results for the second quarter of 2015 include the following:

• Successful purchase and data conversion of 18 retail branches, including approximately $644.7 million in deposits, in South Georgia and North Florida
• Completion of the acquisition of Merchants and Southern Bank ("M&S") in Gainesville, Florida, with assets totaling $505.1 million
• Total loan growth (including mortgage loans held for sale) of $605.3 million in the second quarter of 2015
• Organic loan growth of $125.1 million, or 15.4% (annualized), during the second quarter of 2015
• Return on assets and return on average tangible equity, on an operating basis, of 1.11% and 12.83%, respectively
• Increase in total revenue to $64.9 million in the second quarter of 2015, compared with $54.4 million in the same quarter in 2014
• Tangible common equity to tangible assets of 7.46% at June 30, 2015, compared with 7.42% at December 31, 2014
• Noninterest income of $20.6 million, compared with $15.8 million in the second quarter of 2014
• Increase in net income from the Company's total mortgage operations to $3.2 million, compared with $1.6 million in the same quarter in 2014
• Closed loan production of $9.5 million and total revenue of $2.6 million in the second quarter from the Company's SBA division

Acquisition Activity

The Company closed the acquisition of M&S on May 22, 2015 and the branch acquisition on June 12, 2015.  These acquisitions increased the Company's total assets and earning assets by approximately 28% and the Company's total deposits by approximately 30%.  Initially, the acquisitions are detrimental to the Company's mix of earning assets and net interest margin because the majority of the assets acquired were short-term.  The following chart outlines the balances acquired at closing and the Company's target mix of these earning assets over the coming quarters:

 

 

The Company is initially concentrating the deployment of the funds in areas with little to no incremental overhead burden to effectively improve the efficiency ratio and maximize the earnings effect of the two acquisitions.  Retention of some of the Company's mortgage and SBA production, a more aggressive push for municipal lending assets and purchases of higher quality, adjustable-rate mortgage loan pools are the most likely strategies the Company will use to deploy this liquidity.

Fee income associated with the branch acquisition was a material part of the initial assumptions.  Total deposits acquired declined by 24% from the announcement date to the closing date, but indications reflect that fee income will not decline at that high of a level.  Management's current estimate of fee income associated with the acquisition is approximately $16.0 million per year, slightly less than the Company's initial expectation of $16.8 million per year. 

Net Interest Income and Net Interest Margin

Net interest income (taxable equivalent) for the second quarter of 2015 totaled $41.3 million, an increase of $5.6 million, or 15.8%, compared with the $35.3 million reported for the second quarter of 2014.  Impacts of the recently closed acquisitions in the second quarter were minimal at $1.4 million because of the timing of closing and due to 66% of the initial growth in earning assets being in lower yielding federal funds sold or short-term assets.  By the end of the second quarter, the Company had improved the incremental asset mix, and management is confident that the net interest income targets originally projected can be achieved given better than expected yields and quicker deployment of the funds acquired.

Excluding the impact of accretion, net interest income (taxable equivalent) was $38.6 million, an increase of 6.64% compared with the first quarter of 2015 and 16.88% compared with the second quarter of 2014.  Accretion income in the current quarter declined to $2.6 million, compared with $3.1 million in the first quarter of 2015, but was slightly higher as compared with the $2.5 million recorded in the second quarter of 2014.  Higher levels of non-interest income resulted mostly from growth in average loans outstanding of approximately $199.9 million when compared to the first quarter of 2015.  Average balances of covered loans continued to decline, falling by $16.3 million from the first quarter of 2015.

Yields on all loans (including purchased non-covered and covered loans and excluding accretion income) declined in the second quarter of 2015 to 4.86%, compared with 5.19% in the same quarter in 2014.  Higher yielding covered loans as a percentage of total loans has declined from 13.9% in the second quarter of 2014 to only 7.9% for the current quarter of 2015.  Additionally, some of the growth in the legacy portfolio has been in both municipal and adjustable mortgages that have a significantly better risk profile but lower yields than consolidated levels seen in the past.

Loan production in the second quarter of 2015 totaled $282.6 million, with weighted average yields of 4.47%, compared with $254.0 million and 4.55%, respectively, in the first quarter of 2015.  Investment securities yields during the second quarter of 2015 were 2.61%, compared with 2.89% in the same quarter in 2014.

Total interest expense for the second quarter of 2015 was $3.5 million, compared with $3.3 million in the same quarter of 2014.  Increases in total interest expense were driven primarily by increases in total deposits and other borrowings resulting from both acquisition activity and organic growth.  Deposit costs of funds were only slightly lower during the second quarter of 2015 at 0.24%, compared with 0.29% during the second quarter of 2014.  Yields on each deposit class were substantially unchanged over the past year except for MMDAs, which fell from 0.38% during the second quarter of 2014 to 0.31% in the second quarter of 2015.  Management does not expect deposit costs or overall funding costs to decrease materially in the coming quarters given tightening liquidity and increasingly stronger forecasts for asset growth.

Non-interest Income

Non-interest income in the second quarter of 2015 improved to $20.6 million, an increase of $4.8 million, or 30.4%, compared with the same quarter in 2014.  Continued growth and profitability in the Company's mortgage operations provided most of the improvement, with revenue from mortgage operations increasing to $9.7 million, an increase of 40% compared with the same quarter of 2014.  Total loan production increased to $285.6 million in the quarter, compared with $184.3 million in the second quarter of 2014, while spreads (gain on sale) were relatively unchanged at 3.67% in the current quarter compared with 3.56% in the same quarter of 2014. 

Service charges on deposit accounts increased by $1.3 million to $7.2 million during the quarter, an increase of 22.3% compared with the same quarter in 2014.  Because of the late-quarter close of the recent acquisitions, increases in service charges related to the Company's recent acquisitions totaled only $742,000 during the quarter.  Going forward, management estimates approximately $4.0 million of additional fee income on the two acquisitions.

Revenues from the Company's SBA division totaled $2.6 million, compared with $1.9 million in the second quarter of 2014.  Due to the excess liquidity obtained in the acquisitions as well as the preferential duration and yields, management decided to retain a portion of its SBA production, which resulted in unrecognized gains on guaranteed portions of new production of $675,000 during the current quarter.  Total principal of closed loans in the second quarter of 2015 totaled $9.5 million, and the Company projects an additional $22.0 million of production for the third quarter of 2015.

Non-interest Expense

Excluding merger- and credit-related costs, non-interest expenses totaled $39.9 million in the second quarter of 2015, compared with $37.7 million in the first quarter of 2015 and $31.6 million in the second quarter of 2014.  Substantially all of the increase in operating expenses in the second quarter of 2015 over the first quarter of the year relates to increases associated with higher revenues in the mortgage and SBA divisions, which totaled $1.9 million.  Against the second quarter of 2014 and on the same basis, operating expenses have increased $8.3 million, which includes $2.1 million of higher costs in the mortgage and SBA divisions, $2.4 million associated with the additional branches acquired in the Company's acquisition of The Coastal Bank on June 30, 2014 and approximately $1.4 million related to increased costs in information technology and customer support centers in anticipation of the acquisitions completed in the second quarter.

Impacts to overall operating expenses in the second quarter of 2015 associated with the recently closed acquisitions were limited to only $1.1 million.  Five overlapping branches have been identified for consolidation, which is expected to save approximately $2.8 million per year.  An additional $2.9 million of annual savings is anticipated to be in place shortly after the conversion of M&S late in the third quarter of 2015.

Salaries and benefits increased to $22.5 million in the current quarter of 2015, compared with $20.6 million in the first quarter of 2015 and $16.9 million in the same quarter in 2014.  Increases in compensation costs against the first quarter reflect an increase of $889,000 in higher levels of commissions for mortgage and SBA personnel and the impact of staffing additions from the acquisition of The Coastal Bank in June 2014 and the acquisitions completed in 2015.

Non-provision credit resolution-related costs increased from $2.8 million in the second quarter of 2014 to $11.2 million in the second quarter of 2015.  During the quarter, the Company recorded a non-recurring, after-tax charge of $7.3 million to aggressively mark certain non-performing assets in a manner that would facilitate quick disposition.  The Company believes that normal credit costs for the Company are closer to $2.5 million going forward and that levels of non-performing and substandard assets should decline materially before year end. 

Occupancy and equipment costs increased from $4.1 million in the second quarter of 2014 to $4.8 million in the second quarter of 2015, due to the increased number of branches that are now operated by the Company.  Data processing and telecommunications expenses increased from $3.9 million in the second quarter of 2014 to $4.2 million in the second quarter of 2015.

Balance Sheet Trends

Total assets at June 30, 2015 were $5.21 billion, compared with $4.04 billion reported at December 31, 2014.  The growth in total assets was driven by the acquisitions of M&S and 18 additional retail branches during the second quarter of 2015. 

Loans, including loans held for sale, totaled $3.57 billion at June 30, 2015, compared with $2.90 billion at December 31, 2014.  During the second quarter, organic growth in non-covered, non-purchased loans amounted to $172.2 million, or 34.5% on an annualized basis.  Purchased, non-covered loans increased $434.2 million during the quarter, to $1.08 billion from $643.1 million at March 31, 2015.  In addition to the loans acquired through the M&S and branch acquisitions, the Company purchased approximately $269.0 million of whole-loan, adjustable rate mortgage pools to deploy the excess cash received in the acquisitions.

Investment securities at the end of the quarter amounted to $871.5 million, or 19.8% of earning assets, compared with $552.1 million, or 15.5% of earning assets, at December 31, 2014. 

At June 30, 2015, total deposits amounted to $4.51 billion, or 97.5% of total funding, compared with $3.43 billion and 95.8%, respectively, at December 31, 2014.  Non-interest bearing deposits at the end of the current quarter were $1.28 billion, or 28.4% of total deposits, compared with $839.4 million, or 24.5%, at December 31, 2014.

Stockholders' equity at June 30, 2015 totaled $486.8 million, compared with $366.0 million reported at December 31, 2014.  The increase in stockholders' equity was the result of the issuance of $114.9 million of common shares in the first quarter of 2015 and earnings of $11.1 million during the first six months of 2015.  Tangible book value increased during the first six months of 2015, from $10.99 per share at December 31, 2014 to $11.81 per share at June 30, 2015.  Tangible common equity as a percentage of tangible assets increased to 7.46% at the end of the second quarter of 2015, compared with 7.42% at the end of 2014. 

Conference Call

The Company will host a teleconference at 10:00 a.m. EDT today (July 24, 2015) to discuss the Company's results and answer appropriate questions. The conference call can be accessed by dialing 1-877-504-1190 or 1-412-902-6630 for international participants and 1-855-669-9657 for Canada. The conference ID name is Ameris Bancorp.  A replay of the call will be available one hour after the end of the conference call until August 7, 2015. To listen to the replay, dial 1-877-344-7529 or 1-412-317-0088 for international participants and 1-855-669-9658 for Canada. The conference replay access code is 10069080. The conference call replay and the financial information discussed will also be available on the Investor Relations page of the Ameris Bank website at www.amerisbank.com. 

Ameris Bancorp is headquartered in Moultrie, Georgia, and at the end of the most recent quarter had 103 locations in Georgia, Alabama, northern Florida and South Carolina.  

This news release contains certain performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management of Ameris Bancorp (the "Company") uses these non-GAAP measures in its analysis of the Company's performance. These measures are useful when evaluating the underlying performance and efficiency of the Company's operations and balance sheet. The Company's management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company's management believes that investors may use these non-GAAP financial measures to evaluate the Company's financial performance without the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

This news release contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "estimate", "expect", "intend", "anticipate" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates which they were made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements and are referred to the Company's periodic filings with the Securities and Exchange Commission for a summary of certain factors that may impact the Company's results of operations and financial condition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Ameris Bancorp