Edgar Filing: Ameris Bancorp

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

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

Commission File Number: 001-13901

LOGO

AMERIS BANCORP

(Exact name of registrant as specified in its charter)


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

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

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

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

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

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

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

There were 23,814,144 shares of Common Stock outstanding as of April 30, 2012.

AMERIS BANCORP

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		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets at March 31, 2012, December 31, 2011 and March 31, 2011		3

	Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 31, 2012 and 2011		4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2012 and 2011		5

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		47

Item 4.	Controls and Procedures.		47

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.		48

Item 1A.	Risk Factors.		48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		48

Item 3.	Defaults Upon Senior Securities.		48

Item 4.	Mine Safety Disclosures.		48

Item 5.	Other Information.		48

Item 6.	Exhibits.		48

Signatures			48

Item 1. Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	March 31, 2012			December 31, 2011			March 31, 2011
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	64,963		$	65,528		$	88,386
Federal funds sold and interest bearing accounts		194,172			229,042			264,508
Investment securities available for sale, at fair value		371,791			339,967			305,620
Other investments		10,967			9,878			12,436
Mortgage loans held for sale		14,863			11,563			—

Loans		1,323,844			1,332,086			1,345,981
Covered loans		653,377			571,489			526,012
Less: allowance for loan losses		28,689			35,156			35,443

Loans, net		1,948,532			1,868,419			1,836,550


Other real estate owned		40,035			50,301			62,258
Covered other real estate owned		85,803			78,617			59,757

Total other real estate owned		125,838			128,918			122,015

Premises and equipment, net		72,755			73,124			66,359
FDIC indemnification asset		220,016			242,394			167,176
Intangible assets		4,179			3,250			3,973
Goodwill		956			956			956
Other assets		14,202			21,268			50,444

Total assets	$	3,043,234		$	2,994,307		$	2,918,423


Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	444,707		$	395,347		$	316,060
Interest-bearing		2,220,653			2,196,219			2,256,629

Total deposits		2,665,360			2,591,566			2,572,689
Securities sold under agreements to repurchase		28,790			37,665			20,257
Other borrowings		3,810			20,000			—
Other liabilities		5,308			9,037			9,351
Subordinated deferrable interest debentures		42,269			42,269			42,269

Total liabilities		2,745,537			2,700,537			2,644,566


Commitments and contingencies

Stockholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 52,000 shares issued and outstanding		50,884			50,727			50,269
Common stock, par value $1; 30,000,000 shares authorized; 25,150,318, 25,087,468 and 25,102,218 issued		25,150			25,087			25,102
Capital surplus		166,579			166,639			165,995
Retained earnings		59,402			54,852			37,580
Accumulated other comprehensive income		6,513			7,296			5,742
Treasury stock, at cost, 1,336,174 shares		(10,831	)		(10,831	)		(10,831	)

Total stockholders’ equity		297,697			293,770			273,857

Total liabilities and stockholders’ equity	$	3,043,234		$	2,994,307		$	2,918,423

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2012			2011
Interest income
Interest and fees on loans	$	29,482		$	28,971
Interest on taxable securities		2,309			2,658
Interest on nontaxable securities		365			320
Interest on deposits in other banks		120			175
Interest on federal funds sold		6			13

Total interest income		32,282			32,137


Interest expense
Interest on deposits		4,084			7,375
Interest on other borrowings		471			555

Total interest expense		4,555			7,930


Net interest income		27,727			24,207
Provision for loan losses		12,882			7,043

Net interest income after provision for loan losses		14,845			17,164


Noninterest income
Service charges on deposit accounts		4,386			4,267
Mortgage origination fees		1,475			450
Other service charges, commissions and fees		391			239
Gain on acquisition		20,037			—
Gain on sale of securities		—			224
Other		975			1,013

Total noninterest income		27,264			6,193


Noninterest expense
Salaries and employee benefits		11,446			9,843
Occupancy and equipment expense		3,335			2,730
Advertising and marketing expense		349			163
Amortization of intangible assets		220			263
Data processing and communications costs		1,925			2,396
Other operating expenses		16,971			5,760

Total noninterest expense		34,246			21,155


Income before income tax expense		7,863			2,202
Applicable income tax expense		2,498			824

Net income	$	5,365		$	1,378

Preferred stock dividends		815			798

Net income available to common stockholders	$	4,550		$	580


Other comprehensive loss
Unrealized holding loss arising during period on investment securities available for sale, net of tax		(689	)		(262	)
Reclassification adjustment for gains included in net income, net of tax		—			(146	)
Unrealized loss on cash flow hedges arising during period, net of tax		(94	)		(54	)

Other comprehensive loss	$	(783	)	$	(462	)

Comprehensive income	$	3,767		$	118


Basic and Diluted earnings per share	$	0.19		$	0.02


Weighted average common shares outstanding
Basic		23,762			23,440
Diluted		23,916			23,474

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended					Three Months Ended
	March 31, 2012					March 31, 2011
	Shares		Amount			Shares			Amount
PREFERRED STOCK
Balance at beginning of period		52,000	$	50,727			52,000		$	50,121
Accretion of fair value of warrant		—		157			—			148


*Balance at end of period*		52,000	$	50,884			52,000		$	50,269

COMMON STOCK
Balance at beginning of period		25,087,468	$	25,087			24,982,911		$	24,983
Issuance of restricted shares		62,450		62			125,075			125
Cancellation of restricted shares		—		—			(7,000	)		(7	)
Proceeds from exercise of stock options		400		1			1,232			1


*Balance at end of period*		25,150,318	$	25,150			25,102,218		$	25,102

CAPITAL SURPLUS
Balance at beginning of period			$	166,639					$	165,930
Stock-based compensation				—						174
Proceeds from exercise of stock options				2						9
Issuance of restricted shares				(62	)					(125	)
Cancellation of restricted shares				—						7


*Balance at end of period*			$	166,579					$	165,995

RETAINED EARNINGS
Balance at beginning of period			$	54,852					$	37,000
Net income				5,365						1,378
Dividends on preferred shares				(657	)					(650	)
Accretion of fair value warrant				(158	)					(148	)


*Balance at end of period*			$	59,402					$	37,580

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities and derivatives:
Balance at beginning of period			$	7,296					$	6,204
Accumulated other comprehensive income				(783	)					(462	)


*Balance at end of period*			$	6,513					$	5,742

TREASURY STOCK
Balance at beginning of period			$	10,831					$	10,831
Purchase of treasury shares				—						—


*Balance at end of period*			$	10,831					$	10,831


*TOTAL STOCKHOLDERS’ EQUITY*			$	297,697					$	273,857

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities:
Net income	$	5,365		$	1,378
Adjustments reconciling net income to net cash provided by operating activities:
Depreciation		1,143			1,112
Net gains on sale or disposal of premises and equipment		(4	)		(189	)
Gain on acquisition		(20,037	)		—
Net losses or write-downs on sale of other real estate owned		7,252			33
Provision for loan losses		12,882			7,043
Amortization of intangible assets		220			263
Net change in mortgage loans held for sale		(3,300	)		—
Net gains on securities available for sale		—			(224	)
Other prepaids, deferrals and accruals, net		4,201			(162	)

Net cash provided by operating activities		7,722			9,254


Cash flows from investing activities:
Net decrease (increase) in federal funds sold and interest bearing deposits		34,870			(3,246	)
Proceeds from maturities of securities available for sale		21,912			12,922
Purchase of securities available for sale		(15,637	)		(19,869	)
Proceeds from sales of securities available for sale		760			23,503
Net change in loans		17,496			37,682
Proceeds from sales of other real estate owned		16,296			9,306
Proceeds from sales of premises and equipment		305			344
Decrease in FDIC indemnification asset		75,032			502
Net cash proceeds received from FDIC-assisted acquisitions		65,050			—
Purchases of premises and equipment		(1,075	)		(1,539	)

Net cash provided by investing activities		215,009			59,605


Cash Flows From Financing Activities:
Net (decrease) increase in deposits		(187,242	)		37,263
Net decrease in securities sold under agreements to repurchase		(8,875	)		(47,927	)
Repayment of other borrowings		(26,524	)		(43,495	)
Dividends paid - preferred stock		(657	)		(650	)
Proceeds from exercise of stock options		2			10

Net cash used in financing activities		(223,296	)		(54,799	)


Net (decrease) increase in cash and due from banks		(565	)		14,060

Cash and due from banks at beginning of period		65,528			74,326


Cash and due from banks at end of period	$	64,963		$	88,386

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid/(received) during the period for:
Interest	$	5,098		$	8,494
Income taxes	$	—		$	—

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly-owned banking subsidiary, Ameris Bank (the “Bank”). At March 31, 2012 the Bank operated 67 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. Ameris’ Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within Ameris’ established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Newly Adopted Accounting Pronouncements

ASU 2011-04 - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 generally represents clarifications of Topic 820, but also includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. ASU 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011 for public companies. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-05 - Amendments to Topic 220, Comprehensive Income (“ASU 2011-05”). ASU 2011-05 grants an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. For public entities, ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and is to be adopted retrospectively. It did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350) Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 grants an entity the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This conclusion can be used as a basis for determining whether it is necessary to perform the two-step goodwill impairment test required in Topic 350. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. It is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The accounting standard for disclosures about the fair value of financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The fair value hierarchy describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments and other accounts recorded based on their fair value:

Cash, Due From Banks, Interest-Bearing Deposits in Banks and Federal Funds Sold: The carrying amount of cash, due from banks and interest-bearing deposits in banks and federal funds sold approximates fair value.

Investment Securities Available for Sale: The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and municipal bonds. The level 2 fair value pricing is provided by an independent third-party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.

Other Investments: Federal Home Loan Bank (“FHLB”) stock is included in other investment securities at its original cost basis, as cost approximates fair value and there is no ready market for such investments.

Mortgage Loans Held-for-Sale: Mortgage loans held-for-sale are carried at cost, which is a reasonable estimate of fair value.

Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is based on estimated discounted cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with accounting standards and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 2 assets due to the extensive use of market appraisals. To the extent that market appraisals or other methods do not produce reliable determinations of fair value, these assets are deemed to be Level 3.

Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.

Covered Assets: Covered assets include loans and other real estate owned on which the majority of losses would be covered by loss-sharing agreements with the Federal Deposit Insurance Corporation (the “FDIC”). Management initially valued these assets at fair value using mostly unobservable inputs and, as such, has classified these assets as Level 3.

Intangible Assets and Goodwill: Intangible assets consist of core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of three to ten years. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill and other intangible assets deemed to have an indefinite useful life are not amortized but instead are subject to an annual review for impairment.

FDIC Indemnification Asset: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared-loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared-loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.

Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently offered for certificates with similar maturities.

Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar type borrowing arrangements.

Subordinated Deferrable Interest Debentures: The carrying amount of the Company’s variable rate trust preferred securities approximates fair value.

Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.

Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of March 31, 2012, December 31, 2011 and March 31, 2011, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial instruments, were as follows:


			Fair Value Measurements at March 31, 2012 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,948,532	$	—	$	1,981,385	$	—	$	1,981,385

Financial liabilities:
Deposits		2,665,360		—		2,667,731		—		2,667,731
Other borrowings		3,810		3,854		—		—		3,854


	December 31, 2011				March 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,868,419	$	1,877,320	$	1,836,550	$	1,845,963

Financial liabilities:
Deposits		2,591,566		2,593,113		2,572,689		2,576,253
Other borrowings		20,000		20,936		—		—

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):


	Fair Value Measurements on a Recurring Basis As of March 31, 2012
	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	28,848		$	—	$	28,848		$	—
State, county and municipal securities		81,997			—		81,997			—
Corporate debt securities		11,385			—		9,385			2,000
Mortgage-backed securities		249,561			2,292		247,269			—
Derivative financial instruments		(2,089	)		—		(2,089	)		—

Total recurring assets at fair value	$	369,702		$	2,292	$	365,410		$	2,000


	Fair Value Measurements on a Recurring Basis As of December 31, 2011
	Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
U.S. government agencies	$	14,937		$	—	$	14,937		$	—
State, county and municipal securities		79,133			2,966		76,167			—
Corporate debt securities		11,401			—		9,401			2,000
Mortgage-backed securities		234,496			3,302		231,194			—
Derivative financial instruments		(2,049	)		—		(2,049	)		—

Total recurring assets at fair value	$	337,918		$	6,268	$	329,650		$	2,000


	Fair Value Measurements on a Recurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. government agencies	$	33,545	$	—	$	33,545	$	—
State, county and municipal securities		56,898		—		56,898		—
Corporate debt securities		9,749		—		7,749		2,000
Mortgage-backed securities		205,428		12,764		192,664		—
Derivative financial instruments		598		—		598		—

Total recurring assets at fair value	$	306,218	$	12,764	$	291,454	$	2,000

The following table is a presentation of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of March 31, 2012, December 31, 2011 and March 31, 2011 (dollars in thousands):


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2012
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	69,606	$	—	$	69,606	$	—
Other real estate owned		40,035		—		—		40,035
Covered loans		653,377		—		—		653,377
Covered other real estate owned		85,803		—		—		85,803

Total nonrecurring assets at fair value	$	848,821	$	—	$	69,606	$	779,215


	Fair Value Measurements on a Nonrecurring Basis As of December 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	70,296	$	—	$	70,296	$	—
Other real estate owned		50,301		—		—		50,301
Covered loans		571,489		—		—		571,489
Covered other real estate owned		78,617		—		—		78,617

Total nonrecurring assets at fair value	$	770,703	$	—	$	70,296	$	700,407


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2011
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans carried at fair value	$	68,391	$	—	$	68,391	$	—
Other real estate owned		62,258		—		—		62,258
Covered loans		524,105		—		—		524,105
Covered other real estate owned		59,757		—		—		59,757

Total nonrecurring assets at fair value	$	714,511	$	—	$	68,391	$	646,120

Below is the Company’s reconciliation of Level 3 assets as of March 31, 2012.


	Investment Securities Available for Sale		Other Real Estate Owned			Covered Loans			Covered Other Real Estate Owned
Beginning balance January 1, 2012	$	2,000	$	50,301		$	571,489		$	78,617
Total gains/(losses) included in net income		—		(6,538	)		—			(714	)
Purchases, sales, issuances, and settlements, net		—		(8,799	)		91,108			(1,320	)
Transfers in or out of Level 3		—		5,071			(9,220	)		9,220

Ending balance March 31, 2012	$	2,000	$	40,035		$	653,377		$	85,803

NOTE 2 – INVESTMENT SECURITIES

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

The amortized cost and estimated fair value of investment securities available for sale at March 31, 2012, December 31, 2011 and March 31, 2011 are presented below:


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

March 31, 2012:
U. S. government agencies	$	28,634	$	258	$	(44	)	$	28,848
State, county and municipal securities		78,440		3,723		(166	)		81,997
Corporate debt securities		11,639		217		(471	)		11,385
Mortgage-backed securities		244,232		5,573		(244	)		249,561

Total debt securities	$	362,945	$	9,771	$	(925	)	$	371,791


December 31, 2011:
U. S. government agencies	$	14,670	$	267	$	—		$	14,937
State, county and municipal securities		75,665		3,558		(90	)		79,133
Corporate debt securities		11,640		167		(406	)		11,401
Mortgage-backed securities		228,085		6,559		(148	)		234,496

Total debt securities	$	330,060	$	10,551	$	(644	)	$	339,967


March 31, 2011:
U. S. government agencies	$	33,137	$	455	$	(47	)	$	33,545
State, county and municipal securities		55,971		1,310		(383	)		56,898
Corporate debt securities		12,150		168		(2,569	)		9,749
Mortgage-backed securities		202,204		5,143		(1,919	)		205,428

Total debt securities	$	303,462	$	7,076	$	(4,918	)	$	305,620

The amortized cost and fair value of available-for-sale securities at March 31, 2012 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.


	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	16,167	$	16,220
Due from one year to five years		18,833		19,527
Due from five to ten years		43,629		46,232
Due after ten years		40,084		40,251
Mortgage-backed securities		244,232		249,561

	$	362,945	$	371,791

Securities with a carrying value of approximately $208.1 million serve as collateral to secure public deposits and other purposes required or permitted by law at March 31, 2012.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at March 31, 2012, December 31, 2011 and March 31, 2011.


	Less Than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
March 31, 2012:
U. S. government agencies	$	8,960	$	(44	)	$	—	$	—		$	8,960	$	(44	)
State, county and municipal securities		8,960		(166	)		—		—			8,960		(166	)
Corporate debt securities		100		—			6,611		(471	)		6,711		(471	)
Mortgage-backed securities		37,860		(234	)		2,292		(10	)		40,152		(244	)

Total debt securities	$	55,880	$	(444	)	$	8,903	$	(481	)	$	64,783	$	(925	)


December 31, 2011:
U. S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities		10,134		(90	)		—		—			10,134		(90	)
Corporate debt securities		100		—			6,681		(406	)		6,781		(406	)
Mortgage-backed securities		20,929		(148	)		—		—			20,929		(148	)

Total debt securities	$	31,163	$	(238	)	$	6,681	$	(406	)	$	37,844	$	(644	)


March 31, 2011:
U. S. government agencies	$	11,037	$	(47	)	$	—	$	—		$	11,037	$	(47	)
State, county and municipal securities		12,171		(383	)		—		—			12,171		(383	)
Corporate debt securities		413		(26	)		5,067		(2,543	)		5,480		(2,569	)
Mortgage-backed securities		75,721		(1,919	)		—		—			75,721		(1,919	)

Total debt securities	$	99,342	$	(2,375	)	$	5,067	$	(2,543	)	$	104,409	$	(4,918	)

NOTE 3 – LOANS

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

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

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

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

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


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	149,320	$	142,960	$	142,826
Real estate – construction and development		122,331		130,270		152,863
Real estate – commercial and farmland		658,054		672,765		672,212
Real estate – residential		328,053		330,727		336,755
Consumer installment		42,085		37,296		33,698
Other		24,001		18,068		7,627

	$	1,323,844	$	1,332,086	$	1,345,981

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $653.4 million, $571.5 million and $526.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively, are not included in the above schedule.

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


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	43,157	$	41,867	$	45,954
Real estate – construction and development		93,430		77,077		89,356
Real estate – commercial and farmland		350,244		321,257		242,153
Real estate – residential		162,768		127,644		140,239
Consumer installment		3,778		3,644		8,310

	$	653,377	$	571,489	$	526,012

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

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


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	4,732	$	3,987	$	5,966
Real estate – construction and development		10,647		15,020		17,893
Real estate – commercial and farmland		21,539		35,385		28,313
Real estate – residential		14,065		15,498		15,557
Consumer installment		1,275		933		662

	$	52,258	$	70,823	$	68,391

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


(Dollars in Thousands)	March 31, 2012		December 31, 2011		March 31, 2011
Commercial, financial and agricultural	$	14,185	$	11,952	$	9,149
Real estate – construction and development		35,170		30,977		28,364
Real estate – commercial and farmland		79,620		75,458		44,110
Real estate – residential		40,609		41,139		34,701
Consumer installment		637		473		1,488

	$	170,221	$	159,999	$	117,812

The following table presents an analysis of non-covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	1,477	$	291	$	4,559	$	6,327	$	142,993	$	149,320	$	—
Real estate – construction & development		2,356		481		9,531		12,368		109,963		122,331		—
Real estate – commercial & farmland		9,991		2,412		19,646		32,049		626,005		658,054		—
Real estate – residential		3,905		6,175		13,298		23,378		304,675		328,053		—
Consumer installment loans		856		497		1,070		2,423		39,662		42,085		—
Other		—		—		—		—		24,001		24,001		—

Total	$	18,585	$	9,856	$	48,104	$	76,545	$	1,247,299	$	1,323,844	$	—


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2011:
Commercial, financial & agricultural	$	1,103	$	705	$	3,975	$	5,783	$	137,177	$	142,960	$	—
Real estate – construction & development		2,395		1,507		13,608		17,510		112,760		130,270		—
Real estate – commercial & farmland		6,686		7,071		32,953		46,710		626,055		672,765		—
Real estate – residential		5,229		4,995		12,874		23,098		307,629		330,727		—
Consumer installment loans		963		305		725		1,993		35,303		37,296		—
Other		—		—		—		—		18,068		18,068		—

Total	$	16,376	$	14,583	$	64,135	$	95,094	$	1,236,992	$	1,332,086	$	—


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	848	$	695	$	5,923	$	7,466	$	135,360	$	142,826	$	—
Real estate – construction & development		2,324		1,864		16,011		20,199		132,664		152,863		—
Real estate – commercial & farmland		7,127		7,315		17,883		32,325		639,887		672,212		—
Real estate – residential		4,314		2,732		13,480		20,526		316,229		336,755		—
Consumer installment loans		409		177		444		1,030		32,668		33,698		—
Other		—		—		—		—		7,627		7,627		—

Total	$	15,022	$	12,783	$	53,741	$	81,546	$	1,264,435	$	1,345,981	$	—

The following table presents an analysis of covered past due loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	682	$	430	$	14,229	$	15,341	$	27,816	$	43,157	$	549
Real estate – construction & development		2,704		778		32,302		35,784		57,646		93,430		909
Real estate – commercial & farmland		12,905		6,994		68,282		88,181		262,063		350,244		2,583
Real estate – residential		5,859		3,514		34,870		44,243		118,525		162,768		3
Consumer installment loans		65		68		685		818		2,960		3,778		241

Total	$	22,215	$	11,784	$	150,368	$	184,367	$	469,010	$	653,377	$	4,285


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2011:
Commercial, financial & agricultural	$	968	$	4,297	$	11,253	$	16,518	$	25,349	$	41,867	$	—
Real estate – construction & development		2,444		1,318		27,867		31,629		45,448		77,077		—
Real estate – commercial & farmland		18,282		8,544		64,091		90,917		230,340		321,257		165
Real estate – residential		3,485		1,493		35,950		40,928		86,716		127,644		290
Consumer installment loans		127		270		440		837		2,807		3,644		—

Total	$	25,306	$	15,922	$	139,601	$	180,829	$	390,660	$	571,489	$	455


	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	963	$	3,511	$	8,223	$	12,697	$	33,257	$	45,954	$	—
Real estate – construction & development		1,870		3,233		27,717		32,820		56,536		89,356		532
Real estate – commercial & farmland		9,144		11,607		38,496		59,247		182,906		242,153		402
Real estate – residential		6,669		5,268		34,423		46,360		93,879		140,239		3,006
Consumer installment loans		118		99		1,394		1,611		6,699		8,310		—

Total	$	18,764	$	23,718	$	110,253	$	152,735	$	373,277	$	526,012	$	3,940

Impaired Loans

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

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


	As of and For the Period Ended
	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in Thousands)
Nonaccrual loans	$	52,258	$	70,823	$	68,391
Troubled debt restructurings not included above		26,848		17,951		25,832

Total impaired loans	$	79,106	$	88,774	$	94,223


Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	79,106	$	88,774	$	94,223

Allowance related to impaired loans	$	9,500	$	18,478	$	16,821

Average investment in impaired loans	$	83,940	$	88,320	$	88,761

Interest income recognized on impaired loans	$	57	$	637	$	75

Foregone interest income on impaired loans	$	187	$	613	$	389

The following table presents an analysis of information pertaining to non-covered impaired loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	7,599	$	—	$	4,732	$	4,732	$	932	$	4,921
Real estate – construction & development		20,593		—		11,952		11,952		1,993		13,812
Real estate – commercial & farmland		45,098		—		39,304		39,304		3,615		42,155
Real estate – residential		24,845		—		21,843		21,843		2,928		21,948
Consumer installment loans		1,391		—		1,275		1,275		32		1,104

Total	$	99,526	$	—	$	79,106	$	79,106	$	9,500	$	83,940


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	9,592	$	—	$	5,110	$	5,110	$	1,366	$	5,700
Real estate – construction & development		21,893		—		15,672		15,672		4,053		18,667
Real estate – commercial & farmland		48,688		—		45,006		45,006		8,331		42,192
Real estate – residential		25,309		—		22,053		22,053		4,499		21,081
Consumer installment loans		1,056		—		933		933		229		680

Total	$	106,538	$	—	$	88,774	$	88,774	$	18,478	$	88,320


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	9,419	$	—	$	6,397	$	6,397	$	2,425	$	5,872
Real estate – construction & development		33,590		—		20,801		20,801		4,254		20,052
Real estate – commercial & farmland		51,874		—		45,731		45,731		5,584		44,281
Real estate – residential		23,440		—		20,632		20,632		4,405		18,026
Consumer installment loans		890		—		662		662		153		530

Total	$	119,213	$	—	$	94,223	$	94,223	$	16,821	$	88,761

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


	As of and For the Period Ended
	March 31, 2012		December 31, 2011		March 31, 2011
	(Dollars in Thousands)
Nonaccrual loans	$	170,221	$	159,999	$	117,812
Troubled debt restructurings not included above		18,220		19,884		8,859

Total impaired loans	$	188,441	$	179,883	$	126,671


Impaired loans not requiring a related allowance	$	188,441	$	179,883	$	126,671

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	184,162	$	138,950	$	107,497

Interest income recognized on impaired loans	$	179	$	526	$	286

Foregone interest income on impaired loans	$	441	$	202	$	32

The following table presents an analysis of information pertaining to impaired covered loans as of March 31, 2012, December 31, 2011 and March 31, 2011.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2012:
Commercial, financial & agricultural	$	24,085	$	14,260	$	—	$	14,260	$	—	$	13,144
Real estate – construction & development		59,102		37,831		—		37,831		—		36,097
Real estate – commercial & farmland		128,389		90,847		—		90,847		—		87,793
Real estate – residential		65,971		44,866		—		44,866		—		46,573
Consumer installment loans		786		637		—		637		—		555

Total	$	278,333	$	188,441	$	—	$	188,441	$	—	$	184,162


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2011:
Commercial, financial & agricultural	$	21,352	$	12,027	$	—	$	12,027	$	—	$	10,210
Real estate – construction & development		47,005		34,363		—		34,363		—		30,610
Real estate – commercial & farmland		106,953		84,740		—		84,740		—		56,607
Real estate – residential		68,411		48,280		—		48,280		—		40,675
Consumer installment loans		623		473		—		473		—		848

Total	$	244,344	$	179,883	$	—	$	179,883	$	—	$	138,950


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of March 31, 2011:
Commercial, financial & agricultural	$	17,627	$	9,207	$	—	$	9,207	$	—	$	7,482
Real estate – construction & development		74,222		28,365		—		28,365		—		27,088
Real estate – commercial & farmland		77,769		45,760		—		45,760		—		37,639
Real estate – residential		67,307		41,851		—		41,851		—		33,983
Consumer installment loans		1,619		1,488		—		1,488		—		1,305

Total	$	238,544	$	126,671	$	—	$	126,671	$	—	$	107,497

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Following is a description of the general characteristics of the grades:

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

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

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

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

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

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

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	18,767	$	19	$	211	$	415	$	7,042	$	—	$	26,454
15		14,063		5,402		155,568		80,623		1,198		—		256,854
20		63,200		33,805		269,746		85,022		19,478		24,001		495,252
23		265		8,458		9,188		11,719		1		—		29,631
25		44,035		58,943		164,642		107,530		11,983		—		387,133
30		3,148		1,955		20,551		16,135		540		—		42,329
40		5,716		13,459		38,148		26,515		1,828		—		85,666
50		123		290		—		94		15		—		522
60		3		—		—		—		—		—		3

Total	$	149,320	$	122,331	$	658,054	$	328,053	$	42,085	$	24,001	$	1,323,844

The following table presents the non-covered loan portfolio by risk grade as of December 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	17,213	$	20	$	235	$	252	$	6,210	$	—	$	23,930
15		15,379		5,391		151,068		88,586		1,065		—		261,489
20		60,631		32,654		272,241		80,989		20,781		18,068		485,364
23		32		7,994		10,679		10,997		28		—		29,730
25		42,815		62,029		163,554		110,786		7,181		—		386,365
30		2,509		2,027		21,490		15,001		557		—		41,584
40		4,258		19,864		53,498		23,867		1,460		—		102,947
50		123		291		—		249		14		—		677
60		—		—		—		—		—		—		—

Total	$	142,960	$	130,270	$	672,765	$	330,727	$	37,296	$	18,068	$	1,332,086

The following table presents the non-covered loan portfolio by risk grade as of March 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	14,048	$	220	$	1,104	$	111	$	5,451	$	—	$	20,934
15		11,087		2,395		137,897		36,377		907		—		188,663
20		50,300		38,200		267,341		115,189		18,573		7,627		497,230
23		2,244		7,775		8,533		8,167		30		—		26,749
25		55,843		69,541		165,089		137,846		7,460		—		435,779
30		1,913		7,568		41,089		14,129		573		—		65,272
40		7,386		26,889		51,158		24,936		672		—		111,041
50		5		275		—		—		6		—		286
60		—		—		1		—		26		—		27

Total	$	142,826	$	152,863	$	672,212	$	336,755	$	33,698	$	7,627	$	1,345,981

The following table presents the covered loan portfolio by risk grade as of March 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	216	$	9	$	—	$	1,036	$	458	$	—	$	1,719
15		26		51		1,734		579		12		—		2,402
20		4,592		5,541		24,784		17,716		622		—		53,255
23		11		1,534		3,763		1,686		—		—		6,994
25		17,075		31,707		157,031		75,809		1,550		—		283,172
30		2,400		10,628		49,518		12,044		102		—		74,692
40		18,837		43,960		113,414		53,898		1,034		—		231,143
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	43,157	$	93,430	$	350,244	$	162,768	$	3,778	$	—	$	653,377

The following table presents the covered loan portfolio by risk grade as of December 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	442	$	—	$	—	$	1,329	$	768	$	—	$	2,539
15		29		52		1,755		586		14		—		2,436
20		4,807		5,751		26,211		19,216		687		—		56,672
23		—		1,177		3,262		1,038		—		—		5,477
25		15,531		21,142		137,981		43,606		1,308		—		219,568
30		5,882		10,654		49,642		12,374		172		—		78,724
40		15,176		38,273		102,406		49,495		695		—		206,045
50		—		28		—		—		—		—		28
60		—		—		—		—		—		—		—

Total	$	41,867	$	77,077	$	321,257	$	127,644	$	3,644	$	—	$	571,489

The following table presents the covered loan portfolio by risk grade as of March 31, 2011.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	965	$	—	$	—	$	—	$	1,139	$	—	$	2,104
15		66		54		1,409		372		22		—		1,923
20		10,601		6,832		18,539		21,190		1,357		—		58,519
23		—		—		—		—		—		—		—
25		14,443		21,023		93,423		53,379		3,614		—		185,882
30		5,646		15,590		41,345		12,798		331		—		75,710
40		13,979		45,857		87,437		52,460		1,847		—		201,580
50		209		—		—		40		—		—		249
60		45		—		—		—		—		—		45

Total	$	45,954	$	89,356	$	242,153	$	140,239	$	8,310	$	—	$	526,012

Troubled Debt Restructurings

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

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

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

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first three months of 2012 totaling $11.4 million and loans in 2011 totaling $37.2 million under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

The following table presents the amount of troubled debt restructurings by loan class, classified separately as accrual and non-accrual at March 31, 2012 and December 31, 2011.


As of March 31, 2012	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Real estate – construction & development		6	$	1,305		4	$	1,626
Real estate – commercial & farmland		18		17,765		2		2,176
Real estate – residential		22		7,778		3		1,065

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