Edgar Filing: Ameris Bancorp

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if smaller reporting company)

Smaller reporting company

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, 2013

¨	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 23,876,680 shares of Common Stock outstanding as of April 30, 2013.

Item 1.

Financial Statements

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


	March 31, 2013			December 31, 2012			March 31, 2012
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	50,487		$	80,256		$	64,963
Federal funds sold and interest bearing accounts		81,205			193,677			194,172
Investment securities available for sale, at fair value		324,029			346,909			371,791
Other investments		5,528			6,832			10,967
Mortgage loans held for sale		42,332			48,786			14,863

Loans		1,492,753			1,450,635			1,323,844
Covered loans		460,724			507,712			653,377
Less: allowance for loan losses		23,382			23,593			28,689

Loans, net		1,930,095			1,934,754			1,948,532


Other real estate owned		40,434			39,850			40,035
Covered other real estate owned		77,915			88,273			85,803

Total other real estate owned		118,349			128,123			125,838


Premises and equipment, net		72,340			75,983			72,755
FDIC loss-share receivable		160,979			159,724			220,016
Intangible assets		2,676			3,040			4,179
Goodwill		956			956			956
Cash value of bank owned life insurance		45,832			15,603			—
Other assets		26,843			24,409			14,202

Total assets	$	2,861,651		$	3,019,052		$	3,043,234

Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	490,961		$	510,751		$	444,707
Interest-bearing		1,999,012			2,113,912			2,220,653

Total deposits		2,489,973			2,624,663			2,665,360
Securities sold under agreements to repurchase		22,919			50,120			28,790
Other borrowings		—			—			3,810
Other liabilities		22,768			22,983			5,308
Subordinated deferrable interest debentures		42,269			42,269			42,269

Total liabilities		2,577,929			2,740,035			2,745,537

Commitments and contingencies

Stockholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 28,000, 28,000 and 52,000 shares issued and outstanding		27,753			27,662			50,884
Common stock, par value $1; 30,000,000 shares authorized; 25,238,635, 25,154,818 and 25,150,318 shares issued		25,239			25,155			25,150
Capital surplus		165,078			164,949			166,579
Retained earnings		70,554			65,710			59,402
Accumulated other comprehensive income		6,274			6,607			6,513
Treasury stock, at cost, 1,362,955, 1,355,050 and 1,336,174 shares		(11,176	)		(11,066	)		(10,831	)

Total stockholders’ equity		283,722			279,017			297,697

Total liabilities and stockholders’ equity	$	2,861,651		$	3,019,052		$	3,043,234

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,
	2013			2012
Interest income
Interest and fees on loans	$	28,716		$	29,482
Interest on taxable securities		1,697			2,309
Interest on nontaxable securities		375			365
Interest on deposits in other banks		85			120
Interest on federal funds sold		—			6

Total interest income		30,873			32,282


Interest expense
Interest on deposits		2,226			4,084
Interest on other borrowings		309			471

Total interest expense		2,535			4,555


Net interest income		28,338			27,727
Provision for loan losses		2,923			12,882

Net interest income after provision for loan losses		25,415			14,845


Noninterest income
Service charges on deposit accounts		4,837			4,386
Mortgage origination fees		4,464			1,475
Other service charges, commissions and fees		329			391
Gain on acquisition		—			20,037
Gain on sale of securities		172			—
Other		1,558			975

Total noninterest income		11,360			27,264

Noninterest expense
Salaries and employee benefits		13,806			11,446
Occupancy and equipment expense		2,931			3,335
Advertising and marketing expense		255			349
Amortization of intangible assets		364			220
Data processing and communications costs		2,570			1,925
Other operating expenses		8,958			16,971

Total noninterest expense		28,884			34,246


Income before income tax expense		7,891			7,863
Applicable income tax expense		2,606			2,498

Net income	$	5,285		$	5,365

Preferred stock dividends		441			815

Net income available to common stockholders	$	4,844		$	4,550


Other comprehensive loss
Unrealized holding loss arising during period on investment securities available for sale, net of tax		(429	)		(689	)
Reclassification adjustment for gains included in net income, net of tax		(112	)		—
Unrealized gain (loss) on cash flow hedges arising during period , net of tax		209			(94	)

Other comprehensive loss	$	(332	)	$	(783	)

Comprehensive income	$	4,512		$	3,767

Basic and Diluted earnings per share	$	0.20		$	0.19

Weighted average common shares outstanding
Basic		23,868			23,762
Diluted		24,246			23,916

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, 2013					March 31, 2012
	Shares		Amount			Shares		Amount
PREFERRED STOCK
Balance at beginning of period		28,000	$	27,662			52,000	$	50,727
Accretion of fair value of warrant		—		91			—		157

*Balance at end of period*		28,000	$	27,753			52,000	$	50,884

COMMON STOCK
Balance at beginning of period		25,154,818	$	25,155			25,087,468	$	25,087
Issuance of restricted shares		81,400		81			62,450		62
Proceeds from exercise of stock options		2,417		3			400		1

*Balance at end of period*		25,238,635	$	25,239			25,150,318	$	25,150

CAPITAL SURPLUS
Balance at beginning of period			$	164,949				$	166,639
Stock-based compensation				197					—
Proceeds from exercise of stock options				13					2
Issuance of restricted shares				(81	)				(62	)

*Balance at end of period*			$	165,078				$	166,579

RETAINED EARNINGS
Balance at beginning of period			$	65,710				$	54,852
Net income				5,284					5,365
Dividends on preferred shares				(349	)				(657	)
Accretion of fair value warrant				(91	)				(158	)

*Balance at end of period*			$	70,554				$	59,402

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities and derivatives:
Balance at beginning of period			$	6,607				$	7,296
Other comprehensive income during the period				(333	)				(783	)

*Balance at end of period*			$	6,274				$	6,513

TREASURY STOCK
Balance at beginning of period			$	11,066				$	10,831
Purchase of treasury shares				110					—

*Balance at end of period*			$	11,176				$	10,831

TOTAL STOCKHOLDERS’ EQUITY			$	283,722				$	297,697

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,
	2013			2012
Cash flows from operating activities:
Net income	$	5,285		$	5,365
Adjustments reconciling net income to net cash provided by operating activities:
Depreciation		1,246			1,143
Stock based compensation expense		197			—
Net (gains) losses on sale or disposal of premises and equipment		6			(4	)
Net gains on securities available for sale		(172	)		—
Gain on acquisition		—			(20,037	)
Net losses or write-downs on sale of other real estate owned		3,047			7,252
Provision for loan losses		2,923			12,882
Amortization of intangible assets		364			220
Net change in mortgage loans held for sale		6,454			(3,300	)
Other prepaids, deferrals and accruals, net		11,571			4,201

Net cash provided by operating activities		30,921			7,722

Cash flows from investing activities, net of effects of business combinations:
Net decrease (increase) in federal funds sold and interest bearing deposits		112,472			34,870
Proceeds from maturities of securities available for sale		20,746			21,912
Purchase of securities available for sale		(25,328	)		(15,637	)
Purchase of bank owned life insurance		(28,674	)		—
Decrease in restricted equity securities, net		1,304			—
Proceeds from sales of securities available for sale		26,802			760
Net change in loans		(13,805	)		17,496
Proceeds from sales of other real estate owned		10,140			16,296
Proceeds from sales of premises and equipment		713			305
(Increase) decrease in FDIC indemnification asset		(1,255	)		75,032
Net cash proceeds received from FDIC-assisted acquisitions		—			65,050
Purchases of premises and equipment		(1,470	)		(1,075	)

Net cash provided by investing activities		101,645			215,009

Cash flows from financing activities, net of effects of business combinations:
Net (decrease) increase in deposits		(134,690	)		(187,242	)
Net decrease in securities sold under agreements to repurchase		(27,201	)		(8,875	)
Repayment of other borrowings		—			(26,524	)
Dividends paid - preferred stock		(350	)		(657	)
Purchase of treasury shares		(110	)		—
Proceeds from exercise of stock options		16			2

Net cash used in financing activities		(162,335	)		(223,296	)

Net decrease in cash and due from banks		(29,769	)		(565	)
Cash and due from banks at beginning of period		80,256			65,528

Cash and due from banks at end of period	$	50,487		$	64,963

SUPPLEMENTAL DISCLOSURES OF NON-CASH INFORMATION
Cash paid during the period for:
Interest	$	2,805		$	5,098
Income taxes	$	780		$	—
Loans transferred to other real estate owned	$	15,541		$	14,291

See notes to unaudited consolidated financial statements

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

(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, 2013 the Bank operated 57 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, 2013 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, 2012.

Newly Adopted Accounting Pronouncements

ASU 2013-02 - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires an entity to provide information about the amounts reclassified from accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under United States generally accepted accounting principles to be reclassified to net income in its entirety in the same reporting period. For all other amounts, an entity is required to cross-reference to other disclosures that provide additional details about these amounts. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. It did not have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2012-06 - Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (“ASU 2012-06”). When an entity recognizes an indemnification asset and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs as a result of a change in the cash flows expected to be collected on the indemnified asset, ASU 2012-06 requires the entity to recognize the change in the measurement of the indemnification asset on the same basis as the indemnified assets. Any amortization of changes in value of the indemnification asset should be limited to the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets. ASU 2012-06 is effective for fiscal years beginning on or after December 15, 2012, and early adoption is permitted. It is to be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted acquisition of a financial institution. ASU 2012-06 did not have a material effect on the Company’s results of operations, financial position or disclosures.

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 was 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 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and was 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 was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. It did not 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: The fair value of mortgage loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and are classified within Level 2 of the valuation hierarchy.

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 estimated based on discounted contractual 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 ASC 310-10, Accounting by Creditors for Impairment of a Loan, 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 3 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 Loss-Share Receivable: 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 December 31, 2012 and 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 statements, were as follows:


			Fair Value Measurements at March 31, 2013 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,930,095	$	—	$	1,458,604	$	501,874	$	1,960,478

Financial liabilities:
Deposits		2,489,973		—		2,491,282		—		2,491,282


			Fair Value Measurements at December 31, 2012 Using:
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in Thousands)
Financial assets:
Loans, net	$	1,934,754	$	—	$	1,406,366	$	560,226	$	1,966,592

Financial liabilities:
Deposits		2,624,663		—		2,624,883		—		2,624,883


			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	$	—	$	1,258,402	$	722,983	$	1,981,385

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

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, 2013, December 31, 2012 and March 31, 2012 (dollars in thousands):


	Fair Value Measurements on a Recurring Basis As of March 31, 2013
	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	$	5,015	$	—	$	5,015	$	—
State, county and municipal securities		115,532		—		115,532		—
Corporate debt securities		10,297		—		8,297		2,000
Mortgage-backed securities		193,185		4,054		189,131		—
Mortgage loans held for sale		42,332		—		42,332		—

Total recurring assets at fair value	$	366,361	$	4,054	$	360,307	$	2,000


Derivative financial instruments	$	2,553	$	—	$	2,553	$	—

Total recurring liabilities at fair value	$	2,553	$	—	$	2,553	$	—


	Fair Value Measurements on a Recurring Basis As of December 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	$	6,870	$	—	$	6,870	$	—
State, county and municipal securities		114,390		4,854		109,536		—
Corporate debt securities		10,328		—		8,328		2,000
Mortgage-backed securities		215,321		23,893		191,428		—
Mortgage loans held for sale		48,786		—		48,786		—

Total recurring assets at fair value	$	395,695	$	28,747	$	364,948	$	2,000


Derivative financial instruments	$	2,978	$	—	$	2,978	$	—

Total recurring liabilities at fair value	$	2,978	$	—	$	2,978	$	—


	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		—

Total recurring assets at fair value	$	371,791	$	2,292	$	367,499	$	2,000


Derivative financial instruments	$	2,089	$	—	$	2,089	$	—

Total recurring liabilities at fair value	$	2,089	$	—	$	2,089	$	—

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, 2013, December 31, 2012 and March 31, 2012 (dollars in thousands):


	Fair Value Measurements on a Nonrecurring Basis As of March 31, 2013
	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	$	51,150	$	—	$	—	$	51,150
Other real estate owned		40,434		—		—		40,434
Covered loans		460,724		—		—		460,724
Covered other real estate owned		77,915		—		—		77,915

Total nonrecurring assets at fair value	$	630,223	$	—	$	—	$	630,223


	Fair Value Measurements on a Nonrecurring Basis As of December 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	$	52,514	$	—	$	—	$	52,514
Other real estate owned		39,850		—		—		39,850
Covered loans		507,712		—		—		507,712
Covered other real estate owned		88,273		—		—		88,273

Total nonrecurring assets at fair value	$	688,349	$	—	$	—	$	688,349


	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	$	—	$	—	$	848,821

Below is the Company’s reconciliation of Level 3 assets as of March 31, 2013.


	Investment Securities Available for Sale		Impaired Loans Carried at Fair Value			Other Real Estate Owned			Covered Loans			Covered Other Real Estate Owned
Beginning balance January 1, 2013	$	2,000	$	52,514		$	39,850		$	507,712		$	88,273
Total gains/(losses) included in net income		—		—			(15	)		—			(3,032	)
Purchases, sales, issuances, and settlements, net		—		1,262			(2,027	)		(31,449	)		(22,865	)
Transfers in or out of Level 3		—		(2,626	)		2,626			(15,539	)		15,539

Ending balance March 31, 2013	$	2,000	$	51,150		$	40,434		$	460,724		$	77,915

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, 2013, December 31, 2012 and March 31, 2012 are presented below:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
March 31, 2013:
U. S. government agencies	$	5,000	$	15	$	—		$	5,015
State, county and municipal securities		110,628		5,051		(147	)		115,532
Corporate debt securities		10,542		355		(600	)		10,297
Mortgage-backed securities		188,492		5,342		(649	)		193,185

Total debt securities	$	314,662	$	10,763	$	(1,396	)	$	324,029


December 31, 2012:
U. S. government agencies	$	6,605	$	271	$	(6	)	$	6,870
State, county and municipal securities		109,736		4,864		(210	)		114,390
Corporate debt securities		10,545		330		(547	)		10,328
Mortgage-backed securities		209,824		5,701		(204	)		215,321

Total debt securities	$	336,710	$	11,166	$	(967	)	$	346,909


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

The amortized cost and fair value of available-for-sale securities at March 31, 2013 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	$	3,027	$	3,041
Due from one year to five years		29,250		30,645
Due from five to ten years		58,652		61,448
Due after ten years		35,241		35,710
Mortgage-backed securities		188,492		193,185

	$	314,662	$	324,029

Securities with a carrying value of approximately $245.4 million serve as collateral to secure public deposits and other purposes required or permitted by law at March 31, 2013.

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, 2013, December 31, 2012 and March 31, 2012.


	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, 2013:
U. S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities		19,159		(138	)		505		(9	)		19,664		(147	)
Corporate debt securities		244		(6	)		4,506		(594	)		4,750		(600	)
Mortgage-backed securities		55,189		(648	)		1,120		(1	)		56,309		(649	)

Total debt securities	$	74,592	$	(792	)	$	6,131	$	(604	)	$	80,723	$	(1,396	)


December 31, 2012:
U. S. government agencies	$	4,994	$	(6	)	$	—	$	—		$	4,994	$	(6	)
State, county and municipal securities		15,595		(199	)		505		(11	)		16,100		(210	)
Corporate debt securities		—		—			4,560		(547	)		4,560		(547	)
Mortgage-backed securities		23,951		(181	)		3,617		(23	)		27,568		(204	)

Total debt securities	$	44,540	$	(386	)	$	8,682	$	(581	)	$	53,222	$	(967	)


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	)

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, 2013		December 31, 2012		March 31, 2012
Commercial, financial and agricultural	$	180,888	$	174,217	$	149,320
Real estate – construction and development		130,161		114,199		122,331
Real estate – commercial and farmland		766,227		732,322		658,054
Real estate – residential		355,716		346,480		328,053
Consumer installment		37,335		40,178		42,085
Other		22,426		43,239		24,001

	$	1,492,753	$	1,450,635	$	1,323,844

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 $460.7 million, $507.7 million and $653.4 million at March 31, 2013, December 31, 2012 and March 31, 2012, 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, 2013		December 31, 2012		March 31, 2012
Commercial, financial and agricultural	$	28,568	$	32,606	$	43,157
Real estate – construction and development		57,114		70,184		93,430
Real estate – commercial and farmland		260,159		278,506		350,244
Real estate – residential		113,668		125,056		162,768
Consumer installment		1,215		1,360		3,778

	$	460,724	$	507,712	$	653,377

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, 2013		December 31, 2012		March 31, 2012
Commercial, financial and agricultural	$	3,756	$	4,138	$	4,732
Real estate – construction and development		9,390		9,281		10,647
Real estate – commercial and farmland		9,798		11,962		21,539
Real estate – residential		13,840		12,595		14,065
Consumer installment		692		909		1,275

	$	37,476	$	38,885	$	52,258

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


(Dollars in Thousands)	March 31, 2013		December 31, 2012		March 31, 2012
Commercial, financial and agricultural	$	8,718	$	10,765	$	14,185
Real estate – construction and development		18,956		20,027		35,170
Real estate – commercial and farmland		47,580		55,946		79,620
Real estate – residential		23,018		28,672		40,609
Consumer installment		243		302		637

	$	98,515	$	115,712	$	170,221

The following table presents an analysis of non-covered past due loans as of March 31, 2013, December 31, 2012 and March 31, 2012:


	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, 2013:
Commercial, financial & agricultural	$	1,797	$	149	$	3,729	$	5,675	$	175,213	$	180,888	$	—
Real estate – construction & development		1,538		1,538		8,312		11,388		118,773		130,161		—
Real estate – commercial & farmland		11,115		3,220		9,352		23,687		742,540		766,227		—
Real estate – residential		7,686		1,719		11,699		21,104		334,612		355,716		—
Consumer installment loans		745		169		563		1,477		35,858		37,335		—
Other		—		—		—		—		22,426		22,426		—

Total	$	22,881	$	6,795	$	33,655	$	63,331	$	1,429,422	$	1,492,753	$	—


	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, 2012:
Commercial, financial & agricultural	$	258	$	312	$	3,969	$	4,539	$	169,678	$	174,217	$	—
Real estate – construction & development		347		332		8,969		9,648		104,551		114,199		—
Real estate – commercial & farmland		2,867		2,296		9,544		14,707		717,615		732,322		—
Real estate – residential		7,651		2,766		10,990		21,407		325,073		346,480		—
Consumer installment loans		702		391		815		1,908		38,270		40,178		—
Other		—		—		—		—		43,239		43,239		—

Total	$	11,825	$	6,097	$	34,287	$	52,209	$	1,398,426	$	1,450,635	$	—


	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	$	—

The following table presents an analysis of covered past due loans as of March 31, 2013, December 31, 2012 and March 31, 2012:


	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, 2013:
Commercial, financial & agricultural	$	756	$	314	$	7,270	$	8,340	$	20,228	$	28,568	$	98
Real estate – construction & development		3,971		876		17,415		22,262		34,852		57,114		—
Real estate – commercial & farmland		10,227		2,837		42,464		55,528		204,631		260,159		—
Real estate – residential		5,608		345		18,895		24,848		88,820		113,668		48
Consumer installment loans		41		11		205		257		958		1,215		—

Total	$	20,603	$	4,383	$	86,249	$	111,235	$	349,489	$	460,724	$	146


	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, 2012:
Commercial, financial & agricultural	$	2,390	$	1,105	$	10,612	$	14,107	$	18,499	$	32,606	$	98
Real estate – construction & development		1,584		2,592		19,656		23,832		46,352		70,184		1,077
Real estate – commercial & farmland		11,451		7,373		52,570		71,394		207,112		278,506		1,347
Real estate – residential		6,066		3,396		24,976		34,438		90,618		125,056		779
Consumer installment loans		45		13		258		316		1,044		1,360		—

Total	$	21,536	$	14,479	$	108,072	$	144,087	$	363,625	$	507,712	$	3,301


	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

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, 2013		December 31, 2012		March 31, 2012
	(Dollars in Thousands)
Nonaccrual loans	$	37,476	$	38,885	$	52,258
Troubled debt restructurings not included above		18,513		18,744		26,848

Total impaired loans	$	55,989	$	57,629	$	79,106


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

Impaired loans requiring a related allowance	$	55,989	$	57,629	$	79,106

Allowance related to impaired loans	$	4,839	$	5,115	$	9,500

Average investment in impaired loans	$	56,808	$	70,209	$	83,940

Interest income recognized on impaired loans	$	78	$	495	$	57

Foregone interest income on impaired loans	$	54	$	718	$	187

The following table presents an analysis of information pertaining to non-covered impaired loans as of March 31, 2013, December 31, 2012 and March 31, 2012:


	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, 2013:
Commercial, financial & agricultural	$	7,818	$	—	$	4,555	$	4,555	$	740	$	4,747
Real estate – construction & development		20,633		—		11,273		11,273		922		11,144
Real estate – commercial & farmland		22,996		—		18,676		18,676		1,816		19,793
Real estate – residential		24,777		—		20,792		20,792		1,344		20,320
Consumer installment loans		920		—		693		693		17		804

Total	$	77,144	$	—	$	55,989	$	55,989	$	4,839	$	56,808


	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, 2012:
Commercial, financial & agricultural	$	8,024	$	—	$	4,940	$	4,940	$	743	$	4,968
Real estate – construction & development		20,316		—		11,016		11,016		910		11,706
Real estate – commercial & farmland		25,076		—		20,910		20,910		2,191		30,638
Real estate – residential		24,155		—		19,848		19,848		1,246		21,813
Consumer installment loans		1,187		—		915		915		25		1,084

Total	$	78,758	$	—	$	57,629	$	57,629	$	5,115	$	70,209


	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

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


	As of and For the Period Ended
	March 31, 2013		December 31, 2012		March 31, 2012
	(Dollars in Thousands)
Nonaccrual loans	$	98,515	$	115,712	$	170,221
Troubled debt restructurings not included above		21,592		19,194		18,220

Total impaired loans	$	120,107	$	134,906	$	188,441


Impaired loans not requiring a related allowance	$	120,107	$	134,906	$	188,441

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

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	127,507	$	163,825	$	184,162

Interest income recognized on impaired loans	$	169	$	849	$	179

Foregone interest income on impaired loans	$	147	$	491	$	441

The following table presents an analysis of information pertaining to impaired covered loans as of March 31, 2013, December 31, 2012 and March 31, 2012:


	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, 2013:
Commercial, financial & agricultural	$	24,301	$	8,754	$	—	$	8,754	$	—	$	9,778
Real estate – construction & development		78,421		23,978		—		23,978		—		23,607
Real estate – commercial & farmland		139,197		55,822		—		55,822		—		60,026
Real estate – residential		54,422		31,310		—		31,310		—		33,823
Consumer installment loans		324		243		—		243		—		273

Total	$	296,665	$	120,107	$	—	$	120,107	$	—	$	127,507


	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, 2012:
Commercial, financial & agricultural	$	27,060	$	10,802	$	—	$	10,802	$	—	$	12,506
Real estate – construction & development		85,279		23,236		—		23,236		—		29,970
Real estate – commercial & farmland		159,493		64,231		—		64,231		—		78,790
Real estate – residential		63,559		36,335		—		36,335		—		42,061
Consumer installment loans		393		302		—		302		—		498

Total	$	335,784	$	134,906	$	—	$	134,906	$	—	$	163,825


	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

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The 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 and 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 and 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, 2013:


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	$	32,223	$	—	$	304	$	500	$	7,241	$	—	$	40,268
15		11,569		4,794		146,563		68,212		1,635		—		232,773
20		75,503		34,947		385,984		127,294		19,623		22,426		665,777
23		45		6,606		8,970		13,662		120		—		29,403
25		52,631		66,012		187,567		112,096		7,340		—		425,646
30		3,324		6,004		12,334		10,573		250		—		32,485
40		5,494		11,643		24,505		23,379		1,126		—		66,147
50		99		155		—		—		—		—		254
60		—		—		—		—		—		—		—

Total	$	180,888	$	130,161	$	766,227	$	355,716	$	37,335	$	22,426	$	1,492,753

The following table presents the non-covered loan portfolio by risk grade as of December 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	$	24,623	$	—	$	309	$	464	$	7,597	$	—	$	32,993
15		11,316		4,373		147,966		71,254		1,591		—		236,500
20		79,522		31,413		351,997		114,418		21,361		43,239		641,950
23		42		8,521		9,012		13,788		70		—		31,433
25		49,071		52,577		176,395		113,591		7,576		—		399,210
30		2,343		3,394		19,401		9,672		488		—		35,298
40		7,200		13,765		27,242		23,292		1,495		—		72,994
50		100		156		—		1		—		—		257
60		—		—		—		—		—		—		—

Total	$	174,217	$	114,199	$	732,322	$	346,480	$	40,178	$	43,239	$	1,450,635

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 covered loan portfolio by risk grade as of March 31, 2013:


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	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		34		1,598		638		—		—		2,270
20		3,117		11,106		36,020		27,547		266		—		78,056
23		75		1,248		9,153		1,946		—		—		12,422
25		8,135		10,184		110,985		40,863		508		—		170,675
30		2,979		4,457		35,601		8,784		50		—		51,871
40		14,262		30,085		66,802		33,890		391		—		145,430
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	28,568	$	57,114	$	260,159	$	113,668	$	1,215	$	—	$	460,724

The following table presents the covered loan portfolio by risk grade as of December 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	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		39		1,640		644		—		—		2,323
20		3,997		12,194		37,098		31,337		292		—		84,918
23		28		1,174		9,576		2,052		—		—		12,830
25		10,013		19,216		114,849		40,194		558		—		184,830
30		4,294		7,214		38,665		11,883		50		—		62,106
40		14,274		30,347		76,678		38,946		460		—		160,705
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	32,606	$	70,184	$	278,506	$	125,056	$	1,360	$	—	$	507,712

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

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 2013 totaling $27.4 million and loans in 2012 totaling $40.3 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.