10-Q
Table of Contents

 

 

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 September 30, 2014

OR

 

¨ 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):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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 28,160,598 shares of Common Stock outstanding as of October 31, 2014.

 

 

 


Table of Contents

AMERIS BANCORP

TABLE OF CONTENTS

 

         Page  

PART I – FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements.

  
 

Consolidated Balance Sheets at September 30, 2014, December 31, 2013 and September  30, 2013

     1   
 

Consolidated Statements of Earnings and Comprehensive Income for the Three and Nine Month Periods Ended September 30, 2014 and 2013

     2   
 

Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September  30, 2014 and 2013

     3   
 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013

     4   
 

Notes to Consolidated Financial Statements

     5   

Item 2.

 

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

     45   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk.

     70   

Item 4.

 

Controls and Procedures.

     70   

PART II – OTHER INFORMATION

  

Item 1.

 

Legal Proceedings.

     71   

Item 1A.

 

Risk Factors.

     71   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

     71   

Item 3.

 

Defaults Upon Senior Securities.

     71   

Item 4.

 

Mine Safety Disclosures.

     71   

Item 5.

 

Other Information.

     71   

Item 6.

 

Exhibits.

     71   

Signatures

       72   


Table of Contents

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share data)

 

     September 30,
2014
    December 31,
2013
    September 30,
2013
 
     (Unaudited)           (Unaudited)  

Assets

      

Cash and due from banks

   $ 69,421      $ 62,955      $ 53,516   

Federal funds sold and interest-bearing accounts

     40,165        204,984        73,899   

Investment securities available for sale, at fair value

     529,509        486,235        312,248   

Other investments

     12,687        16,828        7,764   

Mortgage loans held for sale

     110,059        67,278        69,634   

Loans, net of unearned income

     1,848,759        1,618,454        1,589,267   

Purchased loans not covered by FDIC loss share agreements (“purchased non-covered loans”)

     673,724        448,753        —     

Purchased loans covered by FDIC loss share agreements (“covered loans”)

     313,589        390,237        417,649   

Less: allowance for loan losses

     (22,212     (22,377     (23,854
  

 

 

   

 

 

   

 

 

 

Loans, net

     2,813,860        2,435,067        1,983,062   
  

 

 

   

 

 

   

 

 

 

Other real estate owned, net

     35,320        33,351        37,978   

Purchased, non-covered other real estate owned, net

     13,660        4,276        —     

Covered other real estate owned, net

     28,883        45,893        52,552   
  

 

 

   

 

 

   

 

 

 

Total other real estate owned, net

     77,863        83,520        90,530   
  

 

 

   

 

 

   

 

 

 

Premises and equipment, net

     98,752        103,188        65,661   

FDIC loss-share receivable

     38,233        65,441        81,763   

Other intangible assets, net

     9,114        6,009        1,972   

Goodwill

     58,879        35,049        956   

Cash value of bank owned life insurance

     58,217        49,432        49,095   

Other assets

     82,649        51,663        28,402   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,999,408      $ 3,667,649      $ 2,818,502   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 816,517      $ 668,531      $ 475,505   

Interest-bearing

     2,556,602        2,330,700        1,967,916   
  

 

 

   

 

 

   

 

 

 

Total deposits

     3,373,119        2,999,231        2,443,421   

Securities sold under agreements to repurchase

     32,351        83,516        20,255   

Other borrowings

     147,409        194,572        5,000   

Other liabilities

     27,615        18,165        17,201   

Subordinated deferrable interest debentures

     65,084        55,466        42,269   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     3,645,578        3,350,950        2,528,146   
  

 

 

   

 

 

   

 

 

 

Stockholders’ Equity

      

Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0, 28,000 and 28,000 shares issued and outstanding

     —          28,000        27,938   

Common stock, par value $1; 100,000,000 shares authorized; 28,157,898; 26,461,769 and 25,270,851 issued

     28,158        26,462        25,271   

Capital surplus

     224,142        189,722        165,835   

Retained earnings

     109,170        83,991        83,025   

Accumulated other comprehensive income (loss)

     3,974        (294     (531

Treasury stock, at cost, 1,383,496; 1,363,342 and 1,363,342 shares

     (11,614     (11,182     (11,182
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     353,830        316,699        290,356   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,999,408      $ 3,667,649      $ 2,818,502   
  

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

1


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2014     2013     2014     2013  

Interest income

        

Interest and fees on loans

   $ 39,610      $ 29,633      $ 109,376      $ 88,208   

Interest on taxable securities

     3,034        1,720        8,972        5,136   

Interest on nontaxable securities

     496        352        1,143        1,071   

Interest on deposits in other banks and federal funds sold

     46        44        175        158   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     43,186        31,749        119,666        94,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

        

Interest on deposits

     2,540        2,025        6,928        6,334   

Interest on other borrowings

     1,514        404        3,858        1,105   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     4,054        2,429        10,786        7,439   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     39,132        29,320        108,880        87,134   

Provision for loan losses

     1,669        2,920        4,760        10,008   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     37,463        26,400        104,120        77,126   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

        

Service charges on deposit accounts

     6,659        4,948        18,092        14,480   

Mortgage banking activity

     7,498        5,232        19,510        14,697   

Other service charges, commissions and fees

     690        593        2,004        1,539   

Gain (loss) on sale of securities

     132        —          138        171   

Other noninterest income

     2,922        1,515        6,730        4,145   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     17,901        12,288        46,474        35,032   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

        

Salaries and employee benefits

     20,226        14,412        54,562        41,599   

Occupancy and equipment

     4,669        3,149        12,804        9,058   

Advertising and marketing expenses

     594        434        2,022        1,016   

Amortization of intangible assets

     698        346        1,668        1,068   

Data processing and telecommunications expenses

     3,928        3,072        11,322        8,478   

Credit resolution related expenses

     3,186        2,971        8,216        10,164   

Merger and conversion charges

     551        512        3,873        512   

Other noninterest expenses

     4,727        3,853        14,669        12,426   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     38,579        28,749        109,136        84,321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

     16,785        9,939        41,458        27,837   

Income tax expense

     5,122        3,262        13,315        9,197   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     11,663        6,677        28,143        18,640   

Less preferred stock dividends and discount accretion

     —          443        286        1,326   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

   $ 11,663      $ 6,234      $ 27,857      $ 17,314   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

        

Unrealized holding gain (loss) arising during period on investment securities available for sale, net of tax of $114, $2,158, ($2,610) and $4,375

     (211     (4,007     4,847        (8,125

Reclassification adjustment for losses (gains) included in earnings, net of tax of $46, $0, $48 and $60

     (86     —          (90     (111

Unrealized gain (loss) on cash flow hedges arising during period, net of tax of ($80), $57, $264 and ($591)

     149        (106     (489     1,098   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (148     (4,113     4,268        (7,138
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 11,515      $ 2,564      $ 32,411      $ 11,502   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 0.44      $ 0.26      $ 1.08      $ 0.72   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.43      $ 0.26      $ 1.07      $ 0.71   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.05      $ —        $ 0.10      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

        

Basic

     26,773        23,901        25,705        23,883   

Diluted

     27,161        24,316        26,099        24,298   

See notes to unaudited consolidated financial statements.

 

2


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(amounts in thousands, except per share data)

(Unaudited)

 

     Nine Months Ended     Nine Months Ended  
     September 30, 2014     September 30, 2013  
     Shares     Amount     Shares     Amount  

PREFERRED STOCK

        

Issued at beginning of period

     28,000      $ 28,000        28,000      $ 27,662   

Repurchase of preferred stock

     (28,000     (28,000     —         —     

Accretion of fair value of warrant

     —         —          —         276   
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     —        $ —          28,000      $ 27,938   

COMMON STOCK

        

Issued at beginning of period

     26,461,769      $ 26,462        25,154,818      $ 25,155   

Issuance of restricted shares

     68,047        68        83,400        83   

Issuance of common stock

     1,598,998        1,599        —          —     

Cancellation of restricted shares

     —          —          (1,000     (1

Proceeds from exercise of stock options

     29,084        29        33,633        34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Issued at end of period

     28,157,898      $ 28,158        25,270,851      $ 25,271   

CAPITAL SURPLUS

        

Balance at beginning of period

     $ 189,722        $ 164,949   

Stock-based compensation

       1,230          592   

Issuance of common stock

       32,875          —     

Proceeds from exercise of stock options

       383          376   

Issuance of restricted shares

       (68       (83

Cancellation of restricted shares

       —            1   
    

 

 

     

 

 

 

Balance at end of period

     $ 224,142        $ 165,835   

RETAINED EARNINGS

        

Balance at beginning of period

     $ 83,991        $ 65,710   

Net income

       28,143          18,640   

Cash dividends declared, $0.10 per share

       (2,678       —     

Dividends on preferred shares

       (286       (1,050

Accretion of fair value of warrant

       —            (275
    

 

 

     

 

 

 

Balance at end of period

     $ 109,170        $ 83,025   

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX

        

Unrealized gains on securities and derivatives:

        

Balance at beginning of period

     $ (294     $ 6,607   

Other comprehensive income (loss)

       4,268          (7,138
    

 

 

     

 

 

 

Balance at end of period

     $ 3,974        $ (531

TREASURY STOCK

        

Balance at beginning of period

     (1,363,342   $ (11,182     (1,355,050   $ (11,066

Purchase of treasury shares

     (20,154     (432     (8,292     (116
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

     (1,383,496   $ (11,614     (1,363,342   $ (11,182
    

 

 

     

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     $ 353,830        $ 290,356   
    

 

 

     

 

 

 

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

 

     Nine Months Ended
September 30,
 
     2014     2013  

Cash flows from operating activities:

    

Net income

   $ 28,143      $ 18,640   

Adjustments reconciling net income to net cash provided by operating activities:

    

Depreciation

     5,850        3,683   

Stock based compensation expense

     1,230        592   

Net gains on sale or disposal of premises and equipment

     (615     (61

Net losses or write-downs on sale of other real estate owned

     2,344        5,646   

Provision for loan losses

     4,760        10,008   

Accretion of discount on covered loans

     (20,822     (36,552

Accretion of discount on purchased non-covered loans

     (5,840     —     

Accretion of FDIC loss-share receivable, net of amortization of FDIC clawback payable

     8,699        19,721   

Increase in cash surrender value of BOLI

     (973     (898

Amortization of intangible assets

     1,668        1,068   

Net amortization of investment securities available for sale

     2,609        2,531   

Originations of mortgage loans held for sale

     (504,164     (399,606

Proceeds from sales of mortgage loans held for sale

     468,671        378,758   

Net gains on securities available for sale

     (138     (171

Change attributable to other operating activities

     3,685        15,843   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (4,893     19,202   
  

 

 

   

 

 

 

Cash flows from investing activities, net of effect of business combinations:

    

Net decrease in federal funds sold and interest-bearing deposits

     180,742        119,778   

Proceeds from maturities of securities available for sale

     37,706        43,474   

Purchase of securities available for sale

     (102,340     (61,445

Proceeds from sales of securities available for sale

     92,975        36,669   

Purchase of bank owned life insurance

     —          (30,000

Net increase in loans, excluding purchased non-covered and covered loans

     (243,809     (155,447

Payments received on purchased non-covered loans

     58,350        —     

Payments received on covered loans

     85,946        96,629   

Payments received from FDIC under loss share agreements

     18,509        58,240   

Proceeds from sales of other real estate owned

     31,913        55,270   

Decrease in restricted equity securities, net

     5,116        —     

Proceeds from sales of premises and equipment

     1,213        1,889   

Purchases of premises and equipment

     (3,779     (4,136

Net cash proceeds received from acquisitions

     1,099        —     
  

 

 

   

 

 

 

Net cash provided by investing activities

     163,641        160,921   
  

 

 

   

 

 

 

Cash flows from financing activities, net of effect of business combinations:

    

Net increase/(decrease) in deposits

     4,864        (181,242

Net decrease in securities sold under agreements to repurchase

     (56,593     (29,865

Repayment of other borrowings

     (187,032     —     

Proceeds from other borrowings

     117,463        5,000   

Redemption of preferred stock

     (28,000     —     

Dividends paid—preferred stock

     (286     (1,050

Dividends paid—common stock

     (2,678     —     

Purchase of treasury shares

     (432     (116

Proceeds from exercise of stock options

     412        410   
  

 

 

   

 

 

 

Net cash used in financing activities

     (152,282     (206,863
  

 

 

   

 

 

 

Net increase (decrease) in cash and due from banks

     6,466        (26,740

Cash and due from banks at beginning of period

     62,955        80,256   
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 69,421      $ 53,516   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid/(received) during the period for:

    

Interest

   $ 10,773      $ 7,840   

Income taxes

   $ 15,008      $ 11,304   

Loans (excluding purchased non-covered and covered loans) transferred to other real estate owned

   $ 9,268      $ 8,329   

Purchased non-covered loans transferred to other real estate owned

   $ 1,955      $ —     

Covered loans transferred to other real estate owned

   $ 10,840      $ 28,725   

Issuance of common stock in acquisitions

   $ 34,474      $ —     

See notes to unaudited consolidated financial statements.

 

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Table of Contents

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

(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 September 30, 2014, the Bank operated 74 retail branches and 11 mortgage offices 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. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within the Company’s established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of their 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 September 30, 2014 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, 2013.

Newly Issued Accounting Pronouncements

ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2016. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2014-04 – Receivables – Troubled Debt Restructurings by Creditors (“ASU 2014-04”). ASU 2014-04 clarifies when a creditor should reclassify mortgage loans collateralized by residential real estate from loans to other real estate owned. It defines when an in-substance repossession or foreclosure has occurred and when a creditor is considered to have received physical possession of residential real estate collateralizing a mortgage loan. ASU 2014-04 is effective for fiscal years beginning after December 31, 2014, and early adoption is permitted. It can be applied either prospectively or using a modified retrospective transition method. The Company is evaluating the impact this standard may have on the Company’s results of operations, financial position or disclosures.

ASU 2013-11—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. However, if a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of these revisions did not have a material impact on the Company’s results of operations, financial position or disclosures.

 

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NOTE 2 – BUSINESS COMBINATIONS

Coastal Bankshares, Inc.

On June 30, 2014, the Company completed its acquisition of The Coastal Bankshares, Inc. (“Coastal”), a bank holding company headquartered in Savannah, Georgia. Upon consummation of the acquisition, Coastal was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Coastal’s wholly owned banking subsidiary, The Coastal Bank (“Coastal Bank”), was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Coastal Bank had a total of six banking locations in Chatham, Liberty and Effingham Counties, Georgia. Coastal’s common shareholders received 0.4671 of a share of the Company’s common stock in exchange for each share of Coastal’s common stock. As a result, the Company issued 1,598,998 common shares at a fair value of $34.5 million and paid $2.8 million cash in exchange for outstanding warrants.

The acquisition of Coastal was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. During the third quarter of 2014, management revised its initial estimates regarding the valuation of other real estate owned. In addition, during the third quarter of 2014, management completed its assessment and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Sections 382 of the Internal Revenue Code of 1986, as amended.

The following table presents the assets acquired and liabilities of Coastal assumed as of June 30, 2014 and their fair value estimates:

 

(Dollars in Thousands)    As Recorded by
Coastal
    Initial Fair
Value
Adjustments
    Subsequent
Fair Value
Adjustments
    As Recorded
by Ameris
 

Assets

        

Cash and cash equivalents

   $ 3,895      $         $         $ 3,895   

Federal funds sold and interest-bearing balances

     15,923        —          —          15,923   

Investment securities

     67,266        (500 )(a)      —          66,766   

Other investments

     975        —          —          975   

Mortgage loans held for sale

     7,288        —          —          7,288   

Loans

     296,141        (16,700 )(b)      —          279,441   

Less allowance for loan losses

     (3,218     3,218 (c)      —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Loans, net

     292,923        (13,482     —          279,441   

Other real estate owned

     14,992        (3,528 )(d)      (2,600 )(g)      8,864   

Premises and equipment

     11,882        —          —          11,882   

Intangible assets

     507        4,266 (e)      —          4,773   

Other assets

     22,710        —          2,624 (h)      25,334   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 438,361      $ (13,244   $ 24      $ 425,141   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

        

Deposits:

        

Noninterest-bearing

   $ 80,012      $ —        $ —        $ 80,012   

Interest-bearing

     289,012        —          —          289,012   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     369,024        —          —          369,024   

Federal funds purchased and securities sold under agreements to repurchase

     5,428        —          —          5,428   

Other borrowings

     22,005        —          —          22,005   

Other liabilities

     6,192        —          —          6,192   

Subordinated deferrable interest debentures

     15,465        (6,413 )(f)      —          9,052   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     418,114        (6,413     —          411,701   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     20,247        (6,831     —          13,440   

Goodwill

     —          23,854        24        23,830   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ 20,247      $ 17,023      $ —        $ 37,270   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consideration:

        

Ameris Bancorp common shares issued

     1,598,998         

Purchase price per share of the Company’s common stock

   $ 21.56         
  

 

 

   

Company common stock issued

     34,474         

Cash exchanged for shares

     2,796         
  

 

 

   

Fair value of total consideration transferred

   $ 37,270         
  

 

 

   

 

Explanation of fair value adjustments

 

  (a) Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

 

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  (b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

 

  (c) Adjustment reflects the elimination of Coastal’s allowance for loan losses.

 

  (d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.

 

  (e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

 

  (f) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

 

  (g) Adjustment reflects the additional fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.

 

  (h) Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

Goodwill of $23.8 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Coastal acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

The results of operations of Coastal subsequent to the acquisition date are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisition had occurred on January 1, 2013, unadjusted for potential cost savings (in thousands).

 

     Three Months
Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2014      2013  

Net interest income and noninterest income

   $ 46,373       $ 165,913       $ 137,590   

Net income

   $ 6,680       $ 26,275       $ 19,733   

Net income available to common stockholders

   $ 6,237       $ 25,989       $ 18,407   

Income per common share available to common stockholders – basic

   $ 0.24       $ 0.95       $ 0.72   

Income per common share available to common stockholders – diluted

   $ 0.24       $ 0.94       $ 0.71   

Average number of shares outstanding, basic

     25,500         27,304         25,482   

Average number of shares outstanding, diluted

     25,915         27,698         25,897   

In the acquisition, the Company purchased $279.4 million of loans at fair value, net of $16.7 million, or 5.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $29.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest

   $ 38,194   

Non-accretable difference

     (5,632
  

 

 

 

Cash flows expected to be collected

     32,562   

Accretable yield

     (3,282
  

 

 

 

Total purchased credit-impaired loans acquired

   $ 29,280   
  

 

 

 

 

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Prosperity Banking Company

On December 23, 2013, the Company completed its acquisition of The Prosperity Banking Company (“Prosperity”), a bank holding company headquartered in Saint Augustine, Florida. Upon consummation of the acquisition, Prosperity was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Prosperity’s wholly owned banking subsidiary, Prosperity Bank, was also merged with and into the Bank. Prosperity Bank had a total of 12 banking locations, with the majority of the franchise concentrated in northeast Florida. Prosperity’s common shareholders were entitled to elect to receive either 3.125 shares of the Company’s common stock or $41.50 in cash in exchange for each share of Prosperity’s voting common stock. As a result of Prosperity shareholders’ elections, the Company issued 1,168,918 common shares at a fair value of $24.6 million.

The acquisition of Prosperity was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.

The following table presents the assets acquired and liabilities of Prosperity assumed as of December 23, 2013 and their initial fair value estimates:

 

(Dollars in Thousands)    As Recorded by
Prosperity
    Fair Value
Adjustments
    As Recorded
by Ameris
 

Assets

      

Cash and cash equivalents

   $ 4,285      $ —        $ 4,285   

Federal funds sold and interest-bearing balances

     21,687        —          21,687   

Investment securities

     151,863        411 (a)      152,274   

Other investments

     8,727        —          8,727   

Loans

     487,358        (37,662 )(b)      449,696   

Less allowance for loan losses

     (6,811     6,811 (c)      —     
  

 

 

   

 

 

   

 

 

 

Loans, net

     480,547        (30,851     449,696   

Other real estate owned

     6,883        (1,260 )(d)      5,623   

Premises and equipment

     36,293        —          36,293   

Intangible assets

     174        4,383 (e)      4,557   

Other assets

     26,600        1,192 (f)      27,792   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 737,059      $ (26,125   $ 710,934   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Deposits:

      

Noninterest-bearing

   $ 149,242      $ —        $ 149,242   

Interest-bearing

     324,441        —          324,441   
  

 

 

   

 

 

   

 

 

 

Total deposits

     473,683        —          473,683   

Federal funds purchased and securities sold under agreements to repurchase

     21,530        —          21,530   

Other borrowings

     185,000        12,313 (g)      197,313   

Other liabilities

     14,058        455 (h)      14,513   

Subordinated deferrable interest debentures

     29,500        (16,303 )(i)      13,197   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     723,771        (3,535     720,236   
  

 

 

   

 

 

   

 

 

 

Net identifiable assets acquired over (under) liabilities assumed

     13,288        (22,590     (9,302

Goodwill

     —          34,093        34,093   
  

 

 

   

 

 

   

 

 

 

Net assets acquired over (under) liabilities assumed

   $ 13,288      $ 11,503      $ 24,791   
  

 

 

   

 

 

   

 

 

 

Consideration:

      

Ameris Bancorp common shares issued

     1,168,918       

Purchase price per share of the Company’s common stock

   $ 21.07       
  

 

 

     

Company common stock issued

     24,629       

Cash exchanged for shares

     162       
  

 

 

     

Fair value of total consideration transferred

   $ 24,791       
  

 

 

     

 

 

Explanation of fair value adjustments

 

  (a) Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

 

  (b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

 

  (c) Adjustment reflects the elimination of Prosperity’s allowance for loan losses.

 

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(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.

 

(e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

 

(f) Adjustment reflects the adjustment to write-off the non-realizable portion of Prosperity’s deferred tax asset of ($6.644 million), to record the deferred tax asset generated by purchase accounting adjustments of $8.435 million and to record the fair value adjustment of other assets of ($0.599 million) at the acquisition date.

 

(g) Adjustment reflects the fair value adjustment (premium) to the FHLB borrowings of $12.741 million and the fair value adjustment to the subordinated debt of $0.428 million.

 

(h) Adjustment reflects the fair value adjustment of other liabilities at the acquisition date.

 

(i) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

Goodwill of $34.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Prosperity acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

The results of operations of Prosperity subsequent to the acquisition date are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisition had occurred on January 1, 2013, unadjusted for potential cost savings (in thousands).

 

     Three Months
Ended
September 30,
     Nine Months
Ended
September 30,
 
     2013      2013  

Net interest income and noninterest income

   $ 48,541       $ 142,390   

Net income

   $ 7,214       $ 18,729   

Net income available to common stockholders

   $ 6,771       $ 17,403   

Income per common share available to common stockholders – basic

   $ 0.27       $ 0.69   

Income per common share available to common stockholders – diluted

   $ 0.27       $ 0.68   

Average number of shares outstanding, basic

     25,070         25,052   

Average number of shares outstanding, diluted

     25,485         25,467   

In the acquisition, the Company purchased $449.7 million of loans at fair value, net of $37.7 million, or 7.73%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $67.2 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest

   $ 92,461   

Non-accretable difference

     (14,311
  

 

 

 

Cash flows expected to be collected

     78,150   

Accretable yield

     (10,985
  

 

 

 

Total purchased credit-impaired loans acquired

   $ 67,165   
  

 

 

 

 

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On the dates of acquisition, the Company estimated the future cash flows on each individual loan and made the necessary adjustments to reflect the asset at fair value. At each quarter end subsequent to the acquisition dates, the Company revises the estimates of future cash flows based on current information and makes the necessary adjustments to carrying value. The adjustments are performed on a loan-by-loan basis and have resulted in the Company recording a $4,000 provision for loan loss expense during the three month period ended September 30, 2014. There were no adjustments needed during the twelve months ended December 31, 2013 and the nine months ended September 30, 2013.

A rollforward of purchased non-covered loans with deterioration of credit quality for the nine months ended September 30, 2014, the year ended December 31, 2013 and the nine months ended September 30, 2013 is shown below:

 

(Dollars in Thousands)

   September 30,
2014
    December 31,
2013
     September 30,
2013
 

Balance, January 1

   $ 67,165      $ —         $ —     

Charge-offs, net of recoveries

     (4     —           —     

Additions due to acquisitions

     29,280       67,165         —     

Other (loan payments, transfers, etc.)

     (4,440     —           —     
  

 

 

   

 

 

    

 

 

 

Ending balance

   $ 92,001      $ 67,165       $ —     
  

 

 

   

 

 

    

 

 

 

A rollforward of purchased non-covered loans without deterioration of credit quality for the nine months ended September 30, 2014, the year ended December 31, 2013 and the nine months ended September 30, 2013 is shown below:

 

(Dollars in Thousands)

   September 30,
2014
    December 31,
2013
    September 30,
2013
 

Balance, January 1

   $ 381,588      $ —        $ —     

Additions due to acquisitions

     250,161        382,531        —     

Loan payments, transfers, etc.

     (50,026     (943     —     
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 581,723      $ 381,588      $ —     
  

 

 

   

 

 

   

 

 

 

The following is a summary of changes in the accretable discounts of purchased non-covered loans during the nine months ended September 30, 2014, the year ended December 31, 2013 and the nine months ended September 30, 2013:

 

(Dollars in Thousands)

   September 30,
2014
    December 31,
2013
     September 30,
2013
 

Balance, January 1

   $ 26,189      $ —         $ —     

Additions due to acquisitions

     7,799        26,189         —     

Accretion

     (5,840     —           —     

Other activity, net

     916        —           —     
  

 

 

   

 

 

    

 

 

 

Ending balance

   $ 29,064      $ 26,189       $ —     
  

 

 

   

 

 

    

 

 

 

 

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Table of Contents

NOTE 3 – INVESTMENT SECURITIES

The Company’s 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. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s 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 September 30, 2014, December 31, 2013 and September 30, 2013 are presented below:

 

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

September 30, 2014:

          

U. S. government agencies

   $ 14,951       $ —         $ (491   $ 14,460   

State, county and municipal securities

     134,641         3,708         (714     137,635   

Corporate debt securities

     10,801         237         (73     10,965   

Mortgage-backed securities

     364,399         4,493         (2,443     366,449   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 524,792       $ 8,438       $ (3,721   $ 529,509   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2013:

          

U. S. government agencies

   $ 14,947       $ —         $ (1,021   $ 13,926   

State, county and municipal securities

     112,659         2,269         (2,174     112,754   

Corporate debt securities

     10,311         275         (261     10,325   

Collateralized debt obligations

     1,480         —           —          1,480   

Mortgage-backed securities

     349,441         2,347         (4,038     347,750   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 488,838       $ 4,891       $ (7,494   $ 486,235   
  

 

 

    

 

 

    

 

 

   

 

 

 

September 30, 2013:

          

U. S. government agencies

   $ 14,945       $ —         $ (1,028   $ 13,917   

State, county and municipal securities

     112,643         2,331         (2,035     112,939   

Corporate debt securities

     10,314         280         (856     9,738   

Mortgage-backed securities

     176,818         2,714         (3,878     175,654   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 314,720       $ 5,325       $ (7,797   $ 312,248   
  

 

 

    

 

 

    

 

 

   

 

 

 

The amortized cost and fair value of available-for-sale securities at September 30, 2014 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. The weighted average life of these securities is less than 4.5 years and modeled not to extend beyond 6 years in an increasing rate scenario. Therefore, these securities are not included in the following maturity summary:

 

     Amortized
Cost
     Fair
Value
 
     (Dollars in Thousands)  

Due in one year or less

   $ 10,647       $ 10,844   

Due from one year to five years

     35,432         36,856   

Due from five to ten years

     66,554         67,094   

Due after ten years

     47,760         48,266   

Mortgage-backed securities

     364,399         366,449   
  

 

 

    

 

 

 
   $ 524,792       $ 529,509   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $265.9 million serve as collateral to secure public deposits and for other purposes required or permitted by law at September 30, 2014, compared to $399.0 million and $217.3 million at December 31, 2013 and September 30, 2013, respectively.

 

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Table of Contents

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at September 30, 2014, December 31, 2013 and September 30, 2013.

 

     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)  

September 30, 2014:

               

U. S. government agencies

   $ —         $ —        $ 14,460       $ (491   $ 14,460       $ (491

State, county and municipal securities

     10,296         (98     22,696         (616     32,992         (714

Corporate debt securities

     —           —          4,997         (73     4,997         (73

Mortgage-backed securities

     71,050         (416     51,314         (2,027     122,364         (2,443
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 81,346       $ (514   $ 93,467       $ (3,207   $ 174,813       $ (3,721
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2013:

               

U. S. government agencies

   $ 13,926       $ (1,021   $ —         $ —        $ 13,926       $ (1,021

State, county and municipal securities

     47,401         (1,882     3,794         (292     51,195         (2,174

Corporate debt securities

     —           —          4,826         (261     4,826         (261

Collateralized debt obligations

     —           —          —           —          —           —     

Mortgage-backed securities

     94,989         (2,493     23,388         (1,545     118,377         (4,038
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 156,316       $ (5,396   $ 32,008       $ (2,098   $ 188,324       $ (7,494
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

September 30, 2013:

               

U. S. government agencies

   $ 13,917       $ (1,028   $ —         $ —        $ 13,917       $ (1,028

State, county and municipal securities

     46,516         (1,735     3,807         (300     50,323         (2,035

Corporate debt securities

     —           —          4,235         (856     4,235         (856

Mortgage-backed securities

     90,639         (3,878     —           —          90,639         (3,878
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 151,072       $ (6,641   $ 8,042       $ (1,156   $ 159,114       $ (7,797
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at September 30, 2014, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at September 30, 2014, these investments are not considered impaired on an other-than-temporary basis.

At September 30, 2014, December 31, 2013 and September 30, 2013, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the nine months ended September 30, 2014, year ended December 31, 2013 and nine months ended September 30, 2013:

 

     September 30,
2014
    December 31, 2013     September 30,
2013
 
     (Dollars in Thousands)  

Gross gains on sales of securities

   $ 141      $ 353      $ 353   

Gross losses on sales of securities

     (3     (182     (182
  

 

 

   

 

 

   

 

 

 

Net realized gains on sales of securities available for sale

   $ 138      $ 171      $ 171   
  

 

 

   

 

 

   

 

 

 

Sales proceeds

   $ 92,975      $ 36,669      $ 36,669   
  

 

 

   

 

 

   

 

 

 

 

12


Table of Contents

NOTE 4 – 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 the Company’s 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, excluding purchased non-covered and covered loans:

 

(Dollars in Thousands)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 334,783       $ 244,373       $ 244,991   

Real estate – construction and development

     154,315         146,371         132,277   

Real estate – commercial and farmland

     882,160         808,323         799,149   

Real estate – residential

     436,515         366,882         355,920   

Consumer installment

     31,403         34,249         36,303   

Other

     9,583         18,256         20,627   
  

 

 

    

 

 

    

 

 

 
   $ 1,848,759       $ 1,618,454       $ 1,589,267   
  

 

 

    

 

 

    

 

 

 

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the FDIC. Purchased non-covered loans totaling $673.7 million and $448.8 million at September 30, 2014 and December 31, 2013, respectively, are not included in the above schedule. There were no purchased non-covered loans at September 30, 2013.

Purchased non-covered loans are shown below according to major loan type as of the end of the periods shown:

 

(Dollars in Thousands)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 38,077       $ 32,141       $ —     

Real estate – construction and development

     60,262         31,176         —     

Real estate – commercial and farmland

     296,790         179,898         —     

Real estate – residential

     273,347         200,851         —     

Consumer installment

     5,248         4,687         —     
  

 

 

    

 

 

    

 

 

 
   $ 673,724       $ 448,753       $ —     
  

 

 

    

 

 

    

 

 

 

 

13


Table of Contents

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 $313.6 million, $390.2 million and $417.6 million at September 30, 2014, December 31, 2013 and September 30, 2013, 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)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 22,545       $ 26,550       $ 27,768   

Real estate – construction and development

     27,756         43,179         50,702   

Real estate – commercial and farmland

     180,566         224,451         237,086   

Real estate – residential

     82,445         95,173         101,146   

Consumer installment

     277         884         947   
  

 

 

    

 

 

    

 

 

 
   $ 313,589       $ 390,237       $ 417,649   
  

 

 

    

 

 

    

 

 

 

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 against interest income. Interest payments on nonaccrual 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. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual 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 loans accounted for on a nonaccrual basis, excluding purchased non-covered and covered loans:

 

(Dollars in Thousands)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 2,695       $ 4,103       $ 4,198   

Real estate – construction and development

     3,037         3,971         4,229   

Real estate – commercial and farmland

     8,983         8,566         9,548   

Real estate – residential

     7,608         12,152         13,303   

Consumer installment

     487         411         442   
  

 

 

    

 

 

    

 

 

 
   $ 22,810       $ 29,203       $ 31,720   
  

 

 

    

 

 

    

 

 

 

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

 

(Dollars in Thousands)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 54       $ 11       $ —     

Real estate – construction and development

     1,969         325         —     

Real estate – commercial and farmland

     8,776         1,653         —     

Real estate – residential

     6,132         4,658         —     

Consumer installment

     76         12         —     
  

 

 

    

 

 

    

 

 

 
   $ 17,007       $ 6,659       $ —     
  

 

 

    

 

 

    

 

 

 

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

 

(Dollars in Thousands)

   September 30,
2014
     December 31,
2013
     September 30,
2013
 

Commercial, financial and agricultural

   $ 8,441       $ 7,257       $ 7,872   

Real estate – construction and development

     8,896         14,781         16,582   

Real estate – commercial and farmland

     14,617         33,495         37,079   

Real estate – residential

     7,227         13,278         13,028   

Consumer installment

     102         341         350   
  

 

 

    

 

 

    

 

 

 
   $ 39,283       $ 69,152       $ 74,911   
  

 

 

    

 

 

    

 

 

 

 

14


Table of Contents

The following table presents an aging analysis of loans, excluding purchased non-covered and covered past due loans as of September 30, 2014, December 31, 2013 and September 30, 2013:

 

     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 September 30, 2014:

                    

Commercial, financial & agricultural

   $ 271       $ 400       $ 2,483       $ 3,154       $ 331,629       $ 334,783       $ —     

Real estate – construction & development

     1,232         285         2,899         4,416         149,899         154,315         —     

Real estate – commercial & farmland

     3,025         484         8,918         12,427         869,733         882,160         —     

Real estate – residential

     4,416         2,085         7,303         13,804         422,711         436,515         —     

Consumer installment loans

     333         113         396         842         30,561         31,403         —     

Other

     —           —           —           —           9,583         9,583         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,277       $ 3,367       $ 21,999       $ 34,643       $ 1,814,116       $ 1,848,759       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 31, 2013:

                    

Commercial, financial & agricultural

   $ 10,893       $ 272       $ 4,081       $ 15,246       $ 229,127       $ 244,373       $ —     

Real estate – construction & development

     1,026         69         3,935         5,030         141,341         146,371         —     

Real estate – commercial & farmland

     3,981         1,388         7,751         13,120         795,203         808,323         —     

Real estate – residential

     5,422         1,735         11,587         18,744         348,138         366,882         —     

Consumer installment loans

     568         197         305         1,070         33,179         34,249         —     

Other

     —           —           —           —           18,256         18,256         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 21,890       $ 3,661       $ 27,659       $ 53,210       $ 1,565,244       $ 1,618,454       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 September 30, 2013:

                    

Commercial, financial & agricultural

   $ 623       $ 297       $ 4,107       $ 5,027       $ 239,964       $ 244,991       $ —     

Real estate – construction & development

     1,200         794         4,229         6,223         126,054         132,277         —     

Real estate – commercial & farmland

     3,883         2,458         9,523         15,864         783,285         799,149         —     

Real estate – residential

     5,515         3,531         11,818         20,864         335,056         355,920         —     

Consumer installment loans

     497         255         327         1,079         35,224         36,303         —     

Other

     —           —           —           —           20,627         20,627         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,718       $ 7,335       $ 30,004       $ 49,057       $ 1,540,210       $ 1,589,267       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

The following table presents an aging analysis of purchased non-covered past due loans based on the recorded basis as of September 30, 2014 and December 31, 2013. There were no purchased non-covered loans as of September 30, 2013:

 

     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 September 30, 2014:

                    

Commercial, financial & agricultural

   $ 33       $ 46       $ 55       $ 134       $ 37,943       $ 38,077       $ —     

Real estate – construction & development

     520         135         3,069         3,724         56,538         60,262         1,100   

Real estate – commercial & farmland

     3,497         1,227         8,266         12,990         283,800         296,790         258   

Real estate – residential

     3,915         1,440         5,929         11,284         262,063         273,347         —     

Consumer installment loans

     36         5         76         117         5,131         5,248         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,001       $ 2,853       $ 17,395       $ 28,249       $ 645,475       $ 673,724       $ 1,358   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 31, 2013:

                    

Commercial, financial & agricultural

   $ 370       $ 70       $ 11       $ 451       $ 31,690       $ 32,141       $ —     

Real estate – construction & development

     1,008         89         325         1,422         29,754         31,176         —     

Real estate – commercial & farmland

     6,851         2,064         1,516         10,431         169,467         179,898         —     

Real estate – residential

     4,667         1,074         3,428         9,169         191,682         200,851         —     

Consumer installment loans

     7         17         9         33         4,654         4,687         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 12,903       $ 3,314       $ 5,289       $ 21,506       $ 427,247       $ 448,753       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

The following table presents an aging analysis of covered loans as of September 30, 2014, December 31, 2013 and September 30, 2013:

 

     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 September 30, 2014:

                    

Commercial, financial & agricultural

   $ 568       $ 188       $ 1,978       $ 2,734       $ 19,811       $ 22,545       $ —     

Real estate – construction & development

     632         72         8,659         9,363         18,393         27,756         —     

Real estate – commercial & farmland

     7,100         322         8,930         16,352         164,214         180,566         305   

Real estate – residential

     2,694         1,473         5,563         9,730         72,715         82,445         65   

Consumer installment loans

     2         7         101         110         167         277         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,996       $ 2,062       $ 25,231       $ 38,289       $ 275,300       $ 313,589       $ 370   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 31, 2013:

                    

Commercial, financial & agricultural

   $ 3,966       $ 12       $ 6,165       $ 10,143       $ 16,407       $ 26,550       $ —    

Real estate – construction & development

     843         144         14,055         15,042         28,137         43,179         —    

Real estate – commercial & farmland

     8,482         4,350         26,428         39,260         185,191         224,451         346  

Real estate – residential

     7,648         1,914         10,244         19,806         75,367         95,173         —    

Consumer installment loans

     51         14         305         370         514         884         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 20,990       $ 6,434       $ 57,197       $ 84,621       $ 305,616       $ 390,237       $ 346  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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 September 30, 2013:

                    

Commercial, financial & agricultural

   $ 319       $ 50       $ 6,695       $ 7,064       $ 20,704       $ 27,768       $ —     

Real estate – construction & development

     2,831         658         15,781         19,270         31,432         50,702         266   

Real estate – commercial & farmland

     7,365         5,350         30,503         43,218         193,868         237,086         568   

Real estate – residential

     2,980         1,727         11,078         15,785         85,361         101,146         823   

Consumer installment loans

     49         —           311         360         587         947         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,544       $ 7,785       $ 64,368       $ 85,697       $ 331,952       $ 417,649       $ 1,657   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

17


Table of Contents

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 impaired loans, excluding purchased non-covered and covered loans:

 

     As of and For the Period Ended  
     September 30,
2014
     December 31,
2013
     September 30,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 22,810       $ 29,203       $ 31,720   

Troubled debt restructurings not included above

     17,261         17,214         17,024   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 40,071       $ 46,417       $ 48,744   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 117       $ 54       $ 17   
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 799       $ 522       $ 468   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ 138       $ 30       $ 216   
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 161       $ 418       $ 388   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of September 30, 2014, December 31, 2013 and September 30, 2013.

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Nine Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of September 30, 2014:

              

Commercial, financial & agricultural

   $ 4,445       $ 8       $ 2,943       $ 2,951       $ 631       $ 2,402       $ 3,285   

Real estate – construction & development

     8,824         211         4,743         4,954         612         5,243         5,596   

Real estate – commercial & farmland

     18,955         7,311         8,753         16,064         1,698         16,242         16,312   

Real estate – residential

     18,251         5,635         9,946         15,581         1,286         15,356         17,169   

Consumer installment loans

     606         —           521         521         10         517         516   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 51,081       $ 13,165       $ 26,906       $ 40,071       $ 4,237       $ 39,760       $ 42,878   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2013:

              

Commercial, financial & agricultural

   $ 6,240       $ —         $ 4,618       $ 4,618       $ 435       $ 4,669       $ 4,844   

Real estate – construction & development

     11,363         —           5,867         5,867         512         6,011         8,341   

Real estate – commercial & farmland

     18,456         —           15,479         15,479         1,443         15,860         17,559   

Real estate – residential

     24,342         —           19,970         19,970         1,472         20,571         20,335   

Consumer installment loans

     623         —           483         483         9         469         642   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 61,024       $ —         $ 46,417       $ 46,417       $ 3,871       $ 47,580       $ 51,721   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of September 30, 2013:

              

Commercial, financial & agricultural

   $ 7,401       $ —         $ 4,719       $ 4,719       $ 820       $ 5,052       $ 4,900   

Real estate – construction & development

     14,299         —           6,155         6,155         821         6,775         8,960   

Real estate – commercial & farmland

     18,628         —           16,241         16,241         1,999         16,366         18,079   

Real estate – residential

     24,701         —           21,174         21,174         1,530         20,533         20,427   

Consumer installment loans

     565         —           455         455         10         559         681   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 65,594       $ —         $ 48,744       $ 48,744       $ 5,180       $ 49,285       $ 53,047   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     As of and For the Period Ended  
     September 30,
2014
     December 31,
2013
     September 30,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 17,007       $ 6,659       $ —     

Troubled debt restructurings not included above

     583         —           —     
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 17,590       $ 6,659       $ —     
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 19       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 35       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ 18       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 176       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to impaired purchased non-covered loans as of September 30, 2014 and December 31, 2013. There were no purchased non-covered loans as of September 30, 2013:

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Nine Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of September 30, 2014:

              

Commercial, financial & agricultural

   $ 438       $ 54       $ —         $ 54       $ —         $ 98       $ 81   

Real estate – construction & development

     3,794         2,274         —           2,274         —           2,273         1,501   

Real estate – commercial & farmland

     12,354         8,776         —           8,776         —           7,712         5,976   

Real estate – residential

     9,610         6,407         —           6,407         —           6,533         6,233   

Consumer installment loans

     184         79         —           79         —           64         43   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 26,380       $ 17,590       $ —         $ 17,590       $ —         $ 16,680       $ 13,834   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2013:

              

Commercial, financial & agricultural

   $ 19       $ 11       $ —         $ 11       $ —         $ 1       $ —     

Real estate – construction & development

     542         325         —           325         —           25         6   

Real estate – commercial & farmland

     2,673         1,653         —           1,653         —           126         32   

Real estate – residential

     7,712         4,658         —           4,658         —           354         90   

Consumer installment loans

     20         12         —           12         —           1         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,996       $ 6,659       $ —         $ 6,659       $ —         $ 507       $ 128   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

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

 

     As of and For the Period Ended  
     September 30,
2014
     December 31,
2013
     September 30,
2013
 
     (Dollars in Thousands)  

Nonaccrual loans

   $ 39,283       $ 69,152       $ 74,911   

Troubled debt restructurings not included above

     22,757         22,243         21,184   
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 62,040       $ 91,395       $ 96,095   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date interest income recognized on impaired loans

   $ 176       $ 175       $ 9   
  

 

 

    

 

 

    

 

 

 

Year-to-date interest income recognized on impaired loans

   $ 1,115       $ 968       $ 793   
  

 

 

    

 

 

    

 

 

 

Quarter-to-date foregone interest income on impaired loans

   $ —         $ 44       $ 44   
  

 

 

    

 

 

    

 

 

 

Year-to-date foregone interest income on impaired loans

   $ 94       $ 330       $ 286   
  

 

 

    

 

 

    

 

 

 

The following table presents an analysis of information pertaining to impaired covered loans as of September 30, 2014, December 31, 2013 and September 30, 2013:

 

     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Nine Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of September 30, 2014:

              

Commercial, financial & agricultural

   $ 11,356       $ 8,467       $ —         $ 8,467       $ —         $ 10,367       $ 9,511   

Real estate – construction & development

     13,268         11,920         —           11,920         —           11,484         14,760   

Real estate – commercial & farmland

     26,624         23,118         —           23,118         —           23,562         29,904   

Real estate – residential

     20,331         18,430         —           18,430         —           19,112         21,456   

Consumer installment loans

     134         105         —           105         —           116         177   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 71,713       $ 62,040       $ —         $ 62,040       $ —         $ 64,641       $ 75,808   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Twelve Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of December 31, 2013:

              

Commercial, financial & agricultural

   $ 9,680       $ 7,270       $ —         $ 7,270       $ —         $ 7,577       $ 8,696   

Real estate – construction & development

     20,915         18,037         —           18,037         —           19,464         21,794   

Real estate – commercial & farmland

     46,612         40,749         —           40,749         —           42,014         51,584   

Real estate – residential

     29,089         24,998         —           24,998         —           24,345         28,452   

Consumer installment loans

     394         341         —           341         —           346         304   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 106,690       $ 91,395       $ —         $ 91,395       $ —         $ 93,745       $ 110,830   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
With No
Allowance
     Recorded
Investment
With
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Three Month
Average
Recorded
Investment
     Nine Month
Average
Recorded
Investment
 
     (Dollars in Thousands)  

As of September 30, 2013:

              

Commercial, financial & agricultural

   $ 10,645       $ 7,884       $ —         $ 7,884       $ —         $ 8,327       $ 9,052   

Real estate – construction & development

     25,401         20,890         —           20,890         —           21,860         22,734   

Real estate – commercial & farmland

     51,105         43,279         —           43,279         —           48,558         54,292   

Real estate – residential

     28,078         23,692         —           23,692         —           24,810         29,316   

Consumer installment loans

     404         350         —           350         —           318         295   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 115,633       $ 96,095       $ —         $ 96,095       $ —         $ 103,872       $ 115,689   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Every loan is assigned a risk rating, with the exception of credit card receivables and overdraft protection loans which are treated as pools and assigned a risk rating. All relationships greater than $1.0 million and the majority of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department or an independent third party loan review. 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, the 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 of borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate the 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 exhibit 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 a 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.

 

21


Table of Contents

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of September 30, 2014.

 

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

   $ 114,298       $ 171       $ 251       $ 479       $ 6,287       $ —         $ 121,486   

15

     29,665         4,114         136,303         51,508         1,124         —           222,714   

20

     110,337         50,427         478,551         241,457         17,700         9,583         908,055   

23

     186         9,292         9,574         9,469         305         —           28,826   

25

     73,251         83,245         217,226         105,635         4,842         —           484,199   

30

     3,438         1,781         16,217         10,060         254         —           31,750   

40

     3,608         5,285         23,950         17,907         890         —           51,640   

50

     —           —           88         —           —           —           88   

60

     —           —           —           —           1         —           1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 334,783       $ 154,315       $ 882,160       $ 436,515       $ 31,403       $ 9,583       $ 1,848,759   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 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

   $ 66,983       $ —         $ 265       $ 419       $ 6,714       $ —         $ 74,381   

15

     24,789         4,655         147,157         52,335         1,276         —           230,212   

20

     93,852         45,195         431,790         165,339         18,619         18,256         773,051   

23

     127         8,343         10,219         12,641         274         —           31,604   

25

     50,373         78,736         181,645         103,427         6,310         —           420,491   

30

     2,111         2,876         11,849         13,558         197         —           30,591   

40

     6,011         6,566         25,398         19,153         859         —           57,987   

50

     127         —           —           10         —           —           137   

60

     —          —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244,373       $ 146,371       $ 808,323       $ 366,882       $ 34,249       $ 18,256       $ 1,618,454   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of September 30, 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

   $ 65,033       $ —         $ 278       $ 420       $ 7,028       $ —         $ 72,759   

15

     20,668         5,080         147,355         56,464         1,243         —           230,810   

20

     89,216         37,765         421,669         142,186         19,691         20,627         731,154   

23

     97         7,085         10,054         13,275         218         —           30,729   

25

     60,407         72,942         183,371         109,604         7,034         —           433,358   

30

     3,019         2,264         12,089         11,427         153         —           28,952   

40

     6,326         7,141         24,333         22,534         936         —           61,270   

50

     225         —           —           10         —           —           235   

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244,991       $ 132,277       $ 799,149       $ 355,920       $ 36,303       $ 20,627       $ 1,589,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents

The following table presents the purchased non-covered loan portfolio by risk grade as of September 30, 2014:

 

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

   $ 3,187       $ —         $ —         $ 292       $ 486       $ —         $ 3,965   

15

     5,023         447         14,136         15,336         519         —           35,461   

20

     11,230         12,345         90,915         64,178         2,034         —           180,702   

23

     8         —           —           1,208         —           —           1,216   

25

     16,467         38,426         167,458         175,313         2,065         —           399,729   

30

     1,494         2,164         9,300         7,071         19         —           20,048   

40

     668         6,880         14,981         9,915         121         —           32,565   

50

     —           —           —           34         4         —           38   

60

     —           —           —           —           —                   —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38,077       $ 60,262       $ 296,790       $ 273,347       $ 5,248       $ —         $ 673,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of December 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

   $ 1,865       $ —         $ —         $ 289       $ 451       $ —         $ 2,605   

15

     4,606         7         12,998         16,160         703         —           34,474   

20

     5,172         3,960         43,802         34,576         1,383         —           88,893   

23

     —           —           —           —           —           —           —     

25

     19,638         20,733         102,260         129,923         1,888         —           274,442   

30

     576         1,760         9,554         10,878         194                 —           22,962   

40

     284         4,716         11,284         9,025         68         —           25,377   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 32,141       $ 31,176       $ 179,898       $ 200,851       $ 4,687       $ —         $ 448,753   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

There were no purchased non-covered loans as of September 30, 2013.

 

23


Table of Contents

The following table presents the covered loan portfolio by risk grade as of September 30, 2014:

 

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

     —           2         795         531         —           —           1,328   

20

     1,302         3,380         33,200         15,957         71         —           53,910   

23

     145         547         14,640         5,815         —                   —           21,147   

25

     5,687         11,725         89,201         35,344         41         —           141,998   

30

     4,827         3,006         8,808         8,649         43         —           25,333   

40

     10,584         9,096         33,922         16,149         122         —           69,873   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 22,545       $ 27,756       $ 180,566       $ 82,445       $ 277       $ —         $ 313,589   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of December 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

     —           16         1,048         638         —           —           1,702   

20

     2,184         8,549         34,674         21,363         193                 —           66,963   

23

     134         1,085         17,037         4,748         51         —           23,055   

25

     7,508         9,611         101,657         38,427         235         —           157,438   

30

     5,125         2,006         21,297         6,979         17         —           35,424   

40

     11,599         21,912         48,738         23,018         388         —           105,655   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 26,550       $ 43,179       $ 224,451       $ 95,173       $ 884       $ —         $ 390,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the covered loan portfolio by risk grade as of September 30, 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

     —           22         1,098         641         —           —           1,761   

20

     2,697         11,347         34,252         22,545         208         —           71,049   

23

     135         1,080         16,708         2,902         51                 —           20,876   

25

     7,609         7,360         108,886         39,632         250         —           163,737   

30

     1,485         5,505         24,790         9,196         14         —           40,990   

40

     15,842         25,388         51,352         26,230         424         —           119,236   

50

     —           —           —           —           —           —           —     

60

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 27,768       $ 50,702       $ 237,086       $ 101,146       $ 947       $ —         $ 417,649   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

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 a 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 on 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) 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 nine months of 2014 and 2013 totaling $8.0 million and $17.0 million, respectively, 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.

As of September 30, 2014, December 31, 2013 and September 30, 2013, the Company had a balance of $20.5 million, $20.9 million and $20.2 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $4.4 million, $2.1 million and $2.1 million in previous charge-offs on such loans at September 30, 2014, December 31, 2013 and September 30, 2013, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $2.2 million, $2.1 million and $1.7 million at September 30, 2014, December 31, 2013 and September 30, 2013, respectively. At September 30, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the three and nine month periods ending September 30, 2014, the Company modified loans as troubled debt restructurings with principal balances of $763,000 and $2.4 million, respectively. These modifications impacted the Company’s allowance for loan losses by $49,000 and $203,000, respectively, for the three and nine month periods ended September 30, 2014. Troubled debt restructurings with an outstanding balance of $528,000 at June 30, 2014 defaulted during the three months ended September 30, 2014 and these defaults did not have a material impact on the Company’s allowance for loan loss. Troubled debt restructurings with an outstanding balance of $1.3 million at December 31, 2013 defaulted during the first nine months of 2014 and these defaults did not have a material impact on the Company’s allowance for loan loss.

 

25


Table of Contents

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at September 30, 2014, December 31, 2013 and September 30, 2013:

 

As of September 30, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

             4       $ 257                 4       $ 507   

Real estate – construction & development

             11         1,917                 4         196   

Real estate – commercial & farmland

             21         7,080                 2         1,672   

Real estate – residential

             43         7,973                 10         759   

Consumer installment

             9         34                 12         93   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

             88       $ 17,261                 32       $ 3,227   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

             4       $ 515                 3       $ 525   

Real estate – construction & development

             8         1,896                 2         32   

Real estate – commercial & farmland

             17         6,913                 4         2,273   

Real estate – residential

             37         7,818                 8         834   

Consumer installment

             6         72                 3         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

             72       $ 17,214                 20       $ 3,683   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of September 30, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

             4       $ 521                 3       $ 533   

Real estate – construction & development

             8         1,926                 1         29   

Real estate – commercial & farmland

             16         6,693                 3         1,858   

Real estate – residential

             35         7,871                 7         704   

Consumer installment

             1         13                 2         26   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

             64       $ 17,024                 16       $ 3,150   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2014, the Company had a balance of $583,000 in troubled debt restructurings included in purchased non-covered loans. The Company did not have any troubled debt restructurings included in purchased non-covered loans as of December 31, 2013 and September 30, 2013. The Company has not recorded any previous charge-offs on such loans at September 30, 2014. At September 30, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and non-accrual at September 30, 2014:

 

As of September 30, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

             —         $ —                   —         $ —     

Real estate – construction & development

     1         305         —           —     

Real estate – commercial & farmland

     —           —           —           —     

Real estate – residential

     4         275         2         247   

Consumer installment

     1         3         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     6       $ 583         2       $ 247   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

26


Table of Contents

As of September 30, 2014, December 31, 2013 and September 30, 2013, the Company had a balance of $25.0 million, $27.3 million and $28.4 million, respectively, in troubled debt restructurings included in covered loans. The Company has recorded $2.1 million, $1.6 million and $3.7 million in previous charge-offs on such loans at September 30, 2014, December 31, 2013 and September 30, 2013, respectively. At September 30, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as accrual and non-accrual at September 30, 2014, December 31, 2013 and September 30, 2013:

 

As of September 30, 2014    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 26         1       $ 3   

Real estate – construction & development

     3         3,024         3         56   

Real estate – commercial & farmland

     15         8,501         6         1,225   

Real estate – residential

             94         11,202         13         965   

Consumer installment

     1         4                 —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     114       $ 22,757         23       $ 2,249   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of December 31, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 13         5       $ 71   

Real estate – construction & development

     3         3,256         4         52   

Real estate – commercial & farmland

     13         7,255         5         3,946   

Real estate – residential

     83         11,719         8         942   

Consumer installment

             —           —           2         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     100       $ 22,243                 24       $ 5,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

As of September 30, 2013    Accruing Loans      Non-Accruing Loans  

Loan class:

   #      Balance
(in thousands)
     #      Balance
(in thousands)
 

Commercial, financial & agricultural

     1       $ 12         3       $ 40   

Real estate – construction & development

     5         4,308         4         690   

Real estate – commercial & farmland

     11         6,200         7         4,805   

Real estate – residential

     79         10,461         11         1,874   

Consumer installment

             —           —           1         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     96       $ 20,981                 26       $ 7,414   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

27


Table of Contents

Allowance for Loan Losses

The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by independent auditors and regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of certain mortgage loans serviced at a third party, mortgage warehouse lines and overdraft protection loans which are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. All relationships greater than $1.0 million and the majority of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department or an independent third party loan review firm. As a result of these loan reviews, certain loans may be identified as having deteriorating credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

During the nine months ended September 30, 2014, the year ended December 31, 2013 and the nine months ended September 30, 2013, the Company recorded provision for loan loss expense of $685,000, $1.5 million and $1.3 million, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. During the nine months ended September 30, 2014, the Company recorded provision for loan loss expense of $4,000 to account for losses where the initial estimate of cash flows was found to be excessive on purchased, non-covered loans. Charge-offs on purchased loans, both covered and non-covered, are recorded when impairment is recorded. Provision expense for covered loans is recorded net of the indemnification by the FDIC loss-share agreements.

 

28


Table of Contents

The following table details activity in the allowance for loan losses by portfolio segment for the periods indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

     Commercial,
financial &
agricultural
    Real estate –
construction &
development
    Real estate –
commercial &
farmland
    Real estate–residential     Consumer
installment
loans and
Other
    Purchased
non-covered
loans
    Covered
loans
    Total  
     (Dollars in Thousands)  

Three months ended September 30, 2014:

  

Balance, June 30, 2014

   $ 2,185      $ 5,431      $ 8,317      $ 5,166      $ 1,155      $ —        $ —        $ 22,254   

Provision for loan losses

     540        63        1,237        595        (862     4        92        1,669   

Loans charged off

     (191     (296     (953     (406     (129     (4     (376     (2,355

Recoveries of loans previously charged off

     47        96        31        52        134        —          284        644   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

   $ 2,581      $ 5,294      $ 8,632      $ 5,407      $ 298      $ —        $ —        $ 22,212   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nine months ended September 30, 2014:

  

Balance, January 1, 2014

   $ 1,823      $ 5,538      $ 8,393      $ 6,034      $ 589      $ —        $ —        $ 22,377   

Provision for loan losses

     1,627        (26     2,311        529        (370     4        685        4,760   

Loans charged off

     (1,099     (518     (2,255     (1,339     (343     (4     (1,514     (7,072

Recoveries of loans previously charged off

     230        300        183        183        422        —          829        2,147   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

   $ 2,581      $ 5,294      $ 8,632      $ 5,407      $ 298      $ —        $ —        $ 22,212   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end amount allocated to:

  

Loans individually evaluated for impairment

   $ 611      $ 540      $ 1,682      $ 1,272      $ —        $ —        $ —        $ 4,105   

Loans collectively evaluated for impairment

     1,970        4,754        6,950        4,135        298        —          —          18,107   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 2,581      $ 5,294      $ 8,632      $ 5,407      $ 298      $ —        $ —        $ 22,212   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans: