Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: general competitive, economic, unemployment, political and market conditions and fluctuations, including real estate market conditions, and the effects of such conditions and fluctuations on the creditworthiness of borrowers, collateral values, asset recovery values and the value of investment securities; movements in interest rates and their impacts on net interest margin; expectations on credit quality and performance; competitive pressures on product pricing and services; legislative and regulatory changes; changes in U.S. government monetary and fiscal policy; the impact of the COVID-19 pandemic on the general economy, our customers and the allowance for loan losses; the benefits that may be realized by our customers from government assistance programs and regulatory actions related to the COVID-19 pandemic; the potential impact of the phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR; additional competition in our markets; changes in state and federal banking laws and regulations to which we are subject; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; the cost savings and any revenue synergies expected to result from acquisition transactions, which may not be fully realized within the expected timeframes if at all; the success and timing of other business strategies; our outlook and long-term goals for future growth; weather events, natural disasters, geopolitical events, acts of war or terrorism or other hostilities, public health crises and other catastrophic events beyond our control; and other factors discussed in our filings with the Securities and Exchange Commission (the “SEC”) under the Exchange Act.
All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.
Overview
The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of June 30, 2021, as compared with December 31, 2020, and operating results for the three- and six-month periods ended June 30, 2021 and 2020. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.
This discussion contains certain performance measures determined by methods other than in accordance with GAAP. Management of the Company uses these non-GAAP measures in its analysis of the Company’s performance. These measures are useful when evaluating the underlying performance and efficiency of the Company’s operations and balance sheet. The Company’s management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company’s management believes that investors may use these non-GAAP financial measures to evaluate the Company’s financial performance without the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Non-GAAP measures include adjusted net income and adjusted net income per diluted share. The Company calculates the regulatory capital ratios using current regulatory report instructions. The Company’s management uses these measures to assess the quality of capital and believes that investors may find them useful in their evaluation of the Company. These capital measures may or may not be necessarily comparable to similar capital measures that may be presented by other companies.
Critical Accounting Policies
There have been no significant changes to our critical accounting policies from those disclosed in our 2020 Annual Report on Form 10-K. The reader should refer to the notes to our consolidated financial statements in our 2020 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.
Results of Operations for the Three Months Ended June 30, 2021 and 2020
Consolidated Earnings and Profitability
Ameris reported net income available to common shareholders of $88.3 million, or $1.27 per diluted share, for the quarter ended June 30, 2021, compared with $32.2 million, or $0.47 per diluted share, for the same period in 2020. The Company’s return on average assets and average shareholders’ equity were 1.64% and 12.66%, respectively, in the second quarter of 2021, compared with 0.67% and 5.23%, respectively, in the second quarter of 2020. During the second quarter of 2021, the Company recorded pre-tax servicing right recovery of $749,000 and pre-tax gains on the sale of premises of $236,000. During the second quarter of 2020, the Company incurred pre-tax merger and conversion charges of $895,000, pre-tax restructuring charges of $1.5 million, pre-tax servicing right impairment of $8.0 million, pre-tax gain on BOLI proceeds of $845,000, pre-tax expenses related to SEC and DOJ investigation of $1.3 million, pre-tax expenses related to the COVID-19 pandemic of $2.0 million and pre-tax losses on the sale of premises of $281,000. Excluding these adjustment items, the Company’s net income would have been $87.5 million, or $1.25 per diluted share, for the second quarter of 2021 and $42.4 million, or $0.61 per diluted share, for the second quarter of 2020.
Below is a reconciliation of adjusted net income to net income, as discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
(in thousands, except share and per share data)
|
2021
|
|
2020
|
|
Net income
|
$
|
88,327
|
|
|
$
|
32,236
|
|
|
Adjustment items:
|
|
|
|
|
Merger and conversion charges
|
—
|
|
|
895
|
|
|
|
|
|
|
|
Restructuring charge
|
—
|
|
|
1,463
|
|
|
Servicing right impairment (recovery)
|
(749)
|
|
|
7,989
|
|
|
Gain on BOLI proceeds
|
—
|
|
|
(845)
|
|
|
Expenses related to SEC and DOJ investigation
|
—
|
|
|
1,294
|
|
|
Natural disaster and pandemic expenses
|
—
|
|
|
2,043
|
|
|
(Gain) loss on the sale of premises
|
(236)
|
|
|
281
|
|
|
Tax effect of adjustment items (Note 1)
|
206
|
|
|
(2,933)
|
|
|
After tax adjustment items
|
(779)
|
|
|
10,187
|
|
|
Adjusted net income
|
$
|
87,548
|
|
|
$
|
42,423
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - diluted
|
69,791,670
|
|
|
69,292,972
|
|
|
Net income per diluted share
|
$
|
1.27
|
|
|
$
|
0.47
|
|
|
Adjusted net income per diluted share
|
$
|
1.25
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
Note 1: Tax effect is calculated utilizing a 21% rate for taxable adjustments. Gain on BOLI proceeds is non-taxable and no tax effect is included.
|
Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the second quarter of 2021 and 2020, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2021
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
109,260
|
|
|
$
|
34,085
|
|
|
$
|
8,988
|
|
|
$
|
14,050
|
|
|
$
|
7,368
|
|
|
$
|
173,751
|
|
|
Interest expense
|
(1,410)
|
|
|
11,552
|
|
|
268
|
|
|
1,168
|
|
|
321
|
|
|
11,899
|
|
|
Net interest income
|
110,670
|
|
|
22,533
|
|
|
8,720
|
|
|
12,882
|
|
|
7,047
|
|
|
161,852
|
|
|
Provision for credit losses
|
(3,949)
|
|
|
5,647
|
|
|
(155)
|
|
|
(607)
|
|
|
(794)
|
|
|
142
|
|
|
Noninterest income
|
16,171
|
|
|
69,055
|
|
|
1,333
|
|
|
2,677
|
|
|
4
|
|
|
89,240
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
37,814
|
|
|
44,798
|
|
|
278
|
|
|
937
|
|
|
1,678
|
|
|
85,505
|
|
|
Occupancy and equipment
|
9,050
|
|
|
1,553
|
|
|
1
|
|
|
132
|
|
|
76
|
|
|
10,812
|
|
|
Data processing and communications expenses
|
10,280
|
|
|
1,435
|
|
|
68
|
|
|
—
|
|
|
94
|
|
|
11,877
|
|
|
Other expenses
|
18,763
|
|
|
7,638
|
|
|
30
|
|
|
284
|
|
|
852
|
|
|
27,567
|
|
|
Total noninterest expense
|
75,907
|
|
|
55,424
|
|
|
377
|
|
|
1,353
|
|
|
2,700
|
|
|
135,761
|
|
|
Income before income tax expense
|
54,883
|
|
|
30,517
|
|
|
9,831
|
|
|
14,813
|
|
|
5,145
|
|
|
115,189
|
|
|
Income tax expense
|
14,196
|
|
|
6,408
|
|
|
2,064
|
|
|
3,111
|
|
|
1,083
|
|
|
26,862
|
|
|
Net income
|
$
|
40,687
|
|
|
$
|
24,109
|
|
|
$
|
7,767
|
|
|
$
|
11,702
|
|
|
$
|
4,062
|
|
|
$
|
88,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2020
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
128,653
|
|
|
$
|
34,714
|
|
|
$
|
5,285
|
|
|
$
|
8,757
|
|
|
$
|
7,609
|
|
|
$
|
185,018
|
|
|
Interest expense
|
8,323
|
|
|
10,412
|
|
|
259
|
|
|
1,723
|
|
|
487
|
|
|
21,204
|
|
|
Net interest income
|
120,330
|
|
|
24,302
|
|
|
5,026
|
|
|
7,034
|
|
|
7,122
|
|
|
163,814
|
|
|
Provision for credit losses
|
86,805
|
|
|
423
|
|
|
403
|
|
|
2,322
|
|
|
(1,792)
|
|
|
88,161
|
|
|
Noninterest income
|
14,468
|
|
|
104,195
|
|
|
727
|
|
|
1,570
|
|
|
—
|
|
|
120,960
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
40,423
|
|
|
50,003
|
|
|
209
|
|
|
2,612
|
|
|
1,921
|
|
|
95,168
|
|
|
Occupancy and equipment
|
11,679
|
|
|
1,953
|
|
|
1
|
|
|
97
|
|
|
77
|
|
|
13,807
|
|
|
Data processing and communications expenses
|
8,919
|
|
|
1,406
|
|
|
55
|
|
|
15
|
|
|
119
|
|
|
10,514
|
|
|
Other expenses
|
27,997
|
|
|
6,949
|
|
|
88
|
|
|
359
|
|
|
886
|
|
|
36,279
|
|
|
Total noninterest expense
|
89,018
|
|
|
60,311
|
|
|
353
|
|
|
3,083
|
|
|
3,003
|
|
|
155,768
|
|
|
Income (loss) before income tax expense
|
(41,025)
|
|
|
67,763
|
|
|
4,997
|
|
|
3,199
|
|
|
5,911
|
|
|
40,845
|
|
|
Income tax expense (benefit)
|
(8,582)
|
|
|
14,231
|
|
|
1,049
|
|
|
671
|
|
|
1,240
|
|
|
8,609
|
|
|
Net income (loss)
|
$
|
(32,443)
|
|
|
$
|
53,532
|
|
|
$
|
3,948
|
|
|
$
|
2,528
|
|
|
$
|
4,671
|
|
|
$
|
32,236
|
|
Net Interest Income and Margins
The following table sets forth the average balance, interest income or interest expense, and average interest rate for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the three months ended June 30, 2021 and 2020. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30,
|
|
|
2021
|
|
2020
|
|
(dollars in thousands)
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Rate Paid
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Rate Paid
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold, interest-bearing deposits in banks, and time deposits in other banks
|
$
|
2,481,336
|
|
|
$
|
607
|
|
|
0.10%
|
|
$
|
422,798
|
|
|
$
|
168
|
|
|
0.16%
|
|
Investment securities
|
857,079
|
|
|
5,420
|
|
|
2.54%
|
|
1,382,699
|
|
|
9,544
|
|
|
2.78%
|
|
Loans held for sale
|
1,705,167
|
|
|
11,773
|
|
|
2.77%
|
|
1,614,080
|
|
|
14,053
|
|
|
3.50%
|
|
Loans
|
14,549,104
|
|
|
157,112
|
|
|
4.33%
|
|
13,915,406
|
|
|
162,617
|
|
|
4.70%
|
|
Total interest-earning assets
|
19,592,686
|
|
|
174,912
|
|
|
3.58%
|
|
17,334,983
|
|
|
186,382
|
|
|
4.32%
|
|
Noninterest-earning assets
|
1,946,208
|
|
|
|
|
|
|
1,887,198
|
|
|
|
|
|
|
Total assets
|
$
|
21,538,894
|
|
|
|
|
|
|
$
|
19,222,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing demand deposits
|
$
|
9,063,721
|
|
|
$
|
2,846
|
|
|
0.13%
|
|
$
|
7,355,593
|
|
|
$
|
5,123
|
|
|
0.28%
|
|
Time deposits
|
2,006,265
|
|
|
2,929
|
|
|
0.59%
|
|
2,473,177
|
|
|
9,150
|
|
|
1.49%
|
|
Federal funds purchased and securities sold under agreements to repurchase
|
6,883
|
|
|
5
|
|
|
0.29%
|
|
12,452
|
|
|
25
|
|
|
0.81%
|
|
FHLB advances
|
48,910
|
|
|
193
|
|
|
1.58%
|
|
1,212,537
|
|
|
1,686
|
|
|
0.56%
|
|
Other borrowings
|
376,376
|
|
|
4,683
|
|
|
4.99%
|
|
269,300
|
|
|
3,487
|
|
|
5.21%
|
|
Subordinated deferrable interest debentures
|
125,068
|
|
|
1,243
|
|
|
3.99%
|
|
123,120
|
|
|
1,733
|
|
|
5.66%
|
|
Total interest-bearing liabilities
|
11,627,223
|
|
|
11,899
|
|
|
0.41%
|
|
11,446,179
|
|
|
21,204
|
|
|
0.75%
|
|
Demand deposits
|
6,874,471
|
|
|
|
|
|
|
5,061,578
|
|
|
|
|
|
|
Other liabilities
|
238,931
|
|
|
|
|
|
|
236,051
|
|
|
|
|
|
|
Shareholders’ equity
|
2,798,269
|
|
|
|
|
|
|
2,478,373
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
$
|
21,538,894
|
|
|
|
|
|
|
$
|
19,222,181
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
3.17%
|
|
|
|
|
|
3.57%
|
|
Net interest income
|
|
|
$
|
163,013
|
|
|
|
|
|
|
$
|
165,178
|
|
|
|
|
Net interest margin
|
|
|
|
|
3.34%
|
|
|
|
|
|
3.83%
|
On a tax-equivalent basis, net interest income for the second quarter of 2021 was $163.0 million, a decrease of $2.2 million, or 1.3%, compared with $165.2 million reported in the same quarter in 2020. The lower net interest income is a result of a shift in mix to lower yielding interest-bearing cash, partially offset by disciplined deposit repricing and a reduction in borrowing costs. Average interest earning assets increased $2.26 billion, or 13.0%, from $17.33 billion in the second quarter of 2020 to $19.59 billion for the second quarter of 2021. This growth in interest earning assets resulted primarily from organic growth in average loans and excess liquidity from deposit growth. The Company’s net interest margin during the second quarter of 2021 was 3.34%, down 49 basis points from 3.83% reported in the second quarter of 2020. Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to $6.4 billion during the second quarter of 2021, with weighted average yields of 3.36%, compared with $7.2 billion and 3.17%, respectively, during the second quarter of 2020. Loan production yields in the lines of business were negatively impacted three and 36 basis points during the second quarters of 2021 and 2020, respectively, by originations of PPP loans in our SBA division. Loan production in the banking division amounted to $911.3 million during the second quarter of 2021, with weighted average yields of 3.75%, compared with $472.1 million and 4.16%, respectively, during the second quarter of 2020.
Total interest income, on a tax-equivalent basis, decreased to $174.9 million during the second quarter of 2021, compared with $186.4 million in the same quarter of 2020. Yields on earning assets decreased to 3.58% during the second quarter of 2021, compared with 4.32% reported in the second quarter of 2020. During the second quarter of 2021, loans comprised 83.0% of average earning assets, compared with 89.6% in the same quarter of 2020. Yields on loans decreased to 4.33% in the second
quarter of 2021, compared with 4.70% in the same period of 2020. Accretion income for the second quarter of 2021 was $4.5 million, compared with $9.6 million in the second quarter of 2020.
The yield on total interest-bearing liabilities decreased from 0.75% in the second quarter of 2020 to 0.41% in the second quarter of 2021. Total funding costs, inclusive of noninterest-bearing demand deposits, decreased to 0.26% in the second quarter of 2021, compared with 0.52% during the second quarter of 2020. Deposit costs decreased from 0.39% in the second quarter of 2020 to 0.13% in the second quarter of 2021. Non-deposit funding costs increased from 1.72% in the second quarter of 2020 to 4.41% in the second quarter of 2021. The increase in non-deposit funding costs was driven primarily by a shift in mix from short-term FHLB advances as excess liquidity reduced outstanding FHLB advances. Average balances of interest bearing deposits and their respective costs for the second quarter of 2021 and 2020 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2021
|
|
Three Months Ended
June 30, 2020
|
|
(dollars in thousands)
|
Average
Balance
|
|
Average
Cost
|
|
Average
Balance
|
|
Average
Cost
|
|
NOW
|
$
|
3,314,334
|
|
|
0.10%
|
|
$
|
2,441,305
|
|
|
0.21%
|
|
MMDA
|
4,872,500
|
|
|
0.16%
|
|
4,221,906
|
|
|
0.36%
|
|
Savings
|
876,887
|
|
|
0.06%
|
|
692,382
|
|
|
0.05%
|
|
Retail CDs
|
2,005,265
|
|
|
0.58%
|
|
2,471,134
|
|
|
1.49%
|
|
Brokered CDs
|
1,000
|
|
|
3.21%
|
|
2,043
|
|
|
2.76%
|
|
Interest-bearing deposits
|
$
|
11,069,986
|
|
|
0.21%
|
|
$
|
9,828,770
|
|
|
0.58%
|
Provision for Credit Losses
The Company’s provision for credit losses during the second quarter of 2021 amounted to $142,000, compared with $88.2 million in the second quarter of 2020. This decrease was primarily attributable to an improved economic forecast in our CECL model, particularly levels of unemployment, home prices and gross domestic product. The provision for credit losses for the second quarter of 2021 was comprised of negative $899,000 related to loans, $1.3 million related to unfunded commitments and negative $258,000 related to other credit losses compared with $68.4 million related to loans and $19.7 million related to unfunded commitments for the second quarter of 2020. Non-performing assets as a percentage of total assets decreased from 0.48% at December 31, 2020 to 0.32% at June 30, 2021. The decrease in non-performing assets is primarily attributable to a decrease in nonaccruing loans as a result of collection activities and upgrades and continued success with OREO sales. Net charge-offs on loans during the second quarter of 2021 were approximately $2.6 million, or 0.07% of average loans on an annualized basis, compared with approximately $9.2 million, or 0.27%, in the second quarter of 2020. The Company’s total allowance for credit losses on loans at June 30, 2021 was $175.1 million, or 1.18% of total loans, compared with $199.4 million, or 1.38% of total loans, at December 31, 2020. This decrease is primarily attributable to the provision release noted above and for the year-to-date period amounting to negative $17.5 million.
Noninterest Income
Total noninterest income for the second quarter of 2021 was $89.2 million, a decrease of $31.7 million, or 26.2%, from the $121.0 million reported in the second quarter of 2020. Income from mortgage-related activities was $70.2 million in the second quarter of 2021, a decrease of $34.7 million, or 33.1%, from $104.9 million in the second quarter of 2020. Total production in the second quarter of 2021 amounted to $2.39 billion, compared with $2.67 billion in the same quarter of 2020, while spread (gain on sale) decreased to 2.77% in the current quarter, compared with 3.53% in the same quarter of 2020. The retail mortgage open pipeline finished the second quarter of 2021 at $1.75 billion, compared with $2.33 billion at March 31, 2021 and $2.67 billion at the end of the second quarter of 2020. Service charges on deposit accounts increased $1.1 million, or 10.9%, to $11.0 million in the second quarter of 2021, compared with $9.9 million in the second quarter of 2020. This increase in service charges on deposit accounts is due primarily to an increase in volume, particularly in business accounts.
Other noninterest income increased $1.8 million, or 34.9%, to $6.9 million for the second quarter of 2021, compared with $5.2 million during the second quarter of 2020. The increase in other noninterest income was primarily attributable to an increase in gains on sales of SBA loans of $1.5 million, an increase in BOLI income of $450,000 and an increase in merchant fee income of $390,000, partially offset by a decrease of $845,000 in gain on BOLI proceeds.
Noninterest Expense
Total noninterest expense for the second quarter of 2021 decreased $20.0 million, or 12.8%, to $135.8 million, compared with $155.8 million in the same quarter 2020. Salaries and employee benefits decreased $9.7 million, or 10.2%, from $95.2 million
in the second quarter of 2020 to $85.5 million in the second quarter of 2021, due primarily to a decrease in variable compensation tied to mortgage production of $5.1 million, a decrease in severance of $1.1 million related to branch consolidations and efficiency initiatives and a decrease in PPP related incentives of $625,000. Occupancy and equipment expenses decreased $3.0 million, or 21.7%, to $10.8 million for the second quarter of 2021, compared with $13.8 million in the second quarter of 2020, due primarily to a reduction in leased locations related to previously announced efficiency initiatives and real estate taxes. Data processing and communications expenses increased $1.4 million, or 13.0%, to $11.9 million in the second quarter of 2021, compared with $10.5 million in the second quarter of 2020. Advertising and marketing expense was $1.9 million in the second quarter of 2021, compared with $1.5 million in the second quarter of 2020. Amortization of intangible assets decreased $1.5 million, or 27.4%, from $5.6 million in the second quarter of 2020 to $4.1 million in the second quarter of 2021. Core deposit intangibles are being amortized over an accelerated basis; therefore, the expense recorded will decline over the life of the asset. There were no merger and conversion charges in the second quarter of 2021, compared with $895,000 of such charges in the same quarter of 2020. Other noninterest expenses decreased $6.4 million, or 23.5%, from $27.4 million in the second quarter of 2020 to $20.9 million in the second quarter of 2021, due primarily to a decrease of $1.8 million in FDIC insurance, a decrease of $2.0 million in expenses related to the COVID-19 pandemic, and a decrease of $2.0 million in legal and professional fees. These decreases in other noninterest expenses were partially offset by increases in loan servicing expenses of $657,000 and variable expenses tied to production in our lines of business.
Income Taxes
Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of nondeductible expenses. For the second quarter of 2021, the Company reported income tax expense of $26.9 million, compared with $8.6 million in the same period of 2020. The Company’s effective tax rate for the three months ending June 30, 2021 and 2020 was 23.3% and 21.1%, respectively. The increase in the effective tax rate is primarily a result of increased pre-tax book income compared with the same period in 2020.
Results of Operations for the Six Months Ended June 30, 2021 and 2020
Consolidated Earnings and Profitability
Ameris reported net income available to common shareholders of $213.3 million, or $3.06 per diluted share, for the six months ended June 30, 2021, compared with $51.6 million, or $0.74 per diluted share, for the same period in 2020. The Company’s return on average assets and average shareholders’ equity were 2.03% and 15.66%, respectively, in the six months ended June 30, 2021, compared with 0.56% and 4.17%, respectively, in the same period in 2020. During the first six months of 2021, the Company recorded pre-tax servicing right recovery of $11.4 million, pre-tax gain on BOLI proceeds of $603,000 and pre-tax gain on the sale of premises of $500,000. During the first six months of 2020, the Company incurred pre-tax merger and conversion charges of $1.4 million, pre-tax restructuring charges related to branch consolidations of $1.5 million, pre-tax servicing right impairment of $30.2 million, pre-tax gain on BOLI proceeds of $845,000, pre-tax expenses related to SEC and DOJ investigation of $2.7 million, pre-tax expenses related to the COVID-19 pandemic of $2.6 million and pre-tax loss on the sale of premises of $751,000. Excluding these adjustment items, the Company’s net income would have been $203.3 million, or $2.91 per diluted share, for the six months ended June 30, 2021 and $81.6 million, or $1.18 per diluted share, for the same period in 2020.
Below is a reconciliation of adjusted net income to net income, as discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
(in thousands, except share and per share data)
|
2021
|
|
2020
|
|
Net income available to common shareholders
|
$
|
213,289
|
|
|
$
|
51,558
|
|
|
Adjustment items:
|
|
|
|
|
Merger and conversion charges
|
—
|
|
|
1,435
|
|
|
|
|
|
|
|
Restructuring charge
|
—
|
|
|
1,463
|
|
|
Servicing right impairment (recovery)
|
(11,388)
|
|
|
30,154
|
|
|
Gain on BOLI proceeds
|
(603)
|
|
|
(845)
|
|
|
Expenses related to SEC and DOJ investigation
|
—
|
|
|
2,737
|
|
|
Natural disaster and pandemic charges
|
—
|
|
|
2,591
|
|
|
(Gain) loss on the sale of premises
|
(500)
|
|
|
751
|
|
|
Tax effect of adjustment items (Note 1)
|
2,496
|
|
|
(8,216)
|
|
|
After tax adjustment items
|
(9,995)
|
|
|
30,070
|
|
|
Adjusted net income
|
$
|
203,294
|
|
|
$
|
81,628
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - diluted
|
69,764,923
|
|
|
69,413,027
|
|
|
Net income per diluted share
|
$
|
3.06
|
|
|
$
|
0.74
|
|
|
Adjusted net income per diluted share
|
$
|
2.91
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
Note 1: Tax effect is calculated utilizing a 21% rate for taxable adjustments. Gain on BOLI proceeds is non-taxable and no tax effect is included. A portion of the merger and conversion charges for the six months ended June 30, 2020 are nondeductible for tax purposes.
|
Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the six months ended June 30, 2021 and 2020, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
221,639
|
|
|
$
|
64,284
|
|
|
$
|
19,315
|
|
|
$
|
32,084
|
|
|
$
|
14,379
|
|
|
$
|
351,701
|
|
|
Interest expense
|
(1,847)
|
|
|
22,767
|
|
|
689
|
|
|
2,567
|
|
|
696
|
|
|
24,872
|
|
|
Net interest income
|
223,486
|
|
|
41,517
|
|
|
18,626
|
|
|
29,517
|
|
|
13,683
|
|
|
326,829
|
|
|
Provision for loan losses
|
(27,853)
|
|
|
1,094
|
|
|
(300)
|
|
|
(1,154)
|
|
|
(236)
|
|
|
(28,449)
|
|
|
Noninterest income
|
32,909
|
|
|
166,695
|
|
|
2,313
|
|
|
5,288
|
|
|
8
|
|
|
207,213
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
80,537
|
|
|
94,636
|
|
|
608
|
|
|
2,319
|
|
|
3,390
|
|
|
181,490
|
|
|
Occupancy and equipment
|
19,170
|
|
|
3,029
|
|
|
2
|
|
|
238
|
|
|
154
|
|
|
22,593
|
|
|
Data processing and communications expenses
|
20,481
|
|
|
2,981
|
|
|
117
|
|
|
1
|
|
|
181
|
|
|
23,761
|
|
|
Other expenses
|
38,473
|
|
|
15,827
|
|
|
63
|
|
|
579
|
|
|
1,773
|
|
|
56,715
|
|
|
Total noninterest expense
|
158,661
|
|
|
116,473
|
|
|
790
|
|
|
3,137
|
|
|
5,498
|
|
|
284,559
|
|
|
Income before income tax expense
|
125,587
|
|
|
90,645
|
|
|
20,449
|
|
|
32,822
|
|
|
8,429
|
|
|
277,932
|
|
|
Income tax expense
|
32,652
|
|
|
19,035
|
|
|
4,294
|
|
|
6,893
|
|
|
1,769
|
|
|
64,643
|
|
|
Net income
|
$
|
92,935
|
|
|
$
|
71,610
|
|
|
$
|
16,155
|
|
|
$
|
25,929
|
|
|
$
|
6,660
|
|
|
$
|
213,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
260,954
|
|
|
$
|
68,125
|
|
|
$
|
10,135
|
|
|
$
|
12,485
|
|
|
$
|
16,087
|
|
|
$
|
367,786
|
|
|
Interest expense
|
22,249
|
|
|
26,067
|
|
|
1,807
|
|
|
3,270
|
|
|
2,634
|
|
|
56,027
|
|
|
Net interest income
|
238,705
|
|
|
42,058
|
|
|
8,328
|
|
|
9,215
|
|
|
13,453
|
|
|
311,759
|
|
|
Provision for loan losses
|
122,802
|
|
|
2,420
|
|
|
394
|
|
|
1,419
|
|
|
2,173
|
|
|
129,208
|
|
|
Noninterest income
|
32,241
|
|
|
138,564
|
|
|
1,687
|
|
|
2,847
|
|
|
—
|
|
|
175,339
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
82,044
|
|
|
81,100
|
|
|
419
|
|
|
4,088
|
|
|
3,463
|
|
|
171,114
|
|
|
Occupancy and equipment
|
22,026
|
|
|
3,457
|
|
|
2
|
|
|
194
|
|
|
156
|
|
|
25,835
|
|
|
Data processing and communications expenses
|
19,716
|
|
|
2,392
|
|
|
96
|
|
|
28
|
|
|
236
|
|
|
22,468
|
|
|
Other expenses
|
58,642
|
|
|
12,824
|
|
|
122
|
|
|
874
|
|
|
1,942
|
|
|
74,404
|
|
|
Total noninterest expense
|
182,428
|
|
|
99,773
|
|
|
639
|
|
|
5,184
|
|
|
5,797
|
|
|
293,821
|
|
|
Income (loss) before income tax expense
|
(34,284)
|
|
|
78,429
|
|
|
8,982
|
|
|
5,459
|
|
|
5,483
|
|
|
64,069
|
|
|
Income tax expense (benefit)
|
(8,307)
|
|
|
16,639
|
|
|
1,886
|
|
|
1,146
|
|
|
1,147
|
|
|
12,511
|
|
|
Net income (loss)
|
$
|
(25,977)
|
|
|
$
|
61,790
|
|
|
$
|
7,096
|
|
|
$
|
4,313
|
|
|
$
|
4,336
|
|
|
$
|
51,558
|
|
Net Interest Income and Margins
The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the six months ended June 30, 2021 and 2020. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
(dollars in thousands)
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Rate Paid
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Yield/
Rate Paid
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold, interest-bearing deposits in banks, and time deposits in other banks
|
$
|
2,324,365
|
|
|
$
|
1,141
|
|
|
0.10%
|
|
$
|
434,843
|
|
|
$
|
1,455
|
|
|
0.67%
|
|
Investment securities
|
907,049
|
|
|
11,716
|
|
|
2.60%
|
|
1,419,580
|
|
|
19,825
|
|
|
2.81%
|
|
Loans held for sale
|
1,496,155
|
|
|
22,600
|
|
|
3.05%
|
|
1,600,606
|
|
|
27,690
|
|
|
3.48%
|
|
Loans
|
14,501,802
|
|
|
318,585
|
|
|
4.43%
|
|
13,308,960
|
|
|
321,253
|
|
|
4.85%
|
|
Total interest-earning assets
|
19,229,371
|
|
|
354,042
|
|
|
3.71%
|
|
16,763,989
|
|
|
370,223
|
|
|
4.44%
|
|
Noninterest-earning assets
|
1,915,380
|
|
|
|
|
|
|
1,885,757
|
|
|
|
|
|
|
Total assets
|
$
|
21,144,751
|
|
|
|
|
|
|
$
|
18,649,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing demand deposits
|
$
|
8,915,964
|
|
|
$
|
5,894
|
|
|
0.13%
|
|
$
|
7,145,803
|
|
|
$
|
17,855
|
|
|
0.50%
|
|
Time deposits
|
2,036,668
|
|
|
6,679
|
|
|
0.66%
|
|
2,579,288
|
|
|
20,520
|
|
|
1.60%
|
|
Federal funds purchased and securities sold under agreements to repurchase
|
8,077
|
|
|
12
|
|
|
0.30%
|
|
14,045
|
|
|
65
|
|
|
0.93%
|
|
FHLB advances
|
48,931
|
|
|
385
|
|
|
1.59%
|
|
1,239,920
|
|
|
6,795
|
|
|
1.10%
|
|
Other borrowings
|
376,318
|
|
|
9,321
|
|
|
4.99%
|
|
269,377
|
|
|
6,998
|
|
|
5.22%
|
|
Subordinated deferrable interest debentures
|
124,823
|
|
|
2,581
|
|
|
4.17%
|
|
125,426
|
|
|
3,794
|
|
|
6.08%
|
|
Total interest-bearing liabilities
|
11,510,781
|
|
|
24,872
|
|
|
0.44%
|
|
11,373,859
|
|
|
56,027
|
|
|
0.99%
|
|
Demand deposits
|
6,644,646
|
|
|
|
|
|
|
4,571,249
|
|
|
|
|
|
|
Other liabilities
|
242,402
|
|
|
|
|
|
|
218,498
|
|
|
|
|
|
|
Shareholders’ equity
|
2,746,922
|
|
|
|
|
|
|
2,486,140
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
$
|
21,144,751
|
|
|
|
|
|
|
$
|
18,649,746
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
3.27%
|
|
|
|
|
|
3.45%
|
|
Net interest income
|
|
|
$
|
329,170
|
|
|
|
|
|
|
$
|
314,196
|
|
|
|
|
Net interest margin
|
|
|
|
|
3.45%
|
|
|
|
|
|
3.77%
|
On a tax-equivalent basis, net interest income for the six months ended June 30, 2021 was $329.2 million, an increase of $15.0 million, or 4.8%, compared with $314.2 million reported in the same period of 2020. The higher net interest income is a result of disciplined deposit pricing and a reduction in borrowing costs, partially offset by a decline in the yield on earning assets. Average interest earning assets increased $2.47 billion, or 14.7%, from $16.76 billion in the first six months of 2020 to $19.23 billion for the first six months of 2021. This growth in interest earning assets resulted primarily from organic growth in average loans, including PPP loans, and excess liquidity from deposit growth. The Company’s net interest margin during the first six months of 2021 was 3.45%, down 32 basis points from 3.77% reported for the first six months of 2020. Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to $13.9 billion during the first six months of 2021, with weighted average yields of 3.25%, compared with $11.1 billion and 3.51%, respectively, during the first six months of 2020. Loan production yields in the lines of business were negatively impacted seven and 26 basis points during the first six months of 2021 and 2020, respectively, by originations of PPP loans in our SBA division. Loan production in the banking division amounted to $1.5 billion during the first six months of 2021 with weighted average yields of 3.77%, compared with $1.4 billion and 4.42%, respectively, during the first six months of 2020.
Total interest income, on a tax-equivalent basis, decreased to $354.0 million during the six months ended June 30, 2021, compared with $370.2 million in the same period of 2020. Yields on earning assets decreased to 3.71% during the first six months of 2021, compared with 4.44% reported in the same period of 2020. During the first six months of 2021, loans comprised 83.2% of average earning assets, compared with 88.9% in the same period of 2020. Yields on loans decreased to
4.43% during the six months ended June 30, 2021, compared with 4.85% in the same period of 2020. Accretion income for the first six months of 2021 was $10.6 million, compared with $16.1 million in the first six months of 2020.
The yield on total interest-bearing liabilities decreased from 0.99% during the six months ended June 30, 2020 to 0.44% in the same period of 2021. Total funding costs, inclusive of noninterest-bearing demand deposits, decreased to 0.28% in the first six months of 2021, compared with 0.71% during the same period of 2020. Deposit costs decreased from 0.54% in the first six months of 2020 to 0.14% in the same period of 2021. Non-deposit funding costs increased from 2.15% in the first six months of 2020 to 4.44% in the same period of 2021. The increase in non-deposit funding costs was driven primarily by a shift in mix from short-term FHLB advances as excess liquidity reduced outstanding FHLB advances. Average balances of interest bearing deposits and their respective costs for the six months ended June 30, 2021 and 2020 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
|
Six Months Ended
June 30, 2020
|
|
(dollars in thousands)
|
Average
Balance
|
|
Average
Cost
|
|
Average
Balance
|
|
Average
Cost
|
|
NOW
|
$
|
3,248,655
|
|
|
0.11%
|
|
$
|
2,364,626
|
|
|
0.34%
|
|
MMDA
|
4,817,197
|
|
|
0.16%
|
|
4,113,275
|
|
|
0.66%
|
|
Savings
|
850,112
|
|
|
0.06%
|
|
667,902
|
|
|
0.09%
|
|
Retail CDs
|
2,035,668
|
|
|
0.66%
|
|
2,547,671
|
|
|
1.59%
|
|
Brokered CDs
|
1,000
|
|
|
2.82%
|
|
31,617
|
|
|
2.04%
|
|
Interest-bearing deposits
|
$
|
10,952,632
|
|
|
0.23%
|
|
$
|
9,725,091
|
|
|
0.79%
|
Provision for Credit Losses
The Company’s provision for credit losses during the six months ended June 30, 2021 amounted to negative $28.4 million, compared with $129.2 million in the six months ended June 30, 2020. This decrease was primarily attributable to an improved economic forecast in our CECL model, particularly levels of unemployment, home prices and gross domestic product. The construction and development segment was the largest contributor to the decrease in provision as a result of both a decline in funded balances and an improvement in qualitative factors compared with December 31, 2020. The improvement in qualitative factors is attributable to uncertainty in the forecast and loss drivers used in the December 31, 2020 provision estimate which Management determined were both properly addressed in the current estimate. The provision for credit losses for the first six months of 2021 was comprised of negative $17.5 million related to loans, negative $10.5 million related to unfunded commitments and negative $431,000 related to other credit losses compared with $105.5 million related to loans and $23.7 million related to unfunded commitments for the same period in 2020. Non-performing assets as a percentage of total assets decreased from 0.48% at December 31, 2020 to 0.32% at June 30, 2021. The decrease in non-performing assets is primarily attributable to a decrease in nonaccruing loans as a result of collection activities and upgrades and continued success with OREO sales. Net charge-offs on loans during the first six months of 2021 were $6.9 million, or 0.10% of average loans on an annualized basis, compared with approximately $13.6 million, or 0.20%, in the first six months of 2020. The Company’s total allowance for credit losses on loans at June 30, 2021 was $175.1 million, or 1.18% of total loans, compared with $199.4 million, or 1.38% of total loans, at December 31, 2020. This decrease is primarily attributable to the provision release noted above.
Noninterest Income
Total noninterest income for the six months ended June 30, 2021 was $207.2 million, an increase of $31.9 million, or 18.2%, from the $175.3 million reported for the six months ended June 30, 2020. Income from mortgage-related activities increased $28.5 million, or 20.3%, from $140.3 million in the first six months of 2020 to $168.7 million in the same period of 2021. Total production in the first six months of 2021 amounted to $5.03 billion, compared with $4.03 billion in the same period of 2020, while spread (gain on sale) increased to 3.39% during the six months ended June 30, 2021, compared with 3.31% in the same period of 2020. The retail mortgage open pipeline was $1.75 billion at June 30, 2021, compared with $2.00 billion at December 31, 2020 and $2.67 billion at June 30, 2020. Mortgage-related activities was positively impacted during the first six months of 2021 by a recovery of previous mortgage servicing right impairment of $10.5 million, compared with an impairment of $29.0 million for the same period in 2020.
Other noninterest income increased $3.2 million, or 28.1%, to $14.6 million for the first six months of 2021, compared with $11.4 million during the same period of 2020. The increase in other noninterest income was primarily attributable to an increase in gains on sales of SBA loans of $839,000, an increase in merchant fee income of $572,000, an increase in trust income of $640,000 and a decrease in SBA servicing asset impairment of $2.0 million, partially offset by a decrease of $852,000 in indirect automobile servicing income.
Noninterest Expense
Total noninterest expenses for the six months ended June 30, 2021 decreased $9.3 million, or 3.2%, to $284.6 million, compared with $293.8 million in the same period of 2020. Salaries and employee benefits increased $10.4 million, or 6.1%, from $171.1 million in the first six months of 2020 to $181.5 million in the same period of 2021 due primarily to an increase in variable compensation tied to increased mortgage production of $11.7 million. Occupancy and equipment expenses decreased $3.2 million, or 12.5%, to $22.6 million for the first six months of 2021, compared with $25.8 million in the same period of 2020, due primarily to a reduction in leased locations related to previously announced efficiency initiatives. Data processing and communications expenses increased $1.3 million, or 5.8%, to $23.8 million in the first six months of 2021, from $22.5 million reported in the same period of 2020. Credit resolution-related expenses decreased $2.0 million, or 62.9%, from $3.1 million in the first six months of 2020 to $1.2 million in the same period of 2021. This decrease in credit resolution-related expenses primarily resulted from a reduction in write-downs on OREO properties and a gain on sale of OREO properties of $714,000. Advertising and marketing expense was $3.4 million in the first six months of 2021, compared with $3.8 million in the first six months of 2020. Amortization of intangible assets decreased $3.0 million, or 27.1%, from $11.2 million in the first six months of 2020 to $8.2 million in the first six months of 2021. Core deposit intangibles are being amortized over an accelerated basis; therefore, the expense recorded will decline over the life of the asset. There were no merger and conversion charges in the first six months of 2021, compared with $1.4 million in the same period in 2020. Other noninterest expenses decreased $10.8 million, or 19.7%, from $54.8 million in the first six months of 2020 to $44.0 million in the same period of 2021, due primarily to a decrease of $4.0 million in FDIC insurance, a decrease of $2.6 million in expenses related to the COVID-19 pandemic and a decrease of $4.4 million in legal and professional fees. These decreases in other noninterest expenses were partially offset by increases in loan servicing expenses of $2.7 million and variable expenses tied to production in our mortgage division.
Income Taxes
Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of nondeductible expenses. For the six months ended June 30, 2021, the Company reported income tax expense of $64.6 million, compared with $12.5 million in the same period of 2020. The Company’s effective tax rate for the six months ended June 30, 2021 and 2020 was 23.3% and 19.5%, respectively. The increase in the effective tax rate is primarily a result of increased pre-tax book income and the benefit recorded in the first quarter of 2020 for loss carrybacks allowed as a result of the CARES Act.
Financial Condition as of June 30, 2021
Securities
Debt securities classified as available-for-sale are recorded at fair value with unrealized holding gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Securities available-for-sale may be bought and sold in response to changes in market conditions including, but not limited to, fluctuations in interest rates, changes in securities' prepayment risk, increases in loan demand, general liquidity needs and to position the portfolio to take advantage of market conditions that create more economically attractive returns. Debt securities are classified as held-to-maturity based on management's positive intent and ability to hold such securities to maturity and are carried at amortized cost. Restricted equity securities are classified as other investment securities and are carried at cost and are periodically evaluated for impairment based on the ultimate recovery of par value or cost basis.
The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the expected life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date.
Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate available-for-sale securities in an unrealized loss position on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation, to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security before recovering its amortized cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the above criteria is not met, management evaluates whether the decline in fair value is attributable to credit or resulted from other factors. If credit-related impairment exists, the Company recognizes an allowance for credit losses, limited to the amount by which the fair value is less than the amortized cost basis. Any impairment not recognized through an allowance for credit losses is recognized in other comprehensive income, net of tax, as a non credit-related impairment. The Company does not intend to sell these available-for-sale investment securities at an unrealized loss position at June 30, 2021, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Based on the results of management's review, at June 30, 2021, management determined that $81,000 was attributable to credit impairment and established the allowance for credit losses accordingly. The remaining $332,000 in unrealized loss was determined to be from factors other than credit.
The Company's held-to-maturity securities have zero expected credit losses and no related allowance for credit losses has been established.
The following table is a summary of our investment portfolio at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(dollars in thousands)
|
Amortized Cost
|
|
Fair
Value
|
|
Amortized Cost
|
|
Fair
Value
|
|
Securities available-for-sale
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
$
|
12,120
|
|
|
$
|
12,327
|
|
|
$
|
17,161
|
|
|
$
|
17,504
|
|
|
State, county and municipal securities
|
58,016
|
|
|
60,836
|
|
|
63,286
|
|
|
66,778
|
|
|
Corporate debt securities
|
43,132
|
|
|
43,612
|
|
|
51,639
|
|
|
51,896
|
|
|
SBA pool securities
|
52,283
|
|
|
54,281
|
|
|
59,973
|
|
|
62,497
|
|
|
Mortgage-backed securities
|
581,021
|
|
|
607,111
|
|
|
748,521
|
|
|
784,204
|
|
|
Total debt securities available-for-sale
|
$
|
746,572
|
|
|
$
|
778,167
|
|
|
$
|
940,580
|
|
|
$
|
982,879
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
29,055
|
|
|
$
|
29,008
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total debt securities held-to-maturity
|
$
|
29,055
|
|
|
$
|
29,008
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The amounts of securities available-for-sale and held-to-maturity in each category as of June 30, 2021 are shown in the following table according to contractual maturity classifications: (i) one year or less; (ii) after one year through five years; (iii) after five years through ten years; and (iv) after ten years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government
Sponsored Agencies
|
|
State, County and
Municipal Securities
|
|
Corporate Debt Securities
|
|
(dollars in thousands)
Securities available-for-sale (1)
|
|
Amount
|
|
Yield
(2)
|
|
Amount
|
|
Yield
(2)(3)
|
|
Amount
|
|
Yield
(2)
|
|
One year or less
|
|
$
|
10,147
|
|
|
1.92
|
%
|
|
$
|
11,242
|
|
|
3.38
|
%
|
|
$
|
500
|
|
|
3.03
|
%
|
|
After one year through five years
|
|
2,180
|
|
|
2.04
|
|
|
19,451
|
|
|
3.79
|
|
|
10,263
|
|
|
4.00
|
|
|
After five years through ten years
|
|
—
|
|
|
—
|
|
|
18,893
|
|
|
3.87
|
|
|
31,153
|
|
|
5.30
|
|
|
After ten years
|
|
—
|
|
|
—
|
|
|
11,250
|
|
|
3.88
|
|
|
1,696
|
|
|
4.24
|
|
|
|
|
$
|
12,327
|
|
|
1.94
|
%
|
|
$
|
60,836
|
|
|
3.75
|
%
|
|
$
|
43,612
|
|
|
4.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA Pool Securities
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
(dollars in thousands)
Securities available-for-sale (1)
|
|
Amount
|
|
Yield
(2)
|
|
Amount
|
|
Yield
(2)
|
|
|
|
|
|
One year or less
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
3,567
|
|
|
2.11
|
%
|
|
|
|
|
|
After one year through five years
|
|
13,075
|
|
|
2.20
|
|
|
99,564
|
|
|
2.74
|
|
|
|
|
|
|
After five years through ten years
|
|
10,054
|
|
|
2.27
|
|
|
173,392
|
|
|
2.79
|
|
|
|
|
|
|
After ten years
|
|
31,152
|
|
|
2.47
|
|
|
330,588
|
|
|
2.31
|
|
|
|
|
|
|
|
|
$
|
54,281
|
|
|
2.36
|
%
|
|
$
|
607,111
|
|
|
2.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
Securities held-to-maturity (1)
|
|
Amount
|
|
Yield
(2)
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
—
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
After one year through five years
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
After five years through ten years
|
|
16,018
|
|
|
1.62
|
|
|
|
|
|
|
|
|
|
|
After ten years
|
|
13,037
|
|
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,055
|
|
|
1.72
|
%
|
|
|
|
|
|
|
|
|
(1)The amortized cost and fair value of debt securities are presented based on contractual maturities. Actual cash flows may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.
(2)Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security in that range.
(3)Yields on securities of state and political subdivisions are stated on a taxable-equivalent basis, using a tax rate of 21%.
Loans and Allowance for Credit Losses
At June 30, 2021, gross loans outstanding (including loans and loans held for sale) were $15.99 billion, up $342.8 million from $15.65 billion reported at December 31, 2020. Loans held for sale increased from $1.17 billion at December 31, 2020 to $1.21 billion at June 30, 2021 primarily in our mortgage division, partially offset by the sale of a consumer portfolio of $165.9 million. Loans increased $299.9 million, or 2.07%, from $14.48 billion at December 31, 2020 to $14.78 billion at June 30, 2021, driven primarily by organic growth net of PPP loan runoff.
The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for credit losses ("ACL") on loans in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) consumer installment; (3) indirect automobile; (4) mortgage warehouse; (5) municipal; (6) premium finance; (7) construction and development related real estate; (8) commercial and farmland real estate; and (9) residential real estate. The Company’s management has
strategically located its branches in select markets in Georgia, Alabama, Florida, North Carolina and South Carolina to take advantage of the growth in these areas.
The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past-due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the ACL. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged off.
The Company estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of ACL, except for loans modified under the Disaster Relief Program.
Expected credit losses are reflected in the ACL through a charge to credit loss expense. When the Company deems all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.
The Company measures expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics. Depending on the nature of the pool of financial assets with similar risk characteristics, the Company currently uses the DCF method, the PD×LGD method or a qualitative approach.
The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed. The Company’s methodologies revert back to historical loss information on a straight-line basis over four quarters when it can no longer develop reasonable and supportable forecasts.
At the end of the second quarter of 2021, the ACL on loans totaled $175.1 million, or 1.18% of loans, compared with $199.4 million, or 1.38% of loans, at December 31, 2020. Our nonaccrual loans decreased from $76.5 million at December 31, 2020 to $59.9 million at June 30, 2021. The decrease in nonaccrual loans is primarily attributable to collection activities and upgrades. For the first six months of 2021, our net charge off ratio as a percentage of average loans decreased to 0.10%, compared with 0.20% for the first six months of 2020. The total provision for credit losses for the first six months of 2021 was negative $28.4 million, decreasing from $129.2 million recorded for the first six months of 2020. Our ratio of total nonperforming assets to total assets decreased from 0.48% at December 31, 2020 to 0.32% at June 30, 2021.
The following table presents an analysis of the allowance for credit losses on loans, provision for credit losses on loans and net charge-offs as of and for the six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
(dollars in thousands)
|
2021
|
|
2020
|
|
Balance of allowance for credit losses on loans at beginning of period
|
$
|
199,422
|
|
|
$
|
38,189
|
|
|
Adjustment to allowance for adoption of ASC 326
|
—
|
|
|
78,661
|
|
|
Provision charged to operating expense
|
(17,478)
|
|
|
105,496
|
|
|
Charge-offs:
|
|
|
|
|
Commercial, financial and agricultural
|
5,899
|
|
|
2,972
|
|
|
Consumer installment
|
3,117
|
|
|
2,104
|
|
|
Indirect automobile
|
970
|
|
|
2,247
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium finance
|
2,537
|
|
|
2,734
|
|
|
Real estate – construction and development
|
212
|
|
|
74
|
|
|
Real estate – commercial and farmland
|
1,422
|
|
|
7,243
|
|
|
Real estate – residential
|
555
|
|
|
625
|
|
|
Total charge-offs
|
14,712
|
|
|
17,999
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
Commercial, financial and agricultural
|
1,352
|
|
|
665
|
|
|
Consumer installment
|
568
|
|
|
1,420
|
|
|
Indirect automobile
|
1,072
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium finance
|
3,588
|
|
|
1,360
|
|
|
Real estate – construction and development
|
251
|
|
|
510
|
|
|
Real estate – commercial and farmland
|
226
|
|
|
106
|
|
|
Real estate – residential
|
781
|
|
|
345
|
|
|
Total recoveries
|
7,838
|
|
|
4,446
|
|
|
Net charge-offs
|
6,874
|
|
|
13,553
|
|
|
Balance of allowance for credit losses on loans at end of period
|
$
|
175,070
|
|
|
$
|
208,793
|
|
The following table presents an analysis of the allowance for credit losses on loans and net charge-offs for loans held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended
|
|
(dollars in thousands)
|
June 30, 2021
|
|
June 30, 2020
|
|
Allowance for credit losses on loans at end of period
|
$
|
175,070
|
|
|
$
|
208,793
|
|
|
Net charge-offs for the period
|
6,874
|
|
|
13,553
|
|
|
Loan balances:
|
|
|
|
|
End of period
|
14,780,791
|
|
|
14,503,157
|
|
|
Average for the period
|
14,501,802
|
|
|
13,308,960
|
|
|
Net charge-offs as a percentage of average loans (annualized)
|
0.10
|
%
|
|
0.20
|
%
|
|
Allowance for credit losses on loans as a percentage of end of period loans
|
1.18
|
%
|
|
1.44
|
%
|
Loans
Loans are stated at amortized cost. Balances within the major loans receivable categories are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
June 30, 2021
|
|
December 31, 2020
|
|
Commercial, financial and agricultural
|
$
|
1,406,421
|
|
|
$
|
1,627,477
|
|
|
Consumer installment
|
229,411
|
|
|
306,995
|
|
|
Indirect automobile
|
397,373
|
|
|
580,083
|
|
|
Mortgage warehouse
|
841,347
|
|
|
916,353
|
|
|
Municipal
|
647,578
|
|
|
659,403
|
|
|
Premium finance
|
780,328
|
|
|
687,841
|
|
|
Real estate – construction and development
|
1,527,883
|
|
|
1,606,710
|
|
|
Real estate – commercial and farmland
|
6,051,472
|
|
|
5,300,006
|
|
|
Real estate – residential
|
2,898,978
|
|
|
2,796,057
|
|
|
|
$
|
14,780,791
|
|
|
$
|
14,480,925
|
|
Non-Performing Assets
Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and OREO. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of non-performing loans over $250,000 on a quarterly basis. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.
Nonaccrual loans totaled $59.9 million at June 30, 2021, a decrease of $16.5 million, or 21.6%, from $76.5 million at December 31, 2020. Accruing loans delinquent 90 days or more totaled $4.9 million at June 30, 2021, a decrease of $3.5 million, or 41.5%, compared with $8.3 million at December 31, 2020. At June 30, 2021, OREO totaled $5.8 million, a decrease of $6.1 million, or 51.4%, compared with $11.9 million at December 31, 2020. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. At the end of the second quarter of 2021, total non-performing assets as a percent of total assets decreased to 0.32% compared with 0.48% at December 31, 2020.
Non-performing assets at June 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
June 30, 2021
|
|
December 31, 2020
|
|
Nonaccrual loans
|
$
|
59,921
|
|
|
$
|
76,457
|
|
|
Accruing loans delinquent 90 days or more
|
4,874
|
|
|
8,326
|
|
|
Repossessed assets
|
226
|
|
|
544
|
|
|
Other real estate owned
|
5,775
|
|
|
11,880
|
|
|
Total non-performing assets
|
$
|
70,796
|
|
|
$
|
97,207
|
|
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.
As of June 30, 2021 and December 31, 2020, the Company had a balance of $92.3 million and $85.0 million, respectively, in troubled debt restructurings. These totals do not include COVID-19 loan modifications accounted for under Section 4013 of the CARES Act. Further information on these loans is set forth under the heading "COVID-19 Deferrals" below. The following table presents the amount of troubled debt restructurings by loan class classified separately as accrual and nonaccrual at June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
12
|
|
$
|
1,038
|
|
|
10
|
|
$
|
805
|
|
|
Consumer installment
|
9
|
|
28
|
|
|
19
|
|
43
|
|
|
Indirect automobile
|
336
|
|
1,647
|
|
|
47
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction and development
|
5
|
|
898
|
|
|
4
|
|
301
|
|
|
Real estate – commercial and farmland
|
28
|
|
46,025
|
|
|
11
|
|
7,103
|
|
|
Real estate – residential
|
238
|
|
31,570
|
|
|
31
|
|
2,515
|
|
|
Total
|
628
|
|
$
|
81,206
|
|
|
122
|
|
$
|
11,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
9
|
|
$
|
521
|
|
|
11
|
|
$
|
849
|
|
|
Consumer installment
|
10
|
|
32
|
|
|
20
|
|
56
|
|
|
Indirect automobile
|
437
|
|
2,277
|
|
|
51
|
|
461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction and development
|
4
|
|
506
|
|
|
5
|
|
707
|
|
|
Real estate – commercial and farmland
|
28
|
|
36,707
|
|
|
7
|
|
1,401
|
|
|
Real estate – residential
|
264
|
|
38,800
|
|
|
34
|
|
2,671
|
|
|
Total
|
752
|
|
$
|
78,843
|
|
|
128
|
|
$
|
6,145
|
|
The following table presents the amount of troubled debt restructurings by loan class classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
Loans Currently Paying
Under Restructured Terms
|
|
Loans that have Defaulted Under Restructured Terms
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
18
|
|
$
|
1,746
|
|
|
4
|
|
$
|
97
|
|
|
Consumer installment
|
13
|
|
33
|
|
|
15
|
|
38
|
|
|
Indirect automobile
|
321
|
|
1,613
|
|
|
62
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction and development
|
8
|
|
1,184
|
|
|
1
|
|
15
|
|
|
Real estate – commercial and farmland
|
37
|
|
52,275
|
|
|
2
|
|
853
|
|
|
Real estate – residential
|
231
|
|
30,307
|
|
|
38
|
|
3,778
|
|
|
Total
|
628
|
|
$
|
87,158
|
|
|
122
|
|
$
|
5,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Loans Currently Paying
Under Restructured Terms
|
|
Loans that have Defaulted Under Restructured Terms
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
11
|
|
$
|
532
|
|
|
9
|
|
$
|
839
|
|
|
Consumer installment
|
12
|
|
33
|
|
|
18
|
|
55
|
|
|
Indirect automobile
|
411
|
|
2,138
|
|
|
77
|
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction and development
|
5
|
|
507
|
|
|
4
|
|
706
|
|
|
Real estate – commercial and farmland
|
29
|
|
36,512
|
|
|
6
|
|
1,595
|
|
|
Real estate – residential
|
249
|
|
35,348
|
|
|
49
|
|
6,123
|
|
|
Total
|
717
|
|
$
|
75,070
|
|
|
163
|
|
$
|
9,918
|
|
The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and nonaccrual at June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Type of Concession
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Forgiveness of interest
|
1
|
|
$
|
72
|
|
|
—
|
|
$
|
—
|
|
|
Forbearance of interest
|
14
|
|
1,086
|
|
|
10
|
|
2,004
|
|
|
|
|
|
|
|
|
|
|
|
Forbearance of principal
|
453
|
|
63,098
|
|
|
63
|
|
7,733
|
|
|
Forbearance of principal, extended amortization
|
—
|
|
—
|
|
|
1
|
|
178
|
|
|
Rate reduction only
|
62
|
|
8,160
|
|
|
4
|
|
244
|
|
|
Rate reduction, maturity extension
|
—
|
|
—
|
|
|
1
|
|
3
|
|
|
Rate reduction, forbearance of interest
|
39
|
|
2,969
|
|
|
7
|
|
349
|
|
|
Rate reduction, forbearance of principal
|
19
|
|
2,537
|
|
|
28
|
|
164
|
|
|
Rate reduction, forgiveness of interest
|
40
|
|
3,284
|
|
|
8
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
628
|
|
$
|
81,206
|
|
|
122
|
|
$
|
11,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Type of Concession
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Forgiveness of interest
|
1
|
|
$
|
73
|
|
|
—
|
|
$
|
—
|
|
|
Forbearance of interest
|
19
|
|
2,255
|
|
|
7
|
|
1,044
|
|
|
|
|
|
|
|
|
|
|
|
Forbearance of principal
|
563
|
|
58,131
|
|
|
72
|
|
3,372
|
|
|
Forbearance of principal, extended amortization
|
—
|
|
—
|
|
|
1
|
|
204
|
|
|
Rate reduction only
|
66
|
|
8,893
|
|
|
4
|
|
525
|
|
|
Rate reduction, maturity extension
|
—
|
|
—
|
|
|
1
|
|
5
|
|
|
Rate reduction, forbearance of interest
|
41
|
|
3,472
|
|
|
9
|
|
389
|
|
|
Rate reduction, forbearance of principal
|
21
|
|
2,609
|
|
|
25
|
|
193
|
|
|
Rate reduction, forgiveness of interest
|
41
|
|
3,410
|
|
|
8
|
|
412
|
|
|
Rate reduction, forgiveness of principal
|
—
|
|
—
|
|
|
1
|
|
1
|
|
|
Total
|
752
|
|
$
|
78,843
|
|
|
128
|
|
$
|
6,145
|
|
The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and nonaccrual at June 30, 2021 and December 31, 2020:
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|
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|
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|
|
|
|
|
|
|
|
June 30, 2021
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Collateral Type
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Warehouse
|
4
|
|
$
|
233
|
|
|
2
|
|
$
|
289
|
|
|
Raw land
|
5
|
|
4,806
|
|
|
6
|
|
724
|
|
|
Hotel and motel
|
7
|
|
29,728
|
|
|
1
|
|
4,903
|
|
|
Office
|
6
|
|
1,245
|
|
|
—
|
|
—
|
|
|
Retail, including strip centers
|
10
|
|
8,562
|
|
|
3
|
|
856
|
|
|
1-4 family residential
|
242
|
|
31,930
|
|
|
33
|
|
2,991
|
|
|
Church
|
1
|
|
2,181
|
|
|
1
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
Automobile/equipment/CD
|
353
|
|
2,521
|
|
|
76
|
|
1,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
628
|
|
$
|
81,206
|
|
|
122
|
|
$
|
11,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Collateral Type
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Warehouse
|
4
|
|
$
|
248
|
|
|
2
|
|
$
|
305
|
|
|
Raw land
|
5
|
|
4,611
|
|
|
7
|
|
1,135
|
|
|
|
|
|
|
|
|
|
|
|
Hotel and motel
|
4
|
|
22,372
|
|
|
—
|
|
—
|
|
|
Office
|
6
|
|
1,281
|
|
|
—
|
|
—
|
|
|
Retail, including strip centers
|
13
|
|
8,627
|
|
|
—
|
|
—
|
|
|
1-4 family residential
|
266
|
|
38,913
|
|
|
35
|
|
3,170
|
|
|
Church
|
—
|
|
—
|
|
|
1
|
|
166
|
|
|
Automobile/equipment/CD
|
454
|
|
2,791
|
|
|
82
|
|
1,368
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
|
—
|
|
—
|
|
|
1
|
|
1
|
|
|
Total
|
752
|
|
$
|
78,843
|
|
|
128
|
|
$
|
6,145
|
|
COVID-19 Deferrals
In response to the COVID-19 pandemic, the Company offered affected borrowers payment relief under its Disaster Relief Program. These modifications primarily consisted of short-term payment deferrals or interest-only periods to assist customers. The Company has begun providing payment modifications to certain borrowers in economically sensitive industries of various terms up to nine months. Modifications related to the COVID-19 pandemic and qualifying under the provisions of Section 4013 of the CARES Act are not deemed to be troubled debt restructurings. As of June 30, 2021, $127.7 million in loans remained in payment deferral under the COVID-19 pandemic Disaster Relief Program compared with $332.8 million at December 31, 2020.
The table below presents short-term deferrals related to the COVID-19 pandemic that were not considered TDRs as of June 30, 2021 and December 31, 2020.
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|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(dollars in thousands
|
COVID-19 Deferrals
|
|
Deferrals as a % of total loans
|
|
COVID-19 Deferrals
|
|
Deferrals as a % of total loans
|
|
Commercial, financial and agricultural
|
$
|
2,539
|
|
|
0.2
|
%
|
|
$
|
12,471
|
|
|
0.8
|
%
|
|
Consumer installment
|
29
|
|
|
—
|
%
|
|
1,418
|
|
|
0.5
|
%
|
|
Indirect automobile
|
1,126
|
|
|
0.3
|
%
|
|
8,936
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – construction and development
|
873
|
|
|
0.1
|
%
|
|
11,049
|
|
|
0.7
|
%
|
|
Real estate – commercial and farmland
|
63,827
|
|
|
1.1
|
%
|
|
179,183
|
|
|
3.4
|
%
|
|
Real estate – residential
|
59,331
|
|
|
2.0
|
%
|
|
119,722
|
|
|
4.3
|
%
|
|
|
$
|
127,725
|
|
|
0.9
|
%
|
|
$
|
332,779
|
|
|
2.3
|
%
|
Commercial Lending Practices
The federal bank regulatory agencies previously issued interagency guidance on commercial real estate lending and prudent risk management practices. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including one-to-four family residential construction), multi-family property and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with
the property, excluding owner-occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing or permanent financing of the property. Loans for owner-occupied CRE are generally excluded from the CRE guidance.
The CRE guidance is applicable when either:
(1)total loans for construction, land development, and other land, net of owner-occupied loans, represent 100% or more of a bank’s total risk-based capital; or
(2)total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner-occupied loans, represent 300% or more of a bank’s total risk-based capital.
Banks that are subject to the CRE guidance criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.
As of June 30, 2021, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:
(1)within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;
(2)on average, CRE loan sizes are generally larger than non-CRE loan types; and
(3)certain construction and development loans may be less predictable and more difficult to evaluate and monitor.
The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of June 30, 2021 and December 31, 2020. The loan categories and concentrations below are based on Federal Reserve Call codes:
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|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(dollars in thousands)
|
Balance
|
|
% of Total
Loans
|
|
Balance
|
|
% of Total
Loans
|
|
Construction and development loans
|
$
|
1,527,883
|
|
|
10%
|
|
$
|
1,606,710
|
|
|
11%
|
|
Multi-family loans
|
536,386
|
|
|
4%
|
|
347,951
|
|
|
2%
|
|
Nonfarm non-residential loans (excluding owner-occupied)
|
3,742,159
|
|
|
25%
|
|
3,260,389
|
|
|
23%
|
|
Total CRE Loans (excluding owner-occupied)
|
5,806,428
|
|
|
39%
|
|
5,215,050
|
|
|
36%
|
|
All other loan types
|
8,974,363
|
|
|
61%
|
|
9,265,875
|
|
|
64%
|
|
Total Loans
|
$
|
14,780,791
|
|
|
100%
|
|
$
|
14,480,925
|
|
|
100%
|
The following table outlines the percentage of construction and development loans and total CRE loans, net of owner-occupied loans, to the Bank’s total risk-based capital, and the Company’s internal concentration limits as of June 30, 2021 and December 31, 2020:
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Internal
Limit
|
|
Actual
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Construction and development loans
|
100%
|
|
65%
|
|
74%
|
|
Total CRE loans (excluding owner-occupied)
|
300%
|
|
245%
|
|
241%
|
Short-Term Investments
The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At June 30, 2021, the Company’s short-term investments were $3.04 billion, compared with $1.91 billion at December 31, 2020. At June 30, 2021, the Company had $20.0 million in federal funds sold and $3.02 billion was in interest-bearing deposit balances at correspondent banks and the Federal Reserve Bank of Atlanta.
Derivative Instruments and Hedging Activities
The Company has forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of $20.3 million and $51.8 million at June 30, 2021 and December 31, 2020, respectively, and a liability of $2.5 million and $16.4 million at June 30, 2021 and December 31, 2020, respectively.
Capital
Common Stock Repurchase Program
On September 19, 2019, the Company announced that its Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock through October 31, 2020. On October 22, 2020, the Company announced that its Board of Directors approved the extension of the share repurchase program through October 31, 2021. Repurchases of shares must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of June 30, 2021, $14.3 million, or 358,664 shares of the Company's common stock, had been repurchased under the program.
Capital Management
Capital management consists of providing equity to support both current and anticipated future operations. The capital resources of the Company are monitored on a periodic basis by state and federal regulatory authorities.
Under the regulatory capital frameworks adopted by the Federal Reserve ("FRB") and the FDIC, the Company and the Bank must each maintain a common equity Tier 1 capital to total risk-weighted assets ratio of at least 4.5%, a Tier 1 capital to total risk-weighted assets ratio of at least 6%, a total capital to total risk-weighted assets ratio of at least 8% and a leverage ratio of Tier 1 capital to average total consolidated assets of at least 4%. The Company and the Bank are also required to maintain a capital conservation buffer of common equity Tier 1 capital of at least 2.5% of risk-weighted assets in addition to the minimum risk-based capital ratios in order to avoid certain restrictions on capital distributions and discretionary bonus payments.
In March 2020, the Office of the Comptroller of the Currency, the FRB and the FDIC issued an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule provides banking organizations that implement CECL in 2020 the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. As a result, the Company and Bank elected the five-year transition relief allowed under the interim final rule effective March 31, 2020.
As of June 30, 2021, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of for the Company and the Bank at June 30, 2021 and December 31, 2020:
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|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Tier 1 Leverage Ratio (tier 1 capital to average assets)
|
|
|
|
|
Consolidated
|
9.23%
|
|
8.99%
|
|
Ameris Bank
|
10.65%
|
|
10.39%
|
|
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
|
|
|
|
|
Consolidated
|
11.61%
|
|
11.14%
|
|
Ameris Bank
|
13.38%
|
|
12.87%
|
|
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
|
|
|
|
|
Consolidated
|
11.61%
|
|
11.14%
|
|
Ameris Bank
|
13.38%
|
|
12.87%
|
|
Total Capital Ratio (total capital to risk weighted assets)
|
|
|
|
|
Consolidated
|
15.31%
|
|
15.27%
|
|
Ameris Bank
|
14.46%
|
|
14.19%
|
Interest Rate Sensitivity and Liquidity
The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the ALCO Committee. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.
The ALCO Committee is comprised of senior officers of Ameris. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.
The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.
The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to increase/decrease no more than 20% given a change in selected interest rates of 200 basis points over any 24-month period.
Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term assets at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 30% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At June 30, 2021 and December 31, 2020, the net carrying value of the Company’s other borrowings was $425.3 million and $425.2 million, respectively.
The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:
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|
|
June 30,
2021
|
|
March 31,
2021
|
|
December 31,
2020
|
|
September 30,
2020
|
|
June 30,
2020
|
|
Investment securities available-for-sale to total deposits
|
4.26%
|
|
4.81%
|
|
5.80%
|
|
6.96%
|
|
7.95%
|
|
Loans (net of unearned income) to total deposits
|
80.96%
|
|
81.67%
|
|
85.39%
|
|
93.03%
|
|
93.03%
|
|
Interest-earning assets to total assets
|
90.79%
|
|
91.15%
|
|
90.88%
|
|
90.66%
|
|
90.51%
|
|
Interest-bearing deposits to total deposits
|
61.75%
|
|
61.93%
|
|
63.73%
|
|
63.21%
|
|
64.11%
|
The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at June 30, 2021 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.