Ameris Bancorp reported net income available to common shareholders of $3.6 million, or $0.15 per diluted share, for the fourth quarter of 2012, compared to $322,000, or $0.01 per diluted share, for the same period in 2011.  For the year, Ameris earned $10.9 million, or $0.46 per diluted share, compared to $17.9 million, or $0.76 per diluted share, in 2011.  Results for the year to date period include non-recurring after-tax gains on FDIC-assisted acquisitions totaling $13.0 million in 2012 and $17.5 million in 2011. 

Highlights of the Company's results for 2012 include the following:

• Increase in total revenue (excluding gains on FDIC-assisted acquisitions) of 9.2% during 2012 as compared to 2011.
• 46% of TARP preferred stock investment redeemed during the fourth quarter, which will positively impact the Company's 2013 financial results by $1.5 million.
• Net interest margin increased slightly to 4.60% in 2012 from 4.57% in 2011.
• Non-interest income growth (excluding gains on FDIC-assisted acquisitions) of $11.9 million, or 45.9%, during 2012 when compared to amounts recorded in 2011.
• Credit costs declined in the current quarter to lowest level in 17 quarters.
• Legacy loans increased by $118.5 million during 2012, or 8.9% compared to balances atDecember 31, 2011.
• Tangible common equity to tangible assets increased to 8.20% at December 31, 2012, compared to 7.99% at December 31, 2011.
• Non-performing legacy assets declined 33.0% during 2012, ending the year at $78.7 million, compared to $117.5 million at the end of December 31, 2011.

Increase in Net Interest Income

Net interest income increased in 2012 to $114.4 million, up from $113.5 million reported in 2011.  During 2012, the Company's net interest margin increased to 4.60%, compared to 4.57% during 2011.  Lower yields on most earning asset classes have been offset by lower funding costs and better allocation of earning assets.  Earning assets totaled $2.55 billion at December 31, 2012, compared to$2.48 billion at the end of 2011.  Loans comprised 78.8% of total earning assets at the end of 2012, compared to 77.1% at the end of 2011, while investment securities represented 13.9% of total earning assets at December 31, 2012, compared to 14.1% at December 31, 2011.

Legacy loan yields continued to decrease, averaging 5.58% in 2012, compared to 5.89% in 2011.  Covered loan yields declined from 8.70% in 2011 to 7.33% in 2012.  The decline in covered loan yields relates mostly to one-time adjustments made during 2011 associated with certain fair value determinations.  As expected cash flow on covered loans improves, a portion of the loan discount that was previously attributable to credit problems is reclassified into interest income.  This reclassification occurs over the estimated life of the loan. 

The Company has offset the declines in earning asset yields with corresponding declines in funding costs.  Deposit costs, the Company's largest funding expense, declined from 0.98% in 2011 to 0.51% in 2012.  That decline relates to continued shifts in deposit mix, favoring lower cost transaction accounts and non-interest bearing balances, and lower market rates in the Company's communities. 

Non-Interest Income

Successes impacting non-interest income augmented the smaller increases in net interest margin during 2012.  Total non-interest income, excluding one-time gains on FDIC-assisted acquisitions, increased to $37.8 million in 2012 compared to $25.9 million in 2011.  Income from mortgage banking activities increased substantially as the Company's efforts to build ranks of producers and various channels were successful.  Total mortgage banking income increased to $13.0 million in 2012, up from$3.0 million in 2011.  The Company anticipates continued growth in mortgage banking revenues and profitability during 2013 considering recent recruiting efforts and the growing pipelines and closings in the newly established wholesale business. 

In addition to increases in mortgage banking revenues, service charges on deposit accounts also increased, growing 8.3% in 2012 to $19.6 million.  Deposit growth from FDIC-assisted acquisitions, as well as strong growth internally in transaction accounts, led to continued growth in this area of fee income.

Non-Interest Expense

Excluding credit related costs, total operating expenses increased $17.5 million to $97.1 million in 2012 compared to $79.5 million in 2011.

On December 7, 2012, the Company announced a major restructuring effort aimed at reducing core operating expenses by at least $12.1 million during 2013.  These plans included lower headcounts in both the bank and in corporate functions, accelerated efforts to focus more overhead resources on corporate clients and closing at least thirteen retail banking locations.  Discussing the restructuring efforts, Edwin W. Hortman, Jr., President and CEO, said, "Our recently announced plans recognize that today's banking environment is different than in recent years.  Today's net interest spread and opportunities for fee income necessitate greater efficiency in the way we operate the Company to derive the level of profitability we expect.  We expect that our recently announced plan will be sufficient to bring operating efficiency back in line."

Balance Sheet Trends

Total assets were relatively unchanged during 2012, ending the year at $3.0 billion.  Efforts in 2012 centered mostly on redeploying the cash flows from covered assets (including loans, OREO and the indemnification asset from FDIC-assisted acquisitions) into traditional and more stable earning assets.  This effort was successful as the Company realized $136.8 million of reductions in those covered assets but grew legacy loans and investment securities by $159.7 million.  A similar strategy is in place in 2013 as the Company anticipates continued growth in legacy loan balances and a slower pace in the decline in covered loan balances.

Average earning assets in 2012 were almost unchanged from 2011 levels, ending the year at $2.50 billion.  Total average loans increased to $2.01 billion at December 31, 2012, compared to $1.92 billionin 2011.  Legacy loans were $1.45 billion at December 31, 2012, increasing 8.9%, or $118.5 million, during the year.  Expansion of loan officer teams in the Company's larger metro markets contributed significantly to the growth, as did several newer lines of business, including mortgage banking.  Covered loans declined, as expected, by $63.8 million during 2012 to $507.7 million.  The Company expects continued declines in covered loan balances, as well as lower yields due to lower amounts of accretable discounts.

Despite higher average balances of investment securities in 2012 compared to 2011, the Company recorded 16.0% less in interest revenue in 2012 than in 2011.  Average balances grew 10.4% during 2012 to $361.5 million, but average yields slipped 24.5% to 2.83% on a tax-equivalent basis.  Governmental intervention in the mortgage industry and FOMC actions have caused faster prepayments in the mortgage-backed portfolio and reduced yields on reinvestment alternatives.   Although the Company reinvests most of the portfolio cash flows, efforts to grow the portfolio have been reduced and the Company has relied somewhat on mortgage loans held for sale as a short-term investment alternative in the current interest rate environment.  Loans held for sale grew to $48.8 million at December 31, 2012, compared to $11.6 million at the end of 2011, and total interest revenue on mortgage loans increased $869,000 in 2012 compared to 2011, partially offsetting the decrease in interest revenue on investment securities.

Total deposits increased $33 million to $2.6 billion at December 31, 2012.  Although the increase in total deposits was not significant, the continued growth in non-interest bearing deposits was noteworthy.  Non-interest bearing demand deposits grew 29.2% in 2012 after growing 30.9% in 2011, ending the year at $510.8 million, or 19.5% of total deposits, compared to 15.3% of total deposits atDecember 31, 2011.  CDs, conversely, fell 16.5% during 2012 and finished the year comprising only 28.4% of total funding compared to 34.4% at December 31, 2011.  Aggressive sales efforts and multiple strategies on non-interest bearing demand accounts, combined with multiple acquisitions, have contributed to success on improving the Company's deposit mix.  

Credit Quality

For the year ended December 31, 2012, nonperforming assets decreased $38.8 million, or 33.0%, to$78.7 million.  Non-accrual loans declined $31.9 million to $38.9 million at December 31, 2012, and legacy OREO declined $6.8 million to $39.9 million at the end of the year.  The Company's bulk sale of non-performing assets in the first quarter of 2012 reduced non-performing loans by $16.1 million, OREO by $13.3 million and classified accruing loans by $1.8 million.

Total classified loans declined 29.3% during 2012, ending the year at $73.3 million, compared to$103.6 million at December 31, 2011.  A slower pace of migration to classified and non-accrual status during 2012 compared to prior years and an accelerated pace of resolution led to the improvement in classified assets.

The Company's provision for loan losses during 2012 totaled $31.1 million, compared to $32.7 millionin 2011.  Combined with non-provision expenses, credit costs totaled $54.2 million in 2012, only a slight decline from the $58.1 million in 2011.  During the fourth quarter of 2012, credit costs totaled only $7.2 million, the Company's lowest amount of such costs in seventeen quarters.  Speaking on credit quality, Mr. Hortman commented, "We were successful in our goal to make a major move on NPAs, reducing them by 33% during 2012.  As we move into 2013, our efforts are focused on maintaining a downward slope on classified assets while managing materially lower credit costs.  With classified assets to capital in the 30% range, credit quality is not an impediment to executing our strategies, and we believe the move we made on quality in 2012 will reflect positively in 2013's earnings."

Capital Levels

During the fourth quarter of 2012, the Company repurchased $24 million in shares of the  preferred stock originally issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP) in November 2008.  The reduction in preferred stock will reduce the dividends payable and will positively impact the Company's 2013 financial results by approximately $1.5 million.  The Company anticipates repurchasing the remainder of the original $52 million TARP preferred stock investment prior to February 2014, subject to the receipt of regulatory approval. 

In addition, the Company's tangible common equity as a percentage of tangible assets increased to 8.20% at December 31, 2012, compared to 7.99% at December 31, 2011.