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Jax Daily Record Monday, May 1, 201712:00 PM EST

Ameris works to unleash M&As

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by: Mark Basch Contributing Writer

Ameris Bancorp grew earnings during the first quarter, but CEO Edwin Hortman sees more growth once the company resumes its acquisition strategy.

“There continues to be a number of discussions around M&A opportunities, so we’re pushing hard to get back to that arena,” Hortman said during the company’s quarterly conference call.

“Although, we’re excited about our organic growth for the foreseeable future, we’re anxious to layer on some of the M&A opportunities that we see that further augment our strong profitability,” he said.

Ameris, officially headquartered in Moultrie, Ga., but with executive offices in Jacksonville, put merger and acquisition activity on hold at the end of 2016 because of regulatory issues.

The company was found in violation of the Bank Secrecy Act, a federal law requiring financial institutions to help the government prevent money laundering. Regulators told the bank it couldn’t pursue more acquisitions until it regained compliance.

Ameris blamed the problem on software issues. During the conference call, Hortman said he expects the regulatory issues to be resolved as soon as it fixes the glitch.

“We continue to make excellent progress there and we remain on track to have every item of the consent order completed by June 30, as we talked about previously.”

Ameris reported first-quarter earnings of 59 cents a share, up from 37 cents in the first quarter of 2016.

Hortman said about half of the growth came from its acquisition last year of The Jacksonville Bank and a new joint venture that provides credit on property and casualty insurance premiums.

“The rest of the growth in earnings is from organic growth in the balance sheet, coupled with really impressive management of operating expenses. Our organic growth, with lower efficiency ratios, is going to continue to be an impressive earnings driver that should hold our operating ratios in the favorable place they are today,” he said.

SunTrust Robinson Humphrey analyst Jennifer Demba raised her rating on Ameris last week from “hold” to “buy.”

“We believe another solid reported quarter has set the stage for an upgrade. A return to bank acquisitions once the Bank Secrecy Act/anti-money laundering issue is resolved, along with a continued strong loan and revenue growth outlook, make us incrementally more positive on the stock,” Demba said in her research note.

ACFC earnings show 3-cent gain

Atlantic Coast Financial Corp. last week reported its first-quarter core earnings rose by 3 cents a share to 10 cents.

“Our first-quarter progress also is noteworthy because it underscores the diversity of business, which has helped us maintain the momentum we achieved last year, even as we prepare for the potential effects of possible interest rate increases or other macroeconomic events that may affect the industry nationwide, as well as the seasonally slow nature of the first quarter,” CEO John Stephens said in a news release.

However, the one analyst who follows Atlantic Coast Financial, Bob Ramsey of FBR, expressed caution.

“Atlantic Coast’s first-quarter EPS exceeded our estimate given strong gains on the sale of loans held for sale, which more than offset a 10 percent decline in net interest income this quarter,” Ramsey said in his research note.

“Our concern is the net interest income trajectory going forward, as the drop in both net interest margin and average earning assets may make it tough to maintain ACFC’s profitability in quarters with more normalized levels of loan gain-on-sale income,” he said.

EverBank Financial earnings increase

EverBank Financial Corp. on Friday reported first quarter earnings of 28 cents a share, up from 20 cents the previous year.

As the Jacksonville-based banking company waits to complete its acquisition by Teachers Insurance and Annuity Association of America, it did not detail its financial results in a news release. It only released its quarterly financial schedules in a Securities and Exchange Commission filing.

Landstar beats its own forecast

Landstar System Inc. on Wednesday reported first-quarter earnings that beat its own forecasts.

The Jacksonville-based trucking company earned 77 cents a share, up from 69 cents in the first quarter of 2016 and above the company’s forecast range of 70 cents to 75 cents.

Landstar regularly provides quarterly forecasts and analysts who follow the company usually agree with those predictions.

First-quarter revenue rose 9.7 percent to $780.9 million, also beating the company’s forecast range of $725 million to $775 million.

“Considering the continued soft U.S. economic environment, especially the soft U.S. manufacturing sector, the Landstar model continued to demonstrate how well we perform even in a soft economic environment as we generated record first-quarter revenue, gross profit and diluted earnings per share,” CEO Jim Gattoni said in the company’s conference call.

Landstar is forecasting second-quarter earnings of 84 to 89 cents a share, compared with 76 cents in the second quarter of 2016, with revenue of $820 million to $870 million.

Lower gas demand hurts Patriot

Patriot Transportation Holding Inc. reported earnings of 8 cents a share for its second quarter ended March 31, down from 26 cents the previous year.

Revenue fell 5.7 percent to $27.4 million.

The Jacksonville-based trucking company, which transports petroleum products and other goods, said lower demand for gasoline during the quarter affected results.

Patriot also was hurt by the loss of business from one large customer which sought out lower bids from the company’s competitors.

During Patriot’s conference call, new CEO Robert Sandlin said the company is not willing to lower its rates to match low bidders.

“We have been successful adding back business at better prices in some markets. However this generally does not happen simultaneously with any business loss,” he said.

Sandlin was promoted from vice president of Patriot to president and CEO last month when Tom Baker resigned to take a position with Vulcan Materials Co. Baker remains chairman of the board of Patriot.

CSX upgraded

CSX Corp.’s stock jumped as much as $4.35 to $51.28 on April 20 after Hunter Harrison’s first conference call as CEO, but at least one analyst heard enough to expect more gains.

Raymond James analyst Patrick Tyler Brown raised his rating on the Jacksonville-based railroad company from “market perform” to “outperform” and set a $55 price target for the stock after Harrison’s long, sometimes rambling conference call.

“Following a review of the opportunity for CSX under its highly experienced and successful new CEO (Hunter Harrison), we are upgrading shares to outperform,” Brown said in a research note.

“While material value recognition has already been garnered (preventing us from being even more constructive), we believe CSX is at an inflection point and should see significant improvement in service, margins, and free cash flow in coming years,” he said.

Wall Street already was expecting big things from Harrison, who became chief executive of CSX in March.

The stock reached a new high of $51.66 last week, 40 percent higher than the stock’s price when word of Harrison’s interest in the CSX job leaked out in January.

Mantle Ridge puts Harrison pay at $17 million yearly

Speaking of Harrison, hedge fund Mantle Ridge, which backed Harrison’s effort to become CSX chief executive, filed additional proxy materials last week to try and convince CSX shareholders to approve Harrison’s compensation package.

Specifically, shareholders at the June 5 annual meeting will be voting on an $84 reimbursement payment representing money Harrison forfeited when he left his previous position as CEO of Canadian Pacific Railway Ltd. to pursue the CSX job.

CSX has not said what the total value of Harrison’s compensation package is, other than to say he will receive $2.2 million in salary, an opportunity to receive $2.8 million in annual bonuses and options to buy 9 million shares of CSX stock.

The value of the options are subject to several interpretations, depending on the formula, but Mantle Ridge said in one of its proxy filings that “we value” the options at $12 million a year.

That would put the total value of Harrison’s package, excluding the $84 million payment, at $17 million a year for four years.

Harrison’s predecessor, Michael Ward, received $13.6 million in compensation last year.

Mantle Ridge also filed questions and answers about why shareholders should approve the $84 million, including the question: “Could CSX hire another executive that did not require reimbursement but could be reasonably expected to deliver similar results?”

Mantle Ridge’s answer: “No. There is no one in the industry whose record comes even close to Mr. Harrison’s.”

ParkerVision in Nasdaq compliance

ParkerVision Inc. is back in the good graces of Nasdaq after an increase in the price of its stock and the number of shares outstanding.

The Jacksonville-based developer of wireless technology said in January it was in danger of losing its listing on the Nasdaq Capital Market because the total market value of its stock had fallen below the $35 million floor required for listing.

ParkerVision, which reported 13.2 million outstanding shares at the end of 2016, was trading at about $2 at the time of the notification.

However, ParkerVision’s stock price has risen some, reaching a high of $2.72 last week, and its most recent SEC filing showed 17.7 million outstanding shares, so the total market value is above $35 million.

ParkerVision said it was notified by Nasdaq on Thursday that it has regained compliance.

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