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Basch Report
Jax Daily Record Monday, Nov. 27, 201706:50 AM EST

Ameris still waiting for all-clear on compliance issues

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Bank can’t finalize deal for Atlantic Coast until it gets FDIC go-ahead.
by: Mark Basch Contributing Writer

Nearly a year ago, federal banking regulators told Ameris Bancorp it could not pursue any merger and acquisition opportunities until it settled compliance issues with the Bank Secrecy Act.

You might think it is all resolved because Ameris announced an agreement 10 days ago to buy Atlantic Coast Financial Corp.

However, it turns out, the bank still hasn’t received the go-ahead from the Federal Deposit Insurance Corp.

“We have a very high degree of confidence that the consent order is going to be lifted soon, which would allow this deal to proceed through the approval channels and be consummated in the normal time periods without any delays,” Ameris CEO Edwin Hortman said during a conference call with analysts to discuss the $145 million acquisition agreement.

Ameris hopes to close the deal in the second quarter of 2018.

The Bank Secrecy Act is a federal law requiring financial institutions to help the government prevent money laundering. 

Ameris has said software glitches caused the bank to be noncompliant, but that it has worked to fix the problem.

During the bank’s quarterly earnings conference call last month, Hortman expressed confidence that the FDIC would soon lift the consent order, allowing Ameris to announce a merger deal before the end of this year.

Ameris apparently couldn’t wait.

During the call to discuss Atlantic Coast Financial, Hortman said the bank had “a good exam” with the FDIC, which is why he expects to hear something positive from the regulators.

“I firmly believe we’re in the final stretch of that effort,” he said.

It will be good for the bank if he’s right, because analysts like the Atlantic Coast Financial deal. 

Keefe, Bruyette & Woods analyst Brady Gailey raised his rating on Ameris from “market perform” to “outperform” last Monday, saying the acquisition will be accretive to earnings.

“We like the expanded market share of Ameris’ attractive Jacksonville market. We also believe this sends a good signal that Ameris expects to be released from its BSA-related consent order, another large positive,” Gailey said in his report.

Ameris officially is headquartered in Moultrie, Georgia, but its executives moved to Jacksonville in 2016 after the company acquired The Jacksonville Bank, which had eight offices in the area.

The addition of Atlantic Coast Bank brings eight more Jacksonville branches, as well as three in Waycross and one in Douglas, Georgia.

“We’re getting outstanding results in all three of those markets in our company right now and we’re excited about the leveraging this deal would provide in those markets,” Hortman said.

“The deal is consistent with management’s desires to do in-market transactions to increase scale and gain meaningful synergies,” Piper Jaffray analyst William Curtiss said in a research note.

Curtiss maintained a “neutral” rating on Ameris’ stock.

Rayonier AM closes Tembec deal

Rayonier Advanced Materials Inc. completed its acquisition last week of Montreal-based Tembec Inc., a deal that more than doubles the size of the Jacksonville-based company and expands its geographic reach and product base.

The deal originally was valued at $807 million when it was announced in May, but Rayonier AM had to increase the price to satisfy big Tembec stockholders who were ready to oppose it.

Rayonier AM ended up paying 317 million Canadian dollars (about $247 million) in cash and exchanging 8.4 million shares of its stock to acquire Tembec’s shares. 

Based on Rayonier AM’s stock price when the closing was announced Monday morning and the assumption of debt, the value of the deal was about $874 million.

Rayonier AM’s stock barely moved Monday after announcing completion of the deal, but it jumped as much as $2.05 to a 52-week high of $18.75 Tuesday.

D.A. Davidson analyst Steven Chercover, who already had a “buy” rating on Rayonier AM’s stock, issued a positive report on the company Tuesday, saying the merged company will generate strong cash flow.

“Despite shares being up almost 20 percent since the third quarter earnings release, we still believe Rayonier AM offers very compelling value, and that the combination with Tembec is underappreciated,” Chercover said in his research report.

Fidelity completes Cannae spinoff

Cannae Holdings Inc. began trading as an independent public company last Monday after Fidelity National Financial Inc. completed the spinoff of its investment unit.

Cannae consists of investments formerly held by Fidelity National Financial Ventures, including stakes in several restaurant chains, human resources technology company Ceridian HCM Inc. and health care documentation company T-System Holdings.

Jacksonville-based Fidelity’s executives continue to serve as top officers of Cannae, including Executive Chairman Bill Foley. However, Cannae’s headquarters office is in Las Vegas, where Foley relocated after becoming owner of the city’s National Hockey League expansion franchise.

Fidelity, which is mainly a title insurance company, still has a stake in Cannae. Fidelity invested $100 million in the the company for an 8 percent share of its stock.

Fidelity said in a news release it will “dispose of such shares as soon as a disposition is warranted consistent with the business reasons for the ownership of such shares,” but no later than five years from now.

Cannae trades on the New York Stock Exchange under the ticker symbol “CNNE.”

Black Knight holder sells shares

Fidelity sold off its majority stake in Jacksonville-based Black Knight Inc. at the end of September, leaving affiliates of investment firm Thomas H. Lee Partners as the largest shareholder of the mortgage technology firm.

Last week, Black Knight said Thomas H. Lee is reducing its stake.

The investment firm sold 2 million shares back to the company and 5 million of its Black Knight shares to the public. 

That reduces Thomas H. Lee’s stake from 23 percent to 20 percent, Black Knight said in a Securities and Exchange Commission filing.

Shoe Carnival jumps on earnings

Shoe Carnival Inc.’s stock soared after reporting strong third-quarter earnings and also increasing its earnings forecast for the full year.

The footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver reported earnings of 66 cents a share for the third quarter ended Oct. 28, 12 cents higher than last year and 4 cents higher than the average analyst’s forecast, according to Nasdaq.

Total sales rose 4.7 percent to $287.5 million and comparable store sales (sales at stores open for more than one year) rose 4.4 percent.

Sales rose despite a decline in customer traffic during the quarter, due in part to hurricanes affecting stores in Florida, Texas and Puerto Rico.

Because of the strong third-quarter results, Shoe Carnival increased its earnings forecast for the full fiscal year from a range of $1.35 to $1.45 a share to a range of $1.42 to $1.49.

The company previously had forecast comparable store sales for the full year to be flat to down by a low single-digit percentage. However, it now is forecasting those sales to be flat to up in the low single digits.

Shoe Carnival’s strong earnings report coincided with positive reports from Foot Locker Inc. and Hibbett Sports Inc., sparking a rally in the stocks, according to a report by Reuters news service.

Shoe Carnival’s stock jumped $6.12 to $26.75 on Nov. 17 after its earnings report the previous day.

Weaver is chairman of Shoe Carnival and its largest shareholder. Together with his wife, Delores, Weaver controls about 5 million Shoe Carnival shares, or 28.6 percent of the stock.

Medtronic beats forecasts

Medtronic PLC’s stock rose $3.76 to $82.66 Tuesday after reporting better-than-expected earnings.

The medical-device maker reported adjusted earnings of $1.07 a share for the second quarter ended Oct. 27, 5 cents lower than last year but 8 cents above the average analyst’s forecast, according to Yahoo Finance.

A previously reported temporary shutdown of Medtronic’s Puerto Rican operations after Hurricane Maria reduced earnings by about 3 cents a share, the company said.

Medtronic’s Jacksonville-based division, which produces surgical instruments for ear, nose and throat physicians, grew revenue by a “mid-single digit percentage,” the company said. But it did not give figures.

The company’s specialty therapies division, which includes the ENT division, had a 1 percent decrease in revenue to $365 million.

Duos raises $11 million in capital

Duos Technologies Group Inc. said last week it raised $11 million in capital through a private placement of stock and warrants to buy stock.

The Jacksonville-based company reported a net loss of $124,868, or 7 cents a share, in the third quarter, with revenue falling 24 percent to $1.05 million.

Duos Technologies provides intelligent security analytical technology solutions.

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