ANNUAL REPORT 2018
A high-performing
community bank
providing an exceptional
customer experience.
Dear Shareholders:
I joined Ameris Bancorp and Ameris Bank in 2005, and every year end since I have had the same thought:
how pleasantly surprised I am by how much we accomplished in the most recent year. And more so, how
excited I am about what the year ahead might hold for our Company. We are very entrepreneurial, actively
focused on building our Company and our earnings power, and as we approach year end and look forward,
those principles and strategies keep delivering on the promise of an above average growth rate in our
earnings per share.
In 2018, we delivered on that promise in a big way. For the year, we earned $3.38 per share (on an operating
basis) compared to $2.48 in 2017, an increase of 36%. With earnings at this level in 2018, our five year
compounded annual growth rate in operating earnings is approximately 47% and in the top quartile for
publicly traded banks under $50 billion in total assets.
Our operating ratios improved substantially during 2018. Return on assets for the year (on an operating
basis) improved to 1.50%, compared to 1.26% in 2017. Our efforts to leverage existing administrative staff
and infrastructure in the integration of the Hamilton State Bank and Atlantic Coast Bank acquisitions were
successful, and we pushed our operating efficiency ratio down to 56.19% compared with 60.27% in 2017.
Our margin (excluding accretion) was unchanged during the year despite a material rise in deposit costs,
and credit quality ratios and concentrations all improved over already strong levels at the end of 2017.
As we move into 2019, we have more operating strength and quality than at any time in decades.
We are also going into 2019 with more opportunity. Our announcement in December 2018, regarding
the acquisition of Fidelity Southern Corporation and Fidelity Bank, positions us as the largest non-super
regional bank in Atlanta, Georgia, and creates an image and an attitude that we believe will fuel organic
growth for years to come. In just one year, the Atlanta, Georgia metropolitan area has been almost entirely
consolidated, and our banking franchise will be recognized as both local and serious about growing with
our customers. The successful integration of Fidelity Bank customers, employees and their teams is critical
to our success, and we are determined to deliver on this opportunity in 2019.
I close by saying thank you, and by recognizing why we are continuously successful in our efforts. Our staff
is tireless and intensely aware and protective of our culture. Our board is inspired by the opportunity
ahead of us. The executive team’s leadership skills and passion for our business keeps delivering results.
I am fortunate to be in the position to write this letter with so much excitement about the years ahead.
Thank you for your continued confidence in Ameris Bancorp.
Dennis J. Zember Jr.
Ameris Bancorp President and Chief Executive Officer,
Ameris Bank Chief Executive Officer
ANNUAL REPORT 2018 | 5
STRATEGY
GROWTH, PROGRESS AND MOMENTUM FOR THE FUTURE.
2018 was a year marked by amazing growth, increasing total assets by 46% and net income over 60%,
and further improving our operating efficiency down to 56%. We proudly grew the Ameris Bank family,
welcoming colleagues and customers through the integrations of Atlantic Coast Bank and Hamilton State
Bank, and the final purchase of US Premium Finance.
Our bankers continue to deliver one-of-a-kind exceptional experiences, laser focused on enhancing
existing customer relationships and creating new ones. Our progressive approach to banking materialized
in 2018 when all bankers felt the effects of the interest rate environment, yet grew total deposits,
amounting to 97.4% of total funding, while maintaining margins consistent with those of 2017.
Our mortgage division continues to perfect the loan origination process, supporting a 15 business-day
loan closing plan and originating over $1.77 billion in residential loans in 2018.
A testament to our bankers’ and enterprise services’ dedication to providing the best banking experience,
Ameris Bank was nationally recognized for our 2018 performance. Announced in early 2019, Ameris Bank
was recognized in Forbes 2019 List of America’s Best Banks and as a 2018 Greenwich Excellence Awards
winner for overall satisfaction for small business banking and cash management services.
This recognition creates strong momentum as we move into 2019, alongside two additional
announcements made at the end of 2018. We are proud to be the new name-in-title sponsor of the
Ameris Bank Amphitheatre, Greater Atlanta’s contemporary amphitheatre located in Alpharetta, Georgia,
hosting 30+ events each year. This gives Ameris Bank the opportunity to deepen relationships with
more than 300,000 live music fans annually and to showcase our strength in an important target market.
In December 2018, our company also announced the signing of a definitive merger agreement with
Fidelity Southern Corporation, the holding company of Fidelity Bank, headquartered in Atlanta, Georgia,
which when completed will make Ameris Bank the largest non-super regional bank in the Atlanta, Georgia
metropolitan statistical area (MSA).
ANNUAL REPORT 2018 | 7
FINANCIALS
REVENUE (NET INTEREST INCOME PLUS NON-INTEREST INCOME)
Total recurring revenue increased by $97 million, or 27%, during 2018, which was largely fueled
by growth in our earning assets, as well as growth in our lines of business. Net interest income
also increased 32%, consistent with growth in earning assets. Noninterest income increased over
13%, as our lines of business, including mortgage, warehouse lending and premium finance, grew
revenue. We continue to look for opportunities to diversify our recurring revenue stream through
innovative product lines. With all of our growth, we remain focused on controlling operating
expenses, having improved our operating efficiency ratio to 56.19% for the full year 2018.
DEPOSITS
We continue to grow our balance sheet with core funding through deposit growth. Excluding
deposits gained from the two bank acquisitions completed during 2018, core deposits grew
over 8.6% during the year. While the deposit market remains extremely competitive, we grew
deposits during 2018 at a faster pace than loans. Since 2014, deposits have grown from $3.4 billion
to $9.6 billion. Growth in deposits is a sustainable way to grow our balance sheet, increasing
shareholder value. At the end of 2018, deposits represented 97.4% of our total funding.
TANGIBLE COMMON EQUITY
At the end of 2018, we had approximately $894 million of tangible common equity on our
balance sheet. We are diligent in our acquisitions and the utilization of capital, and view equity
as a fundamental strength in our long-term strategies. Protecting and growing shareholder value
through tangible book value continues to be a vital focus for our Company, and tangible book
value increased to $18.83 per share at year end.
500
400
300
200
100
10.0
8.0
6.0
4.0
2.0
1,000
800
600
400
200
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
NET INTEREST INCOME
PLUS NON-INTEREST INCOME
(In millions of dollars)
TOTAL DEPOSITS
(In billions of dollars)
TANGIBLE COMMON EQUITY
(In millions of dollars)
ANNUAL REPORT 2018 | 9
AMERIS BANCORP LEADERSHIP
BOARD OF DIRECTORS
PICTURED FROM LEFT TO RIGHT. TOP ROW:
CHAIRMAN DANIEL B. JETER, STANDARD DISCOUNT CORPORATION (CONSUMER FINANCE);
VICE CHAIRMAN DENNIS J. ZEMBER JR., AMERIS BANCORP PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERIS BANK CHIEF EXECUTIVE OFFICER;
VICE CHAIRMAN LEO J. HILL, TRANSAMERICA MUTUAL FUNDS (LEAD INDEPENDENT DIRECTOR).
MIDDLE ROW:
WILLIAM I. BOWEN JR., BOWEN-DONALDSON HOME FOR FUNERALS (FUNERAL SERVICES);
R. DALE EZZELL, WISECARDS PRINTING & MAILING (PRINT SERVICES);
ROBERT P. LYNCH, LYNCH MANAGEMENT COMPANY (AUTOMOBILE SALES).
BOTTOM ROW:
ELIZABETH A. MCCAGUE, MCCAGUE AND COMPANY, LLC (CONSULTING AND MEDIATION);
WILLIAM H. STERN, STERN & STERN AND ASSOCIATES (REAL ESTATE);
JIMMY D. VEAL, BEACHVIEW TENT RENTALS, INC. (EVENT SERVICES).
10 | AMERIS BANCORP
EXECUTIVE OFFICERS
PICTURED FROM LEFT TO RIGHT. TOP ROW:
DENNIS J. ZEMBER JR., AMERIS BANCORP PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERIS BANK CHIEF EXECUTIVE OFFICER;
LAWTON E. BASSETT III, AMERIS BANCORP BANKING GROUP PRESIDENT AND AMERIS BANK PRESIDENT;
NICOLE S. STOKES, CPA, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER.
MIDDLE ROW:
JON S. EDWARDS, EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER;
JAMES A. LAHAISE, EXECUTIVE VICE PRESIDENT AND CHIEF STRATEGY OFFICER.
BOTTOM ROW:
CINDI H. LEWIS, EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER AND CORPORATE SECRETARY;
WILLIAM D. MCKENDRY, EXECUTIVE VICE PRESIDENT AND CHIEF RISK OFFICER.
ANNUAL REPORT 2018 | 11
COMMUNITY BOARDS OF DIRECTORS
The Ameris Bank Leadership team remains committed to providing the vision and
opportunities necessary for our Company to grow consistently and strategically year after
year. Supporting our executive team is Ameris Bank’s unique structure, one with local market
leadership and assistance from local community boards of directors.
Albany & Cordele, GA
Dothan, AL
Jacksonville, FL
Ocilla, GA
Regional President:
Michael T. Lee
Market President:
David B. Batchelor
Directors:
Gary H. Paulk, Chairman
Howard C. McMahan, M.D.
Wesley T. Paulk
Director Emeritus:
Loran A. Pate
Savannah, GA
Chief Banking Officer:
Austen D. Carroll
Market President:
Gregory T. Marini
Directors:
Matthew A. West,
Chairman
Nina T. Gompels
J. Mason Heidt, CLTC
John L. Reynolds
Harold B. Yellin, J.D.
Regional President:
Kendall L. Spencer
Directors:
Joseph P. Helow,
Chairman
Robert M. Bradley Jr.
Phillip H. Cury
John A. Delaney
A. Hugh Greene
Major B. Harding Jr.
Robert P. Lynch
J. Charles Wilson, CPA
Moultrie, GA
Regional President:
Michael T. Lee
Market President:
Timothy B. Powers
Directors:
Thomas W. Rowell,
Chairman
Thomas L. Estes, M.D.
Robert A. Faircloth
R. Plenn Hunnicutt
Daniel B. Jeter
Lynn L. Jones Jr.
J. Mark Mobley Jr.
Director Emeritus:
Brooks Sheldon
Regional President:
Michael T. Lee
Market President:
Calvin L. McMillan
Regional President:
Michael T. Lee
Market President:
D. Mark O’Mary Sr.
Directors:
Reid E. Mills, Chairman
Bonny B. Dorough
Gregory R. Garland
Y. Duncan Moore Jr.
J. Austin Turner
Directors:
R. Dale Ezzell, Chairman
Dale Armstrong
Ronald E. Dean
C. Phillip Hayes
Alan D. Wells
Cairo, GA
Regional President:
Michael T. Lee
Market President:
Robert D. Vice
City President:
Martin L. Cannington
Directors:
Jeffrey F. Cox, Chairman
Kevin S. Cauley
Cuy Harrell, III
G. Ashley Register, M.D.
Donalsonville &
Colquitt, GA
Regional President:
Michael T. Lee
Market President:
Robert D. Vice
City President:
Tracy D. Pickle
Directors:
N. Ed King Jr., Chairman
D. Glenn Heard
Kenneth R. Massey
Dan E. Ponder Jr.
Danny S. Shepard
Directors Emeritus:
H. Wayne Carr
John B. Clarke Sr.
Joseph S. Hall
Jerry G. Mitchell
Douglas, GA
Regional President:
Michael T. Lee
Market President:
David B. Batchelor
City President:
M. Shane Shook
Directors:
Kevin L. Gilliard,
Chairman
Faye H. Hennesy
Alfred Lott Jr.
Donnie H. Smith
Gainesville & Ocala, FL
Regional President:
Kendall L. Spencer
Market President:
Suzanne B. Norris
Directors:
Thomas P. McIntosh,
Chairman
R. Dale Barron
Adra B. Kennard
Kenneth B. Kirkpatrick
G. Thomas Mallini
Breck A. Weingart
Director Emeritus:
James D. Salter
12 | AMERIS BANCORP
COMMUNITY BOARDS OF DIRECTORS
Southeast Georgia Coast
St. Augustine, FL
Thomasville, GA
Valdosta, GA
Chief Banking Officer:
Austen D. Carroll
Regional President:
Kendall L. Spencer
Market President:
Michael D. Hodges
Directors:
Jimmy D. Veal, Chairman
Michael L. Davis
Stephen V. Kinney
G. Tony Sammons
Directors Emeritus:
A. Ray Acosta
John W. McDill
Thomas I. Stafford Jr.
J. Thomas Whelchel
Market President:
Cecil F. Gibson, III
Directors:
Mark F. Bailey Sr.,
Chairman
David W. Alban
Jason P. Barrett
T. Brooks Burkhardt
J. Joseph Hatin
Director Emeritus:
Melvin A. McQuaig
State of South Carolina
Regional President:
Mze Wilkins
Directors:
William H. Stern, Chairman
Kirkman Finlay, III
Edward G. McDonnell
William Weston J. Newton
Laurens C. Nicholson
A. Rae Phillips
Tallahassee, FL
Regional President:
Michael T. Lee
Market President:
Steven A. Lohbeck Jr.
Directors:
Halsey W. Beshears,
Chairman
Jeff Hartley
Ruben R. Rowe, III
Brent D. Sparkman
Regional President:
Michael T. Lee
Market President:
Robert D. Vice
Directors:
L. Maurice Chastain,
Chairman
S. Mark Brewer, M.D.
Kenneth E. Hickey
Terrel M. Solana, Ph.D.
Tifton, GA
Regional President:
Michael T. Lee
Market President:
Joshua S. Bowen
Directors:
William I. Bowen Jr.,
Chairman
Austin L. Coarsey
Scott R. Fulp, D.D.S.
John Alan Lindsey
Fortson B. Turner
Clifford A. Walker Sr.,
D.M.D.
Director Emeritus:
J. Raymond Fulp
Regional President:
Michael T. Lee
City President:
Jason C. Glas
Directors:
Charles E. Smith,
Chairman
Bart T. Mizell
M. Alan Wheeler
Directors Emeritus:
Doyle Weltzbarker
Henry C. Wortman
Vidalia, GA
Regional President:
Michael T. Lee
Market President:
David B. Batchelor
Directors:
Christopher A. Hopkins,
Chairman
Pollyann F. Martin
Britton J. McDade
Jeffery S. McLain
ANNUAL REPORT 2018 | 13
Cautionary Note Regarding Forward-Looking StatementsThis Annual Report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe”, “estimate”, “expect”, “intend”, “anticipate” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates which they were made. Ameris Bancorp undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements. Please refer to Ameris Bancorp’s filings with the Securities and Exchange Commission for a summary of important factors that may affect Ameris Bancorp’s forward-looking statements. ANNUAL REPORT 2018
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2018, or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to .
Commission File Number
001-13901
AMERIS BANCORP
(Exact name of registrant as specified in its charter)
GEORGIA
(State of incorporation)
58-1456434
(IRS Employer ID No.)
310 FIRST ST., SE, MOULTRIE, GA 31768
(Address of principal executive offices)
(229) 890-1111
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $1 Per Share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange
Act). Yes
No
As of the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the
voting and non-voting common equity held by nonaffiliates of the registrant was approximately $2,473,151,338.
As of February 19, 2019, the registrant had outstanding 47,498,950 shares of common stock, $1.00 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2019 Annual Meeting of Shareholders are incorporated into Part III hereof by
reference.
AMERIS BANCORP
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Page
4
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30
30
30
31
32
35
66
67
67
67
67
68
68
68
68
69
69
2
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and the documents incorporated by reference herein may contain certain
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-
looking statements can be identified by the use of words such as “may,” “might,” “will,” “would,” “should,” “could,” “expect,”
“plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “probable,” “potential,” “possible,” “target,” “continue,” “look
forward,” or “assume,” and words of similar import. Forward-looking statements are not historical facts but instead express only
management’s beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of
management’s control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or
events indicated in these forward-looking statements. Forward-looking statements are not guarantees of future performance, and
we caution you not to place undue reliance on these statements.
You should understand that important factors, including the following, in addition to those described in Part I, Item 1A., “Risk
Factors,” and elsewhere in this Annual Report, as well as in the documents which are incorporated by reference into this Annual
Report, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), could cause actual results to differ materially from
those expressed in such forward-looking statements:
•
•
•
•
•
•
•
•
•
•
•
•
•
the risks of any acquisitions, mergers or divestitures which we may undertake in the future, including, without limitation,
the related time and costs of implementing such transactions, integrating operations as part of these transactions and
possible failures to achieve expected gains, revenue growth, expense savings and/or other results from such transactions;
the effects of future economic, business and market conditions and changes, including seasonality;
legislative and regulatory changes, including changes in banking, securities and tax laws, regulations and policies and
their application by our regulators;
changes in accounting rules, practices and interpretations;
the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values and
liquidity of loan collateral, securities and interest-sensitive assets and liabilities;
changes in borrower credit risks and payment behaviors;
changes in the availability and cost of credit and capital in the financial markets;
changes in the prices, values and sales volumes of residential and commercial real estate;
the effects of concentrations in our loan portfolio;
our ability to resolve nonperforming assets;
the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses and other
estimates and valuations;
changes in technology or products that may be more difficult, costly or less effective than anticipated; and
the effects of war or other conflicts, acts of terrorism, hurricanes, floods, tornados or other catastrophic events that may
affect economic conditions.
Our management believes the forward-looking statements about us are reasonable. However, you should not place undue reliance
on them. Any forward-looking statements in this Annual Report and the documents incorporated by reference herein are not
guarantees of future performance. They involve risks, uncertainties and assumptions, and actual results, developments and business
decisions may differ from those contemplated by those forward-looking statements, and such differences may be material. Many
of the factors that will determine these results are beyond our ability to control or predict. We disclaim any duty to update any
forward-looking statements, all of which are expressly qualified by the statements in this section.
3
As used in this Annual Report, the terms “we,” “us,” “our,” “Ameris” and the “Company” refer to Ameris Bancorp and its
subsidiaries (unless the context indicates another meaning).
PART I
ITEM 1. BUSINESS
OVERVIEW
We are a financial holding company whose business is conducted primarily through our wholly owned banking subsidiary, Ameris
Bank (the “Bank”), which provides a full range of banking services to its retail and commercial customers who are primarily
concentrated in select markets in Georgia, Alabama, Florida and South Carolina. Ameris was incorporated on December 18, 1980
as a Georgia corporation. The Company’s executive office is located at 310 First St., S.E., Moultrie, Georgia 31768, our telephone
number is (229) 890-1111 and our internet address is www.amerisbank.com. We operate 125 domestic banking offices. We do not
operate in any foreign countries. At December 31, 2018, we had approximately $11.44 billion in total assets, $8.62 billion in total
loans, $9.65 billion in total deposits and $1.46 billion of shareholders’ equity. Our deposits are insured, up to applicable limits,
by the Federal Deposit Insurance Corporation (the “FDIC”).
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at
www.amerisbank.com as soon as reasonably practicable after we electronically file such material with the SEC. These reports are
also available without charge on the SEC’s website at www.sec.gov.
The Parent Company
Our primary business as a bank holding company is to manage the business and affairs of the Bank. As a bank holding company,
we perform certain shareholder and investor relations functions and seek to provide financial support, if necessary, to the Bank.
Ameris Bank
Our principal subsidiary is the Bank, which is headquartered in Moultrie, Georgia and operates branches primarily concentrated
in select markets in Georgia, Alabama, Florida and South Carolina. These branches serve distinct communities in our business
areas with autonomy but do so as one bank, leveraging our favorable geographic footprint in an effort to acquire more customers.
Capital Trust Securities
On September 20, 2006, the Company completed a private placement of an aggregate of $36,000,000 of trust preferred
securities. The placement occurred through a statutory trust subsidiary of Ameris, Ameris Statutory Trust I (the “Trust”). The trust
preferred securities carry a quarterly adjustable interest rate of 1.63% over the 3-Month LIBOR. The trust preferred securities
mature on December 15, 2036, and became redeemable at the Company’s option on September 15, 2011.
On December 16, 2005, Ameris acquired First National Banc, Inc. (“FNB”) by merger. In connection with such transaction, Ameris
assumed the obligations of FNB related to its prior issuance of trust preferred securities. In 2004, FNB’s statutory trust subsidiary,
First National Banc Statutory Trust I, issued $5,000,000 in principal amount of trust preferred securities at a rate per annum equal
to the 3-Month LIBOR plus 2.80% through a pool sponsored by a national brokerage firm. These trust preferred securities have
a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date.
On December 23, 2013, Ameris acquired The Prosperity Banking Company (“Prosperity”) by merger. In connection with such
transaction, Ameris assumed the obligations of Prosperity related to the following issuances of trust preferred securities: (i) in
2003, Prosperity’s statutory trust subsidiary, Prosperity Bank Statutory Trust II, issued $4,500,000 in principal amount of trust
preferred securities at a rate per annum equal to the 3-Month LIBOR plus 3.15%; (ii) in 2004, Prosperity’s statutory trust subsidiary,
Prosperity Banking Capital Trust I, issued $5,000,000 in principal amount of trust preferred securities at a rate per annum equal
to the 3-Month LIBOR plus 2.57%; (iii) in 2006, Prosperity’s statutory trust subsidiary, Prosperity Bank Statutory Trust III, issued
$10,000,000 in principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.60%; and
(iv) in 2007, Prosperity’s statutory trust subsidiary, Prosperity Bank Statutory Trust IV, issued $10,000,000 in principal amount
of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.54%. Each of the foregoing issuances was
consummated through a pool sponsored by a national brokerage firm. These trust preferred securities have a maturity of 30 years
and are redeemable at the Company’s option on any quarterly interest payment date.
4
On June 30, 2014, Ameris acquired Coastal Bankshares, Inc. (“Coastal”) by merger. In connection with such transaction, Ameris
assumed the obligations of Coastal related to the following issuances of trust preferred securities: (i) in 2003, Coastal’s statutory
trust subsidiary, Coastal Bankshares Statutory Trust I, issued $5,000,000 in principal amount of trust preferred securities at a rate
per annum equal to the 3-Month LIBOR plus 3.15%; and (ii) in 2005, Coastal’s statutory trust subsidiary, Coastal Bankshares
Statutory Trust II, issued $10,000,000 in principal amount of trust preferred securities at a rate per annum equal to the 3-Month
LIBOR plus 1.60%. Each of the foregoing issuances was consummated through a pool sponsored by a national brokerage firm.
These trust preferred securities have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest
payment date.
On May 22, 2015, Ameris acquired Merchants & Southern Banks of Florida, Incorporated (“Merchants”) by merger. In connection
with such transaction, Ameris assumed the obligations of Merchants related to the following issuances of trust preferred securities:
(i) in 2005, Merchants’ statutory trust subsidiary, Merchants & Southern Statutory Trust I, issued $3,000,000 in principal amount
of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.90%; and (ii) in 2006, Merchants’ statutory
trust subsidiary, Merchants & Southern Statutory Trust II, issued $3,000,000 in principal amount of trust preferred securities at a
rate per annum equal to the 3-Month LIBOR plus 1.50%. Each of the foregoing issuances was consummated through a pool
sponsored by a national brokerage firm. These trust preferred securities have a maturity of 30 years and are redeemable at the
Company’s option on any quarterly interest payment date.
On March 11, 2016, Ameris acquired Jacksonville Bancorp, Inc. (“JAXB”) by merger. In connection with such transaction, Ameris
assumed the obligations of JAXB related to the following issuances of trust preferred securities: (i) in 2004, JAXB’s statutory
trust subsidiary, Jacksonville Statutory Trust I, issued $4,000,000 in principal amount of trust preferred securities at a rate per
annum equal to the 3-Month LIBOR plus 2.63%; (ii) in 2006, JAXB’s statutory trust subsidiary, Jacksonville Statutory Trust II,
issued $3,000,000 in principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.73%;
(iii) in 2008, JAXB’s statutory trust subsidiary, Jacksonville Bancorp, Inc. Statutory Trust III, issued $7,550,000 in principal
amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 3.75%; and (iv) in 2005, JAXB’s statutory
trust subsidiary, Atlantic BancGroup, Inc. Statutory Trust I, issued $3,000,000 in principal amount of trust preferred securities at
a rate per annum equal to the 3-Month LIBOR plus 1.50%. Each of foregoing issuances has a maturity of 30 years and is redeemable
at the Company’s option on any quarterly interest payment date. Issuances by Jacksonville Statutory Trust I, Jacksonville Statutory
Trust II, and Atlantic BancGroup, Inc. Statutory Trust I were consummated through a pool sponsored by a national brokerage firm,
whereas the issuance by Jacksonville Bancorp, Inc. Statutory Trust III was consummated as a single issue.
On June 29, 2018, Ameris acquired Hamilton State Bancshares, Inc. (“Hamilton”) by merger. In connection with such transaction,
Ameris assumed the obligations of Hamilton related to an issuance of trust preferred securities that Hamilton has assumed in its
acquisition of Cherokee Banking Company on February 17, 2014. In 2005, Cherokee Banking Company's statutory trust subsidiary,
Cherokee Statutory Trust I, issued $3,000,000 in principal amount of trust preferred securities at a rate per annum equal to the 3-
Month LIBOR plus 1.50%. The foregoing issuance was consummated through a pool sponsored by a national brokerage firm.
These trust preferred securities have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest
payment date.
See the notes to our consolidated financial statements included in this Annual Report for a further discussion of these trust preferred
securities.
Strategy
We seek to increase our presence and grow the “Ameris” brand in the markets that we currently serve in Georgia, Alabama, Florida
and South Carolina and in neighboring communities that present attractive opportunities for expansion. Management has pursued
this objective through an acquisition-oriented growth strategy and a prudent operating strategy. Our community banking philosophy
emphasizes personalized service and building broad and deep customer relationships, which has provided us with a substantial
base of low cost core deposits. Our markets are managed by senior level, experienced decision makers in a decentralized structure
that differentiates us from our larger competitors. Management believes that this structure, along with involvement in and
knowledge of our local markets, will continue to provide growth and assist in managing risk throughout our Company.
We have maintained our focus on a long-term strategy of expanding and diversifying our franchise in terms of revenues, profitability
and asset size. Our growth over the past several years has been enhanced significantly by bank acquisitions, including Hamilton
and Atlantic Coast Financial Corporation ("Atlantic") in 2018, JAXB in 2016, 18 retail branches from Bank of America in 2015,
Merchants in 2015, Coastal in 2014, Prosperity in 2013 and ten failed institutions in FDIC-assisted transactions between 2009
and 2012. We expect to continue to take advantage of the consolidation in the financial services industry and enhance our franchise
through future acquisitions. We intend to grow within our existing markets, to branch into or acquire financial institutions in
existing markets as well as financial institutions in other markets consistent with our capital availability and management abilities.
5
BANKING SERVICES
Lending Activities
General. The Company maintains a diversified loan portfolio by providing a broad range of commercial and retail lending services
to business entities and individuals. We provide agricultural loans, commercial business loans, commercial and residential real
estate construction and mortgage loans, consumer loans, revolving lines of credit and letters of credit. The Company also originates
first mortgage residential mortgage loans and generally enters into a commitment to sell these loans in the secondary market. We
have not made or participated in foreign, energy-related or subprime loans. In addition, the Company does not regularly buy loan
participations or portions of national credits but from time to time, may acquire balances subject to participation agreements
through acquisition. Less than 1% of the Company’s loan portfolio was a loan participation purchased at December 31, 2018.
At December 31, 2018, our loan portfolio totaled approximately $8.62 billion, representing approximately 75.4% of our total
assets. For additional discussion of our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Loans.”
Commercial Real Estate Loans. This portion of our loan portfolio has grown significantly over the past few years and represents
the largest segment of our loan portfolio. These loans are generally extended for acquisition, development or construction of
commercial properties. The loans are underwritten with an emphasis on the viability of the project, the borrower’s ability to meet
certain minimum debt service requirements and an analysis and review of the collateral and guarantors, if any.
Residential Real Estate Mortgage Loans. Ameris originates adjustable and fixed-rate residential mortgage loans. These mortgage
loans are generally originated under terms and conditions consistent with secondary market guidelines. Some of these loans will
be placed in the Company’s loan portfolio; however, a majority are sold in the secondary market. The residential real estate
mortgage loans that are included in the Company’s loan portfolio are usually owner-occupied and generally amortized over a 20-
to 30-year period with three- to five-year maturity or repricing. In addition, during 2015 and 2016, the Company purchased
residential mortgage loan pools collateralized by properties located outside our Southeast markets, specifically in California,
Washington and Illinois.
Agricultural Loans. Our agricultural loans are extended to finance crop production, the purchase of farm-related equipment or
farmland and the operations of dairies, poultry producers, livestock producers and timber growers. Agricultural loans typically
involve seasonal balance fluctuations. Although we typically look to an agricultural borrower’s cash flow as the principal source
of repayment, agricultural loans are also generally secured by a security interest in the crops or the farm-related equipment and,
in some cases, an assignment of crop insurance and mortgage on real estate. The lending officer visits the borrower regularly
during the growing season and re-evaluates the loan in light of the borrower’s updated cash flow projections. A portion of our
agricultural loans is guaranteed by the Farm Service Agency Guaranteed Loan Program.
Commercial and Industrial Loans. Generally, commercial and industrial loans consist of loans made primarily to manufacturers,
wholesalers and retailers of goods, service companies, municipalities and other industries. These loans are made for acquisition,
expansion and working capital purposes and may be secured by real estate, accounts receivable, inventory, equipment, personal
guarantees or other assets. The Company monitors these loans by requesting submission of corporate and personal financial
statements and income tax returns. The Company has also generated loans which are guaranteed by the U.S. Small Business
Administration (the “SBA”). SBA loans are generally underwritten in the same manner as conventional loans generated for the
Bank’s portfolio. Periodically, a portion of the loans that are secured by the guaranty of the SBA will be sold in the secondary
market. Management believes that making such loans helps the local community and also provides Ameris with a source of income
and solid future lending relationships as such businesses grow and prosper. The primary repayment risk for commercial loans is
the failure of the business due to economic or financial factors. During 2016, the Bank purchased a pool of commercial insurance
premium finance loans made to borrowers throughout the United States and began a division to originate, administer and service
these types of loans.
Consumer Loans. Our consumer loans include home improvement, home equity, motor vehicle, loans secured by savings accounts
and small unsecured personal credit lines. The terms of these loans typically range from 12 to 240 months and vary based upon
the nature of collateral and size of the loan. These loans are generally secured by various assets owned by the consumer. In addition,
during 2016, the Bank began purchasing consumer installment home improvement loans made to borrowers throughout the United
States.
6
Credit Administration
We have sought to maintain a comprehensive lending policy that meets the credit needs of each of the communities served by the
Bank, including low and moderate-income customers, and to employ lending procedures and policies consistent with this
approach. All loans are subject to our corporate loan policy, which is reviewed annually and updated as needed. The loan policy
provides that lending officers have sole authority to approve loans of various amounts commensurate with their seniority, experience
and needs within the market. Our local market presidents have discretion to approve loans in varying principal amounts up to
established limits, and our regional credit officers review and approve loans that exceed such limits.
Individual lending authority is assigned by the Company’s Chief Credit Officer, as is the maximum limit of new extensions of
credit that may be approved in each market. These approval limits are reviewed annually by the Company and adjusted as needed. All
requests for extensions of credit in excess of any of these limits are reviewed by one of six regional credit officers. When the
request for approval exceeds the authority level of the regional credit officer, the approval of the Company’s Chief Credit Officer
and/or the Company’s loan committee is required. All new loans or modifications to existing loans in excess of $250,000 are
reviewed monthly by the Company’s Credit Administration Department with the lender responsible for the credit. In addition, our
ongoing loan review program subjects the portfolio to sampling and objective review by our ongoing internal loan review process
which is independent of the originating loan officer.
Each lending officer has authority to make loans only in the market area in which his or her Bank office is located and its contiguous
counties. Occasionally, our loan committee will approve making a loan outside of the market areas of the Bank, provided the Bank
has a prior relationship with the borrower. Our lending policy requires analysis of the borrower’s projected cash flow and ability
to service the debt.
The Bank has purchased loans outside of its market area. These include residential mortgage loan pools collateralized by properties
located outside our Southeast markets, specifically in California, Washington and Illinois, consumer installment home improvement
loans made to borrowers throughout the United States and commercial insurance premium finance loans made to borrowers
throughout the United States. These purchases were reviewed and approved by the Chief Credit Officer.
We actively market our services to qualified lending customers in both the commercial and consumer sectors. Our commercial
lending officers actively solicit the business of new companies entering the market as well as longstanding members of that market’s
business community. Through personalized professional service and competitive pricing, we have been successful in attracting
new commercial lending customers. At the same time, we actively advertise our consumer loan products and continually seek to
make our lending officers more accessible.
The Bank continually monitors its loan portfolio to identify areas of concern and to enable management to take corrective action
when necessary. Local market presidents and lending officers meet periodically to review all past due loans, the status of large
loans and certain other credit or economic related matters. Individual lending officers are responsible for collection of past due
amounts and monitoring any changes in the financial status of the borrowers. Loans that are serviced by others, such as certain
residential mortgage loans and consumer installment home improvement loans, are monitored by the Company’s credit officers,
although ultimate collection of past due amounts is the responsibility of the servicing agents.
Investment Activities
Our investment policy is designed to maximize income from funds not needed to meet loan demand in a manner consistent with
appropriate liquidity and risk management objectives. Under this policy, our Company may invest in federal, state and municipal
obligations, corporate obligations, public housing authority bonds, industrial development revenue bonds, securities issued by
Government-Sponsored Enterprises (“GSEs”) and satisfactorily-rated trust preferred obligations. Investments in our portfolio must
satisfy certain quality criteria. Our Company’s investments must be “investment-grade” as determined by either Moody’s or
Standard and Poor’s. Investment securities where the Company has determined a certain level of credit risk are periodically
reviewed to determine the financial condition of the issuer and to support the Company’s decision to continue holding the
security. Our Company may purchase non-rated municipal bonds only if the issuer of such bonds is located in the Company’s
general market area and such bonds are determined by the Company to have a credit risk no greater than the minimum ratings
referred to above. Industrial development authority bonds, which normally are not rated, are purchased only if the issuer is located
in the Company’s market area and if the bonds are considered to possess a high degree of credit soundness. Traditionally, the
Company has purchased and held investment securities with very high levels of credit quality, favoring investments backed by
direct or indirect guarantees of the U.S. government.
While our investment policy permits our Company to trade securities to improve the quality of yields or marketability or to realign
the composition of the portfolio, the Bank historically has not done so to any significant extent.
7
Our investment committee implements the investment policy and portfolio strategies and monitors the portfolio. Reports on all
purchases, sales, net profits or losses and market appreciation or depreciation of the bond portfolio are reviewed by our Board of
Directors each month. The written investment policy is reviewed annually by the Company’s Board of Directors and updated as
needed.
The Company’s securities are held in safekeeping accounts at approved correspondent banks.
Deposits
The Company provides a full range of deposit accounts and services to both retail and commercial customers. These deposit
accounts have a variety of interest rates and terms and consist of interest-bearing and noninterest-bearing accounts, including
commercial and retail checking accounts, regular interest-bearing savings accounts, money market accounts, individual retirement
accounts and certificates of deposit. Our Bank obtains most of its deposits from individuals and businesses in its market areas.
Brokered deposits are deposits obtained by utilizing an outside broker that is paid a fee. The Bank utilizes brokered deposits to
accomplish several purposes, such as (i) acquiring a certain maturity and dollar amount without repricing the Bank’s current
customers which could increase or decrease the overall cost of deposits and (ii) acquiring certain maturities and dollar amounts
to help manage interest rate risk.
Other Funding Sources
The Federal Home Loan Bank (“FHLB”) allows the Company to obtain advances through its credit program. These advances are
secured by securities owned by the Company and held in safekeeping by the FHLB, FHLB stock owned by the Company and
certain qualifying loans secured by real estate, including residential mortgage loans, home equity lines of credit and commercial
real estate loans. The Company has a revolving credit agreement with a regional bank, secured by subsidiary bank stock, and the
Company maintains credit arrangements with various other financial institutions to purchase federal funds. The Company
participates in the Federal Reserve discount window borrowings program.
On March 13, 2017, the Company completed the public offering and sale of $75.0 million in aggregate principal amount of its
5.75% Fixed-To-Floating Rate Subordinated Notes due 2027. The subordinated notes were sold to the public at par. The
subordinated notes will mature on March 15, 2027 and through March 14, 2022 will bear a fixed rate of interest of 5.75% per
annum. Beginning March 15, 2022, the interest rate on the subordinated notes resets quarterly to a floating rate per annum equal
to the then-current three-month LIBOR plus 3.616%.
The Company has long-term subordinated deferrable interest debentures with a net book carrying value of $89.2 million as of
December 31, 2018. The majority of these trust preferred securities were assumed as liabilities in previous whole bank acquisitions.
The Company also enters into repurchase agreements. These repurchase agreements are treated as short-term borrowings and
are reflected on the Company’s balance sheet as such.
Use of Derivatives
The Company seeks to provide stable net interest income despite changes in interest rates. In its review of interest rate risk, the
Company considers the use of derivatives to protect interest income on loans or to create a structure in institutional borrowings
that limits the Company’s cost. During 2017 and 2018, the Company had an interest rate swap with a notional amount of $37.1
million for the purpose of converting from a variable to a fixed interest rate on certain junior subordinated debentures on the
Company’s balance sheet. The interest rate swap, which is classified as a cash flow hedge, is indexed to 90-day LIBOR.
The Company maintains a risk management program to manage interest rate risk and pricing risk associated with its mortgage
lending activities. This program includes the use of forward contracts and other derivatives that are used to offset changes in the
value of the mortgage inventory due to changes in market interest rates. As a normal part of its operations, the Company enters
into derivative contracts such as forward sale commitments and interest rate lock commitments (“IRLCs”) to economically hedge
risks associated with overall price risk related to IRLCs and mortgage loans held for sale carried at fair value. The fair value of
these instruments amounted to an asset of approximately $2,537,000 and $2,888,000 at December 31, 2018 and 2017, respectively,
and a derivative liability of approximately $1,276,000 and $67,000 at December 31, 2018 and 2017, respectively.
8
CORPORATE RESTRUCTURING AND BUSINESS COMBINATIONS
Fidelity Southern Corporation
On December 17, 2018, the Company and Fidelity Southern Corporation, a Georgia corporation ("Fidelity"), entered into an
Agreement and Plan of Merger (the "Fidelity Merger Agreement") pursuant to which Fidelity will merge into Ameris, with Ameris
as the surviving entity and immediately thereafter, Fidelity Bank, a Georgia bank wholly owned by Fidelity, will be merged into
Ameris Bank, with Ameris Bank as the surviving entity. Fidelity Bank operates 69 full-service banking locations, 50 of which are
located in Georgia and 19 of which are located Florida, providing financial products and services to customers primarily in the
metropolitan markets of Atlanta, Georgia, and Jacksonville, Orlando, Tallahassee, and Sarasota-Bradenton, Florida. Under the
terms of the Fidelity Merger Agreement, Fidelity's shareholders will receive 0.80 shares of Ameris common stock, par value $1.00
per share (the "Common Stock"), for each share of Fidelity common stock they hold. Each outstanding Fidelity restricted stock
award will fully vest and be converted into the right to receive 0.80 shares of the Company's Common Stock for each share of
Fidelity common stock underlying such award. Each outstanding Fidelity stock option will fully vest and be converted into an
option to purchase shares of the Company's Common Stock, with the number of underlying shares and per share exercise price
of such option adjusted to reflect the exchange ratio of 0.80. The estimated purchase price is $750.7 million in the aggregate based
upon the $34.02 per share closing price of our Common Stock as of December 14, 2018. The merger is subject to customary
closing conditions, including the receipt of regulatory approvals and the approval of Ameris and Fidelity shareholders. The
transaction is expected to close during the second quarter of 2019. As of December 31, 2018, Fidelity reported assets of $4.73
billion, gross loans of $3.92 billion and deposits of $3.98 billion. The purchase price will be allocated among the net assets of
Fidelity acquired as appropriate, with the remaining balance being reported as goodwill.
Hamilton State Bancshares, Inc.
On June 29, 2018, the Company completed its acquisition of Hamilton. Upon consummation of the acquisition, Hamilton was
merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Hamilton's wholly owned
banking subsidiary, Hamilton State Bank, was also merged with and into the Bank. The acquisition expanded the Company's
existing market presence, as Hamilton State Bank had a total of 28 full-service branches located in Atlanta, Georgia and the
surrounding area as well as in Gainesville, Georgia. Under the terms of the merger agreement, Hamilton's shareholders received
0.16 shares of Ameris common stock and $0.93 in cash for each share of Hamilton voting common stock or nonvoting common
stock they previously held. As a result, the Company issued 6,548,385 common shares at a fair value of $349.4 million and paid
$47.8 million in cash to the former shareholders of Hamilton as merger consideration, resulting in an aggregate purchase price of
approximately $397.1 million.
Atlantic Coast Financial Corporation
On May 25, 2018, the Company completed its acquisition of Atlantic. Upon consummation of the acquisition, Atlantic was merged
with and into the Company, with Ameris as the surviving entity in the merger. At that time, Atlantic's wholly owned banking
subsidiary, Atlantic Coast Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market
presence, as Atlantic Coast Bank had a total of 12 full-service branches located in Jacksonville and Jacksonville Beach, Duval
County, Florida, Waycross, Georgia and Douglas, Georgia. Under the terms of the merger agreement, Atlantic's shareholders
received 0.17 shares of Ameris common stock and $1.39 in cash for each share of Atlantic common stock they previously held.
As a result, the Company issued 2,631,520 shares of Common Stock with a value of approximately $147.8 million and paid $21.5
million in cash to the former shareholders of Atlantic as merger consideration, resulting in an aggregate purchase price of
approximately $169.3 million.
US Premium Finance Holding Company
On January 31, 2018, the Company closed on the purchase of the final 70% of the outstanding shares of common stock of US
Premium Finance Holding Company ("USPF"), completing its acquisition of USPF and making USPF a wholly owned subsidiary
of the Company. Through a series of three acquisition transactions that closed on January 18, 2017, January 3, 2018 and January
31, 2018, the Company issued a total of 1,073,158 shares of its common stock at a fair value of $55.9 million and paid $21.4
million in cash to the former shareholders of USPF. Pursuant to the terms of the Stock Purchase Agreement dated January 25,
2018 under which Company purchased the final 70% of the outstanding shares of common stock of USPF, the selling shareholders
of USPF may receive additional cash payments aggregating up to $5.8 million based on the achievement by the Company's premium
finance division of certain income targets, between January 1, 2018 and June 30, 2019. As of the January 31, 2018 acquisition
date, the present value of the contingent earn-out consideration expected to be paid was $5.7 million. Including the fair value of
the Company's common stock issued, cash paid and the present value of the contingent earn-out consideration expected to be paid,
the aggregate purchase price of USPF amounted to $83.0 million.
9
Jacksonville Bancorp, Inc.
On March 11, 2016, Ameris acquired JAXB by merger, at which time JAXB’s wholly owned banking subsidiary, The Jacksonville
Bank (“Jacksonville Bank”), also was merged with and into the Bank. JAXB was headquartered in Jacksonville, Florida and it
operated eight full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida. The acquisition
expanded the Company’s existing market presence in the Jacksonville market. The consideration for the acquisition was a
combination of cash and our Common Stock, with an aggregate purchase price of approximately $96.4 million. The total
consideration consisted of $23.9 million in cash and 2,549,469 shares of Common Stock with a value of approximately $72.5
million.
Merchants & Southern Banks of Florida, Inc.
On May 22, 2015, Ameris acquired Merchants by merger, at which time Merchants’ wholly owned banking subsidiary, Merchants
and Southern Bank, also was merged with and into the Bank. Merchants was headquartered in Gainesville, Florida and operated
thirteen banking locations in Alachua, Marion and Clay Counties in Florida. The acquisition of Merchants was significant to the
Company’s growth strategy, as it expanded our existing footprint in several attractive Florida markets. Ameris paid an aggregate
purchase price of $50.0 million to acquire the stock of Merchants.
Acquisition of 18 Branches in North Florida and South Georgia
On June 12, 2015, Ameris completed the acquisition of 18 branches from Bank of America, National Association located in
Calhoun, Columbia, Dixie, Hamilton, Suwanee and Walton Counties, Florida and Ben Hill, Colquitt, Dougherty, Laurens, Liberty,
Thomas, Tift and Ware Counties, Georgia. Ameris acquired approximately $644.7 million in deposits and paid a deposit premium
of $20.0 million, equal to 3.00% of the average daily deposits for the 15 calendar-day period immediately prior to the acquisition
date. In addition, Ameris acquired approximately $4.0 million in loans and $10.7 million in premises and equipment.
Coastal Bankshares, Inc.
On June 30, 2014, Ameris acquired Coastal by merger, at which time Coastal’s wholly owned banking subsidiary, The Coastal
Bank (“Coastal Bank”), also was merged with and into the Bank. Coastal was headquartered in Savannah, Georgia and it operated
six banking locations in Chatham, Liberty and Effingham Counties in Georgia. The acquisition of Coastal grew the Company’s
existing market presence in the Savannah, Georgia market. The consideration for the acquisition, with an aggregate purchase
price of approximately $37.3 million, consisted of approximately 1,599,000 shares of Common Stock with a value of approximately
$34.5 million and $2.8 million cash in exchange for outstanding warrants.
The Prosperity Banking Company
On December 23, 2013, Ameris acquired Prosperity by merger, at which time Prosperity’s wholly owned banking subsidiary,
Prosperity Bank (“Prosperity Bank”), also was merged with and into the Bank. Prosperity was headquartered in Saint Augustine,
Florida and it operated 12 banking locations in St. Johns, Duval, Flagler, Bay, Putnam and Volusia Counties in northeast Florida
and the Florida panhandle. The acquisition of Prosperity was significant to the Company, as it expanded our existing Southeastern
footprint in several attractive Florida markets. The consideration for the acquisition was a combination of cash and our Common
Stock, with an aggregate purchase price of approximately $24.6 million. The total consideration consisted of $162,000 in cash
and approximately 1,169,000 shares of Common Stock with a value of approximately $24.5 million.
MARKET AREAS AND COMPETITION
The banking industry in general, and in the southeastern United States specifically, is highly competitive and dramatic changes
continue to occur throughout the industry. While our select market areas in Georgia, Alabama, Florida and South Carolina have
experienced strong population growth over the past 20 to 30 years, intense market demands, national and local economic pressures,
including a low interest rate environment, and increased customer awareness of product and service differences among financial
institutions have forced banks to diversify their services and become much more cost effective. Over the past few years, our Bank
has faced strong competition in attracting deposits at profitable levels. Competition for deposits comes from other commercial
banks, thrift institutions, savings banks, internet banks, credit unions, and brokerage and investment banking firms. Interest rates,
online banking capabilities, convenience of office locations and marketing are all significant factors in our Bank’s competition
for deposits.
Competition for loans comes from other commercial banks, thrift institutions, savings banks, insurance companies, consumer
finance companies, credit unions, mortgage companies, leasing companies and other institutional lenders. In order to remain
10
competitive, our Bank has varied interest rates and loan fees to some degree as well as increased the number and complexity of
services provided. We have not varied or altered our underwriting standards in any material respect in response to competitor
willingness to do so and in some markets have not been able to experience the growth in loans that we would have
preferred. Competition is affected by the general availability of lendable funds, general and local economic conditions, current
interest rate levels and other factors that are not readily predictable.
Competition among providers of financial products and services continues to increase with consumers having the opportunity to
select from a growing variety of traditional and nontraditional alternatives. The industry continues to consolidate, which affects
competition by eliminating some regional and local institutions, while strengthening the franchise of acquirers. Management
expects that competition will become more intense in the future due to changes in state and federal laws and regulations and the
entry of additional bank and nonbank competitors. See “Supervision and Regulation” under this Item.
EMPLOYEES
At December 31, 2018, the Company employed approximately 1,804 full-time-equivalent employees. We consider our relationship
with our employees to be good.
We have adopted the Ameris Bancorp 401(k) Profit Sharing Plan, as a retirement plan for our employees. This plan provides
deferral of compensation by our employees and contributions by Ameris. We also maintain a comprehensive employee benefits
program providing, among other benefits, hospitalization and major medical insurance and life insurance. Management considers
these benefits to be competitive with those offered by other financial institutions in our market areas. Our employees are not
represented by any collective bargaining group.
RELATED PARTY TRANSACTIONS
The Company makes loans to our directors and their affiliates and to banking officers. These loans are made on substantially the
same terms as those prevailing at the time for comparable transactions and do not involve more than normal credit risk. At
December 31, 2018, we had approximately $8.62 billion in total loans outstanding, of which approximately $1.5 million were
outstanding to certain directors and their affiliates. Company policy prohibits loans to executive officers.
SUPERVISION AND REGULATION
General
We are extensively regulated under federal and state law. Generally, these laws and regulations are intended to protect depositors
and not shareholders. Set forth below is a summary of certain provisions of certain laws that affect the regulation of bank holding
companies and banks. The discussion is qualified in its entirety by reference to applicable laws and regulations. Changes in such
laws and regulations may have a material effect on our business and prospects.
Federal Bank Holding Company Regulation and Structure
As a bank holding company, we are subject to regulation under the Bank Holding Company Act and to the supervision, examination
and reporting requirements of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Our Bank has a
Georgia state charter and is subject to regulation, supervision and examination by the FDIC and the Georgia Department of Banking
and Finance (the “GDBF”).
The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:
•
•
•
it may acquire direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank
holding company will directly or indirectly own or control more than 5% of the voting shares of the bank;
it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or
it may merge or consolidate with any other bank holding company.
The Bank Holding Company Act further provides that the Federal Reserve may not approve any transaction that would result in
a monopoly or that would substantially lessen competition in the banking business, unless the public interest in meeting the needs
of the communities to be served outweighs the anti-competitive effects. The Federal Reserve is also required to consider the
financial and managerial resources and future prospects of the bank holding companies and banks involved and the convenience
11
and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy, and
consideration of convenience and needs issues focuses, in part, on performance under the Community Reinvestment Act, both of
which are discussed elsewhere in more detail.
Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company.
Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of
a bank holding company. Control is also presumed to exist, although such presumption is rebuttable, if a person or company
acquires 10% or more, but less than 25%, of any class of voting securities and either:
•
•
the bank holding company has registered securities under Section 12 of the Exchange Act; or
no other person owns a greater percentage of that class of voting securities immediately after the transaction.
Our Common Stock is registered under Section 12 of the Exchange Act. The regulations provide a procedure for challenging
rebuttable presumptions of control.
The Bank Holding Company Act generally prohibits a bank holding company from engaging in activities other than banking,
managing or controlling banks or other permissible subsidiaries and acquiring or retaining direct or indirect control of any company
engaged in any activities other than activities closely related to banking or managing or controlling banks. In determining whether
a particular activity is permissible, the Federal Reserve considers whether performing the activity can be expected to produce
benefits to the public that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. The Federal Reserve has the power to order a bank holding company
or its subsidiaries to terminate any activity or control of any subsidiary when the continuation of the activity or control constitutes
a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company.
Under the Bank Holding Company Act, a bank holding company may file an election with the Federal Reserve to be treated as a
financial holding company and engage in an expanded list of financial activities. The election must be accompanied by a certification
that all of the company’s insured depository institution subsidiaries are “well capitalized” and “well managed.” Additionally, the
Community Reinvestment Act rating of each subsidiary bank must be satisfactory or better. Effective August 24, 2000, pursuant
to a previously-filed election with the Federal Reserve, Ameris became a financial holding company. As such, we may engage in
activities that are financial in nature or incidental or complementary to financial activities, including insurance underwriting,
securities underwriting and dealing, and making merchant banking investments in commercial and financial companies. If the
Bank ceases to be “well capitalized” or “well managed” under applicable regulatory standards, the Federal Reserve may, among
other things, place limitations on our ability to conduct these broader financial activities. In addition, if the Bank receives a rating
of less than satisfactory under the Community Reinvestment Act, we would be prohibited from engaging in any additional activities
other than those permissible for bank holding companies that are not financial holding companies. If, after becoming a financial
holding company and undertaking activities not permissible for a bank holding company, a company fails to continue to meet any
of the prerequisites for financial holding company status, including those described above, the company must enter into an agreement
with the Federal Reserve to comply with all applicable capital and management requirements. If the company does not return to
compliance within 180 days, the Federal Reserve may order the company to divest its subsidiary banks or the company may
discontinue or divest investments in companies engaged in activities permissible only for a bank holding company that has elected
to be treated as a financial holding company.
By statute and regulation, we are expected to act as a source of financial strength for the Bank and to commit resources to support
the Bank. This support may be required at times when, without this Federal Reserve policy, we might not be inclined to provide
it. In addition, any capital loans made by us to the Bank will be repaid only after its deposits and various other obligations are
repaid in full.
Our Bank is also subject to numerous state and federal statutes and regulations that affect its business, activities and operations
and is supervised and examined by state and federal bank regulatory agencies. The FDIC and the GDBF regularly examine the
operations of our Bank and are given the authority to approve or disapprove mergers, consolidations, the establishment of branches
and similar corporate actions. These agencies also have the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of law.
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Changes to our Regulation and Supervision in Crossing $10 Billion in Assets Threshold
Federal law imposes heightened requirements on banks and bank holding companies that exceed $10 billion in total consolidated
assets. The Company and the Bank exceeded $10 billion in total consolidated assets upon completion of our acquisition of Hamilton
in June 2018. Certain requirements, including the following, will be imposed on the Company or the Bank following the fourth
consecutive quarter (and any applicable phase-in period) in which the Company or the Bank’s total consolidated assets exceed
that $10 billion threshold:
• The calculation of the Bank’s FDIC deposit insurance assessment base will be changed and will utilize the performance
score and a loss-severity score system as summarized under “FDIC Insurance Assessments.”
• The Consumer Financial Protection Bureau (“CFPB”) will become our supervisor with respect to consumer protection
laws and regulations and will have examination authority following the fourth consecutive quarter in which the Bank’s
total assets exceed $10 billion.
• The Bank will become subject to the cap on debit card interchange fees imposed by the so-called Durbin Amendment
beginning on July 1 of the calendar year following the end of the first year in which the Bank’s total consolidated assets
pass the $10 billion threshold.
Under the Durbin Amendment and the Federal Reserve’s implementing regulations, bank issuers who are not exempt may only
receive an interchange fee from merchants that is reasonable and proportional to the cost of clearing the transaction. The maximum
permissible interchange fee is equal to no more than $0.21 plus five basis points of the transaction value for many types of debit
interchange transactions. A debit card issuer may also recover $0.01 per transaction for fraud prevention purposes if the issuer
complies with certain fraud-related requirements required by the Federal Reserve. The Federal Reserve also has rules governing
routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid
product.
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires publicly traded
bank holding companies with assets of $10 billion or more to perform capital stress testing and establish a risk committee responsible
for enterprise-wide risk management practices, comprised of independent directors, including one risk management expert. These
provisions become applicable if the average of the total consolidated assets of the bank holding company, as reported in its quarterly
Consolidated Financial Statements for Bank Holding Companies, for the four most recent consecutive quarters exceeds $10 billion.
The “Dodd-Frank Act Stress Test,” or “DFAST,” is designed to determine whether the capital planning and risk management
practices of a bank holding company adequately protect it and its affiliates in the event of an economic downturn.
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) was signed into
law. Among other things, the EGRRCPA amended the Dodd-Frank Act to exempt bank holding companies with less than $100
billion in total consolidated assets from DFAST. While EGRRCPA does not statutorily exempt banks with less than $100 billion
in total assets from DFAST until November 25, 2019, the federal banking agencies issued a joint statement on July 6, 2018 extending
the deadline for compliance with DFAST by banks with less than $100 billion in assets until the statutory exemption takes effect
on November 25, 2019. Therefore, the Company and the Bank are not expected to be subject to DFAST requirements at this time.
Payment of Dividends and Other Restrictions
Ameris is a legal entity separate and distinct from its subsidiaries. While there are various legal and regulatory limitations under
federal and state law on the extent to which our Bank can pay dividends or otherwise supply funds to Ameris, the principal source
of our cash revenues is dividends from our Bank. The prior approval of applicable regulatory authorities is required if the total
amount of all dividends declared by the Bank in any calendar year exceeds 50% of the Bank’s net profits for the previous year. The
relevant federal and state regulatory agencies also have authority to prohibit a state member bank or bank holding company, which
would include Ameris and the Bank, from engaging in what, in the opinion of such regulatory body, constitutes an unsafe or
unsound practice in conducting its business. The payment of dividends could, depending upon the financial condition of the
subsidiary, be deemed to constitute an unsafe or unsound practice in conducting its business.
Under Georgia law, the prior approval of the GDBF is required before any cash dividends may be paid by a state bank if: (i) total
classified assets at the most recent examination of such bank exceed 80% of the equity capital (as defined, which includes the
reserve for loan losses) of such bank; (ii) the aggregate amount of dividends declared or anticipated to be declared in the calendar
year exceeds 50% of the net profits (as defined) for the previous calendar year; or (iii) the ratio of equity capital to adjusted total
assets is less than 6%. As of December 31, 2018, there was approximately $67.2 million of retained earnings of our Bank available
for payment of cash dividends under applicable regulations without obtaining regulatory approval.
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In addition, our Bank is subject to limitations under Section 23A of the Federal Reserve Act with respect to extensions of credit
to, investments in and certain other transactions with Ameris. Furthermore, loans and extensions of credit are also subject to various
collateral requirements.
The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses
the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s
net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the
holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would
be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends. Furthermore,
under the prompt corrective action regulations adopted by the Federal Reserve, the Federal Reserve may prohibit a bank holding
company from paying any dividends if one or more of the holding company’s bank subsidiaries is classified as undercapitalized.
A bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding
equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all
such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The Federal
Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound
practice or would violate any law, regulation, Federal Reserve order or condition imposed by, or written agreement with, the
Federal Reserve.
Capital Adequacy
We must comply with the Federal Reserve’s established capital adequacy standards, and our Bank is required to comply with the
capital adequacy standards established by the FDIC. The Federal Reserve has promulgated two basic measures of capital adequacy
for bank holding companies: a risk-based measure and a leverage measure. A bank holding company must satisfy all applicable
capital standards to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance-sheet exposure and minimize disincentives for holding liquid
assets.
Assets and off-balance-sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and off-balance-sheet items.
The regulatory capital framework under which we operate has changed, and is expected to continue to change, in significant
respects as a result of the Dodd-Frank Act which includes certain provisions concerning the capital regulations of U.S. banking
regulators. These provisions are intended to subject bank holding companies to the same capital requirements as their bank
subsidiaries and to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as
regulatory capital. Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized,
many of the new requirements called for have yet to be implemented and will likely be subject to implementing regulations over
the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will
be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on financial institutions’
operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities,
require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements
or otherwise adversely affect our business. These changes may also require us to invest significant management attention and
resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.
In July 2013, the federal banking agencies approved an interim final rule that adopts a series of previously proposed rules to
conform U.S. regulatory capital rules with the international regulatory standards agreed to by the Basel Committee on Banking
Supervision in the accord referred to as “Basel III” and to implement requirements of the Dodd-Frank Act. The adopted regulations
established new higher capital ratio requirements, narrowed the definitions of capital, imposed new operating restrictions on
banking organizations with insufficient capital buffers and increased the risk weighting of certain assets.
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The regulatory changes found in the new final rule include the following:
• The final rule established a new capital measure called “Common Equity Tier 1 Capital” consisting of common stock
and related surplus, retained earnings, accumulated other comprehensive income and, subject to certain adjustments,
minority common equity interests in subsidiaries. Unlike prior rules which excluded unrealized gains and losses on
available for sale debt securities from regulatory capital, the final rule generally requires accumulated other comprehensive
income to flow through to regulatory capital; however, pursuant to a one-time, permanent election made available to
most FDIC-supervised institutions, the Bank elected to opt out of the requirement to include most components of
accumulated other comprehensive income in its regulatory capital. Depository institutions and their holding companies
are now required to maintain Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets. Additionally, the
regulations increased the required ratio of Tier 1 Capital to risk-weighted assets from 4% to 6%. Tier 1 Capital consists
of Common Equity Tier 1 Capital plus Additional Tier 1 Capital which includes non-cumulative perpetual preferred stock.
Neither cumulative preferred stock (other than certain preferred stock issued to the U.S. Treasury) nor trust preferred
securities qualify as Additional Tier 1 Capital, but they may be included in Tier 2 Capital along with qualifying subordinated
debt. The new regulations also require a minimum Tier 1 leverage ratio of 4% for all institutions, while the minimum
required ratio of total capital to risk-weighted assets remains at 8%.
•
In addition to increased capital requirements, depository institutions and their holding companies will be required to
maintain a capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based
capital requirements in order to avoid limitations on the payment of dividends, the repurchase of shares or the payment
of discretionary bonuses. The capital conservation buffer requirement is being phased in, beginning January 1, 2016,
requiring during 2016 a buffer amount greater than 0.625% in order to avoid these limitations, and increasing in amount
each year (1.875% for 2018) until, beginning January 1, 2019, the buffer amount must be greater than 2.5% in order to
avoid the limitations.
• The prompt corrective action regulations, under the final rule, incorporate a Common Equity Tier 1 Capital requirement
and raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the
prompt corrective action regulations, a banking organization is required to have at least an 8% Total Risk-Based Capital
Ratio, a 6% Tier 1 Risk-Based Capital Ratio, a 4.5% Common Equity Tier 1 Risk Based Capital Ratio and a 4% Tier 1
Leverage Ratio. As of December 31, 2018, the minimum risk-based capital requirements including the 1.875% capital
conservation buffer are as follows: 9.875% Total Risk-Based Capital Ratio, 7.875% Tier 1 Risk-Based Capital Ratio, and
6.375% Common Equity Tier 1 Risk Based Capital Ratio. To be well capitalized, a banking organization is required to
have at least a 10% Total Risk-Based Capital Ratio, an 8% Tier 1 Risk-Based Capital Ratio, a 6.5% Common Equity Tier
1 Risk-Based Capital Ratio and a 5% Tier 1 Leverage Ratio.
Since 2001, our consolidated capital ratios have increased due to the issuance of trust preferred securities. At December 31, 2018,
all of our trust preferred securities were included in Tier 1 Capital. At December 31, 2018, our total risk-based capital ratio, our
Tier 1 risk-based capital ratio and our common equity Tier 1 capital ratio were 12.23%, 11.07% and 10.07%, respectively. Neither
Ameris nor the Bank has been advised by any federal banking agency of any additional specific minimum capital ratio requirement
applicable to it.
At December 31, 2018, our leverage ratio was 9.17%, compared with 9.71% at December 31, 2017. Federal Reserve guidelines
provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal
Reserve has indicated that it will consider a “tangible Tier 1 Capital leverage ratio” and other indications of capital strength in
evaluating proposals for expansion or new activities. The Federal Reserve has not advised Ameris of any additional specific
minimum leverage ratio or tangible Tier 1 Capital leverage ratio applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits and certain other restrictions
on its business. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository
institutions that fail to meet applicable capital requirements.
The Federal Deposit Insurance Act (or “FDI Act”) requires the federal regulatory agencies to take “prompt corrective action” if
a depository institution does not meet minimum capital requirements. The FDI Act establishes five capital tiers: “well capitalized,”
“adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository
institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other
factors, as established by regulation.
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The federal bank regulatory agencies have adopted regulations establishing relevant capital measurers and relevant capital levels
applicable to FDIC-insured banks. The relevant capital measures are the Total Capital ratio, Tier 1 Capital ratio, Common Equity
Tier 1 Capital ratio and leverage ratio. Under the regulations, an FDIC-insured bank will be:
•
•
•
•
“well capitalized” if it has a Total Capital ratio of 10% or greater, a Tier 1 Capital ratio of 8% or greater, a Common
Equity Tier 1 Capital ratio of 6.5% or greater and a leverage ratio of 5% or greater and is not subject to any order or
written directive by the appropriate regulatory authority to meet and maintain a specific capital level for any capital
measure;
“adequately capitalized” if it has a Total Capital ratio of 8% or greater, a Tier 1 Capital ratio of 6% or greater, a Common
Equity Tier 1 Capital ratio of 4.5% or greater and a leverage ratio of 4% or greater (3% in certain circumstances) and is
not “well capitalized;”
“undercapitalized” if it has a Total Capital ratio of less than 8%, a Tier 1 Capital ratio of less than 6%, a Common Equity
Tier 1 Capital ratio of less than 4.5% or a leverage ratio of less than 4%;
“significantly undercapitalized” if it has a Total Capital ratio of less than 6%, a Tier 1 Capital ratio of less than 4%, a
Common Equity Tier 1 Capital ratio of less than 3% or a leverage ratio of less than 3%; and
•
“critically undercapitalized” if its tangible equity is equal to or less than 2% of average quarterly tangible assets.
An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if
it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain
matters. As of December 31, 2018, our Bank had capital levels that qualify as “well capitalized” under such regulations.
The FDI Act generally prohibits an FDIC-insured bank from making a capital distribution (including payment of a dividend) or
paying any management fee to its holding company if the bank would thereafter be “undercapitalized.” “Undercapitalized” banks
are subject to growth limitations and are required to submit a capital restoration plan. The federal regulators may not accept a
capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in
restoring the bank’s capital. In addition, for a capital restoration plan to be acceptable, the bank’s parent holding company must
guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company
is limited to the lesser of: (i) an amount equal to 5% of the bank’s total assets at the time it became “undercapitalized”; and (ii) the
amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards
applicable with respect to such institution as of the time it fails to comply with the plan. If a bank fails to submit an acceptable
plan, it is treated as if it is “significantly undercapitalized.”
“Significantly undercapitalized” insured banks may be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets and the cessation of receipt of
deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or
conservator. A bank that is not “well capitalized” is also subject to certain limitations relating to brokered deposits.
FDIC Insurance Assessments
The Bank’s deposits are insured to the maximum extent permitted by the Deposit Insurance Fund (the “DIF”). As insurer, the
FDIC is authorized to conduct examinations of, and to require reporting by, insured institutions. It also may prohibit any insured
institution from engaging in any activity determined by regulation or order to pose a serious threat to the FDIC.
Pursuant to the Dodd-Frank Act, the FDI Act was amended to increase the maximum deposit insurance amount per depositor per
depository institution from $100,000 to $250,000.
The FDIC manages the DIF in part through the DIF’s reserve ratio and sets assessment rates to achieve a “designated reserve
ratio” (the “DRR”), the ratio at which the FDIC believes the DIF can withstand a future banking crisis. The FDIC has set the DRR
at 2.0% as a long-range minimum target. The Dodd-Frank Act requires the reserve ratio of the DIF to reach 1.35% by September
30, 2020. As of September 30, 2018, the reserve ratio for the DIF was 1.36%. The FDIC has adopted a risk-based premium system
that provides for quarterly assessments. In addition, all institutions with deposits insured by the FDIC are required to pay assessments
to fund interest payments on bonds issued by the Financing Corporation, a mixed-ownership government corporation established
to recapitalize the predecessor to the DIF. These assessments will continue until the Financing Corporation bonds mature in 2019.
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Through June 30, 2016, the Bank’s assessment rate was based on a methodology adopted by the FDIC for the quarter beginning
April 1, 2011. This methodology was in response to a provision in the Dodd-Frank Act that changed the calculation of the assessment
base and that entailed changes to the risk-based pricing system. Under the methodology adopted for 2011, the assessment base
became an insured depository institution’s average consolidated total assets less average tangible equity. The overall range of
initial base assessment rates was five basis points to 45 basis points. Institutions (including, at that time, the Bank) that were not
large and highly complex institutions were placed in one of four risk categories depending on the institution’s capital level (using
the same thresholds as in the prompt corrective action regime) and supervisory evaluations by the institution’s primary federal
regulator. The risk category with the highest-rated and well-capitalized institutions included a range of assessment rates, and a
specific rate was assigned to a particular institution based on a variety of financial factors and the institution’s component CAMELS
ratings. Each of the remaining three risk categories imposed the same rate on all institutions in the category.
In April 2016, the FDIC adopted new assessment rates and a new methodology for the assignment of rates that would become
effective when the reserve ratio of the DIF rose above 1.15%. This event occurred when the FDIC announced that as of June 30,
2016, the reserve ratio was 1.17%. The range of initial base assessment rates shifted down to three basis points to 30 basis points
(subject to certain adjustments for unsecured debt and brokered deposits). Insured depository institutions other than large and
highly complex institutions were assigned to one of three (rather than four) risk categories based solely on composite CAMELS
rating. Each of the three risk categories has a range of rates, and the rate for a particular institution is determined based on seven
financial ratios and the weighted average of its component CAMELS ratings. Under the new assessment rule, further downward
adjustments of assessment rates are possible as the DRR exceeds 2.0% and higher levels.
The Bank’s adjusted average consolidated total assets are expected to exceed $10 billion for four consecutive quarters with the
first quarter of 2019. As a result, the Bank’s deposit insurance assessment will thereafter be based on a large institution classification,
rather than the small institution classification for prior years. For large insured depository institutions, generally defined as those
with at least $10 billion in total assets, the FDIC has eliminated risk categories when calculating the initial base assessment rates
and now combines CAMELS ratings and financial measures into two scorecards to calculate assessment rates, one for most large
insured depository institutions and another for highly complex insured depository institutions (which are generally those with
more than $50 billion in total assets that are controlled by a parent company with more than $500 billion in total assets). Each
scorecard has two components - a performance score and loss severity score, which are combined and converted to an initial
assessment rate. The FDIC has the ability to adjust a large or highly complex insured depository institution’s total score by a
maximum of 15 points, up or down, based upon significant risk factors that are not captured by the scorecard. Under the current
assessment rate schedule, the initial base assessment rate for large and highly complex insured depository institutions ranges from
three to 30 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments,
ranges from one and one-half to 40 basis points.
Future changes in insurance premiums could have an adverse effect on the operating expenses and results of operations, and we
cannot predict what insurance assessment rates will be in the future.
The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if the FDIC determines
after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the
FDIC. The FDIC also may suspend deposit insurance temporarily during the hearing process for the permanent termination of
insurance, if the institution has no tangible capital. Management is not aware of any existing circumstances that would result in
termination of our deposit insurance.
Acquisitions
As an active acquirer, we must comply with numerous laws related to our acquisition activity. Under the Bank Holding Company
Act, a bank holding company may not directly or indirectly acquire ownership or control of more than 5% of the voting shares or
substantially all of the assets of any bank or merge or consolidate with another bank holding company without the prior approval
of the Federal Reserve. Current federal law authorizes interstate acquisitions of banks and bank holding companies without
geographic limitation. Furthermore, a bank headquartered in one state is authorized to merge with a bank headquartered in another
state, as long as neither of the states has opted out of such interstate merger authority prior to such date, and subject to any state
requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed five years,
and to certain deposit market-share limitations. After a bank has established branches in a state through an interstate merger
transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that
state could have established or acquired branches under applicable federal or state law.
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Community Reinvestment Act
The Community Reinvestment Act requires federal bank regulatory agencies to encourage financial institutions to meet the credit
needs of low and moderate-income borrowers in their local communities. An institution’s size and business strategy determines
the type of examination that it will receive. Large, retail-oriented institutions are examined using a performance-based lending,
investment and service test. Small institutions are examined using a streamlined approach. All institutions may opt to be evaluated
under a strategic plan formulated with community input and pre-approved by the bank regulatory agency.
The Community Reinvestment Act regulations provide for certain disclosure obligations. Each institution must post a notice
advising the public of its right to comment to the institution and its regulator on the institution’s Community Reinvestment Act
performance and to review the institution’s Community Reinvestment Act public file. Each lending institution must maintain for
public inspection a file that includes a listing of branch locations and services, a summary of lending activity, a map of its
communities and any written comments from the public on its performance in meeting community credit needs. The Community
Reinvestment Act requires public disclosure of a financial institution’s written Community Reinvestment Act evaluations. This
promotes enforcement of Community Reinvestment Act requirements by providing the public with the status of a particular
institution’s community reinvestment record.
Consumer Protection Laws
The Bank is subject to a number of federal and state laws designed to protect customers and promote lending to various sectors
of the economy and population. These consumer protection laws apply to a broad range of our activities and to various aspects of
our business and include laws relating to interest rates, fair lending, disclosures of credit terms and estimated transaction costs to
consumer borrowers, debt collection practices, the use of and the provision of information to consumer reporting agencies, and
the prohibition of unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial
products and services. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending
Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act and
state law counterparts.
In addition, the Dodd-Frank Act created the CFPB, which has been given the power to promulgate and enforce federal consumer
protection laws. Depository institutions are subject to the CFPB’s rulemaking authority, while existing federal bank regulatory
agencies retain examination and enforcement authority for such institutions. The focus of the CFPB is on the following: (i) risks
to consumers and compliance with the federal consumer financial laws; (ii) the markets in which firms operate and risks to
consumers posed by activities in those markets; (iii) depository institutions that offer a wide variety of consumer financial products
and services; (iv) depository institutions with a more specialized focus; and (v) non-depository companies that offer one or more
consumer financial products or services. The CFPB has exclusive supervisory authority over insured depository institutions with
more than $10 billion in total assets and any affiliates thereof with respect to certain consumer protection laws and regulations.
The CFPB will become our exclusive supervisor in these areas following the fourth consecutive quarter in which the Bank’s total
assets exceed $10 billion.
The CFPB has promulgated many mortgage-related final rules, including rules related to the ability to repay and qualified mortgage
standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home
Mortgage Disclosure Act requirements and appraisal and escrow standards for higher priced mortgages. The mortgage-related
final rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages
in the United States. For example, under the CFPB’s Ability to Repay and Qualified Mortgage rule, before making a mortgage
loan, a lender must establish that a borrower has the ability to repay the mortgage. “Qualified mortgages,” as defined in the rule,
are presumed to comply with this requirement and, as a result, present less litigation risk to lenders. For a loan to qualify as a
qualified mortgage, the loan must satisfy certain limits on terms and conditions, pricing and a maximum debt-to-income ratio.
Loans eligible for purchase, guarantee or insurance by a government agency or government-sponsored enterprise are exempt from
some of these requirements. Satisfying the qualified mortgage standards, ensuring correct calculations are made for individual
loans and recordkeeping and monitoring impose significant new compliance obligations on, and involve compliance costs for,
mortgage lenders, including the Company.
Financial Privacy
Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a financial institution
must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and
procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that,
except for certain limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless
the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to
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opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain
customer information of a financial nature by fraudulent or deceptive means.
The federal banking agencies pay close attention to the cybersecurity practices of banks, bank holding companies and their affiliates.
The interagency council of the agencies, the Federal Financial Institutions Examination Council (the “FFIEC”), has issued several
policy statements and other guidance for banks as new cybersecurity threats arise. The FFIEC has recently focused on such matters
as compromised customer credentials and business continuity planning. Examinations by the banking agencies now include review
of an institution’s information technology and its ability to thwart cyberattacks.
Anti-Money Laundering
The Bank Secrecy Act, the USA PATRIOT Act of 2001 and other laws and regulations require financial institutions, among other
things, to institute and maintain an effective anti-money laundering (“AML”) program and to file suspicious activity and currency
transaction reports when appropriate. Under these laws and regulations, the Bank is required to take steps to prevent the use of
the Bank to facilitate the flow of illegal or illicit money, to report large currency transactions and to file suspicious activity reports.
In addition, the Bank is required to develop and implement a comprehensive AML compliance program, as well as have in place
appropriate “know your customer” policies and procedures.
Violations of these requirements can result in substantial civil and criminal sanctions. Also, the federal banking agencies are
required to consider the effectiveness of a financial institution’s AML activities when reviewing proposed bank mergers and bank
holding company acquisitions. The federal Financial Crimes Enforcement Network of the Department of the Treasury, in addition
to other bank regulatory agencies, is authorized to impose significant civil money penalties for violations of these requirements
and has recently engaged in coordinated enforcement efforts with state and federal banking regulators, in addition to the U.S.
Department of Justice, the CFPB, the Drug Enforcement Administration and the Internal Revenue Service.
OFAC Regulation
The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions that affect transactions
with designated foreign countries, nationals and others, as defined by various Executive Orders and in various legislation. OFAC
publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts,
known as Specially Designated Nationals and Blocked Persons. If we or the Bank find a name on any transaction,
account or wire transfer that is on an OFAC list, we or the Bank must freeze or block such account or transaction, file
a suspicious activity report and notify the appropriate authorities. Failure to comply with these sanctions could have
serious legal and reputational consequences.
Fiscal and Monetary Policy
Banking is a business which depends on interest rate differentials for success. In general, the difference between the interest paid
by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes
the major portion of a bank’s earnings. Thus, our earnings and growth will be subject to the influence of economic conditions
generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States government and its agencies,
particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market
dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve and the
reserve requirements on deposits. The nature and timing of any changes in such policies and their effect on Ameris cannot be
known at this time.
Current and future legislation and the policies established by federal and state regulatory authorities will affect our future
operations. Banking legislation and regulations may limit our growth and the return to our investors by restricting certain of our
activities.
In addition, capital requirements could be changed and have the effect of restricting our activities or requiring additional capital
to be maintained. We cannot predict with certainty what changes, if any, will be made to existing federal and state legislation and
regulations or the effect that such changes may have on our business.
Federal Home Loan Bank System
Our Company has a correspondent relationship with the FHLB of Atlanta, which is one of 12 regional FHLBs that administer the
home financing credit function of savings companies. Each FHLB serves as a reserve or central bank for its members within its
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assigned region. FHLBs are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system
and make loans to members (i.e., advances) in accordance with policies and procedures, established by the Board of Directors of
the FHLB which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to
be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide
funds for residential home financing.
The FHLB offers certain services to our Company such as processing checks and other items, buying and selling federal funds,
handling money transfers and exchanges, shipping coin and currency, providing security and safekeeping of funds or other valuable
items and furnishing limited management information and advice. As compensation for these services, our Company maintains
certain balances with the FHLB in interest-bearing accounts.
Under federal law, the FHLBs are required to provide funds for the resolution of troubled savings companies and to contribute to
low and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community
investment and low and moderate-income housing projects.
Real Estate Lending Evaluations
The federal regulators have adopted uniform standards for evaluations of loans secured by real estate or made to finance
improvements to real estate. Banks are required to establish and maintain written internal real estate lending policies consistent
with safe and sound banking practices and appropriate to the size of the institution and the nature and scope of its operations. The
regulations establish loan-to-value ratio limitations on real estate loans. Our Company’s loan policies establish limits on loan-to-
value ratios that are equal to or less than those established in such regulations.
Commercial Real Estate Concentrations
Our lending operations may be subject to enhanced scrutiny by federal banking regulators based on our concentration of commercial
real estate loans. The federal banking regulators previously issued guidance reminding financial institutions of the risk posed by
commercial real estate (“CRE”) lending concentrations. CRE loans generally include land development, construction loans, and
loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived
from rental income associated with the property. The guidance prescribes the following guidelines for its examiners to help identify
institutions that are potentially exposed to significant CRE risk and may warrant greater supervisory scrutiny:
•
•
total reported loans for construction, land development and other land (“C&D”) represent 100% or more of the institution’s
total capital; or
total CRE loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s
CRE loan portfolio has increased by 50% or more.
As of December 31, 2018, excluding purchased non-covered and covered assets, our C&D concentration as a percentage of capital
totaled 58.0% and our CRE concentration, net of owner-occupied loans, as a percentage of capital totaled 154.6%. Including
purchased non-covered and covered loans subject to loss-sharing agreements with the FDIC, the Company’s C&D concentration
as a percentage of capital totaled 77.7% and our CRE concentration, net of owner-occupied loans, as a percentage of capital totaled
248.1%.
Limitations on Incentive Compensation
The Dodd-Frank Act requires the federal banking regulators and other agencies, including the SEC, to issue regulations or guidelines
requiring disclosure to the regulators of incentive-based compensation arrangements and to prohibit incentive-based compensation
arrangements for directors, officers or employees that encourage inappropriate risks by providing excessive compensation, fees
or benefits or that could lead to material financial loss to a financial institution. The federal bank regulatory agencies have issued
guidance on incentive compensation policies, which covers all employees who have the ability to materially affect the risk profile
of an institution, either individually or as part of a group, that is based upon the key principles that a financial institution’s incentive
compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to
effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management and (iii) be supported
by strong corporate governance, including active and effective oversight by the institution’s board of directors and appropriate
policies, procedures and monitoring.
As part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations will
be reviewed, and the regulator’s findings will be incorporated into the organization’s supervisory ratings, which can affect the
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organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization
if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the
organization’s safety and soundness and the organization is not taking prompt and effective measures to correct any deficiencies.
In April 2016, the FDIC, the other federal banking agencies and other financial regulatory agencies proposed guidance on incentive-
based compensation arrangements. As applied to banks with total assets between $1 billion and $50 billion, the proposal would
(i) prohibit types and features of incentive-based compensation arrangements that encourage inappropriate risks because they are
excessive or could lead to material financial loss, (ii) require such arrangements to strike a balance between risk and reward, to
be subject to effective risk management and controls, and to be subject to effective governance and (iii) require appropriate board
of directors (or committee) oversight and recordkeeping and disclosure to the appropriate agency. The comment period for these
proposed rules has closed, but the federal agencies have not finalized the proposal, and we do not know whether or when they
may do so.
The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are
likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will
adversely affect the Company’s ability to hire, retain and motivate its key employees.
Evolving Legislation and Regulatory Action
The Dodd-Frank Act implements many new changes in the way financial and banking operations are regulated in the United States.
Many aspects of the Dodd-Frank Act are subject to further rulemaking and will take effect over several years, with the result that
the overall financial impact on the Company and the Bank cannot be anticipated at this time. The current administration has also
suggested an agenda for financial regulatory change, and it is too early to assess whether there will be major changes in the
regulatory environment or only a rebalancing of the post-financial crisis framework.
In addition, from time to time, various other legislative and regulatory initiatives are introduced in Congress and state legislatures,
as well as by regulatory agencies, that may impact the Company or the Bank. Such initiatives may include proposals to expand
or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial
institution regulatory system. Such legislation could change banking statutes and the operating environment of Ameris in substantial
and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible
activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The
Company cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing
regulations, would have on the financial condition or results of operations of the Company. A change in statutes, regulations or
regulatory policies applicable to the Company or the Bank could have a material effect on the business of the Company.
ITEM 1A. RISK FACTORS
An investment in our Common Stock is subject to risks inherent in our business. The material risks and uncertainties that
management believes affect Ameris are described below. Before making an investment decision, you should carefully consider
the risks and uncertainties described below, together with all of the other information included or incorporated by reference in this
Annual Report. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and
uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the
Company’s business operations. This Annual Report is qualified in its entirety by these risk factors.
If any of the following risks or uncertainties actually occurs, the Company’s financial condition and results of operations could
be materially and adversely affected. If this were to happen, the value of the Common Stock could decline significantly, and you
could lose all or part of your investment.
RISKS RELATED TO OUR COMPANY AND INDUSTRY
Our revenues are highly correlated to market interest rates.
Our assets and liabilities are primarily monetary in nature, and as a result, we are subject to significant risks tied to changes in
interest rates. Our ability to operate profitably is largely dependent upon net interest income. In 2018, net interest income made
up 74.4% of our recurring revenue. Unexpected movement in interest rates, that may or may not change the slope of the current
yield curve, could cause our net interest margins to decrease, subsequently decreasing net interest income. In addition, such changes
could materially adversely affect the valuation of our assets and liabilities.
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At present our one-year interest rate sensitivity position is mildly asset sensitive, such that a gradual increase in interest rates
during the next twelve months should have a slightly positive impact on net interest income during that period. However, as with
most financial institutions, our results of operations are affected by changes in interest rates and our ability to manage this risk. The
difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be
affected by changes in market interest rates, changes in relationships between interest rate indices, and changes in the relationships
between long-term and short-term market interest rates. In addition, the mix of assets and liabilities could change as varying levels
of market interest rates might present our customer base with more attractive options.
Certain changes in interest rates, inflation, deflation or the financial markets could affect demand for our products and our
ability to deliver products efficiently.
Loan originations, and potentially loan revenues, could be materially adversely impacted by sharply rising interest
rates. Conversely, sharply falling rates could increase prepayments within our securities portfolio lowering interest earnings from
those investments. An unanticipated increase in inflation could cause our operating costs related to salaries and benefits, technology
and supplies to increase at a faster pace than revenues.
The fair market value of our securities portfolio and the investment income from these securities also fluctuate depending on
general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry
prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of
investment as a result of interest rate fluctuations.
Our concentration of real estate loans subjects the Company to risks that could materially adversely affect our results of
operations and financial condition.
The majority of our loan portfolio is secured by real estate. As the economy deteriorated and depressed real estate values in recent
years, the collateral value of the portfolio and the revenue stream from those loans came under stress and required additional
provision to the allowance for loan losses. Our ability to dispose of foreclosed real estate and resolve credit quality issues is
dependent on real estate activity and real estate prices, both of which have been unpredictable for several years.
Greater loan losses than expected may materially adversely affect our earnings.
We, as lenders, are exposed to the risk that our customers will be unable to repay their loans in accordance with their terms and
that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the
business of making loans and could have a material adverse effect on our operating results. Our credit risk with respect to our real
estate and construction loan portfolio will relate principally to the creditworthiness of business entities and the value of the real
estate serving as security for the repayment of loans. Our credit risk with respect to our commercial loan portfolio will relate
principally to the general creditworthiness of businesses within our local markets. Our credit risk with respect to our consumer
loan portfolio will relate principally to the general creditworthiness of individuals.
We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for estimated
loan losses based on a number of factors. We believe that our current allowance for loan losses is adequate. However, if our
assumptions or judgments prove to be incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. We
may have to increase our allowance in the future in response to the request of one of our primary banking regulators, to adjust for
changing conditions and assumptions, or as a result of any deterioration in the quality of our loan portfolio. The actual amount of
future provisions for loan losses cannot be determined at this time and may vary from the amounts of past provisions.
Our business is highly correlated to local economic conditions in a geographically concentrated part of the United States.
Unlike larger organizations that are more geographically diversified, our banking offices are primarily concentrated in select
markets in Georgia, Alabama, Florida and South Carolina. As a result of this geographic concentration, our financial results depend
largely upon economic conditions in these market areas. Deterioration in economic conditions in the markets we serve could result
in one or more of the following:
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•
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an increase in loan delinquencies;
an increase in problem assets and foreclosures;
a decrease in the demand for our products and services; and
a decrease in the value of collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the
value of assets associated with problem loans and collateral coverage.
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We face additional risks due to our increased mortgage banking activities that could negatively impact net income and
profitability.
We sell the majority of the mortgage loans that we originate. The sale of these loans generates noninterest income and can be a
source of liquidity for the Bank. Disruption in the secondary market for residential mortgage loans as well as declines in real estate
values could result in one or more of the following:
•
•
•
•
•
our inability to sell mortgage loans on the secondary market, which could negatively impact our liquidity position;
declines in real estate values could decrease the potential of mortgage originations, which could negatively impact our
earnings;
if it is determined that loans were made in breach of our representations and warranties to the secondary market, we could
incur losses associated with the loans;
increased compliance requirements could result in higher compliance costs, higher foreclosure proceedings or lower loan
origination volume, all which could negatively impact future earnings; and
a rise in interest rates could cause a decline in mortgage originations, which could negatively impact our earnings.
Legislation and regulatory proposals enacted in response to market and economic conditions may materially adversely affect
our business and results of operations.
The banking industry is heavily regulated. We are subject to examinations, supervision and comprehensive regulation by various
federal and state agencies. Our compliance with these regulations is costly and restricts certain of our activities. Banking regulations
are primarily intended to protect the federal deposit insurance fund and depositors, not shareholders. The burden imposed by
federal and state regulations puts banks at a competitive disadvantage compared to less regulated competitors such as finance
companies, mortgage banking companies and leasing companies. Changes in the laws, regulations and regulatory practices affecting
the banking industry may increase our costs of doing business or otherwise adversely affect us and create competitive advantages
for others. Federal economic and monetary policies may also affect our ability to attract deposits and other funding sources, make
loans and investments and achieve satisfactory interest spreads.
The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry, including
new or revised regulation of such things as systemic risk, capital adequacy, deposit insurance assessments and consumer financial
protection. In addition, the federal banking regulators have issued joint guidance on incentive compensation and the Treasury and
the federal banking regulators have issued statements calling for higher capital and liquidity requirements for banking organizations.
Complying with these and other new legislative or regulatory requirements, and any programs established thereunder, could have
a material adverse impact on our results of operations, our financial condition and our ability to fill positions with the most qualified
candidates available.
Our growth and financial performance may be negatively impacted if we are unable to successfully execute our growth plans,
including successful completion of the Fidelity merger.
Economic conditions and other factors, such as our ability to identify appropriate markets for expansion, our ability to recruit and
retain qualified personnel, our ability to fund earning asset growth at a reasonable and profitable level, sufficient capital to support
our growth initiatives, competitive factors and banking laws, will impact our success.
We may seek to supplement our internal growth through acquisitions. This may include other acquisition transactions in addition
to the Fidelity merger that is currently pending. We cannot predict with certainty the number, size or timing of acquisitions, or
whether any such acquisitions, including the Fidelity merger, will occur at all. Our acquisition efforts have traditionally focused
on targeted banking entities in markets in which we currently operate and markets in which we believe we can compete
effectively. However, as consolidation of the financial services industry continues, the competition for suitable acquisition
candidates may increase. We may compete with other financial services companies for acquisition opportunities, and many of
these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are able or
willing to pay. We also may need additional debt or equity financing in the future to fund acquisitions. We may not be able to
obtain additional financing or, if available, it may not be in amounts and on terms acceptable to us. If we are unable to locate
suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain additional debt or
equity financing necessary for us to continue making acquisitions, we would be required to find other methods to grow our business
and we may not grow at the same rate we have in the past, or at all.
Generally, we must receive federal regulatory approval before we can acquire a bank or bank holding company. In determining
whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the
acquisition on the competition, financial condition and future prospects. The regulators also review current and projected capital
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ratios and levels, the competence, experience and integrity of management and its record of compliance with laws and regulations,
the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the
Community Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering activities. We
cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We may also be
required to sell banks or branches as a condition to receiving regulatory approval, which condition may not be acceptable to us
or, if acceptable to us, may reduce the benefits of any acquisition.
In the past, we have utilized de novo branching in new and existing markets as a way to supplement our growth. De novo branching
and any acquisition carry with it numerous risks, including the following:
•
•
•
•
•
•
•
the inability to obtain all required regulatory approvals;
significant costs and anticipated operating losses associated with establishing a de novo branch or a new bank;
the inability to secure the services of qualified senior management;
the local market may not accept the services of a new bank owned and managed by a bank holding company headquartered
outside of the market area of the new bank;
economic downturns in the new market;
the inability to obtain attractive locations within a new market at a reasonable cost; and
the additional strain on management resources and internal systems and controls.
We have experienced to some extent many of these risks with our de novo branching to date.
We rely on dividends from the Bank for most of our revenue.
Ameris is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from
the Bank. These dividends are the principal source of funds to pay dividends on the Common Stock and interest and principal on
the Company’s debt. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the
Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is
subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to the Company, the
Company may not be able to service debt, pay obligations or pay dividends on the Common Stock and its business, financial
condition and results of operations may be materially adversely affected. Consequently, cash-based activities, including further
investments in the Bank or in support of the Bank, could require borrowings or additional issuances of common or preferred stock.
We are subject to regulation by various federal and state entities.
We are subject to the regulations of the SEC, the Federal Reserve, the FDIC, the GDBF, the CFPB and other governmental agencies
and regulatory bodies. New regulations issued by these agencies may adversely affect our ability to carry on our business
activities. We are subject to various federal and state laws and certain changes in these laws and regulations may adversely affect
our operations. Noncompliance with certain of these regulations may impact our business plans, including our ability to branch,
offer certain products or execute existing or planned business strategies.
We are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes
in accounting rules could materially adversely affect the reported financial statements or our results of operations and may also
require extraordinary efforts or additional costs to implement. Any of these laws or regulations may be modified or changed from
time to time, and we cannot be assured that such modifications or changes will not adversely affect us.
A new accounting standard will result in a significant change in how we recognize credit losses and may materially adversely
affect our financial condition or results of operations.
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, “Financial Instruments-
Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss”
model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”)
model. Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held
for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected
credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable
and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the
financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss”
model required under current generally accepted accounting principles, which delays recognition until it is probable a loss has
been incurred. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance
for loan losses and could require us to significantly increase our allowance. Moreover, the CECL model may create more volatility
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in the level of our allowance for loan losses. If we are required to materially increase our level of allowance for loan losses for
any reason, such increase could adversely affect our business, financial condition and results of operations.
The new CECL accounting standard will become effective for us for fiscal years beginning after December 15, 2019 and for
interim periods within those fiscal years. We are currently evaluating the impact the CECL model will have on our accounting,
but we expect to recognize a one-time cumulative effect adjustment to equity and the allowance for loan losses as of the beginning
of the first reporting period in which the new standard is effective. We cannot yet determine the magnitude of any such one-time
cumulative adjustment or of the overall impact of the new standard on our financial condition or results of operations.
Our total consolidated assets increased to over $10 billion as of June 30, 2018, which will subject us to additional regulations
and oversight that were not previously applicable to us and that will impact our revenues and/or expenses.
Upon completion of the acquisition of Hamilton in June 2018, the Company and the Bank exceeded $10 billion in total consolidated
assets. As a result, certain requirements will be imposed on the Company or the Bank following the fourth consecutive quarter
(and any applicable phase-in period) in which the Company or the Bank’s total consolidated assets exceed that $10 billion threshold.
Such regulation and oversight include becoming subject to: (i) the examination and enforcement authority of the CFPB with respect
to consumer and small business products and services; (ii) deposit insurance premium assessments based on an FDIC scorecard
based on, among other things, the Bank’s CAMELS rating and results of asset-related stress testing and funding-related stress
testing; and (iii) a cap on interchange transaction fees for debit cards, as required by Federal Reserve regulations, which will
significantly reduce our interchange revenue.
It is difficult to predict the overall compliance cost of these provisions. However, compliance with these provisions will likely
require additional staffing, engagement of external consultants and other operating costs that could have a material adverse effect
on the future financial condition and results of operations of the Company.
We are subject to industry competition which may have an impact upon our success.
Our profitability depends on our ability to compete successfully. We operate in a highly competitive financial services environment.
Certain competitors are larger and may have more resources than we do. We face competition in our regional market areas from
other commercial banks, savings and loan associations, credit unions, internet banks, mortgage companies, finance companies,
mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar
services. Some of our nonbank competitors are not subject to the same extensive regulations that govern us or our bank subsidiary
and may have greater flexibility in competing for business.
Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with
frequent introductions of new technology-driven products and services. Our future success may depend, in part, on our ability to
use technology competitively to provide products and services that provide convenience to customers and create additional
efficiencies in our operations.
Changes in the policies of monetary authorities and other government action could materially adversely affect our profitability.
The results of our operations are affected by credit policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open market operations in U.S. government securities,
changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank
deposits. In view of uncertain conditions in the national economy and in the money markets, we cannot predict with certainty
possible future changes in interest rates, deposit levels, loan demand or our business and earnings.
We may need to rely on the financial markets to provide needed capital.
Our Common Stock is listed and traded on the Nasdaq Global Select Market (“Nasdaq”). If the liquidity of the Nasdaq market
should fail to operate at a time when we may seek to raise equity capital, or if conditions in the capital markets are adverse, we
may be constrained in raising capital. Downgrades in the opinions of the analysts that follow our Company may cause our stock
price to fall and significantly limit our ability to access the markets for additional capital. Should these risks materialize, our ability
to further expand our operations through internal growth or acquisition may be limited.
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We may invest or spend the proceeds in stock offerings in ways with which you may not agree and in ways that may not earn
a profit.
We may choose to use the proceeds of future stock offerings for general corporate purposes, including for possible acquisition
opportunities that may become available. It is not known whether suitable acquisition opportunities may become available or
whether we will be able to successfully complete any such acquisitions. We may use the proceeds of an offering only to focus on
sustaining our organic, or internal, growth or for other purposes. In addition, we may use all or a portion of the proceeds of an
offering to support our capital. You may not agree with the ways we decide to use the proceeds of any stock offerings, and our
use of the proceeds may not yield any profits.
We face risks related to our operational, technological and organizational infrastructure.
Our ability to grow and compete is dependent on our ability to build or acquire the necessary operational and technological
infrastructure and to manage the cost of that infrastructure while we expand. Similar to other large corporations, in our case,
operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled
computer systems, fraud by employees or persons outside of our Company and exposure to external events. We are dependent on
our operational infrastructure to help manage these risks. In addition, we are heavily dependent on the strength and capability of
our technology systems which we use both to interface with our customers and to manage our internal financial and other systems.
Our ability to develop and deliver new products that meet the needs of our existing customers and attract new customers depends
in part on the functionality of our technology systems. Additionally, our ability to run our business in compliance with applicable
laws and regulations is dependent on these infrastructures.
We continuously monitor our operational and technological capabilities and make modifications and improvements when we
believe it will be cost effective to do so. In some instances, we may build and maintain these capabilities ourselves. We also
outsource some of these functions to third parties. These third parties may experience errors or disruptions that could adversely
impact us and over which we may have limited control. We also face risk from the integration of new infrastructure platforms
and/or new third party providers of such platforms into our existing businesses.
Cyberattacks or other security breaches could have a material adverse effect on our business.
In the normal course of business, we collect, process and retain sensitive and confidential information regarding our customers.
We also have arrangements in place with other third parties through which we share and receive information about their customers
who are or may become our customers. Although we devote significant resources and management focus to ensuring the integrity
of our systems through information security and business continuity programs, our facilities and systems, and those of third-party
service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost
data, programming or human errors or other similar events.
Information security risks for financial institutions like us continue to increase in part because of new technologies, the use of the
Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and
the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to
cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers continue to engage
in attacks against financial institutions. These attacks include denial of service attacks designed to disrupt external customer facing
services and ransomware attacks designed to deny organizations access to key internal resources or systems. We are not able to
anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques
used change frequently and because attacks can originate from a wide variety of sources. We employ detection and response
mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and
malware designed to avoid detection.
We rely heavily on communications and information systems to conduct our business. Accordingly, we also face risks related to
cyberattacks and other security breaches in connection with our own and third-party systems, processes and data, including credit
and debit card transactions that typically involve the transmission of sensitive information regarding our customers through various
third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our
processors. Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions
involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or
cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have
exposure and suffer losses for breaches or attacks relating to them. We also rely on numerous other third-party service providers
to conduct other aspects of our business operations and face similar risks relating to them. While we conduct security reviews on
these third parties, we cannot be sure that their information security protocols are sufficient to withstand a cyberattack or other
security breach.
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The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or
our own proprietary information, software, methodologies and business secrets could result in significant legal and financial
exposure, supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and
services, which could have a material adverse effect on our business, financial condition or results of operations. In addition, our
industry continues to experience well-publicized attacks or breaches affecting others in our industry that have heightened concern
by consumers generally about the security of using credit and debit cards, which have caused some consumers, including our
customers, to use our credit and debit cards less in favor of alternative methods of payment and has led to increased regulatory
focus on, and potentially new regulations relating to, these matters. Further cyberattacks or other breaches in the future, whether
affecting us or others, could intensify consumer concern and regulatory focus and result in reduced use of our cards and increased
costs, all of which could have a material adverse effect on our business. To the extent we are involved in any future cyberattacks
or other breaches, our brand and reputation could be affected, which could also have a material adverse effect on our business,
financial condition or results of operations.
Financial services companies depend on the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on
behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Company
may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the
accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other
financial information could have a material adverse impact on the Company’s business and, in turn, the Company’s financial
condition and results of operations.
Reputational risk and social factors may impact our results.
Our ability to originate and maintain accounts is highly dependent upon customer and other external perceptions of our business
practices and our financial health. Adverse perceptions regarding our business practices or our financial health could damage our
reputation in both the customer and funding markets, leading to difficulties in generating and maintaining accounts as well as in
financing them. Adverse developments with respect to the consumer or other external perceptions regarding the practices of our
competitors, or our industry as a whole, may also adversely impact our reputation. In addition, adverse reputational impacts on
third parties with whom we have important relationships may also adversely impact our reputation. Adverse impacts on our
reputation, or the reputation of our industry, may also result in greater regulatory or legislative scrutiny, which may lead to laws,
regulations or regulatory actions that may change or constrain the manner in which we engage with our customers and the products
we offer. Adverse reputational impacts or events may also increase our litigation risk. We carefully monitor internal and external
developments for areas of potential reputational risk and have established governance structures to assist in evaluating such risks
in our business practices and decisions, but we cannot be certain that our efforts will completely mitigate these risks.
We may not be able to attract and retain skilled people.
The Company’s success depends, in large part, on its ability to attract and retain key people. Competition for the best people in
most activities engaged in by the Company can be intense and the Company may not be able to hire people or to retain them. The
unexpected loss of services of one or more of the Company’s key personnel could have a material adverse impact on the Company’s
business because of their skills, knowledge of the Company’s market, years of industry experience and the difficulty of promptly
finding qualified replacement personnel.
We engage in acquisitions of other businesses from time to time. These acquisitions may not produce revenue or earnings
enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration
difficulties.
When appropriate opportunities arise, we will engage in acquisitions of other businesses. Difficulty in integrating an acquired
business or company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product
presence or other anticipated benefits from any acquisition. The integration could result in higher than expected deposit attrition
(run-off), loss of key employees, disruption of our business or the business of the acquired company, or otherwise adversely affect
our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. We will
likely need to make additional investments in equipment and personnel to manage higher asset levels and loan balances as a result
of any significant acquisition, which may materially adversely impact our earnings. Also, the negative effect of any divestitures
required by regulatory authorities in acquisitions or business combinations may be greater than expected.
27
Depending on the condition of any institution that we may acquire, any acquisition may, at least in the near term, materially
adversely affect our capital and earnings and, if not successfully integrated following the acquisition, may continue to have such
effects.
Changes in national and local economic conditions could lead to higher loan charge-offs in connection with past FDIC-assisted
transactions, all of which may not be supported by loss-sharing agreements with the FDIC.
Although loan portfolios acquired in past FDIC-assisted transactions have initially been accounted for at fair value, we do not
know how many of the remaining acquired loans will become impaired, or to what degree such loans may become impaired, and
impairment may result in additional charge-offs to the portfolio. The fluctuations in national, regional and local economic
conditions, including those related to local residential, commercial real estate and construction markets, may increase the level of
charge-offs that we make to our loan portfolio, and, consequently, reduce our net income, and may also increase the level of charge-
offs on the loan portfolios that we have acquired in such acquisitions and correspondingly reduce our net income. These fluctuations
are not predictable, cannot be controlled and may have a material adverse impact on our operations and financial condition even
if other favorable events occur.
Although we have entered into loss-sharing agreements with the FDIC which provide that a significant portion of losses related
to specified loan portfolios that we have acquired in connection with the FDIC-assisted transactions will be borne by the FDIC,
we are not protected for all losses resulting from charge-offs with respect to those specified loan portfolios. Additionally, the loss-
sharing agreements have limited terms, some of which have already expired; therefore, any charge-off of related losses that we
experience after the term of the loss-sharing agreements will not be reimbursable by the FDIC and will negatively impact our net
income. The loss-sharing agreements also impose standard requirements on us which must be satisfied in order to retain loss share
protections.
Hurricanes or other adverse weather events could disrupt our operations or negatively affect economic conditions in the markets
we serve, which could have an adverse effect on our business or results of operations.
Our market areas, located in the southeastern United States, are susceptible to natural disasters, such as hurricanes, tropical storms,
other severe weather events and related flooding and wind damage. These natural disasters could negatively impact regional
economic conditions, cause a decline in the value of mortgaged properties or the destruction of mortgaged properties, cause an
increase in the risk of delinquencies, foreclosures or losses on loans originated by us, damage our banking facilities and offices
and negatively impact our growth strategy. We cannot predict with certainty whether or to what extent damage that may be caused
by severe weather events will affect our operations or assets or the economies in our current or future market areas.
RISKS RELATED TO OUR COMMON STOCK
The price of our Common Stock is volatile and may decline.
The trading price of our Common Stock may fluctuate widely as a result of a number of factors, many of which are outside our
control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices
of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect
the market price of our Common Stock. Among the factors that could affect our stock price are:
•
•
•
•
•
•
•
•
•
•
•
•
actual or anticipated quarterly fluctuations in our operating results and financial condition;
changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts
or actions taken by rating agencies with respect to our securities or those of other financial institutions;
failure to meet analysts’ revenue or earnings estimates;
speculation in the press or investment community;
strategic actions by us or our competitors, such as acquisitions or restructurings;
actions by institutional shareholders;
fluctuations in the stock price and operating results of our competitors;
general market conditions and, in particular, developments related to market conditions for the financial services industry;
proposed or adopted regulatory changes or developments, including changes in accounting rules;
proposed or adopted changes or developments in tax policies or rates;
anticipated or pending investigations, proceedings or litigation that involve or affect us; or
domestic and international economic factors unrelated to our performance.
A significant decline in our stock price could result in substantial losses for individual shareholders and could lead to costly and
disruptive securities litigation.
28
Securities issued by us, including our Common Stock, are not FDIC insured.
Securities issued by us, including our Common Stock, are not savings or deposit accounts or other obligations of any bank and
are not insured by the FDIC, the Deposit Insurance Fund or any other governmental agency or instrumentality, or any private
insurer, and are subject to investment risk, including the possible loss of principal.
Holders of the Company’s debt obligations and any shares of the Company’s preferred stock that may be outstanding in the
future will have priority over the Company’s common stock with respect to payment in the event of liquidation, dissolution or
winding up and with respect to the payment of interest and preferred dividends.
In the event of any winding up and termination of the Company, our Common Stock would rank below all claims of the holders
of the Company’s debt and any preferred stock then outstanding. As of December 31, 2018, we had outstanding trust preferred
securities and accompanying junior subordinated debentures with a carrying value of $89.2 million, other subordinated notes
payable with a carrying value of $73.9 million and an outstanding principal balance drawn on a revolving credit arrangement with
a regional bank in the amount of $70.0 million.
Upon the winding up and termination of the Company, holders of our Common Stock will not be entitled to receive any payment
or other distribution of assets until after all of our obligations to our debt holders have been satisfied and holders of our senior
debt, subordinated debt and junior subordinated debentures issued in connection with trust preferred securities have received any
payments and other distributions due to them. In addition, we are required to pay interest on our senior debt, subordinated debt
and junior subordinated debentures issued in connection with the Company’s trust preferred securities before we pay any dividends
on our Common Stock.
We may borrow funds or issue additional debt and equity securities or securities convertible into equity securities, any of which
may be senior to our Common Stock as to distributions and in liquidation, which could negatively affect the value of our
Common Stock.
In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or
secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured
or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock, common stock or securities
convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our debt and
preferred securities would receive a distribution of our available assets before distributions to the holders of our Common
Stock. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other
factors beyond our control, we cannot predict or estimate with certainty the amount, timing or nature of our future offerings and
debt financings. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the
future. In addition, the borrowing of funds or issuance of debt would increase our leverage and decrease our liquidity, and the
issuance of additional equity securities would dilute the interests of our existing shareholders.
You may not receive dividends on the Common Stock.
Holders of our Common Stock are only entitled to receive such dividends as our Board of Directors may declare out of funds
legally available for such payments. In 2010, in response to anticipated increases in corporate risks, our Board suspended the
payment of dividends on our Common Stock. In 2014, our Board reinstated the payment of dividends on our Common Stock;
however, the payment of dividends could be suspended again at any time.
Sales of a significant number of shares of our Common Stock in the public markets, or the perception of such sales, could
depress the market price of our Common Stock.
Sales of a substantial number of shares of our Common Stock in the public markets and the availability of those shares for sale
could adversely affect the market price of our Common Stock. In addition, future issuances of equity securities, including pursuant
to outstanding options, could dilute the interests of our existing shareholders and could cause the market price of our Common
Stock to decline. We may issue such additional equity or convertible securities to raise additional capital. Depending on the amount
offered and the levels at which we offer the stock, issuances of common or preferred stock could be substantially dilutive to
shareholders of our Common Stock. Moreover, to the extent that we issue restricted stock, phantom shares, stock appreciation
rights, options or warrants to purchase our Common Stock in the future and those stock appreciation rights, options or warrants
are exercised or as shares of the restricted stock vest, our shareholders may experience further dilution. Holders of our shares of
Common Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class
or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. We cannot predict with
certainty the effect that future sales of our Common Stock would have on the market price of our Common Stock.
29
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company’s corporate headquarters is located at 310 First St. SE, Moultrie, Georgia 31768. The Company occupies
approximately 6,300 square feet at this location plus an additional 37,200 square feet used for support services for banking
operations, including credit, sales and operational support, as well as audit and loan review services. The Company also leases
approximately 101,700 square feet in Jacksonville, Florida used for additional corporate support services. In addition to its corporate
headquarters, Ameris operates 125 office or branch locations. Of the 125 branch locations, 96 are owned and 29 are subject to
either building or ground leases. Ameris also operates 16 loan production offices, all of which are subject to building leases. At
December 31, 2018, there were no significant encumbrances on the offices, equipment or other operational facilities owned by
Ameris and the Bank.
ITEM 3. LEGAL PROCEEDINGS
From time to time, as a normal incident of the nature and kind of business in which the Company is engaged, various claims or
charges are asserted against the Company or the Bank. In the ordinary course of business, the Company and the Bank are also
subject to regulatory examinations, information gathering requests, inquiries and investigations. Other than ordinary routine
litigation incidental to the Company’s business, management believes based on its current knowledge and after consultation with
legal counsel that there are no pending or threatened legal proceedings that will, individually or in the aggregate, have a material
adverse effect on the consolidated results of operations or financial condition of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
30
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Common Stock is listed on Nasdaq under the symbol “ABCB”. As of February 19, 2019, there were approximately 2,664
holders of record of the Common Stock. The Company believes a portion of Common Stock outstanding is held either in nominee
name or street name brokerage accounts; therefore, the Company is unable to determine the number of beneficial owners of the
Common Stock.
The amount of and nature of any dividends declared on our Common Stock will be determined by our Board of Directors in its
sole discretion. The Company is required to comply with the restrictions on the payment of dividends in respect of the Common
Stock discussed in the section of Part I, Item 1 of this Annual Report captioned “Payment of Dividends and Other Restrictions.”
Performance Graph
Set forth below is a line graph comparing the change in the cumulative total shareholder return on the Common Stock against the
cumulative return of the NASDAQ Stock Market (U.S. Companies) index and the index of SNL U.S. Bank NASDAQ Stocks for
the five-year period commencing December 31, 2013, and ending December 31, 2018. This line graph assumes an investment of
$100 on December 31, 2013, and reinvestment of dividends and other distributions to shareholders.
Index
Ameris Bancorp
NASDAQ Stock Market (US Companies)
SNL U.S. Bank NASDAQ
Source: S&P Global Market Intelligence
Period Ending
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
100.00
100.00
100.00
122.24
114.75
103.57
163.20
122.74
111.80
211.14
133.62
155.02
235.40
173.22
163.20
156.09
168.30
137.56
Pursuant to the regulations of the SEC, this performance graph is not “soliciting material,” is not deemed filed with the SEC and
is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act.
31
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial information for Ameris. The data set forth below is derived from the
audited consolidated financial statements of Ameris. Acquisitions, including the acquisition of Coastal in 2014, the branch
acquisition in 2015, the acquisition of Merchants in 2015, the acquisition of JAXB in 2016, the acquisitions of USPF, Atlantic
and Hamilton in 2018, as well as the December 2016 purchase of a pool of commercial insurance premium finance loans and the
establishment of a division to originate loans of this type, significantly affected the comparability of selected financial
data. Specifically, since the acquisitions were accounted for using the acquisition method of accounting, the assets of the acquired
institutions were recorded at their fair values, the excess purchase price over the net fair value of the assets was recorded as goodwill
and the results of operations for the business have been included in the Company’s results since the respective dates these acquisitions
were completed. Accordingly, the level of our assets and liabilities and our results of operations for these acquisitions have
significantly affected the Company’s financial position and results of operations. Discussion of these acquisitions can be found
in the “Corporate Restructuring and Business Combinations” section of Part I, Item 1. of this Annual Report and in Note 3 “Business
Combinations” in the notes to consolidated financial statements. The selected financial data should be read in conjunction with,
and is qualified in its entirety by, the consolidated financial statements and the notes thereto and Management’s Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere herein.
32
(dollars in thousands, except per share data)
Selected Balance Sheet Data:
2018
Year Ended December 31,
2016
2017
2015
2014
Total assets
Earning assets
Loans held for sale
Loans
Purchased loans
Purchased loan pools
Investment securities
FDIC loss-share receivable, net of clawback
Total deposits
FDIC loss-share payable including clawback
Shareholders’ equity
Selected Average Balances:
Total assets
Earning assets
Loans held for sale
Loans
Purchased loans
Purchased loan pools
Investment securities
Total deposits
Shareholders’ equity
Selected Income Statement Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
Net income available to common shareholders
$ 11,443,515
$ 7,856,203
$ 6,892,031
$ 5,588,940
$ 4,037,077
10,348,393
7,288,285
6,293,670
5,084,658
3,574,561
111,298
197,442
105,924
111,182
94,759
5,660,457
4,856,514
3,626,821
2,406,877
1,889,881
2,588,832
262,625
1,192,423
—
861,595
328,246
810,873
—
1,069,191
568,314
822,735
—
909,083
592,963
783,185
6,301
945,518
—
541,805
31,351
9,469,313
6,625,845
5,575,163
4,879,290
3,431,149
19,487
1,456,347
8,803
804,479
6,313
646,437
—
—
514,759
366,028
$ 9,744,001
$ 7,330,974
$ 6,166,714
$ 4,804,245
$ 3,731,281
8,861,205
6,759,509
5,598,077
4,320,948
3,303,467
140,273
113,657
97,995
87,952
71,231
5,415,757
4,188,378
2,777,505
2,161,726
1,753,013
1,712,924
297,850
1,036,822
958,738
496,844
861,189
1,127,765
619,440
842,886
918,796
201,689
731,165
897,125
—
508,383
7,862,988
5,845,430
5,200,241
4,126,885
3,200,622
1,178,275
770,296
613,435
492,242
316,400
$
413,326
$
294,347
$
239,065
$
190,393
$
164,566
69,934
343,392
16,667
118,412
293,647
151,490
30,463
121,027
—
121,027
$
$
34,222
260,125
8,364
104,457
231,936
124,282
50,734
73,548
—
73,548
$
$
19,694
219,371
4,091
105,801
215,835
105,246
33,146
72,100
—
72,100
14,856
175,537
5,264
85,586
14,680
149,886
5,648
62,836
199,115
150,869
56,744
15,897
40,847
—
40,847
$
$
56,205
17,482
38,723
286
38,437
$
$
$
$
33
(dollars in thousands, except per share data)
Per Share Data
Net income – basic
Net income – diluted
Common book value
Tangible book value
Common dividends – cash
Profitability Ratios
$
2018
2.81
2.80
30.66
18.83
0.40
Year Ended December 31,
2016
2017
2015
$
$
$
$
2.00
1.98
21.59
17.86
0.40
2.10
2.08
18.51
14.42
0.30
1.29
1.27
15.98
12.65
0.20
2014
1.48
1.46
13.67
10.99
0.15
Net income to average total assets
1.24%
1.00%
1.17%
0.85%
1.08%
Net income to average common shareholders’
equity
Net interest margin
Efficiency ratio
Loan Quality Ratios
10.27
3.92
63.59
9.55
3.95
63.62
11.75
3.99
66.38
8.37
4.12
76.25
12.40
4.59
70.92
Net charge-offs to average loans*
Allowance for loan losses to total loans *
Nonperforming assets to total loans and
OREO**
0.27%
0.46
0.13%
0.44
0.11%
0.56
0.22%
0.85
0.34%
1.12
0.72
0.85
1.12
1.60
3.35
Liquidity Ratios
Loans to total deposits
88.21%
91.25%
94.42%
80.11%
82.64%
Average loans to average earnings assets
Noninterest-bearing deposits to total deposits
83.81
26.12
83.50
26.82
80.83
28.22
75.96
27.26
80.22
24.46
Capital Adequacy Ratios
Shareholders’ equity to total assets
Common stock dividend payout ratio
12.73%
14.23
10.24%
20.00
9.38%
14.29
9.21%
15.50
9.07%
10.14
* Excludes purchased non-covered and covered assets.
** Excludes covered assets.
34
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
During 2018, the Company reported net income of $121.0 million, or $2.80 per diluted share, compared with $73.5 million, or
$1.98 per diluted share, in 2017. The Company’s net income as a percentage of average assets for 2018 and 2017 was 1.24% and
1.00%, respectively, while the Company’s net income as a percentage of average shareholders’ equity was 10.27% and 9.55%,
respectively. Reported net income for the year ended December 31, 2017 includes a charge of $13.6 million to income tax expense
attributable to the remeasurement of the Company's deferred tax assets and deferred tax liabilities due to the federal tax legislation
that reduced the Company's federal corporate tax rate.
Highlights of the Company’s performance in 2018 include the following:
• Growth in adjusted net earnings1 of $53.9 million, representing a 58.5% increase over 2017
• Organic growth in loans of $482.6 million, or 8.5%, compared with $941.0 million, or 20.3%, in 2017
• Adjusted return on average assets1 of 1.50%, compared with 1.26% in 2017
• Adjusted return on average tangible common equity1 of 19.18%, compared with 14.66% in 2017
•
Stable net interest margin, excluding accretion1, of 3.79% during 2018 and 2017
• Loan-to-deposit ratio at the end of 2018 of 88.2%, compared with 91.3% at the end of 2017
•
Increase in total revenue of 26.7% to $461.8 million
• Annualized net charge-offs of 0.18% of average total loans and 0.27% of average non-purchased loans
• Year-over-year organic growth in non-interest bearing deposits of $183.5 million, or 10.3%
•
Improvement in nonperforming assets, decreasing to 0.55% of total assets
______________________________________________________________________________________________________
1 A reconciliation of Non-GAAP financial measures can be found in following two tables.
35
Adjusted Net Income Reconciliation
(dollars in thousands except per share data)
Net income available to common shareholders
Adjustment items:
Merger and conversion charges
Executive retirement benefits
Restructuring charge
Certain compliance resolution expenses
Accelerated premium amortization on loans sold from purchased loan pools
Financial impact of hurricanes
Loss on sale of premises
Tax effect of adjustment items (Note 1)
After-tax adjustment items
Tax expense attributable to remeasurement of deferred tax assets and deferred tax liabilities at reduced federal
corporate tax rate
Reduction in state tax expense accrued in prior year, net of federal tax impact
Adjusted net income
Average assets
Reported return on average assets
Adjusted return on average assets
Average common equity
Average tangible common equity
Reported return on average common equity
Adjusted return on average tangible common equity
Year Ended
December 31,
2018
$ 121,027
2017
73,548
$
20,499
8,424
983
—
—
882
1,033
(4,923)
26,898
915
—
—
5,163
456
410
1,264
(2,873)
5,335
—
(1,717)
$ 146,208
$
13,388
—
92,271
$ 9,744,001
$ 7,330,974
1.24%
1.50%
1.00%
1.26%
$ 1,178,275
$ 762,274
$ 770,296
$ 629,312
10.27%
19.18%
9.55%
14.66%
Note 1: A portion of the 2018 merger and conversion charges and the 2018 executive retirement benefits are nondeductible for tax purposes.
Net Interest Margin Excluding Accretion Reconciliation
(dollars in thousands)
Total interest income (TE)
Accretion income
Total interest income (TE) excluding accretion
Interest expense
Net interest income (TE) excluding accretion
Average earning assets
Net interest margin (TE) excluding accretion
Year Ended
December 31,
2018
$ 417,414
11,829
405,585
69,934
$ 335,651
2017
$ 301,308
10,614
290,694
34,222
$ 256,472
$ 8,861,205
$ 6,759,509
3.79%
3.79%
36
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Ameris has established certain accounting and financial reporting policies to govern the application of accounting principles
generally accepted in the United States of America (“GAAP”) in the preparation of its financial statements. Our significant
accounting policies are described in Note 1 to the consolidated financial statements. Certain accounting policies involve significant
judgments and assumptions by management which have a material impact on the carrying value of certain assets and liabilities;
management considers these accounting policies to be critical accounting policies. The judgments and assumptions used by
management are based on historical experience and other factors which are believed to be reasonable under the
circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from
the judgments and estimates adopted by management which could have a material impact on the carrying values of assets and
liabilities and the results of our operations. We believe the following accounting policies applied by Ameris represent critical
accounting policies.
Allowance for Loan Losses
We believe the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates
used in the preparation of our consolidated financial statements. The allowance for loan losses represents management’s estimate
of probable incurred losses in the Company’s loan portfolio. Calculation of the allowance for loan losses represents a critical
accounting estimate due to the significant judgment, assumptions and estimates related to the amount and timing of estimated
losses, consideration of subjective environmental factors and the amount and timing of cash flows related to impaired loans.
Management believes that the allowance for loan losses is adequate. While management uses available information to recognize
losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination processes, periodically review the Company’s
allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based
on their judgments about information available to them at the time of their examination.
Considering current information and events regarding a borrower’s ability to repay its obligations, management considers a loan
to be impaired when the ultimate collectability of all amounts due, according to the contractual terms of the loan agreement, is in
doubt. When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected
future cash flows discounted at the loan’s effective interest rate or if the loan is collateral-dependent, the fair value of the collateral
is used to determine the amount of impairment. Impairment losses are included in the allowance for loan losses through a charge
to the provision for loan losses.
Subsequent recoveries are credited to the allowance for loan losses. Cash receipts for accruing loans are applied to principal and
interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has
been discontinued are applied first to principal and then to interest income.
Certain economic and interest rate factors could have a material impact on the determination of the allowance for loan losses. An
improving economy could result in the expansion of businesses and creation of jobs which would positively affect our loan growth
and improve our gross revenue stream. Conversely, certain factors could result from an expanding economy which could increase
our credit costs and adversely impact our net earnings. A significant rapid rise in interest rates could create higher borrowing costs
and shrinking corporate profits which could have a material impact on a borrower’s ability to pay. We will continue to concentrate
on maintaining a high quality loan portfolio through strict administration of our loan policy.
Another factor that we have considered in the determination of the allowance for loan losses is loan concentrations to individual
borrowers or industries. Based on total committed exposure at December 31, 2018, we had 15 individual loans/lines of credit that
exceeded our normal in-house credit limit of $30.0 million. Total exposure from these 15 individual loans/lines of credit amounted
to $647.4 million as of December 31, 2018. The largest total committed exposure for a single loan/line of credit at December 31,
2018 was $75.0 million, and we had one line of credit at this level extended to a client of our warehouse lending division. As of
December 31, 2018, we had 18 relationships consisting of 35 loans/lines of credit that exceeded $30.0 million. Total exposure
from these 18 relationships amounted to $781.3 million as of December 31, 2018. The largest total committed exposure for a
single relationship at December 31, 2018 was $75.0 million, and we had one relationship at this level which is a client of our
warehouse lending division as well. Additional disclosure concerning the Company’s largest loan relationships is provided in the
“Balance Sheet Comparison” section below.
A substantial portion of our loan portfolio is in the commercial real estate and residential real estate sectors. The majority of these
loans are secured by real estate in our primary market areas. A substantial portion of OREO is located in those same
37
markets. Therefore, the ultimate collectability of a substantial portion of our loan portfolio and the recoverability of a substantial
portion of the carrying amount of OREO are susceptible to changes to market conditions in our primary market area.
Fair Value Accounting Estimates
GAAP requires the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific
disclosures. The most significant fair values used in determining carrying value include investment securities available for sale,
loans held for sale, derivative financial instruments, impaired loans, OREO, and the net assets acquired in business combinations.
Certain of these assets do not have a readily available market to determine fair value and require an estimate based on specific
parameters. When market prices are unavailable, we determine fair values utilizing estimates, which are constantly changing,
including interest rates, duration, prepayment speeds and other specific conditions. In most cases, these specific parameters require
a significant amount of judgment by management. At December 31, 2018, the percentage of the Company’s assets measured at
fair value on a recurring basis was 11%. See Note 23, “Fair Value Measures”, in the notes to consolidated financial statements
herein for additional disclosures regarding the fair value of our assets and liabilities.
When a loan is considered impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at
the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is
expected solely from the collateral. In addition, foreclosed assets are carried at the net realizable value, following foreclosure.
Although management believes its processes for determining the value of these assets are appropriate and allow Ameris to arrive
at a fair value, the processes require management judgment and assumptions and the value of such assets at the time they are
revalued or divested may be different from management’s determination of fair value.
Business Combinations
Assets purchased and liabilities assumed in a business combination are recorded at their fair value. The fair value of a loan portfolio
acquired in a business combination requires greater levels of management estimates and judgment than the remainder of purchased
assets or assumed liabilities. On the date of acquisition, when the loans have evidence of credit deterioration since origination and
it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments,
the difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition
is referred to as the nonaccretable difference. The Company must estimate expected cash flows at each reporting date. Subsequent
decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result
in a reversal of the provision for loan losses to the extent of prior charges and adjusted accretable yield which will have a positive
impact on future interest income.
Income Taxes
As required by GAAP, we use the asset and liability method of accounting for deferred income taxes and provide deferred income
taxes for all significant income tax temporary differences. See Note 16, “Income Taxes,” in the notes to consolidated financial
statements for additional details.
As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of
the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing
temporary differences resulting from differing treatment of items, such as the provision for loan losses and gains on FDIC-assisted
transactions, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included
in our consolidated balance sheet.
We must also assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we
believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in
determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against
our net deferred tax assets. To the extent we establish a valuation allowance or adjust this allowance in a period, we must include
an expense within the tax provisions in the statement of income.
Long-Lived Assets, Including Intangibles
Goodwill represents the excess of cost over the fair value of the net assets purchased in business combinations. Goodwill is required
to be tested annually for impairment or whenever events occur that may indicate that the recoverability of the carrying amount is
not probable. In the event of an impairment, the amount by which the carrying amount exceeds the fair value is charged to
earnings. The Company performs its annual impairment testing of goodwill in the fourth quarter of each year.
38
Intangible assets include core deposit premiums from various past bank acquisitions as well as intangible assets recorded in
connection with the USPF acquisition for insurance agent relationships, the "US Premium Finance" trade name and a non-compete
agreement.
Core deposit premiums acquired in various past bank acquisitions are based on the established value of acquired customer
deposits. The core deposit premium is initially recognized based on a valuation performed as of the acquisition date and is amortized
over an estimated useful life of seven to ten years.
The insurance agent relationships, the "US Premium Finance" trade name and non-compete agreement intangible assets acquired
in the USPF acquisition are based on the established values as of the acquisition date and are being amortized over estimated
useful lives of eight years, seven years and three years, respectively.
The valuation of intangible assets involves significant forward looking assumptions such as economic conditions, market
interest rates, asset growth rates, credit losses, etc. Changes in any of these assumptions could materially affect the valuation of
the intangible assets.
Amortization periods for intangible assets are reviewed annually in connection with the annual impairment testing of goodwill.
NET INCOME/(LOSS) AND EARNINGS PER SHARE
The Company’s net income during 2018 was $121.0 million, or $2.80 per diluted share, compared with $73.5 million, or $1.98
per diluted share, in 2017, and $72.1 million, or $2.08 per diluted share, in 2016.
For the fourth quarter of 2018, the Company recorded net income of $43.5 million, or $0.91 per diluted share, compared with $9.2
million, or $0.24 per diluted share, for the quarter ended December 31, 2017, and $18.2 million, or $0.52 per diluted share, for
the quarter ended December 31, 2016.
EARNING ASSETS AND LIABILITIES
Average earning assets were approximately $8.86 billion in 2018, compared with approximately $6.76 billion in 2017. The earning
asset and interest-bearing liability mix is regularly monitored to maximize the net interest margin and, therefore, increase return
on assets and shareholders’ equity.
The following statistical information should be read in conjunction with the remainder of “Management’s Discussion and Analysis
of Financial Condition and Results of Operation” and the consolidated financial statements and related notes included elsewhere
in this Annual Report and in the documents incorporated herein by reference.
39
The following tables set forth the amount of 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. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate
for 2018 and a 35% federal tax rate for 2017 and 2016.
Year Ended December 31,
2018
Interest
Income/
Expense
Average
Balance
Average
Yield/
Rate Paid
Average
Balance
2017
Interest
Income/
Expense
Average
Yield/
Rate Paid
Average
Balance
2016
Interest
Income/
Expense
Average
Yield/
Rate Paid
(dollars in thousands)
$ 251,840
$ 5,092
2.02% $ 140,703
$
1,725
1.23% $ 132,486
$
860
0.65%
Assets
Interest-earning assets:
Federal funds sold and
interest-bearing deposits
in banks
Time deposits in other
banks
5,739
119
Investment securities
1,036,822
30,145
Loans held for sale
140,273
5,709
Loans
Purchased loans
5,415,757
269,451
1,712,924
97,997
Purchased loan pools
297,850
8,901
Total interest-earning assets
8,861,205
417,414
Noninterest-earning assets
882,796
Total assets
$ 9,744,001
2.07
2.91
4.07
4.98
5.72
2.99
4.71
—
861,189
113,657
—
22,586
4,222
4,188,378
200,999
958,738
496,844
57,136
14,640
6,759,509
301,308
571,465
$7,330,974
—
2.62
3.71
4.80
5.96
2.95
4.46
—
842,886
97,995
—
20,229
3,391
2,777,505
131,305
1,127,765
619,440
70,363
17,170
5,598,077
243,318
568,637
$6,166,714
Liabilities and
Shareholders' Equity
Interest-bearing liabilities:
Savings and interest-
bearing demand deposits
$ 4,032,178
$ 26,594
0.66% $3,172,234
$ 11,759
0.37% $2,793,713
$
6,984
Time deposits
1,666,639
22,460
1.35
1,002,697
8,118
0.81
890,757
5,427
Federal funds purchased
and securities sold under
agreements to repurchase
FHLB advances
Other borrowings
Subordinated deferrable
interest debentures
Total interest-bearing
liabilities
Noninterest-bearing demand
deposits
Other liabilities
Shareholders' equity
Total liabilities and
shareholders’ equity
Interest rate spread
Net interest income
Net interest margin
15,692
421,891
113,496
23
8,153
6,856
87,444
5,848
0.15
1.93
6.04
6.69
28,694
496,541
68,726
56
5,174
4,044
84,878
5,071
0.20
1.04
5.88
5.97
44,324
150,879
45,526
98
899
1,765
80,952
4,522
6,337,340
69,934
1.10
4,853,770
34,222
0.71
4,006,151
19,695
2,164,171
64,215
1,178,275
$ 9,744,001
1,670,499
36,409
770,296
$7,330,974
1,515,771
31,357
613,435
$6,166,714
$347,480
3.61%
3.92%
$267,086
3.75%
3.95%
$223,623
40
—
2.40
3.46
4.73
6.24
2.77
4.35
0.25%
0.61
0.22
0.60
3.88
5.59
0.49
3.86%
3.99%
RESULTS OF OPERATIONS
Net Interest Income
Net interest income represents the amount by which interest income on interest-earning assets exceeds interest expense incurred
on interest-bearing liabilities. Net interest income is the largest component of our income and is affected by the interest rate
environment and the volume and composition of interest-earning assets and interest-bearing liabilities. Our interest-earning assets
include loans, investment securities, other investments, interest-bearing deposits in banks, federal funds sold and time deposits in
other banks. Our interest-bearing liabilities include deposits, securities sold under agreements to repurchase, other borrowings
and subordinated deferrable interest debentures.
2018 compared with 2017. For the year ended December 31, 2018, interest income was $413.3 million, an increase of $119.0
million, or 40.4%, compared with the same period in 2017. Average earning assets increased $2.10 billion, or 31.1%, to $8.86
billion for the year ended December 31, 2018, compared with $6.76 billion as of December 31, 2017. Yield on average earning
assets on a taxable equivalent basis increased during 2018 to 4.71%, compared with 4.46% for the year ended December 31, 2017.
Average yields on all interest-earning asset categories increased from 2017 to 2018 with the exception of purchased loans, which
experienced a decrease from 5.96% in 2017 to 5.72% in 2018.
Interest expense on deposits and other borrowings for the year ended December 31, 2018 was $69.9 million, an increase of $35.7
million, or 104.4%, compared with $34.2 million for the year ended December 31, 2017. During 2018 average interest-bearing
liabilities were $6.34 billion as compared with $4.85 billion for 2017, an increase of $1.48 billion, or 30.6%. During 2018, average
noninterest-bearing accounts amounted to $2.16 billion and comprised 27.5% of average total deposits, compared with $1.67
billion, or 28.6% of average total deposits, during 2017. Average balances of time deposits amounted to $1.67 billion and comprised
21.2% of average total deposits during 2018, compared with $1.00 billion, or 17.2% of average total deposits, during 2017.
On a taxable-equivalent basis, net interest income for 2018 was $347.5 million, compared with $267.1 million in 2017, an increase
of $80.4 million, or 30.1%. The Company’s net interest margin, on a tax equivalent basis, decreased three basis points to 3.92%
for the year ended December 31, 2018, compared with 3.95% for the year ended December 31, 2017. Accretion income for 2018
increased to $11.8 million, compared with $10.6 million for 2017. Excluding the effect of accretion, the Company’s net interest
margin for 2018 remained unchanged from 2017 at 3.79%.
2017 compared with 2016. For the year ended December 31, 2017, interest income was $294.3 million, an increase of $55.3
million, or 23.1%, compared with the same period in 2016. Average earning assets increased $1.16 billion, or 20.7%, to $6.76
billion for the year ended December 31, 2017, compared with $5.60 billion as of December 31, 2016. Yield on average earning
assets on a taxable equivalent basis increased during 2017 to 4.46%, compared with 4.35% for the year ended December 31, 2016.
Average yields on all interest-earning asset categories increased from 2016 to 2017 with the exception of purchased loans, which
experienced a decrease in accretion income.
Interest expense on deposits and other borrowings for the year ended December 31, 2017 was $34.2 million, an increase of $14.5
million, or 73.8%, compared with $19.7 million for the year ended December 31, 2016. During 2017, average noninterest-bearing
accounts amounted to $1.67 billion and comprised 28.6% of average total deposits, compared with $1.52 billion, or 29.1% of
average total deposits, during 2016. Average balances of time deposits amounted to $1.00 billion and comprised 17.2% of average
total deposits during 2017, compared with $890.8 million, or 17.1% of average total deposits, during 2016.
On a taxable-equivalent basis, net interest income for 2017 was $267.1 million, compared with $223.6 million in 2016, an increase
of $43.5 million, or 19.4%. The Company’s net interest margin, on a tax equivalent basis, decreased 4 basis points to 3.95% for
the year ended December 31, 2017, compared with 3.99% for the year ended December 31, 2016. Accretion income for 2017
decreased to $10.6 million, compared with $14.1 million for 2016. Excluding the effect of accretion, the Company’s net interest
margin for 2017 increased 5 basis points to 3.79%, compared with 3.74% for 2016.
41
The summary of changes in interest income and interest expense on a fully taxable equivalent basis resulting from changes in
volume and changes in rates for each category of earning assets and interest-bearing liabilities for the years ended December 31,
2018 and 2017 are shown in the following table:
(dollars in thousands)
Increase (decrease) in:
Income from earning assets:
Interest on federal funds sold and interest-bearing
deposits in banks
Interest on time deposits in other banks
Interest on investment securities
Interest on loans held for sale
Interest and fees on loans
Interest on purchased loans
Interest on purchased loan pools
Total interest income
Expense from interest-bearing liabilities:
Interest on savings and interest-bearing demand
deposits
Interest on time deposits
Interest on federal funds purchased and securities
sold under agreements to repurchase
Interest on FHLB advances
Interest on other borrowings
Interest on trust preferred securities
Total interest expense
Net interest income
Provision for Loan Losses
2018 vs. 2017
2017 vs. 2016
Increase
(Decrease)
Changes Due To
Increase
Changes Due To
Rate
Volume
(Decrease)
Rate
Volume
$
3,367
$
2,004
$
1,363
$
865
$
812
$
119
7,559
1,487
68,452
40,861
(5,739)
116,106
14,835
14,342
(33)
2,979
2,812
777
35,712
—
2,953
498
9,550
(4,085)
125
11,045
11,647
8,967
(8)
3,757
178
624
25,165
119
4,606
989
58,902
44,946
(5,864)
105,061
3,188
5,375
(25)
(778)
2,634
153
10,547
—
2,357
831
69,694
(13,227)
(2,530)
57,990
4,775
2,691
(42)
4,275
2,279
549
14,527
—
1,918
289
2,996
(2,681)
868
4,202
3,829
2,009
(7)
2,215
1,380
330
9,756
$
80,394
$
(14,120) $
94,514
$
43,463
$
(5,554) $
53
—
439
542
66,698
(10,546)
(3,398)
53,788
946
682
(35)
2,060
899
219
4,771
49,017
The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The
provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-
performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other
factors management deems appropriate. As these factors change, the level of loan loss provision may change.
The Company’s provision for loan losses during 2018 amounted to $16.7 million, compared with $8.4 million for 2017 and $4.1
million in 2016. Net charge-offs in 2018 were 0.18% of average loans compared with 0.12% in 2017 and 0.03% in 2016. Net
charge-offs in 2018 were 0.27% of average legacy loans, compared with 0.13% in 2017 and 0.11% in 2016. Of the $26.2 million
in legacy loan net charge-offs recorded during 2018, approximately $7.2 million, or 49.5%, were charge-offs within the Premium
Finance Division stemming from two purchased loan relationships. These two relationships were non-core general operating lines
to insurance agencies and were not the traditional premium finance offerings that the Company primarily focuses on. Management
notes that both agencies suffered unusual circumstances that precipitated their defaults. Excluding these unusual charge-offs, total
net charge-offs for 2018 would have been 0.09% of average total loans and legacy net charge-offs in 2018 would have been 0.14%
of average legacy loans.
At December 31, 2018, non-performing assets amounted to $63.0 million, or 0.55% of total assets, compared with $53.1 million,
or 0.68% of total assets, at December 31, 2017. Legacy non-performing assets totaled $29.4 million and $28.7 million at December
31, 2018 and 2017, respectively. Legacy other real estate was approximately $7.2 million as of December 31, 2018, reflecting a
14.7% decrease from the $8.5 million reported at December 31, 2017. Purchased other real estate was $9.5 million at December
31, 2018, reflecting a 5.8% increase from the $9.0 million at December 31, 2017.
42
The Company’s allowance for loan losses at December 31, 2018 was $28.8 million, or 0.34% of loans compared with $25.8 million,
or 0.43%, and $23.9 million, or 0.45%, at December 31, 2017 and 2016, respectively. Excluding purchased loans and purchased
loan pools, the Company’s allowance for loan losses at December 31, 2018 was $26.2 million, or 0.46% of loans excluding
purchased loans and purchased loan pools, compared with $21.5 million, or 0.44%, and $20.5 million, or 0.56%, at December 31,
2017 and 2016, respectively. A significant portion of the Company’s loan growth during 2018 consisted of residential mortgage
loans and funded balances on residential mortgage warehouse lines of credit, each of which presents a lower risk of default than
other loan types, such as acquisition, construction and development, investor commercial real estate loans or consumer installment
loans. The growth in lower-risk loans during 2018, combined with the improved historical loss rates and qualitative factors, are
the primary reasons the allowance for loan losses as a percentage of loans, excluding purchased loans and purchased loan pools,
remained relatively consistent from 0.44% at December 31, 2017 to 0.46% at December 31, 2018.
Noninterest Income
Following is a comparison of noninterest income for 2018, 2017 and 2016.
(dollars in thousands)
Service charges on deposit accounts
Mortgage banking activities
Other service charges, commissions and fees
Net gain (loss) on securities
Gain on sale of SBA loans
Other noninterest income
Years Ended December 31,
2017
2016
2018
$
46,128
$
42,054
$
51,292
3,003
(37)
2,728
15,298
48,535
2,872
37
4,590
6,369
42,745
48,298
3,575
94
3,974
7,115
$
118,412
$
104,457
$
105,801
2018 compared with 2017. Total noninterest income in 2018 was $118.4 million, compared with $104.5 million in 2017, reflecting
an increase of 13.4%, or $14.0 million.
Service charges on deposit accounts increased by $4.1 million, or 9.7%, to $46.1 million during 2018 compared with 2017. This
increase was primarily attributable to the Atlantic and Hamilton acquisitions which both closed during the second quarter of 2018.
All areas of service charges on deposits increased during 2018 including maintenance service charges on deposits, interchange
income, and non-sufficient funds/overdraft charges.
Other service charges, commission and fees increased by $131,000 to $3.0 million during 2018, an increase of 4.6% compared
with 2017 due to an increase in ATM fees.
Income from mortgage banking activities increased $2.8 million, or 5.7%, to $51.3 million during 2018 compared with 2017.
Retail mortgage revenues increased $11.2 million, or 18.5%, during 2018, from $60.5 million for 2017 to $71.7 million for 2018.
Net income for the Company’s retail mortgage division grew 35.9% during 2018 to $16.5 million. Revenues from the Company’s
warehouse lending division increased $3.5 million, or 45.9%, during the year, from $7.6 million for 2017 to $11.1 million for
2018. Net income for the warehouse lending division increased $3.7 million , or 86.8%, during 2018, from $4.3 million for 2017
to $8.1 million for 2018.
Gain on sale of SBA loans decreased by $1.9 million, or 40.6%, to $2.7 million during 2018 compared with 2017, reflecting a
33.2% reduction in SBA loans sold during 2018 compared with 2017.
Other noninterest income increased by $8.9 million, or 140.2%, to $15.3 million during 2018 compared with 2018. This increase
was primarily due to $4.5 million in other income recorded to reflect a decrease in the USPF acquisition contingent consideration
expected to be paid. Additionally, loan servicing fee income, check order fees, merchant fee income, and income from bank owned
life insurance were higher in 2018.
2017 compared with 2016. Total noninterest income in 2017 was $104.5 million, compared with $105.8 million in 2016, reflecting
a decrease of 1.3%, or $1.3 million.
Service charges on deposit accounts decreased by $691,000 to $42.1 million during 2017, a decrease of 1.6% compared with 2016.
This decrease was primarily attributable to a decrease in non-sufficient funds / overdraft charges, partially offset by increases in
maintenance service charges on deposit accounts and interchange income.
43
Other service charges, commission and fees decreased by $703,000 to $2.9 million during 2017, a decrease of 19.7% compared
with 2016 due to a decrease in ATM fees.
Income from mortgage banking activities was essentially flat during 2017, increasing slightly from $48.3 million in 2016 to $48.5
million in 2017. Retail mortgage revenues increased 8.4% during 2017, from $55.8 million for 2016 to $60.5 million for 2017.
Net income for the Company’s retail mortgage division grew 10.8% during 2017 to $12.1 million. Revenues from the Company’s
warehouse lending division decreased 1.8% during the year, from $7.8 million for 2016 to $7.6 million for 2017. However, net
income for the warehouse lending division increased 4.8% during 2017, from $4.1 million for 2016 to $4.3 million for 2017.
Noninterest Expense
Following is a comparison of noninterest expense for 2018, 2017 and 2016.
(dollars in thousands)
Salaries and employee benefits
Occupancy and equipment
Amortization of intangible assets
Data processing and communications expenses
Advertising and public relations
Postage & delivery
Printing & supplies
Legal fees
Other professional fees
Directors fees
FDIC insurance
Merger and conversion charges
Credit resolution-related expenses
Other noninterest expenses
Years Ended December 31,
2017
2016
2018
$
149,293
$
120,016
$
106,837
29,131
9,512
30,385
5,571
1,853
2,471
1,772
4,614
880
3,408
20,499
4,016
30,242
24,069
3,932
27,869
5,131
1,803
2,047
1,215
14,140
908
3,078
915
3,493
23,320
24,397
4,376
24,591
4,181
1,906
2,158
1,374
8,511
1,060
3,712
6,376
6,172
20,184
$
293,647
$
231,936
$
215,835
2018 compared with 2017. Total noninterest expense increased $61.7 million, or 26.6%, in 2018 to $293.6 million from $231.9
million in 2017. Total noninterest expense for 2018 include approximately $20.5 million in merger-related charges, $8.4 million
in executive retirement benefits expense, $983,000 in restructuring charges, $882,000 in Hurricane Michael charges, $1.0 million
in losses on sale of bank premises. Total noninterest expense for 2017 includes approximately $915,000 in merger-related charges,
$5.2 million in compliance-related charges, $410,000 in Hurricane Irma charges and $1.3 million in losses on sale of bank premises.
Excluding these amounts, expenses in 2018 increased by $37.6 million, or 16.8%, compared with 2017 levels.
Salaries and benefits increased $29.2 million, or 24.4%, from $120.0 million in 2017 to $149.3 million in 2018. This increase
was attributable to $8.4 million in expense related to executive retirement benefits coupled with higher incentive pay, increased
share-based compensation expense and increased investment in the Company's BSA function, as well as staff additions resulting
from the Atlantic acquisition and the Hamilton acquisition both of which closed during the second quarter of 2018. Full time
equivalent employees increased from 1,460 at December 31, 2017 to 1,804 at December 31, 2018.
Occupancy costs increased $5.1 million, or 21.03%, from $24.1 million in 2017 to $29.1 million in 2018 due primarily to 28
branch locations being added during 2018 as a result of the Atlantic and Hamilton acquisitions.
Amortization of intangible assets increased $5.6 million, or 141.9%, to $9.5 million for 2018 compared with $3.9 million for 2017
due to additional amortization of intangible assets recorded as part of the USPF, Atlantic and Hamilton acquisitions.
Data processing and telecommunications expenses increased $2.5 million, or 9.0%, to $30.4 million for 2018 compared with $27.9
million for 2018. This increase reflects increased core banking system charges due to an increase in the number of accounts being
processed by our core banking system as a result of the Atlantic and Hamilton acquisitions and additional software fees related to
the buildout of our BSA compliance program, partially offset by a $1.4 million refund recorded in the second quarter of 2018
related to overcharges on prior billings from a data processing vendor.
44
Other professional fees decreased $9.5 million, or 67.4%, from $14.1 million in 2017 to $4.6 million in 2018, primarily due to a
$5.5 million reduction in fees incurred in the premium finance division pursuant to the USPF management and license agreement
which were discontinued after completion of the USPF acquisition on January 31, 2018 coupled with a $5.2 million reduction in
consulting fees related to our BSA compliance function.
Merger and conversion charges of $20.5 million in 2018 reflect an increase of $19.6 million, compared with $915,000 recorded
in 2017. Merger and conversion charges were elevated in 2018 due to the acquisitions of UPSF, Atlantic and Hamilton during
2018, as well as the conversion of both Atlantic and Hamilton to our core system during 2018.
Other noninterest expense increased $6.9 million, or 29.7%, to $30.2 million in 2018 from $23.3 million in 2017, resulting primarily
from increases in loan servicing expense, debit card charge-offs, natural disaster expenses related to Hurricane Michael, and
servicing asset amortization expense, partially offset by a decrease in loan expense.
2017 compared with 2016. Total noninterest expense increased $16.1 million, or 7.5%, in 2017 to $231.9 million from $215.8
million in 2016. Total noninterest expense for 2017 include approximately $915,000 in merger-related charges, $5.2 million in
compliance-related charges, $410,000 in Hurricane Irma charges, $1.3 million in losses on sale of bank premises, and $14.3 million
in noninterest expense related to the new premium finance division that was added in late 2016. Total noninterest expense for
2016 include approximately $6.4 million in merger-related charges, $5.8 million in compliance-related charges, $992,000 in losses
on sale of bank premises, and $315,000 in noninterest expense related to the premium finance division. Excluding these amounts,
expenses in 2017 increased by $7.5 million, or 3.7%, compared with 2016 levels.
Salaries and benefits increased $13.2 million, or 12.3%, during 2017. The majority of this increase is attributable to $4.5 million
in salary and benefit expense in the new premium finance division, $3.3 million in salary and benefit expense related to the
strengthening of the Company’s BSA department, and $2.3 million in additional salary and benefits in the retail mortgage division.
Exclusive of these three areas, salary and benefits increased $3.0 million, or 4.0%.
Occupancy costs decreased $328,000, or 1.3%, during 2017, principally as a result of management’s cost saving efforts during
the year. Data processing and IT-related costs increased $3.3 million, or 13.3%, in 2017 due to an increased number of accounts
and products, as well as customer’s increased reliance on mobile and internet oriented products and services.
Other professional fees increased $5.6 million, or 66.1%, in 2017, primarily due to fees incurred in the premium finance division
pursuant to the USPF management and license agreement. Advertising and public relations and other noninterest expense increased
during 2017 to support the larger operations of the Company.
Merger and conversion charges of $915,000 in 2017 reflect a decrease of $5.5 million compared with $6.4 million recorded in
2016. Merger and conversion charges were elevated in 2016 due to the acquisition of JAXB and conversion to our core system.
Credit resolution-related expenses decreased $2.7 million, or 43.4%, in 2017 as credit quality continues to improve.
Income Taxes
Income tax expense is influenced by statutory federal and state tax rates, the amount of taxable income, the amount of tax-exempt
income and the amount of non-deductible expenses. For the year ended December 31, 2018, the Company recorded income tax
expense of approximately $30.5 million, compared with $50.7 million recorded in 2017 and $33.1 million recorded in 2016. The
Company’s effective tax rate was 20.1%, 40.8% and 31.5% for the years ended December 31, 2018, 2017 and 2016, respectively.
Income tax expense for the year ended December 31, 2017 includes a charge of approximately $13.6 million to income tax expense
attributable to the remeasurement of the Company's deferred tax assets and deferred tax liabilities due to federal tax legislation
that reduced the Company's future federal corporate tax rate. Excluding this remeasurement charge, income tax expense for the
year ended December 31, 2017 would have been $37.1 million and the Company's effective tax rate would have been approximately
29.9%.
45
BALANCE SHEET COMPARISON
LOANS
Management believes that our loan portfolio is adequately diversified. The loan portfolio contains no foreign loans or significant
concentrations in any one industry. As of December 31, 2018, approximately 68.7% of our legacy loan portfolio was secured by
real estate, compared with 65.2% at December 31, 2017 and 70.3% at December 31, 2016.
The amount of loans outstanding, excluding purchased loans, at the indicated dates is shown in the following table according to
type of loans.
(dollars in thousands)
2018
2017
December 31,
2016
2015
2014
Commercial, financial and agricultural
$ 1,316,359
$ 1,362,508
$
967,138
$
449,623
$
319,654
Real estate – construction and development
671,198
624,595
363,045
244,693
Real estate – commercial and farmland
1,814,529
1,535,439
1,406,219
1,104,991
Real estate – residential
Consumer installment
1,403,000
1,009,461
455,371
324,511
781,018
109,401
570,430
37,140
161,507
907,524
456,106
45,090
Loans, net of unearned income
$ 5,660,457
$ 4,856,514
$ 3,626,821
$ 2,406,877
$ 1,889,881
The following table summarizes the various loan types comprising the "Commercial, financial and agricultural" loan category
displayed in the preceding table.
(dollars in thousands)
Municipal loans
Premium finance loans
Other commercial, financial and agricultural loans
2018
2017
December 31,
2016
2015
2014
$
510,600
$
522,880
$
385,697
$
239,151
$
115,647
410,381
395,378
482,536
357,092
353,858
227,583
—
—
210,472
204,007
$ 1,316,359
$ 1,362,508
$
967,138
$
449,623
$
319,654
The following table provides additional disclosure on the various loan types comprising the subgroup “Real estate – commercial &
farmland” at December 31, 2018.
(dollars in thousands)
Owner-occupied
Farmland
Apartments
Hotels and motels
Offices and office buildings
Strip centers (anchored & non-anchored)
Convenience stores
Retail properties
Warehouse properties
All other
Outstanding
Balance
Average
Maturity
(Months)
Average Rate
%
Nonaccrual
79
37
46
64
59
55
51
77
53
37
64
4.98%
5.10%
4.73%
4.96%
4.55%
4.73%
4.39%
4.94%
4.85%
5.29%
4.88%
0.49%
0.30%
0.05%
0.36%
0.01%
—%
0.60%
0.28%
0.13%
0.11%
0.26%
$
597,690
140,002
140,443
67,372
228,712
213,172
6,080
238,769
133,565
48,724
$
1,814,529
46
The Company seeks to diversify its loan portfolio across its geographic footprint and in various loan types. Also, the Company’s
in-house lending limit for a single loan is $30.0 million, which would normally prevent a concentration with a single loan project.
Certain lending relationships may contain more than one loan and, consequently, exceed the in-house lending limit. The Company
regularly monitors its largest loan relationships to avoid a concentration with a single borrower. The largest 25 loan relationships
as of December 31, 2018 based on committed amount are summarized below by type.
(dollars in thousands)
Committed
Amount
Average
Rate
Average
Maturity
(months)
%
Unsecured
% in
Nonaccrual
Status
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Mortgage warehouse and mortgage servicing
rights lines of credit
Total
$
$
255,895
270,880
69,965
364,826
961,566
2.68%
5.43%
4.96%
5.23%
4.59%
162
61
51
3
65
—%
—
—
—
—%
—%
—%
—%
—%
—%
Total legacy loans, excluding purchased loans, as of December 31, 2018, are shown in the following table according to their
contractual maturity.
(dollars in thousands)
Contractual Maturity in:
One Year
or Less
Over
One Year
through
Five Years
Over
Five Years
Total
Commercial, financial and agricultural
$
502,087
$
269,271
$
545,001
$
1,316,359
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Purchased Assets
222,425
197,571
422,432
12,304
309,274
960,629
158,499
153,001
139,499
656,329
822,069
290,066
671,198
1,814,529
1,403,000
455,371
$
1,356,819
$
1,850,674
$
2,452,964
$
5,660,457
Purchased loans are defined as loans that are acquired in bank acquisitions including those acquisitions covered by the loss-sharing
agreements with the FDIC. Purchased loans totaled $2.59 billion and $861.6 million at December 31, 2018 and 2017, respectively.
Purchased OREO is defined as OREO that was acquired in bank acquisitions including those acquisitions covered by the loss-
sharing agreements with the FDIC. Purchased OREO totaled $9.5 million and $9.0 million at December 31, 2018 and 2017,
respectively.
The Bank initially records purchased loans at fair value, taking into consideration certain credit quality risk and interest rate risk.
The Company believes its estimation of credit risk and its adjustments to the carrying balances of the acquired loans is adequate.
If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, additional
provision for loan loss expense will be recorded for the impairment in value. If the Company determines that a loan or group of
loans has improved from its initial assessment of fair value, then the increase in cash flows over those expected at the acquisition
date will result in a reversal of provision for loan loss expense to the extent of prior provisions or will be recognized as interest
income prospectively if no provisions have been made or have been fully reversed.
47
The amount of purchased loans outstanding, at the indicated dates, is shown in the following table according to type of loan.
(dollars in thousands)
2018
2017
December 31,
2016
2015
2014
Commercial, financial and agricultural
$
372,686
$
74,378
$
96,537
$
51,008
$
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
227,900
1,337,859
623,199
27,188
65,513
468,246
250,539
2,919
81,368
576,355
310,277
4,654
79,692
461,981
311,191
5,211
59,508
81,809
454,333
344,862
5,006
Total purchased non-covered loans
$ 2,588,832
$
861,595
$ 1,069,191
$
909,083
$
945,518
Purchased loans as of December 31, 2018, are shown below according to their contractual maturity.
(dollars in thousands)
Purchased loans
Purchased loan pools
Total purchased loans
Contractual Maturity in:
One Year
or Less
Over
One Year
through
Five Years
Over
Five Years
$
$
422,733
6,634
429,367
$
$
935,664
17,476
953,140
$
$
1,230,435
238,515
1,468,950
$
$
Total
2,588,832
262,625
2,851,457
Total loans (legacy loans, purchased loans and purchased loan pools) which have maturity dates after one year are summarized
below by those loans that have predetermined interest rates and those loans that have floating or adjustable interest rates.
(dollars in thousands)
Predetermined interest rates
Floating or adjustable interest rates
Purchased Loan Pools
$
December 31,
2018
4,186,039
2,552,554
6,738,593
$
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-
assisted transactions. As of December 31, 2018, purchased loan pools totaled $262.6 million and consisted of whole-loan, adjustable
rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $260.5 million and $2.1
million of remaining purchase premium paid at acquisition. As of December 31, 2017, purchased loan pools totaled $328.2 million
with principal balances totaling $324.4 million and $3.8 million of remaining purchase premium paid at acquisition. As of December
31, 2016, purchased loan pools totaled $568.3 million with principal balances totaling $559.4 million and $8.9 million of remaining
purchase premium paid at acquisition. As of December 31, 2015, purchased loan pools totaled $593.0 million with principal
balances totaling $580.7 million and $12.3 million of remaining purchase premium paid at acquisition. At December 31, 2018,
2017, 2016 and 2015 the Company has allocated approximately $732,000, $1.1 million, $1.8 million and $581,000, respectively,
of the allowance for loan losses to the purchased loan pools. The Company did not have any purchased loan pools prior to 2015.
Assets Covered by Loss-Sharing Agreements with the FDIC
Included in purchased loans above are loans that were acquired in FDIC-assisted transactions that are covered by the loss-sharing
agreements with the FDIC (“covered loans”) totaling $38.1 million and $30.2 million at December 31, 2018 and 2017, respectively.
OREO that is covered by the loss-sharing agreements with the FDIC totaled $424,000 and $187,000 at December 31, 2018 and
2017, respectively. The loss-sharing agreements are subject to the servicing procedures as specified in the agreements with the
FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated
fair value at the respective acquisition dates. The net FDIC loss-share payable reported at December 31, 2018 was $19.5 million
which includes the clawback liability of $19.5 million the Bank expects to pay to the FDIC. The net FDIC loss-share payable
reported at December 31, 2017 was $8.8 million which includes the clawback liability of $10.0 million the Bank expects to pay
to the FDIC.
48
Covered loans are shown below according to loan type as of the end of the years shown (in thousands).
(dollars in thousands)
2018
2017
December 31,
2016
2015
2014
Commercial, financial and agricultural
$
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total covered loans
$
577
730
74
36,618
97
140
195
107
29,604
107
$
794
$
5,546
$
2,992
12,917
41,389
68
7,612
71,226
53,038
107
21,467
23,447
147,627
78,520
218
$
38,096
$
30,153
$
58,160
$
137,529
$
271,279
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses represents a reserve for probable incurred losses in the loan portfolio. The adequacy of the allowance
for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing,
past due and other loans that management believes might be potentially impaired or warrant additional attention. We segregate
our loan portfolio by type of loan and utilize this segregation in evaluating exposure to risks within the portfolio. In addition, based
on internal reviews and external reviews performed by independent loan reviewers and regulatory authorities, we further segregate
our loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans
are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the
review affords management the opportunity to fine tune the amount of exposure in a given credit. In establishing allowances,
management considers historical loan loss experience but adjusts this data with a significant emphasis on data such as current loan
quality trends, current economic conditions and other factors in the markets where the Bank operates. Factors considered include,
among others, current valuations of real estate in our markets, unemployment rates, the effect of weather conditions on agricultural
related entities and other significant local economic events, such as major plant closings.
We have developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the
Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan
portfolio. Commercial insurance premium loans, overdraft protection loans and certain mortgage loans and consumer loans serviced
by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five
ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percent factor
to be applied to the loan balance to determine the adequate amount of allowance. Many of the larger loans require an annual review
by an independent loan officer and are often reviewed by independent third parties. As a result of these loan reviews, certain loans
may be assigned specific allowance allocations. Other loans that surface as problem loans may also be assigned specific allowance
allocations. Assigned risk ratings can be adjusted based on the number of days past due. The calculation of the allowance for loan
losses, including underlying data and assumptions, is reviewed regularly by the independent internal loan review department.
Generally, the primary contributor to the allowance for loan losses methodology is historical losses by loan type. The Company’s
look-back period for historical losses is 16 quarters. Current period losses are lower than those incurred four years ago, which
has reduced the need in the allowance for loan losses, as a percentage of loans, at December 31, 2018, as compared with prior
periods. The Company’s qualitative factors currently utilized in determining the allowance for loan losses are higher compared
with prior periods. Additionally, a significant portion of the Company's loan growth during 2018 consisted of residential mortgage
loans and funded balances on residential mortgage warehouse lines of credit, each of which presents a lower risk of default than
other loan types, such as acquisition, construction and development, investor commercial real estate loans or consumer installment
loans. The growth in lower-risk loans during 2018, combined with the improved historical loss rates and qualitative factors, are
the primary reasons the allowance for loan losses as a percentage of loans, excluding purchased loans and purchased loan pools,
remained relatively consistent from 0.44% at December 31, 2017 to 0.46% at December 31, 2018.
49
The following table sets forth the breakdown of the allowance for loan losses by loan category for the periods indicated. Management
believes the allowance can be allocated only on an approximate basis. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any other category.
(dollars in thousands)
Commercial, financial, and agricultural
Real estate construction & development
Real estate – commercial and farmland
Total Commercial
Real estate - residential
Consumer installment and Other
Total excluding purchased loans and
purchased loan pools
Purchased loans
Purchased loan pools
Total
December 31,
2018
2017
2016
2015
2014
Amount
$ 4,287
3,734
8,975
16,996
5,363
3,795
26,154
1,933
732
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
15% $ 3,631
14% $ 2,192
9% $ 1,144
5% $ 2,004
9%
13
31
59
19
13
91
7
2
3,629
7,501
14,761
4,786
1,916
21,463
3,253
1,075
14
29
57
19
7
83
13
4
2,990
7,662
12,844
6,786
827
20,457
1,626
1,837
13
32
54
28
3
85
7
8
5,009
7,994
14,147
4,760
1,574
20,481
—
581
24
38
67
23
7
97
—
3
5,030
8,823
15,857
4,129
1,171
24
42
75
19
6
21,157
100
—
—
—
—
$ 28,819
100% $ 25,791
100% $ 23,920
100% $ 21,062
100% $ 21,157
100%
The following table provides an analysis of the allowance for loan losses, provision for loan losses and net charge-offs for the
years ended December 31, 2018, 2017, 2016, 2015, and 2014.
(dollars in thousands)
2018
2017
2016
2015
2014
December 31,
Balance of allowance for loan losses at beginning of period
$
25,791
$
23,920
$
21,062
$
21,157
$
Provision charged to operating expense
16,667
8,364
4,091
5,264
Charge-offs:
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate - residential
Consumer installment
Purchased loans
Purchased loan pools
Total charge-offs
Recoveries:
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate - residential
Consumer installment
Purchased loans
Purchased loan pools
Total recoveries
Net charge-offs
13,803
292
338
771
4,189
1,738
—
21,131
2,850
95
853
2,151
1,618
2,900
—
10,467
3,769
1,270
120
176
346
499
2,582
—
7,492
13,639
246
184
237
116
1,921
—
3,974
6,493
1,999
588
708
1,122
351
1,559
—
6,327
400
490
269
391
127
3,417
—
5,094
1,233
1,438
622
2,367
1,587
410
2,709
—
9,133
651
323
317
151
137
2,195
—
3,774
5,359
22,377
5,648
1,567
592
3,288
1,707
471
1,935
—
9,560
321
349
274
254
486
1,008
—
2,692
6,868
Balance of allowance for loan losses at end of period
$
28,819
$
25,791
$
23,920
$
21,062
$
21,157
50
The following table provides an analysis of the allowance for loan losses and net charge-offs for legacy loans, purchased loans,
purchased loan pools and total loans held of investment.
(dollars in thousands)
December 31, 2018
Allowance for loan losses at end of period
Net charge-offs (recoveries) for the period
Loan balances:
End of period
Average for the period
Legacy
Loans
Purchased
Loans
Purchased
Loan
Pools
Total
$
26,154
14,483
$
1,933
(844)
$
732
—
$
28,819
13,639
5,660,457
5,415,757
2,588,832
1,712,924
262,625
297,850
8,511,914
7,426,531
Net charge-offs as a percentage of average loans
Allowance for loan losses as a percentage of end of period loans
0.27%
0.46%
(0.05)%
0.07 %
0.00%
0.28%
0.18%
0.34%
December 31, 2017
Allowance for loan losses at end of period
Net charge-offs (recoveries) for the period
Loan balances:
End of period
Average for the period
$
21,463
5,514
$
3,253
979
$
1,075
—
$
25,791
6,493
4,856,514
4,188,378
861,595
958,738
328,246
496,844
6,046,355
5,643,960
Net charge-offs as a percentage of average loans
Allowance for loan losses as a percentage of end of period loans
0.13%
0.44%
0.10 %
0.38 %
0.00%
0.33%
0.12%
0.43%
December 31, 2016
Allowance for loan losses at end of period
Net charge-offs (recoveries) for the period
Loan balances:
End of period
Average for the period
$
20,457
3,091
$
1,626
(1,858)
$
1,837
—
$
23,920
1,233
3,626,821
2,777,505
1,069,191
1,127,765
568,314
619,440
5,264,326
4,524,710
Net charge-offs as a percentage of average loans
Allowance for loan losses as a percentage of end of period loans
0.11%
0.56%
(0.16)%
0.15 %
0.00%
0.32%
0.03%
0.45%
December 31, 2015
Allowance for loan losses at end of period
Net charge-offs (recoveries) for the period
Loan balances:
End of period
Average for the period
$
20,481
4,845
$
— $
514
581
—
$
21,062
5,359
2,406,877
2,161,726
909,083
918,796
592,963
201,689
3,908,923
3,282,211
Net charge-offs as a percentage of average loans
Allowance for loan losses as a percentage of end of period loans
0.22%
0.85%
0.06 %
0.00 %
0.00%
0.10%
0.16%
0.54%
December 31, 2014
Allowance for loan losses at end of period
Net charge-offs (recoveries) for the period
Loan balances:
End of period
Average for the period
$
21,157
5,941
$
— $
927
— $
—
21,157
6,868
1,889,881
1,753,013
945,518
897,125
— 2,835,399
— 2,650,138
0.00%
0.00%
0.26%
0.75%
Net charge-offs as a percentage of average loans
Allowance for loan losses as a percentage of end of period loans
0.34%
1.12%
0.10 %
0.00 %
At December 31, 2018, the allowance for loan losses allocated to legacy loans totaled $26.2 million, or 0.46% of legacy loans,
compared with $21.5 million, or 0.44% of legacy loans, at December 31, 2017. The decrease in the allowance for loan losses as
a percentage of legacy loans over the past several years reflects the change in credit risk of our portfolio, both from the mix of
loan and collateral types, as well as the overall improvement in credit quality of the loan portfolio. Our legacy nonaccrual loans
51
increased from $14.2 million at December 31, 2017 to $18.0 million at December 31, 2018. Legacy nonaccrual loans as a percentage
of legacy loans increased from 0.29% at December 31, 2017 to 0.32% at December 31, 2018. For the year ended December 31,
2018, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.27%, compared with 0.13% for the
year ended December 31, 2017. For the year ended December 31, 2018, the Company recorded legacy net charge-offs totaling
$14.5 million, compared with $5.5 million for the year ended December 31, 2017.
The provision for loan losses for the year ended December 31, 2018 increased to $16.7 million, compared with $8.4 million for
the year ended December 31, 2017. As of December 31, 2018 our ratio of nonperforming assets to total assets had decreased to
0.55% from 0.68% at December 31, 2017.
The balance of the allowance for loan losses allocated to loans collectively evaluated for impairment increased 20.6%, or $4.1
million, during the year ended December 31, 2018, while the balance of loans collectively evaluated for impairment increased
42.4%, or $2.5 billion, during the same period, reflecting our Atlantic and Hamilton acquisitions. For legacy loans, a significant
portion of the loan growth during 2018 was concentrated in lower risk categories such as residential mortgage loans and funded
balances on residential mortgage warehouse lines of credit which did not require as large of an allowance for loan losses as other
categories of loans because the inherent risk and historical losses are less than traditional loans, such as acquisition, construction
and development loans, investor commercial real estate loans or consumer installment loans. In addition to the change of type of
loan growth, we also experienced a decline in our historical loss rates on all loan portfolios. We consider a four year loss rate on
all loan categories and our charge off ratio has been steadily declining over that period. We have adjusted the qualitative factors
to account for the inherent risks in the portfolio that are not captured in the historical loss rates, such as commodity prices for
agriculture products, growth rates of certain loan types and other factors management deems appropriate. As a percentage of all
loans collectively evaluated for impairment, the allowance allocated to those loans decreased five basis points, from 0.34% at
December 31, 2017 to 0.29% at December 31, 2018. The largest increase in allowance allocated to loans collectively evaluated
for impairment as a percentage of the related loans was noted in legacy consumer installment loan portfolio. The allowance
allocated to consumer installment loans evaluated collectively for impairment increased from 0.59% at December 31, 2017 to
0.83% at December 31, 2018 due to an increase in historical net chargeoffs for this loan category.
The balance of the allowance for loan losses allocated to loans individually evaluated for impairment decreased 17.5%, or $1.1
million, during the year ended December 31, 2018, while the balance of loans individually evaluated for impairment increased
3.2%, or $1.7 million during the same period. The decrease in the allowance for loan losses allocated to loans individually evaluated
for impairment was primarily attributable to purchased loans. The increase in the balance of loans individually evaluated for
impairment was primarily attributable to purchased loans, partially offset by a decrease in the legacy commercial and farmland
real estate portfolio.
NONPERFORMING LOANS
A loan is placed on non-accrual status when, in management’s judgment, the collection of the interest income appears doubtful.
Interest receivable that has been accrued in prior years and is subsequently determined to have doubtful collectability is charged
to the allowance for loan losses. Interest on loans that are classified as non-accrual is recognized when received. Past due loans
are placed on non-accrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the
process of collection. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide
terms significantly different from the original contractual terms. The following table presents an analysis of loans accounted for
on a non-accrual basis and loans contractually past due 90 days or more as to interest or principal payments and still accruing,
excluding purchased loans.
(dollars in thousands)
2018
2017
2016
2015
2014
December 31,
Non-accrual loans, excluding purchased loans
Commercial, financial and agricultural
$
1,412
$
1,306
$
1,814
$
1,302
$
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Loans contractually past due 90 days or more
as to interest or principal payments and still
accruing, excluding purchased loans
$
$
892
4,654
10,465
529
554
2,665
9,194
483
547
8,757
6,401
595
1,812
7,019
6,278
449
17,952
$
14,202
$
18,114
$
16,860
$
21,728
4,222
$
5,991
$
— $
— $
1
52
1,672
3,774
8,141
7,663
478
The following table presents an analysis of purchased loans accounted for on a non-accrual basis and loans contractually past
due 90 days or more as to interest or principal payments and still accruing.
(dollars in thousands)
Purchased non-accrual loans
2018
2017
December 31,
2016
2015
2014
Commercial, financial & agricultural
$
1,199
$
813
$
692
$
3,867
$
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Purchased loans contractually past due 90
days or more as to interest or principal
payments and still accruing
$
$
Troubled Debt Restructurings
6,119
5,534
10,769
486
3,139
5,685
5,743
48
2,611
10,174
9,476
13
2,807
9,954
9,831
109
24,107
$
15,428
$
22,966
$
26,568
$
53,661
— $
— $
— $
— $
—
8,716
8,720
22,826
13,239
160
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 December 31, 2018 and 2017, the Company had a balance of $11.1 million and $15.6 million, respectively, in troubled debt
restructurings, excluding purchased loans. The following table presents the amount of troubled debt restructurings by loan class,
excluding purchased loans, classified separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Accruing Loans
Non-Accruing Loans
Loan class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
5
5
12
71
6
99
Balance
(in thousands)
256
$
145
2,863
6,043
16
9,323
$
#
14
1
3
20
24
62
Balance
(in thousands)
138
$
2
426
1,119
69
1,754
$
As of December 31, 2017
Accruing Loans
Non-Accruing Loans
Loan class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
4
6
17
74
4
Balance
(in thousands)
$
41
417
6,937
6,199
5
105
$
13,599
#
12
2
5
18
33
70
Balance
(in thousands)
$
$
120
34
204
1,508
98
1,964
53
The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified
separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under
restructured terms at December 31, 2018 and 2017.
As of December 31, 2018
Loan class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
As of December 31, 2017
Loan class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Loans Currently
Paying Under
Restructured Terms
Loans that have
Defaulted Under
Restructured Terms
#
10
5
14
65
18
112
$
Balance
(in thousands)
$
282
147
3,043
5,756
36
9,264
#
9
1
1
26
12
49
Balance
(in thousands)
$
$
112
—
246
1,406
49
1,813
Loans Currently
Paying Under
Restructured Terms
Loans that have
Defaulted Under
Restructured Terms
#
9
4
18
78
24
Balance
(in thousands)
$
55
156
6,722
6,753
59
133
$
13,745
#
7
4
4
14
13
42
Balance
(in thousands)
$
106
295
419
954
44
$
1,818
The following table presents the amount of troubled debt restructurings, excluding purchased loans, by types of concessions made,
classified separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Type of Concession
Forgiveness of interest
Forbearance of interest
Forgiveness of principal
Forbearance of principal
Rate reduction only
Rate reduction, maturity extension
Rate reduction, forbearance of interest
Rate reduction, forbearance of principal
Rate reduction, forgiveness of interest
Rate reduction, forgiveness of principal
Total
Accruing Loans
Non-Accruing Loans
#
—
9
1
6
11
—
27
15
30
—
99
Balance
(in thousands)
$
$
—
1,361
686
360
1,155
—
2,149
1,384
2,228
—
9,323
#
1
5
—
4
1
3
13
29
5
1
62
Balance
(in thousands)
$
55
509
—
75
56
25
618
150
264
2
$
1,754
54
As of December 31, 2017
Type of Concession
Forbearance of interest
Forgiveness of principal
Forbearance of principal
Rate reduction only
Rate reduction, forbearance of interest
Rate reduction, forbearance of principal
Rate reduction, forgiveness of interest
Rate reduction, forgiveness of principal
Total
Accruing Loans
Non-Accruing Loans
#
12
3
5
12
32
6
35
—
Balance
(in thousands)
$
2,567
1,238
2,299
1,366
2,224
1,192
2,713
—
105
$
13,599
#
4
—
6
1
19
33
4
3
70
Balance
(in thousands)
$
163
—
657
29
484
216
408
7
$
1,964
The following table presents the amount of troubled debt restructurings, excluding purchased loans, by collateral types, classified
separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Accruing Loans
Non-Accruing Loans
Collateral Type
Warehouse
Raw land
Hotel and motel
Office
Retail, including strip centers
1-4 family residential
Automobile/equipment/CD
Livestock
Unsecured
Total
#
5
7
1
1
6
71
8
—
—
99
Balance
(in thousands)
$
544
435
260
161
1,980
5,835
108
—
—
$
9,323
#
1
1
1
—
—
21
36
1
1
62
Balance
(in thousands)
$
137
2
246
—
—
1,161
188
18
2
$
1,754
As of December 31, 2017
Accruing Loans
Non-Accruing Loans
Collateral Type
Warehouse
Raw land
Hotel and motel
Office
Retail, including strip centers
1-4 family residential
Automobile/equipment/CD
Unsecured
Total
#
4
8
3
4
5
74
6
1
Balance
(in thousands)
$
2,697
713
1,370
656
2,159
5,992
11
1
105
$
13,599
#
1
2
—
—
3
20
43
1
70
Balance
(in thousands)
$
$
79
34
—
—
80
1,553
216
2
1,964
55
As of December 31, 2018 and 2017, the Company had a balance of $22.2 million and $24.9 million, respectively, in troubled debt
restructurings included in purchased loans. The following table presents the amount of troubled debt restructurings by loan class
of purchased loans, classified separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Accruing Loans
#
1
4
12
115
—
132
Balance
(in thousands)
31
$
1,015
6,162
11,532
—
$
18,740
Non-Accruing Loans
Balance
(in thousands)
32
$
3
#
5
7
24
4
43
$
293
1,685
1,424
17
3,451
As of December 31, 2017
Accruing Loans
Non-Accruing Loans
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
—
3
14
117
—
134
Balance
(in thousands)
$
—
1,018
6,713
12,741
—
$
20,472
#
3
6
10
25
2
46
Balance
(in thousands)
$
$
16
340
2,582
1,462
5
4,405
The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as
those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured
terms at December 31, 2018 and 2017.
As of December 31, 2018
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Loans Currently
Paying Under
Restructured Terms
Loans that have
Defaulted Under
Restructured Terms
#
4
8
17
106
3
138
Balance
(in thousands)
$
63
1,305
7,576
10,040
14
$
18,998
#
—
1
2
33
1
37
Balance
(in thousands)
$
$
—
3
271
2,916
3
3,193
56
As of December 31, 2017
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Loans Currently
Paying Under
Restructured Terms
Loans that have
Defaulted Under
Restructured Terms
#
1
8
22
124
1
156
Balance
(in thousands)
$
11
1,352
9,014
13,151
2
$
23,530
#
2
1
2
18
1
24
Balance
(in thousands)
$
$
5
6
281
1,052
3
1,347
The following table presents the amount of troubled debt restructurings included in purchased loans, by types of concessions made,
classified separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Type of Concession
Forbearance of interest
Forbearance of principal
Forbearance of principal, extended amortization
Rate reduction only
Rate reduction, forbearance of interest
Rate reduction, forbearance of principal
Rate reduction, forgiveness of interest
Total
As of December 31, 2017
Type of Concession
Forbearance of interest
Forgiveness of principal
Forbearance of principal
Forbearance of principal, extended amortization
Rate reduction only
Rate reduction, forbearance of interest
Rate reduction, forbearance of principal
Rate reduction, forgiveness of interest
Total
Accruing Loans
Non-Accruing Loans
#
5
6
—
73
24
8
16
Balance
(in thousands)
$
224
2,368
—
10,911
2,304
1,635
1,298
132
$
18,740
#
10
3
1
6
14
6
3
43
Balance
(in thousands)
$
1,751
226
258
285
356
368
207
$
3,451
Accruing Loans
Non-Accruing Loans
#
4
—
5
2
70
22
10
21
Balance
(in thousands)
$
182
—
2,363
371
#
9
1
4
1
11,450
15
2,211
2,195
1,700
9
5
2
Balance
(in thousands)
$
1,740
63
406
290
1,361
257
187
101
134
$
20,472
46
$
4,405
57
The following table presents the amount of troubled debt restructurings included in purchased loans, by collateral types, classified
separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Accruing Loans
Collateral Type
Warehouse
Raw land
Hotel and motel
Office
Retail, including strip centers
1-4 family residential
Church
Automobile/equipment/CD
Total
#
2
2
1
2
5
118
1
1
Balance
(in thousands)
356
$
873
145
419
3,882
11,837
1,197
31
132
$
18,740
As of December 31, 2017
Accruing Loans
Collateral Type
Warehouse
Raw land
Hotel and motel
Office
Retail, including strip centers
1-4 family residential
Church
Automobile/equipment/CD
Total
#
2
2
1
2
7
119
1
—
134
Balance
(in thousands)
$
368
893
149
460
4,407
12,958
1,237
—
$
20,472
Non-Accruing Loans
Balance
(in thousands)
—
$
—
#
6
—
2
—
26
1
8
43
$
718
—
457
—
2,009
201
65
3,450
Non-Accruing Loans
Balance
(in thousands)
#
—
$
7
1
2
1
28
1
6
46
$
—
829
476
494
160
2,161
218
67
4,405
LIQUIDITY AND INTEREST RATE SENSITIVITY
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 our Company to meet those needs. We seek to meet liquidity requirements primarily through management of short-term
investments (principally interest-bearing deposits in banks) and monthly amortizing loans. Another source of liquidity is the
repayment of maturing single payment loans. In addition, our Company maintains relationships with correspondent banks,
including the FHLB and the Federal Reserve Bank of Atlanta, which could provide funds on short notice, if needed.
A principal objective of our asset/liability management strategy is to minimize our exposure to changes in interest rates by matching
the maturity and repricing horizons of interest-earning assets and interest-bearing liabilities. This strategy is overseen in part
through the direction of our Asset and Liability Committee (the “ALCO Committee”) which establishes policies and monitors
results to control interest rate sensitivity.
As part of our interest rate risk management policy, the ALCO Committee examines the extent to which its assets and liabilities
are “interest rate sensitive” and monitors its interest rate-sensitivity “gap.” An asset or liability is considered to be interest rate
sensitive if it will reprice or mature within the time period analyzed, usually one year or less. The interest rate-sensitivity gap is
the difference between the interest-earning assets and interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities. A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds the interest rate-sensitive
assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive
gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend
to result in an increase in net interest income, while a positive gap would tend to adversely affect net interest income. If our assets
58
and liabilities were equally flexible and moved concurrently, the impact of any increase or decrease in interest rates on net interest
income would be minimal.
A simple interest rate “gap” analysis by itself may not be an accurate indicator of how net interest income will be affected by
changes in interest rates. Accordingly, the ALCO Committee also evaluates how the repayment of particular assets and liabilities
is impacted by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing
liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar
maturities or periods of repricing, they may not react identically to changes in market interest rates. Interest rates on certain types
of assets and liabilities fluctuate in advance of changes in general market interest rates, while interest rates on other types may lag
behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally
referred to as “interest rate caps”) which limit changes in interest rates on a short-term basis and over the life of the asset. In the
event of a change in interest rates, prepayment and early withdrawal levels also could deviate significantly from those assumed
in calculating the interest rate gap. The ability of many borrowers to service their debts also may decrease in the event of an interest
rate increase.
We manage the mix of asset and liability maturities in an effort to control the effects of changes in the general level of interest
rates on net interest income. Except for its effect on the general level of interest rates, inflation does not have a material impact
on the balance sheet due to the rate variability and short-term maturities of its earning assets. In particular, approximately 35.8%
of earning assets mature or reprice within one year or less. Mortgage loans, generally our loan category with the longest maturity,
are usually made with fifteen to thirty year maturities, but with either a fixed rate or a variable interest rate with an adjustment
between origination date and maturity date.
In July 2017, the Financial Conduct Authority, which is the authority that regulates LIBOR, announced that it intends to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee ("ARRC")
has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that represents best practice as the alternative to
USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed
a paced market transition plan to SOFR from USD-LIBOR, and organizations are currently working on industry wide and company
specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. The Company has material contracts
that are indexed to USD-LIBOR, which include certain financial instruments within investment securities, loans, other borrowings,
subordinated deferrable interest debentures and derivative financial instruments. Company management is monitoring this
development in the financial markets and is evaluating the related risks.
59
The following table sets forth the distribution of the repricing of our interest-earning assets and interest-bearing liabilities as of
December 31, 2018, the interest rate sensitivity gap (i.e., interest rate sensitive assets minus interest rate sensitive liabilities), the
cumulative interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest
rate sensitive liabilities) and the cumulative interest rate sensitivity gap ratio. The table also sets forth the time periods in which
earning assets and liabilities will mature or may reprice in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of our customers. In addition, various assets and liabilities
indicated as repricing within the same period may in fact reprice at different times within such period and at different rates.
(dollars in thousands)
Interest-earning assets:
Federal funds sold and interest-bearing
deposits in banks
Time deposits in other banks
Investment securities
Loans held for sale
Loans
Purchased loans
Purchased loan pools
Interest-bearing liabilities:
Interest-bearing demand deposits
Money market deposit accounts
Savings
Time deposits
Federal funds purchased and securities
sold under agreements to repurchase
FHLB advances
Other borrowings
Trust preferred securities
December 31, 2018
Maturing or Repricing Within
One to
Five
Years
Three
Months to
One Year
Over
Five
Years
Zero to
Three
Months
Total
$
507,491
$
— $
3,935
19,819
111,298
1,521,649
824,590
11,301
3,000,083
1,677,130
2,684,210
400,125
296,493
20,384
—
71,550
52,073
6,628
10,043
—
532,430
146,786
10,776
706,663
—
—
—
—
2,000
—
—
— $
249
— $
507,491
—
10,812
127,838
1,049,178
1,206,878
—
—
1,872,014
1,734,364
889,868
193,085
727,588
47,463
111,298
5,660,457
2,588,832
262,625
3,083,054
3,558,593
10,348,393
—
—
—
—
—
—
1,677,130
2,684,210
400,125
—
—
73,926
37,114
583,116
—
4,298
—
—
20,384
6,298
145,476
89,187
5,722
7,390,642
1,597,839
472,076
1,424
2,367,832
5,201,965
1,599,839
Interest rate sensitivity gap
$ (2,201,882) $
(893,176) $ 2,499,938
$ 3,552,871
$ 2,957,751
Cumulative interest rate sensitivity gap
$ (2,201,882) $ (3,095,058) $
(595,120) $ 2,957,751
Interest rate sensitivity gap ratio
0.58
0.44
5.29
621.91
Cumulative interest rate sensitivity gap
ratio
0.58
0.54
0.92
1.40
60
INVESTMENT PORTFOLIO
Following is a summary of the carrying value of investment securities available for sale as of the end of each reported period:
(dollars in thousands)
U.S. government sponsored agencies
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
2018
December 31,
2017
$
— $
— $
150,733
67,314
974,376
137,794
47,143
625,936
$
1,192,423
$
810,873
$
2016
1,020
152,035
32,172
637,508
822,735
The amounts of securities available for sale in each category as of December 31, 2018 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.
(dollars in thousands)
One year or less
After one year through five years
After five years through ten years
After ten years
State, County and
Municipal
Securities
Amount
Yield
(1)(2)
Corporate
Debt
Securities
Mortgage-Backed
Securities
Amount
Yield
(1)
Amount
Yield
(1)
$ 16,407
3.06% $
500
1.74% $
—
—%
62,305
44,608
27,413
3.08
3.04
2.87
23,930
40,986
1,898
2.49
5.74
4.38
41,604
321,693
611,079
2.94
2.79
2.89
$ 150,733
3.03% $ 67,314
4.52% $ 974,376
2.86%
(1) 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.
(2) Yields on securities of state and political subdivisions are stated on a taxable-equivalent basis, using a tax rate of 21%.
The investment portfolio consists of securities which are classified as available for sale and recorded at fair value with unrealized
gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax
effect.
The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the
interest method over the 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. Declines in the fair value of securities below their cost that are deemed to be other-
than-temporary are reflected in earnings as realized losses.
The Company’s methodology for determining whether other-than-temporary impairment losses exist include management
considering (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and
near-term prospects of the issuer or underlying collateral of the security, and (iii) the intent and ability of the Company to retain
its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when
economic or market concerns warrant such evaluation. Substantially all of the unrealized losses on debt securities are related to
changes in interest rates and do not affect the expected cash flows of the issuer or underlying collateral. All unrealized losses are
considered temporary because each security carries an acceptable investment grade, the Company has the intent and ability to
hold such securities until maturity and it is more likely than not that the Company will not be required to sell these securities prior
to recovery or maturity. The Company’s investments in subordinated debt include investments in regional and super-regional banks
on which the Company conducts regular analysis through review of financial information or credit ratings. Investments in preferred
securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment
structures. The Company did not hold any investments in “pooled” trust preferred securities at December 31, 2018.
61
DEPOSITS
Average amount of various deposit classes and the average rates paid thereon are presented below.
(dollars in thousands)
Noninterest-bearing demand
NOW
Money market
Savings
Time
Total deposits
Year Ended December 31,
2018
2017
Amount
Rate
Amount
Rate
$
2,164,171
—% $
1,670,499
—%
1,441,849
2,240,115
350,214
1,666,639
0.34
0.95
0.08
1.35
1,207,024
1,690,091
275,119
1,002,697
0.20
0.54
0.07
0.81
$
7,862,988
0.62% $
5,845,430
0.34%
We have a large, stable base of time deposits with little or no dependence on what we consider volatile deposits. Volatile deposits,
in management’s opinion, are those deposit accounts that are overly rate sensitive and apt to move if our rate offerings are not at
or near the top of the market. Generally speaking, these are brokered deposits or time deposits in amount greater than $100,000.
At December 31, 2018, the Company had brokered deposits of $846.7 million. The amounts of time certificates of deposit issued
in amounts of $100,000 or more as of December 31, 2018, are shown below by category, which is based on time remaining until
maturity of (i) three months or less, (ii) over three through twelve months and (iii) greater than one year.
(dollars in thousands)
Three months or less
Three months to one year
One year or greater
Total
December 31,
2018
$
$
153,129
662,592
269,986
1,085,707
OFF-BALANCE-SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
In the ordinary course of business, our Bank has granted commitments to extend credit to approved customers. Generally, these
commitments to extend credit have been granted on a temporary basis for seasonal or inventory requirements or for construction
period financing and have been approved within the Bank’s credit guidelines. Our Bank has also granted commitments to approved
customers for financial standby letters of credit. These commitments are recorded in the financial statements when funds are
disbursed or the financial instruments become payable. The Bank uses the same credit policies for these off-balance-sheet
commitments as it does for financial instruments that are recorded in the consolidated financial statements. Commitments generally
have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitment amounts
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
The following table summarizes commitments outstanding at December 31, 2018 and 2017.
(dollars in thousands)
Commitments to extend credit
Unused lines of credit
Financial standby letters of credit
Mortgage interest rate lock commitments
Mortgage forward contracts with positive fair value
Mortgage forward contracts with negative fair value
62
December 31,
2018
2017
$
1,671,419
$
1,109,806
112,310
24,596
81,833
—
69,788
11,389
86,149
31,500
163,189
126,750
$
2,053,347
$
1,435,382
The following table summarizes short-term borrowings for the periods indicated.
(dollars in thousands)
Federal funds purchased and securities sold under
agreement to repurchase
2018
Year Ended December 31,
2017
2016
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Average
Balance
Average
Rate
$ 15,692
0.15% $ 28,694
0.20% $ 44,324
0.22%
(dollars in thousands)
Total maximum short-term borrowings outstanding
at any month-end during the year
2018
Total
Balance
Year Ended December 31,
2017
Total
Balance
2016
Total
Balance
$ 23,270
$ 49,836
$ 56,203
As of December 31, 2018 and 2017, the Company had a cash flow hedge that matures September 15, 2020 with a notional amount
of $37.1 million at December 31, 2018 and 2017, for the purpose of converting the variable rate on the junior subordinated
debentures to a fixed rate of 4.11%. The interest rate swap, which is classified as a cash flow hedge, is indexed to 90-Day LIBOR.
As of December 31, 2018, a $75.0 million letter of credit issued by the Federal Home Loan Bank was used to guarantee the Bank’s
performance related to a portion of its public fund deposit balances.
The following table sets forth certain information about contractual cash obligations as of December 31, 2018.
(dollars in thousands)
Total
Payments Due After December 31, 2018
1-3
Years
1 Year
or Less
4-5
Years
Deposits without a stated maturity
$ 7,281,481
$ 7,281,481
$
— $
— $
Time certificates of deposit
2,367,832
1,894,332
394,747
77,329
Repurchase agreements with customers
Other borrowings
Subordinated deferrable interest debentures
Operating lease obligations
Strategic marketing and promotional arrangements
20,384
152,598
113,152
31,385
4,500
20,384
2,020
—
6,386
900
—
70,000
—
9,704
1,800
—
—
—
6,983
1,800
>5
Years
—
1,424
—
80,578
113,152
8,312
—
Total contractual cash obligations
$ 9,971,332
$ 9,205,503
$
476,251
$
86,112
$
203,466
At December 31, 2018, estimated costs to complete construction projects in progress and other binding commitments for capital
expenditures were not a material amount.
CAPITAL ADEQUACY
Capital Regulations
The capital resources of the Company are monitored on a periodic basis by state and federal regulatory authorities. During 2018,
the Company’s capital increased $651.9 million, primarily due to the issuance of Common Stock of $547.1 million and net income
of $121.0 million, which amounts were partially offset by the cash dividends declared on common shares of $17.4 million. During
2017, the Company’s capital increased $158.0 million, primarily due to the issuance of Common Stock of $94.5 million and net
income of $73.5 million, which amounts were partially offset by the cash dividends declared on common shares of $14.9 million.
For both 2018 and 2017, other capital related transactions, such as other comprehensive income, share-based compensation,
common stock issuances through the exercise of stock options, issuances of shares of restricted stock, and treasury stock transactions
accounted for only a small change in the capital of the Company.
In accordance with risk capital guidelines issued by the Federal Reserve, we are required to maintain a minimum standard of total
capital to risk-weighted assets of 8%. Additionally, all member banks must maintain “core” or “Tier 1” capital of at least 4% of
63
total assets (“leverage ratio”). Member banks operating at or near the 4% capital level are expected to have well-diversified risks,
including no undue interest rate risk exposure, excellent control systems, good earnings, high asset quality and well managed on-
and off-balance sheet activities, and, in general, be considered strong banking organizations with a composite 1 rating under the
CAMEL rating system of banks. For all but the most highly rated banks meeting the above conditions, the minimum leverage
ratio is to be 4% plus an additional 1% to 2%.
The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”)
became effective for the Company on January 1, 2015 with full compliance with all of the requirements being phased in over a
multi-year schedule, and fully phased in by January 1, 2019. Under the Basel III rules, the Company must hold a capital conservation
buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% for
2015 to 2.50% by 2019. The capital conservation buffer was 0.625% for 2016, 1.250% for 2017 and 1.875% for 2018.
The following table summarizes the regulatory capital levels of Ameris at December 31, 2018.
(dollars in thousands)
Tier 1 Leverage Ratio (tier 1 capital to
average assets)
Actual
Required
Excess
Amount
Percent
Amount
Percent
Amount
Percent
Consolidated
Ameris Bank
$ 984,620
9.166% $ 429,690
4.000% $ 554,930
$1,127,926
10.506% $ 429,428
4.000% $ 698,498
CET1 Ratio (common equity tier 1 capital to
risk weighted assets)
Consolidated
Ameris Bank
Tier 1 Capital Ratio (tier 1 capital to risk
weighted assets)
Consolidated
Ameris Bank
Total Capital Ratio (total capital to risk
weighted assets)
Consolidated
Ameris Bank
$ 895,433
10.070% $ 566,859
6.375% $ 328,574
$1,127,926
12.716% $ 565,486
6.375% $ 562,440
$ 984,620
11.073% $ 700,237
7.875% $ 284,383
$1,127,926
12.716% $ 698,541
7.875% $ 429,385
$1,087,364
12.229% $ 878,075
9.875% $ 209,289
$1,156,745
13.041% $ 875,948
9.875% $ 280,797
5.166%
6.506%
3.695%
6.341%
3.198%
4.841%
2.354%
3.166%
The required CET1 Ratio, Tier 1 Capital Ratio, and the Total Capital Ratio reflected in the table above include a capital
conservation buffer of 1.875%.
As of December 31, 2018, the Company included $89.2 million in net carrying value of grandfathered subordinated deferrable
interest debentures as additional Tier 1 capital for regulatory capital purposes. However, should the Company's size increase to
over $15 billion in total assets due to an acquisition such as the Company's pending acquisition with Fidelity, the grandfathered
subordinated deferrable interest debentures will no longer qualify as additional Tier 1 capital for regulatory capital purposes.
INFLATION
The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance
with GAAP and practices within the banking industry which require the measurement of financial position and operating results
in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As
a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of
inflation.
64
QUARTERLY FINANCIAL INFORMATION
The following table sets forth certain consolidated quarterly financial information of the Company. This information is derived
from unaudited consolidated financial statements, which include, in the opinion of management, all normal recurring adjustments
which management considers necessary for a fair presentation of the results for such periods.
(dollars in thousands, except per share data)
Selected Income Statement Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Noninterest expense excluding merger and conversion
charges
Merger and conversion charges
Income before income taxes
Income tax
Net income
Per Share Data:
Net income – basic
Net income – diluted
Common dividends - cash
(dollars in thousands)
Selected Income Statement Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Noninterest expense excluding merger and conversion
charges
Merger and conversion charges
Income before income taxes
Income tax
Net income
Per Share Data:
Net income – basic
Net income – diluted
Common dividends - cash
Quarters Ended December 31, 2018
4
3
2
1
$
122,749
$
121,119
$
89,946
$
23,195
99,554
3,661
95,893
30,470
74,813
997
50,553
7,017
22,081
99,038
2,095
96,943
30,171
72,077
276
54,761
13,317
13,947
75,999
9,110
66,889
31,307
67,995
18,391
11,810
2,423
43,536
$
41,444
$
9,387
$
$
0.92
0.91
0.10
$
0.87
0.87
0.10
$
0.24
0.24
0.10
$
$
79,512
10,711
68,801
1,801
67,000
26,464
58,263
835
34,366
7,706
26,660
0.70
0.70
0.10
Quarters Ended December 31, 2017
4
3
2
1
$
79,564
$
76,322
$
71,411
$
10,041
69,523
2,536
66,987
23,563
58,916
421
31,213
22,063
9,467
66,855
1,787
65,068
26,999
63,675
92
28,300
8,142
8,254
63,157
2,205
60,952
28,189
55,739
—
33,402
10,315
9,150
$
20,158
$
23,087
$
$
0.25
0.24
0.10
$
0.54
0.54
0.10
$
0.62
0.62
0.10
$
$
65
67,050
6,460
60,590
1,836
58,754
25,706
52,691
402
31,367
10,214
21,153
0.59
0.59
0.10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed only to U.S. Dollar interest rate changes and, accordingly, we manage exposure by considering the possible changes
in the net interest margin. We do not have any trading instruments nor do we classify any portion of the investment portfolio as
trading. Finally, we have no exposure to foreign currency exchange rate risk, commodity price risk or other market risks.
Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as
“interest rate risk.” The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest
income. As part of our asset/liability management program, the timing of repriced assets and liabilities is referred to as gap
management. Our policy is to maintain a management-adjusted gap ratio in the one-year time horizon of 0.80 to 1.20.
As indicated by the table below, we are slightly asset sensitive in relation to changes in market interest rates in the one-year and
two-year time horizon. Being asset sensitive would result in net interest income increasing in a rising rate environment and
decreasing in a declining rate environment.
We use simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of
rising, declining and flat interest rate scenarios allow management to monitor and adjust interest rate sensitivity to minimize the
impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected
to an instantaneous 100 basis point increase or 100 basis point decrease in market rates on net interest income and is monitored
on a quarterly basis. Our most recent model projects net interest income would increase slightly if rates rise 100 basis points over
the next year. A scenario involving more than a 100 basis point decrease is irrelevant at this time due to the level of current market
rates.
The following table presents the earnings simulation model’s projected impact of a change in interest rates on the projected baseline
net interest income for the 12- and 24-month periods commencing January 1, 2019. This change in interest rates assumes parallel
shifts in the yield curve and does not take into account changes in the slope of the yield curve.
Earnings Simulation Model Results
Change in
Interest Rates
(in bps)
% Change in Projected Baseline
Net Interest Income
12 Months
24 Months
400
300
200
100
(100)
4.0%
3.4%
2.6%
1.5%
(2.1)%
9.9%
8.3%
6.1%
3.4%
(4.3)%
In the event of a shift in interest rates, we may take certain actions intended to mitigate the negative impact to net interest income
or to maximize the positive impact to net interest income. These actions may include, but are not limited to, restructuring of
interest-earning assets and interest-bearing liabilities, seeking alternative funding sources or investment opportunities and
modifying the pricing or terms of loans, leases and deposits.
Impact of Inflation and Changing Prices
The consolidated financial statements and related notes presented elsewhere in this report have been prepared in accordance with
GAAP. This requires the measurement of financial position and operating results in terms of historical dollars without considering
the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, the vast
majority of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance
than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent
as the prices of goods and services.
66
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets – December 31, 2018 and 2017
Consolidated Statements of Income – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Shareholders' Equity – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows – Years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act as of the end of the
period covered by this Annual Report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on
such evaluation, such officers have concluded that, as of the end of the period covered by this Annual Report, the Company’s
disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting is set forth on page F-2 of this Annual Report.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2018, there was no change in the Company’s internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
67
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information set forth under the captions “Proposal 1 – Election of Directors,” “Board and Committee Matters,” “Executive
Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be used in connection with
the solicitation of proxies for the Company’s 2019 Annual Meeting of Shareholders, to be filed with the SEC, is incorporated
herein by reference.
Code of Ethics
Ameris has adopted a code of ethics that is applicable to all employees, including its Chief Executive Officer and all senior financial
officers, including its Chief Financial Officer and principal accounting officer. Ameris will provide to any person without charge,
upon request, a copy of its code of ethics. Such requests should be directed to the Corporate Secretary of Ameris Bancorp at 310
First St., SE, Moultrie, Georgia 31768.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption “Executive Compensation” in the Proxy Statement to be used in connection with the
solicitation of proxies for the Company’s 2019 Annual Meeting of Shareholders, to be filed with the SEC, is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy
Statement to be used in connection with the solicitation of proxies for the Company’s 2019 Annual Meeting of Shareholders, to
be filed with the SEC, is incorporated herein by reference.
Equity Compensation Plans
The following table sets forth certain information with respect to securities to be issued under our equity compensation plans as
of December 31, 2018.
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
Weighted
average exercise
price of
outstanding
options,
warrants and
rights
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
Equity compensation plans approved by security holders (1)
7,711
$
6.94
804,855
(1) Consists of (i) our 2014 Omnibus Equity Compensation Plan, which provides for the granting to directors, officers and certain
other employees of qualified or nonqualified stock options, stock units, stock awards, stock appreciation rights, dividend
equivalents and other stock-based awards; and (ii) the 2005 Omnibus Stock Ownership and Long-Term Incentive Plan and
the ABC Bancorp Omnibus Stock Ownership and Long-Term incentive Plan that was adopted in 1997, both of which are
now operative only with respect to the exercise of options that remain outstanding under such plans and under which no
further awards may be granted. All securities remaining for future issuance represent awards that may be granted under the
2014 Omnibus Equity Compensation Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information set forth under the captions “Certain Relationships and Related Transactions” and “Proposal 1 – Election of
Directors” in the Proxy Statement to be used in connection with the solicitation of proxies for the Company’s 2019 Annual Meeting
of Shareholders, to be filed with the SEC, is incorporated herein by reference.
68
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information set forth under the caption “Proposal 2 – Ratification of Appointment of Independent Auditor” in the Proxy
Statement to be used in connection with the solicitation of proxies for the Company’s 2019 Annual Meeting of Shareholders, to
be filed with the SEC, is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1.
Financial statements:
(a) Ameris Bancorp and Subsidiaries:
(i) Consolidated Balance Sheets – December 31, 2018 and 2017;
(ii) Consolidated Statements of Income – Years ended December 31, 2018, 2017 and 2016;
(iii) Consolidated Statements of Comprehensive Income – Years ended December 31, 2018, 2017 and 2016;
(iv) Consolidated Statements of Shareholders' Equity – Years ended December 31, 2018, 2017 and 2016;
(v) Consolidated Statements of Cash Flows – Years ended December 31, 2018, 2017 and 2016; and
(vi) Notes to Consolidated Financial Statements.
(b) Ameris Bancorp (parent company only):
Parent company only financial information has been included in Note 25 of the Notes to Consolidated Financial
Statements.
2.
Financial statement schedules:
All schedules are omitted as the required information is inapplicable or the information is presented in the financial statements
or related notes.
3. A list of the Exhibits required by Item 601 of Regulation S-K to be filed as a part of this Annual Report is shown on the
“Exhibit Index” filed herewith.
69
Exhibit
No.
EXHIBIT INDEX
Description
2.1
2.2
2.3
2.4
2.5
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
4.4
Agreement and Plan of Merger dated as of November 16, 2017 by and between Ameris Bancorp and Atlantic
Coast Financial Corporation (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on November 17, 2017).
Stock Purchase Agreement dated as of December 29, 2017 by and between Ameris Bancorp and William J.
Villari (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Registration Statement on Form S-3
(Registration No. 333-223080) filed with the SEC on February 16, 2018).
Agreement and Plan of Merger dated as of January 25, 2018 by and between Ameris Bancorp and Hamilton
State Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on Form
8-K filed with the SEC on January 26, 2018).
Stock Purchase Agreement dated as of January 25, 2018 by and among Ameris Bancorp, Ameris Bank,
William J. Villari and The Villari Family Gift Trust (incorporated by reference to Exhibit 2.2 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on January 26, 2018).
Agreement and Plan of Merger dated as of December 17, 2018 by and between Ameris Bancorp and Fidelity
Southern Corporation (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on Form
8-K filed with the SEC on December 17, 2018).
Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris
Bancorp’s Regulation A Offering Statement on Form 1-A filed with the SEC on August 14, 1987).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to
Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 26, 1999).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to
Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 31, 2003).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to
Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on December 1, 2005).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to
Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on November 21, 2008).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to
Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on June 1, 2011).
Bylaws of Ameris Bancorp, as amended and restated effective January 16, 2018 (incorporated by reference to
Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on January 19, 2018).
Indenture between Ameris Bancorp and Wilmington Trust Company dated September 20, 2006 (incorporated
by reference to Exhibit 4.4 to Ameris Bancorp’s Registration Statement on Form S-4 (Registration No.
333-138252) filed with the SEC on October 27, 2006).
Floating Rate Junior Subordinated Deferrable Interest Debenture dated September 20, 2006 to Ameris
Statutory Trust I (incorporated by reference to Exhibit 4.7 to Ameris Bancorp’s Registration Statement on
Form S-4 (Registration No. 333-138252) filed with the SEC on October 27, 2006).
Indenture between Ameris Bancorp (as successor to The Prosperity Banking Company) and U.S. Bank
National Association dated as of March 26, 2003 (incorporated by reference to Exhibit 4.3 to Ameris
Bancorp’s Annual Report on Form 10-K filed with the SEC on March 14, 2014).
First Supplemental Indenture dated as of December 23, 2013 by and among Ameris Bancorp, The Prosperity
Banking Company and U.S. Bank National Association (incorporated by reference to Exhibit 4.4 to Ameris
Bancorp’s Annual Report on Form 10-K filed with the SEC on March 14, 2014).
70
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2033 (included as Exhibit A to
the Indenture filed as Exhibit 4.3 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on
March 14, 2014).
Indenture between Ameris Bancorp (as successor to The Prosperity Banking Company) and Deutsche Bank
Trust Company Americas dated as of June 24, 2004 (incorporated by reference to Exhibit 4.6 to Ameris
Bancorp’s Annual Report on Form 10-K filed with the SEC on March 14, 2014).
First Supplemental Indenture dated as of December 23, 2013 by and among Ameris Bancorp, The Prosperity
Banking Company and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.7 to
Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 14, 2014).
Form of Floating Rate Junior Subordinated Deferrable Interest Note Due 2034 (incorporated by reference to
Exhibit 4.8 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 14, 2014).
Indenture between Ameris Bancorp (as successor to The Prosperity Banking Company) and Wilmington Trust
Company dated as of January 31, 2006 (incorporated by reference to Exhibit 4.9 to Ameris Bancorp’s Annual
Report on Form 10-K filed with the SEC on March 14, 2014).
First Supplemental Indenture dated as of December 23, 2013 by and among Ameris Bancorp, The Prosperity
Banking Company and Wilmington Trust Company (pertaining to Indenture dated as of January 31, 2006)
(incorporated by reference to Exhibit 4.10 to Ameris Bancorp’s Annual Report on Form 10-K filed with the
SEC on March 14, 2014).
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2036 (included as Exhibit A to
the Indenture filed as Exhibit 4.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on
March 14, 2014).
Indenture between Ameris Bancorp (as successor to The Prosperity Banking Company) and Wilmington Trust
Company dated as of September 20, 2007 (incorporated by reference to Exhibit 4.18 to Ameris Bancorp’s
Annual Report on Form 10-K filed with the SEC on March 14, 2014).
First Supplemental Indenture dated as of December 23, 2013 by and among Ameris Bancorp, The Prosperity
Banking Company and Wilmington Trust Company (pertaining to Indenture dated as of September 20, 2007)
(incorporated by reference to Exhibit 4.19 to Ameris Bancorp’s Annual Report on Form 10-K filed with the
SEC on March 14, 2014).
Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2037 (included as
Exhibit A to the Indenture filed as Exhibit 4.18 to Ameris Bancorp’s Annual Report on Form 10-K filed with
the SEC on March 14, 2014).
Indenture between Ameris Bancorp (as successor to Coastal Bankshares, Inc.) and Wells Fargo Bank,
National Association dated as of August 27, 2003 (incorporated by reference to Exhibit 4.1 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on July 1, 2014).
First Supplemental Indenture dated as of June 30, 2014 by and among Ameris Bancorp and Wells Fargo
Bank, National Association (pertaining to Indenture dated as of August 27, 2003) (incorporated by reference
to Exhibit 4.2 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on July 1, 2014).
Form of Junior Subordinated Debt Security Due 2033 (included as Exhibit A to the Indenture filed as Exhibit
4.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on July 1, 2014).
Indenture between Ameris Bancorp (as successor to Coastal Bankshares, Inc.) and U.S. Bank National
Association dated as of December 14, 2005 (incorporated by reference to Exhibit 4.4 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on July 1, 2014).
First Supplemental Indenture dated as of June 30, 2014 by and among Ameris Bancorp, Coastal Bankshares,
Inc. and U.S. Bank National Association (pertaining to Indenture dated as of December 14, 2005)
(incorporated by reference to Exhibit 4.5 to Ameris Bancorp’s Current Report on Form 8-K filed with the
SEC on July 1, 2014).
71
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
Form of Junior Subordinated Debt Security Due 2035 (included as Exhibit A to the Indenture filed as Exhibit
4.4 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on July 1, 2014).
Indenture between Ameris Bancorp (as successor to Merchants & Southern Banks of Florida, Incorporated)
and Wilmington Trust Company dated as of March 17, 2005 (incorporated by reference to Exhibit 4.1 to
Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on May 27, 2015).
First Supplemental Indenture dated as of May 22, 2015 by and among Ameris Bancorp, Merchants &
Southern Banks of Florida, Incorporated and Wilmington Trust Company (pertaining to Indenture dated as of
March 17, 2005) (incorporated by reference to Exhibit 4.2 to Ameris Bancorp’s Current Report on Form 8-K
filed with the SEC on May 27, 2015).
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2035 (included as Exhibit A to
the Indenture filed as Exhibit 4.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on
May 27, 2015).
Indenture between Ameris Bancorp (as successor to Merchants & Southern Banks of Florida, Incorporated)
and Wilmington Trust Company dated as of March 30, 2006 (incorporated by reference to Exhibit 4.4 to
Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on May 27, 2015).
First Supplemental Indenture dated as of May 22, 2015 by and among Ameris Bancorp, Merchants &
Southern Banks of Florida, Incorporated and Wilmington Trust Company (pertaining to Indenture dated as of
March 30, 2006) (incorporated by reference to Exhibit 4.5 to Ameris Bancorp’s Current Report on Form 8-K
filed with the SEC on May 27, 2015).
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2036 (included as Exhibit A to
the Indenture filed as Exhibit 4.4 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on
May 27, 2015).
Indenture between Ameris Bancorp (as successor to Jacksonville Bancorp, Inc.) and Wilmington Trust
Company dated as of June 17, 2004 (incorporated by reference to Exhibit 4.1 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on March 14, 2016).
First Supplemental Indenture dated as of March 11, 2016 by and among Ameris Bancorp, Jacksonville
Bancorp, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 4.2 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on March 14, 2016).
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2034 (included as Exhibit A to
the Indenture filed as Exhibit 4.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on
March 14, 2016).
Indenture between Ameris Bancorp (as successor to Jacksonville Bancorp, Inc.) and Wilmington Trust
Company dated as of September 15, 2005 (incorporated by reference to Exhibit 4.4 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on March 14, 2016).
Second Supplemental Indenture dated as of March 11, 2016 by and among Ameris Bancorp, Jacksonville
Bancorp, Inc. and Wilmington Trust (incorporated by reference to Exhibit 4.5 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on March 14, 2016).
Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2035 (included as
Exhibit A to the Indenture filed as Exhibit 4.4 to Ameris Bancorp’s Current Report on Form 8-K filed with the
SEC on March 14, 2016).
Indenture between Ameris Bancorp (as successor to Jacksonville Bancorp, Inc.) and Wilmington Trust
Company dated as of December 14, 2006 (incorporated by reference to Exhibit 4.7 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on March 14, 2016).
First Supplemental Indenture dated as of March 11, 2016 by and among Ameris Bancorp, Jacksonville
Bancorp, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 4.8 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on March 14, 2016).
72
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
4.43
4.44
4.45
4.46
10.1*
10.2*
10.3*
10.4*
Form of Floating Rate Junior Subordinated Deferrable Interest Debenture Due 2036 (included as Exhibit A to
the Indenture filed as Exhibit 4.7 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on
March 14, 2016).
Indenture between Ameris Bancorp (as successor to Jacksonville Bancorp, Inc.) and Wells Fargo Bank,
National Association dated as of June 20, 2008 (incorporated by reference to Exhibit 4.10 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on March 14, 2016).
First Supplemental Indenture dated as of March 11, 2016 by and between Ameris Bancorp and Wells Fargo
Bank, National Association (incorporated by reference to Exhibit 4.11 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on March 14, 2016).
Form of Junior Subordinated Debt Security Due 2038 (included as Exhibit A to the Indenture filed as Exhibit
4.10 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on March 14, 2016).
Subordinated Debt Indenture dated as of March 13, 2017 by and between Ameris Bancorp and Wilmington
Trust, National Association (incorporated by reference to Exhibit 4.1 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on March 13, 2017).
First Supplemental Indenture, dated as of March 13, 2017, by and between Ameris Bancorp and Wilmington
Trust, National Association (incorporated by reference to Exhibit 4.2 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on March 13, 2017).
Form of 5.75% Fixed-to-Floating Rate Subordinated Note due 2027 (included as Exhibit A to the First
Supplemental Indenture filed as Exhibit 4.2 to Ameris Bancorp’s Current Report on Form 8-K filed with the
SEC on March 13, 2017).
Registration Rights Agreement dated as of January 3, 2018 by and between Ameris Bancorp and William J.
Villari (incorporated by reference to Exhibit 4.9 to Ameris Bancorp’s Registration Statement on Form S-3
(Registration No. 333-223080) filed with the SEC on February 16, 2018).
Registration Rights Agreement dated as of January 31, 2018 by and among Ameris Bancorp, William J.
Villari and The Villari Family Gift Trust (incorporated by reference to Exhibit 4.1 to Ameris Bancorp’s
Current Report on Form 8-K filed with the SEC on February 6, 2018).
Indenture dated as of November 10, 2005 by and between Ameris Bancorp (as successor to Hamilton State
Bancshares, Inc.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.1 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on July 2, 2018).
Second Supplemental Indenture dated as of June 29, 2018 by and among Ameris Bancorp, Hamilton State
Bancshares, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 4.2 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on July 2, 2018).
Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture (included as Exhibit A to the
Indenture filed as Exhibit 4.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on July 2,
2018).
Omnibus Stock Ownership and Long-Term Incentive Plan (incorporated by reference to Exhibit 10.17 to
Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 25, 1998).
ABC Bancorp 2000 Officer/Director Stock Bonus Plan (incorporated by reference to Exhibit 10.19 to Ameris
Bancorp’s Annual Report on Form 10-K filed with the SEC on March 29, 2000).
2005 Omnibus Stock Ownership and Long-Term Incentive Plan (incorporated by reference to Appendix A to
Ameris Bancorp’s Definitive Proxy Statement filed with the SEC on April 18, 2005).
Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 4.2 to Ameris Bancorp’s
Registration Statement on Form S-8 filed with the SEC on January 24, 2006).
73
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14
10.15
10.16*
10.17
10.18*
10.19*
10.20*
Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 4.3 to Ameris
Bancorp’s Registration Statement on Form S-8 filed with the SEC on January 24, 2006).
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 4.4 to Ameris Bancorp’s
Registration Statement on Form S-8 filed with the SEC on January 24, 2006).
Executive Employment Agreement with H. Richard Sturm dated as of May 31, 2007 (incorporated by
reference to Exhibit 10.2 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on June 6,
2007).
First Amendment to Executive Employment Agreement dated December 30, 2008, by and between Ameris
Bancorp and H. Richard Sturm (incorporated by reference to Exhibit 10.6 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on December 30, 2008).
Supplemental Executive Retirement Agreement with Edwin W. Hortman, Jr., dated as of November 7, 2012
(incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Form 10-Q filed with the SEC on
November 9, 2012).
Supplemental Executive Retirement Agreement with Dennis J. Zember Jr., dated as of November 7, 2012
(incorporated by reference to Exhibit 10.2 to Ameris Bancorp’s Form 10-Q filed with the SEC on
November 9, 2012).
Supplemental Executive Retirement Agreement with Jon S. Edwards, dated as of November 7, 2012
(incorporated by reference to Exhibit 10.3 to Ameris Bancorp’s Form 10-Q filed with the SEC on
November 9, 2012).
Supplemental Executive Retirement Agreement with Cindi H. Lewis, dated as of November 7, 2012
(incorporated by reference to Exhibit 10.4 to Ameris Bancorp’s Form 10-Q filed with the SEC on
November 9, 2012).
Supplemental Executive Retirement Agreement with Nicole S. Stokes, dated as of November 7, 2012
(incorporated by reference to Exhibit 10.13 to Ameris Bancorp’s Annual Report on Form 10-K filed with the
SEC on March 1, 2018).
Loan Agreement dated as of August 28, 2013 by and between Ameris Bancorp and NexBank SSB
(incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the
SEC on August 29, 2013).
Pledge and Security Agreement dated as of August 28, 2013 by and between Ameris Bancorp and NexBank
SSB (incorporated by reference to Exhibit 10.3 to Ameris Bancorp’s Current Report on Form 8-K filed with
the SEC on August 29, 2013).
Executive Employment Agreement by and between Ameris Bancorp and James A. LaHaise dated as of June
30, 2014 (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Form 10-Q filed with the SEC on
August 8, 2014).
First Amendment to Loan Agreement dated as of September 26, 2014 by and between Ameris Bancorp and
NexBank SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Current Report on Form 8-K
filed with the SEC on September 29, 2014).
Ameris Bancorp 2014 Omnibus Equity Compensation Plan (incorporated by reference to Appendix A to
Ameris Bancorp’s Definitive Proxy Statement filed with the SEC on April 17, 2014).
Form of Incentive Stock Option Grant Agreement (incorporated by reference to Exhibit 99.2 to Ameris
Bancorp’s Registration Statement on Form S-8 filed with the SEC on November 26, 2014).
Form of Nonqualified Stock Option Grant Agreement (incorporated by reference to Exhibit 99.3 to Ameris
Bancorp’s Registration Statement on Form S-8 filed with the SEC on November 26, 2014).
74
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29
10.30*
10.31
10.32
10.33
10.34
Form of Restricted Stock Grant Agreement (incorporated by reference to Exhibit 99.4 to Ameris Bancorp’s
Registration Statement on Form S-8 filed with the SEC on November 26, 2014).
Executive Employment Agreement by and among Ameris Bancorp, Ameris Bank and Edwin W. Hortman, Jr.
dated as of December 15, 2014 (incorporated by reference to Exhibit 99.1 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on December 18, 2014).
Executive Employment Agreement by and among Ameris Bancorp, Ameris Bank and Dennis J. Zember Jr.
dated as of December 15, 2014 (incorporated by reference to Exhibit 99.2 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on December 18, 2014).
Executive Employment Agreement by and among Ameris Bancorp, Ameris Bank and Jon S. Edwards dated
as of December 15, 2014 (incorporated by reference to Exhibit 99.4 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on December 18, 2014).
Executive Employment Agreement by and among Ameris Bancorp, Ameris Bank and Cindi H. Lewis dated as
of December 15, 2014 (incorporated by reference to Exhibit 99.6 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on December 18, 2014).
Executive Employment Agreement by and among Ameris Bancorp, Ameris Bank and Lawton Bassett, III
dated as of December 15, 2014 (incorporated by reference to Exhibit 10.29 to Ameris Bancorp’s Annual
Report on Form 10-K filed with the SEC on February 29, 2016).
Supplemental Executive Retirement Agreement by and between Ameris Bank and Edwin W. Hortman, Jr.
dated as of November 7, 2016 (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Form 10-Q
filed with the SEC on November 9, 2016).
First Amendment to Supplemental Executive Retirement Agreement by and between Ameris Bank and Cindi
H. Lewis dated as of November 7, 2016 (incorporated by reference to Exhibit 10.2 to Ameris Bancorp’s Form
10-Q filed with the SEC on November 9, 2016).
Limited Waiver and Second Amendment to Loan Agreement dated as of December 28, 2016 by and between
Ameris Bancorp and NexBank SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Current
Report on Form 8-K filed with the SEC on December 29, 2016).
Severance Protection and Restrictive Covenants Agreement by and among Ameris Bancorp, Ameris Bank and
William D. McKendry dated as of October 3, 2017 (incorporated by reference to Exhibit 10.1 to Ameris
Bancorp’s Current Report on Form 8-K filed with the SEC on October 6, 2017).
Third Amendment to Loan Agreement dated October 20, 2017 by and between Ameris Bancorp and NexBank
SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Current Report on Form 8-K filed with
the SEC on October 23, 2017).
Third Amended and Restated Revolving Promissory Note dated as of September 26, 2017 issued by Ameris
Bancorp to NexBank SSB (incorporated by reference to Exhibit 10.2 to Ameris Bancorp’s Current Report on
Form 8-K filed with the SEC on October 23, 2017).
Fourth Amendment to Loan Agreement dated April 25, 2018 by and between Ameris Bancorp and NexBank
SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with
the SEC on April 25, 2018).
Fourth Amended and Restated Revolving Promissory Note dated April 25, 2018 issued by Ameris Bancorp to
NexBank SSB (incorporated by reference to Exhibit 10.2 to Ameris Bancorp's Current Report on Form 8-K
filed with the SEC on April 25, 2018).
10.35*
Retirement Agreement dated June 6, 2018 by and among Ameris Bancorp, Ameris Bank and Edwin W.
Hortman, Jr. (incorporated by reference to Exhibit 10.1 to Ameris Bancorp’s Current Report on Form 8-K
filed with the SEC on June 6, 2018).
21.1
Schedule of Subsidiaries of Ameris Bancorp.
75
23.1
31.1
31.2
32.1
32.2
101
Consent of Crowe LLP.
Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.
Section 1350 Certification by Chief Executive Officer.
Section 1350 Certification by Chief Financial Officer.
The following financial statements from Ameris Bancorp’s Form 10-K for the year ended December 31,
2018, formatted as interactive data files in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets;
(ii) Consolidated Statements of Income;
(iii) Consolidated Statements of Comprehensive Income (Loss);
(iv) Consolidated Statements of Shareholders’ Equity;
(v) Consolidated Statements of Cash Flows; and
(vi) Notes to Consolidated Financial Statements.
* Management contract or a compensatory plan or arrangement.
76
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets – December 31, 2018 and 2017
Consolidated Statements of Income – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Shareholders’ Equity – Years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows – Years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Page
F- 2
F- 3
F- 4
F- 5
F- 6
F- 7
F- 8
F- 10
F- 1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Ameris Bancorp and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As permitted, the Company has excluded the operations of Atlantic Coast Financial Corporation ("Atlantic") and Hamilton State
Bancshares, Inc. ("Hamilton") acquired during 2018, as described in Note 3 of the consolidated financial statements. The assets
acquired in the Atlantic and Hamilton acquisitions and excluded from management’s assessment on internal control over financial
reporting comprised approximately 7.6%% and 15.6%, respectively, of total consolidated assets at December 31, 2018.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (COSO) in Internal Control-Integrated Framework. Based on this assessment and those criteria,
management believes that the Company maintained effective internal control over financial reporting as of December 31, 2018.
Crowe LLP, the Company’s independent registered public accounting firm, has issued an attestation report on the effectiveness
of the Company’s internal control over financial reporting. That report is included in this Annual Report on page F-3.
/s/ Dennis J. Zember Jr.
Dennis J. Zember Jr.,
President and Chief Executive Officer
(principal executive officer)
/s/ Nicole S. Stokes
Nicole S. Stokes
Executive Vice President and Chief Financial Officer
(principal accounting and financial officer)
F- 2
Report of Independent Registered Public Accounting Firm
Crowe LLP
Independent Member Crowe Global
Board of Directors and Stockholders
Ameris Bancorp
Moultrie, Georgia
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ameris Bancorp and Subsidiaries (the "Company") as of December 31, 2018 and 2017,
the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period
ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control
over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework: (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework: (2013)
issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control
over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. As permitted, the Company has excluded the operations of Atlantic Coast
Financial Corporation and Hamilton State Bancshares, Inc., both acquired during 2018 as described in Note 3 of the consolidated financial statements,
from the scope of management’s report on internal control over financial reporting. As such, they have also been excluded from the scope of our audit of
internal control over financial reporting. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Crowe LLP
We have served as the Company's auditor since 2014.
Atlanta, Georgia
March 1, 2019
F- 3
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2018 and 2017
(dollars in thousands, except per share data)
Assets
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Cash and cash equivalents
Time deposits in other banks
Investment securities available for sale, at fair value
Other investments
Loans held for sale, at fair value
Loans
Purchased loans
Purchased loan pools
Loans, net of unearned income
Allowance for loan losses
Loans, net
Other real estate owned, net
Purchased other real estate owned, net
Total other real estate owned, net
Premises and equipment, net
Goodwill
Other intangible assets, net
Cash value of bank owned life insurance
Deferred income taxes, net
Other assets
Total assets
Liabilities
Deposits
Noninterest-bearing
Interest-bearing
Total deposits
Securities sold under agreements to repurchase
Other borrowings
Subordinated deferrable interest debentures, net
FDIC loss-share payable, net
Other liabilities
Total liabilities
Commitments and Contingencies (Note 22)
Shareholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0 shares issued and outstanding
Common stock, par value $1; 100,000,000 shares authorized; 49,014,925 and 38,734,873 shares issued
Capital surplus
Retained earnings
Accumulated other comprehensive loss, net of tax
Treasury stock, at cost, 1,514,984 and 1,474,861 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
See notes to consolidated financial statements.
F- 4
2018
2017
$
$
172,036
472,443
35,048
679,527
10,812
1,192,423
14,455
111,298
5,660,457
2,588,832
262,625
8,511,914
(28,819)
8,483,095
7,218
9,535
16,753
145,410
503,434
58,689
104,096
35,126
88,397
$ 11,443,515
$
2,520,016
7,129,297
9,649,313
20,384
151,774
89,187
19,487
57,023
9,987,168
—
49,015
1,051,584
377,135
(4,826)
(16,561)
1,456,347
$ 11,443,515
$
$
$
139,313
191,335
10
330,658
—
810,873
42,270
197,442
4,856,514
861,595
328,246
6,046,355
(25,791)
6,020,564
8,464
9,011
17,475
117,738
125,532
13,496
79,641
28,320
72,194
7,856,203
1,777,141
4,848,704
6,625,845
30,638
250,554
85,550
8,803
50,334
7,051,724
—
38,735
508,404
273,119
(1,280)
(14,499)
804,479
7,856,203
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands, except per share data)
2018
2017
2016
Interest income
Interest and fees on loans
Interest on taxable securities
Interest on nontaxable securities
Interest on deposits in other banks
Interest on federal funds sold
Total interest income
Interest expense
Interest on deposits
Interest on other borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Service charges on deposit accounts
Mortgage banking activity
Other service charges, commissions and fees
Net gain (loss) on securities
Gain on sale of SBA loans
Other noninterest income
Total noninterest income
Noninterest expense
Salaries and employee benefits
Occupancy and equipment
Advertising and marketing
Amortization of intangible assets
Data processing and communications expenses
Legal and other professional fees
Credit resolution-related expenses
Merger and conversion charges
FDIC insurance
Other noninterest expenses
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Basic earnings per common share
Diluted earnings per common share
Dividends declared per common share
Weighted average common shares outstanding
Basic
Diluted
$
$
$
$
$
$
$
$
$
$
378,209
29,006
900
4,984
227
413,326
49,054
20,880
69,934
343,392
16,667
326,725
46,128
51,292
3,003
(37)
2,728
15,298
118,412
149,293
29,131
5,571
9,512
30,385
6,386
4,016
20,499
3,408
35,446
293,647
151,490
30,463
121,027
2.81
2.80
0.40
43,142
43,248
$
$
$
$
$
270,887
20,154
1,581
1,725
—
294,347
19,877
14,345
34,222
260,125
8,364
251,761
42,054
48,535
2,872
37
4,590
6,369
104,457
120,016
24,069
5,131
3,932
27,869
15,355
3,493
915
3,078
28,078
231,936
124,282
50,734
73,548
2.00
1.98
0.40
36,828
37,144
218,659
17,824
1,722
827
33
239,065
12,410
7,284
19,694
219,371
4,091
215,280
42,745
48,298
3,575
94
3,974
7,115
105,801
106,837
24,397
4,181
4,376
24,591
9,885
6,172
6,376
3,712
25,308
215,835
105,246
33,146
72,100
2.10
2.08
0.30
34,347
34,702
See notes to consolidated financial statements.
F- 5
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
Net income
2018
2017
2016
$
121,027
$
73,548
$
72,100
Other comprehensive income (loss)
Net unrealized holding gains (losses) arising during period on investment
securities available for sale, net of tax expense (benefit) of ($849), ($169) and
($2,355)
Reclassification adjustment for gains on investment securities included in
earnings, net of tax of $19, $13 and $33
Net unrealized gains (losses) on cash flow hedge during the period, net of tax
expense (benefit) of $30, $63 and $13
Total other comprehensive income (loss)
(3,196)
(70)
112
(3,154)
(314)
(24)
116
(222)
(4,374)
(61)
24
(4,411)
Comprehensive income
$
117,873
$
73,326
$
67,689
See notes to consolidated financial statements.
F- 6
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
2018
2017
2016
Shares
Amount
Shares
Amount
Shares
Amount
Common Stock
Balance at beginning of period
Issuance of common stock
Exercise of stock options
Issuance of restricted shares
Forfeitures of restricted shares
Balance at end of period
Capital Surplus
Balance at beginning of period
Issuance of common stock, net of issuance cost
of $0, $4,925, $0
Share-based compensation
Exercise of stock options
Issuance of restricted shares
Forfeitures of restricted shares
Balance at end of period
Retained Earnings
Balance at beginning of period
Cumulative effect of change in accounting for
derivatives
Reclassification of stranded income tax effects
from accumulated other comprehensive income
Adjusted balance at beginning of period
Net income
Dividends on common shares
Balance at end of period
Accumulated Other Comprehensive Income
(Loss), Net of Tax
Unrealized gains (losses) on securities
Balance at beginning of period
Reclassification of stranded income tax
effects to retained earnings
Adjusted balance at beginning of period
Change during period
Balance at end of period
Unrealized gain (loss) on interest rate swap
Balance at beginning of period
Reclassification of stranded income tax
effects to retained earnings
Adjusted balance at beginning of period
Change during period
Balance at end of period
Balance at end of period
Treasury Stock
Balance at beginning of period
Purchase of treasury shares
Balance at end of period
38,734,873
10,124,491
76,286
89,855
(10,580)
49,014,925
$
$
$
38,735
10,124
76
90
(10)
49,015
36,377,807
2,141,072
132,319
84,147
(472)
38,734,873
508,404
537,003
5,419
838
(90)
10
$ 1,051,584
$
273,119
28
392
273,539
121,027
(17,431)
377,135
$
$
$
$
$
$
$
36,378
2,141
132
84
—
38,735
33,625,162
2,549,469
54,510
155,751
(7,085)
36,377,807
410,276
92,359
3,316
2,537
(84)
—
508,404
214,454
—
—
214,454
73,548
(14,883)
273,119
$
(1,572)
$
(1,234)
(339)
(1,911)
(3,266)
(5,177)
292
(53)
239
112
351
(4,826)
(14,499)
(2,062)
(16,561)
1,456,333
18,528
1,474,861
$
$
$
$
$
$
1,474,861
40,123
1,514,984
—
(1,234)
(338)
(1,572)
176
—
176
116
292
(1,280)
(13,613)
(886)
(14,499)
804,479
$
$
$
$
$
$
$
1,413,777
42,556
1,456,333
$
$
$
$
$
$
$
$
$
$
$
$
$
$
33,625
2,549
55
156
(7)
36,378
337,349
69,906
2,261
909
(156)
7
410,276
152,820
—
—
152,820
72,100
(10,466)
214,454
3,201
—
3,201
(4,435)
(1,234)
152
—
152
24
176
(1,058)
(12,388)
(1,225)
(13,613)
646,437
Total Shareholders' Equity
$ 1,456,347
See notes to consolidated financial statements.
F- 7
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
Operating Activities
Net income
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation
Net losses (gains) on sale or disposal of premises and equipment
Provision for loan losses
Net write-downs and losses on sale of other real estate owned
Share-based compensation expense
Amortization of intangible assets
Provision for deferred taxes
Net amortization of investment securities available for sale
Net loss (gain) on securities
Accretion of discount on purchased loans
Amortization of premium on purchased loan pools
Net amortization (accretion) on other borrowings
Amortization of subordinated deferrable interest debentures
Originations of mortgage loans held for sale
Payments received on mortgage loans held for sale
Proceeds from sales of mortgage loans held for sale
Net gains on mortgage loans held for sale
Originations of SBA loans
Proceeds from sales of SBA loans
Net gains on sales of SBA loans
Increase in cash surrender value of bank owned life insurance
Changes in FDIC loss-share receivable/payable, net of cash payments received
Increase in interest receivable
Increase decrease in interest payable
Increase (decrease) in taxes payable
Change attributable to other operating activities
Net cash used in operating activities
Investing Activities, net of effects of business combinations
Proceeds from maturities of time deposits in other banks
Purchases of securities available for sale
Proceeds from prepayments and maturities of securities available for sale
Proceeds from sale of securities available for sale
Net decrease (increase) in other investments
Net increase in loans, excluding purchased loans
Payments received on purchased loans
Purchases of purchased loan pools
Payments received on purchased loan pools
Purchases of premises and equipment
Proceeds from sale of premises and equipment
Proceeds from sales of other real estate owned
Payments received from (paid to) FDIC under loss-sharing agreements
Net cash proceeds received from (paid in) acquisitions
Net cash used in investing activities
2018
2017
2016
$
121,027
$
73,548
$
72,100
10,014
133
16,667
1,301
6,241
9,512
1,374
4,891
37
(11,918)
1,825
96
1,345
(1,768,934)
986
1,542,755
(37,336)
(27,820)
33,675
(2,728)
(1,819)
5,156
(10,965)
2,411
4,032
(10,761)
(108,803)
746
(290,649)
152,393
68,727
33,515
(470,156)
330,226
—
71,817
(10,009)
588
11,784
(3,791)
51,495
(53,314)
9,196
1,264
8,364
500
3,316
3,932
12,430
6,384
(37)
(11,308)
3,543
95
1,322
(1,502,314)
1,238
1,370,008
(46,913)
(33,104)
30,696
(4,590)
(1,588)
3,005
(3,728)
1,757
(473)
10,895
(62,562)
—
(113,261)
115,166
3,090
11,046
(1,016,409)
210,470
—
112,330
(3,760)
16
14,920
(515)
—
(666,907)
9,519
992
4,091
1,953
2,261
4,376
847
7,057
(94)
(16,637)
5,653
(76)
1,453
(1,403,954)
1,390
1,340,668
(52,198)
(69,512)
28,268
(3,974)
(1,734)
11,798
(1,004)
446
(8,328)
(5,128)
(69,767)
—
(200,823)
131,390
75,990
(17,936)
(1,063,345)
247,452
(152,091)
171,087
(10,977)
295
22,483
816
(7,206)
(802,865)
(Continued)
F- 8
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
Financing Activities, net of effects of business combinations
Net increase in deposits
Net decrease in securities sold under agreements to repurchase
Proceeds from other borrowings
Repayment of other borrowings
Issuance of common stock
Proceeds from exercise of stock options
Dividends paid - common stock
Purchase of treasury shares
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest
Income taxes
Loans (excluding purchased loans) transferred to other real estate owned
Purchased loans transferred to other real estate owned
Loans transferred from loans held for sale to loans held for investment
Loans transferred from loans held for investment to loans held for sale
Loans provided for the sales of other real estate owned
Assets acquired in business combinations
Liabilities assumed in business combinations
Issuance of common stock in acquisitions
Issuance of common stock in exchange for equity investment in US Premium
Finance Holding Company
Change in unrealized gain (loss) on securities available for sale, net of tax
Change in unrealized gain on cash flow hedge, net of tax
2018
2017
2016
853,051
(10,254)
1,530,000
(1,844,258)
—
914
(16,405)
(2,062)
510,986
348,869
330,658
679,527
67,523
20,026
4,124
6,393
10,817
8,831
931
3,064,615
2,415,212
547,127
$
$
$
$
$
$
$
$
$
$
$
— $
(3,266) $
$
112
1,050,682
(22,867)
1,837,692
(2,079,554)
88,656
2,669
(14,650)
(886)
861,742
132,273
198,385
330,658
$
32,465
38,939
4,372
5,023
212,850
119,389
1,334
$
$
$
$
$
$
$
— $
— $
— $
$
5,844
(338) $
$
116
$
$
$
$
$
$
$
$
$
$
$
$
$
$
294,513
(10,080)
635,886
(231,020)
—
964
(8,584)
(1,225)
680,454
(192,178)
390,563
198,385
19,248
40,575
3,203
7,229
119,352
—
1,942
561,440
465,048
72,455
—
(4,435)
24
(Concluded)
See notes to consolidated financial statements.
F- 9
AMERIS BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Ameris Bancorp and subsidiaries (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia,
and whose primary business is presently conducted by Ameris Bank, its wholly owned banking subsidiary (the “Bank”). Through
the Bank, the Company operates a full service banking business and offers a broad range of retail and commercial banking services
to its customers concentrated in select markets in Georgia, Alabama, Florida and South Carolina. The Bank also engages in
mortgage banking activities and SBA lending, and, as such, originates, acquires, sells and services one-to-four family residential
mortgage loans and SBA loans in the Southeast. The Bank has purchased residential mortgage loan pools collateralized by properties
located outside our Southeast markets, specifically in California, Washington and Illinois. The Bank purchases consumer
installment home improvement loans made to borrowers throughout the United States. The Bank also originates, administers and
services commercial insurance premium loans made to borrowers throughout the United States. The Company and the Bank are
subject to the regulations of certain federal and state agencies and are periodically examined by those regulatory agencies.
On January 31, 2018, the Company closed on the purchase of the final 70% of the outstanding shares of common stock of US
Premium Finance Holding Company, a Florida corporation ("USPF"), completing its acquisition of USPF and making USPF a
wholly owned subsidiary of the Company. See Note 3 for more information on the USPF acquisition.
Basis of Presentation and Accounting Estimates
The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany
transactions and balances have been eliminated in consolidation.
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities
as of the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Acquisition Accounting
Acquisitions are accounted for under the acquisition method of accounting. Purchased assets and assumed liabilities are recorded
at their estimated fair values as of the purchase date. Any identifiable intangible assets are also recorded at fair value. When the
consideration given is less than the fair value of the net assets received, the acquisition results in a “bargain purchase gain.” If the
consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement
for up to one year after the closing date of an acquisition as additional information regarding the closing date fair values becomes
available.
All identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date.
Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable
(i.e., capable of being sold, transferred, licensed, rented, or exchanged separately from the entity).
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date and carryover of
the seller's related allowance for loan losses is prohibited. When the loans have evidence of credit deterioration since origination
and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest
payments, the difference between contractually required payments at acquisition and the cash flows expected to be collected at
acquisition is referred to as the non-accretable difference. The Company must estimate expected cash flows at each reporting date.
Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in
expected cash flows result in a reversal of the provision for loan losses to the extent of prior provisions and adjust accretable
discount if no prior provisions have been made or have been fully reversed. This increase in accretable discount will have a positive
impact on future interest income.
F- 10
Transfer of financial assets
Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred
assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company
does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in process of collection, amounts
due from banks, interest-bearing deposits in banks and federal funds sold. Net cash flows are reported for customer loan and
deposit transactions, securities sold under agreements to repurchase and federal funds purchased.
The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank. The reserve requirement
as of December 31, 2018 and 2017 was $61.2 million and $44.1 million, respectively, and was met by cash on hand which is
reported on the Company's consolidated balance sheets in cash and due from banks. The total of the average daily required reserve
was approximately $50.4 million and $38.8 million for the years ended December 31, 2018 and 2017, respectively.
Investment Securities
The Company classifies its investment securities in one of three categories: (i) trading, (ii) held to maturity or (iii) available for
sale. Trading securities are bought and held principally for the purpose of selling them in the near term. Held to maturity securities
are those securities for which the Company has the ability and intent to hold until maturity. All other investment securities are
classified as available for sale. At December 31, 2018 and 2017, all securities were classified as available for sale.
Trading securities are carried at fair value. Unrealized gains and losses on trading securities are recorded in earnings as a component
of other noninterest income. Held to maturity securities are recorded initially at cost and subsequently adjusted for paydowns and
amortization of purchase premium or accretion of purchase discount. Available for sale securities are carried at fair value. Unrealized
holding gains and losses, net of the related deferred tax effect, on available for sale securities are excluded from earnings and are
reported in other comprehensive income as a separate component of shareholders’ equity until realized. Transfers of securities
between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers
of securities from held to maturity to available for sale are recorded as a separate component of shareholders’ equity. These
unrealized holding gains or losses are amortized into income over the remaining life of the security as an adjustment to the yield
in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.
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. A decline in the market value of any available for sale or held to maturity
investment below cost that is deemed other than temporary establishes a new cost basis for the security. Other than temporary
impairment deemed to be credit related is charged to earnings. Other than temporary impairment attributed to non-credit related
factors is recognized in other comprehensive income.
In determining whether other-than-temporary impairment losses exist, management considers (i) the length of time and the extent
to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer or underlying
collateral of the security and (iii) the Company’s intent and ability of the Company to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value.
Other Investments
Other investments include Federal Home Loan Bank (“FHLB”) stock and Federal Reserve Bank stock. Prior to the Company's
completion of its acquisition of USPF on January 31, 2018, the minority equity investment in USPF was also included in other
investments. These investments do not have readily determinable fair values due to restrictions placed on transferability and
therefore are carried at cost. These investments are periodically evaluated for impairment based on ultimate recovery of par value
or cost basis. Both cash and stock dividends are reported as income.
Also included in other investments are 11,175 Visa Class B restricted shares owned by the Bank with a carrying value of
approximately $242,000 as of December 31, 2018. These shares are transferable only under limited circumstances until they can
be converted into the publicly traded Visa Class A common shares. This conversion will not occur until the settlement of certain
litigation which will be indemnified by Visa members, including the Bank. Visa funded an escrow account from its initial public
F- 11
offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled
to fund additional amounts to the escrow account by reducing each member bank’s Visa Class B conversion ratio to unrestricted
Visa Class A shares. As of December 31, 2018, the conversion ratio was 1.6298.
Loans Held for Sale
Loans held for sale are carried at the estimated fair value, as determined by outstanding commitments from third party investors
in the secondary market. Adjustments to reflect unrealized gains and losses resulting from changes in fair value of mortgage loans
held for sale and realized gains and losses upon ultimate sale of the mortgage loans held for sale are classified as mortgage banking
activity in the consolidated statements of income. Adjustments to reflect unrealized gains and losses resulting from changes in
fair value of SBA loans held for sale and realized gains and losses upon ultimate sale of the SBA loans held for sale are classified
as gain on sale of SBA loans in the consolidated statements of income.
Servicing Rights
When mortgage and SBA loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income
statement effect recorded in mortgage banking activity or gains on sales of SBA loans accordingly. Fair value is based on market
prices for comparable servicing contracts, when available or alternatively, is based on a valuation model that calculates the present
value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization
method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the
estimated future net servicing income of the underlying loans.
Servicing fee income, which is reported on the income statement as other noninterest income, is recorded for fees earned for
servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are
recorded as income when earned. The amortization of servicing rights is netted against loan servicing fee income. Servicing fees
totaled $4,492,000, $1,687,000 and $1,708,000 for the years ended December 31, 2018, 2017 and 2016, respectively. Late fees
and ancillary fees related to loan servicing are not material.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment
is determined by stratifying rights into strata based on predominant risk characteristics, such as interest rate, loan type and investor
type. Impairment is recognized for a particular stratum through a valuation allowance, to the extent that fair value is less than the
carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular stratum,
a reduction of the valuation allowance may be recorded as an increase to income. Changes in valuation allowances related to
servicing rights are reported in other noninterest income on the income statement. The fair values of servicing rights are subject
to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
Loans
Loans, excluding purchased loans and residential mortgage purchased loan pools (“purchased loan pools”) are reported at their
outstanding principal balances less unearned income, net of deferred fees and origination costs. Interest income is accrued on the
outstanding principal balance. For all classes of loans, the accrual of interest on loans is discontinued when, in management’s
opinion, the borrower may be unable to make payments as they become due, unless the loan is well secured and in the process of
collection. Interest income on mortgage and commercial loans is discontinued and placed on non-accrual status at the time the
loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans and commercial loans are
charged off to the extent principal or interest is deemed uncollectible. Consumer loans continue to accrue interest until they are
charged off, generally between 90 and 120 days past due, unless the loan is in the process of collection. Non-accrual loans and
loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment
and individually classified impaired loans. All interest accrued, but not collected for loans that are placed on nonaccrual or charged
off, is reversed against interest income. Interest income on nonaccrual loans is applied against principal until the loans are returned
to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
F- 12
Purchased Loans
Purchased loans include loans acquired in FDIC-assisted acquisitions (“covered loans”) and other acquisitions (“purchased non-
covered loans”) and are initially recorded at fair value on the date of the purchase. Purchased loans that contain evidence of credit
deterioration (“purchased credit impaired loans”) on the date of purchase are carried at the net present value of expected future
proceeds. All other purchased loans are recorded at their initial fair value, adjusted for subsequent advances, pay downs, amortization
or accretion of any premium or discount on purchase, charge-offs and any other adjustment to carrying value. There is no carryover
of the seller’s allowance for loan losses. After acquisition, losses are recognized by recording a charge-off of the loss and a
corresponding provision expense.
In determining the initial fair value of purchased loans without evidence of credit deterioration at the date of acquisition, management
includes (i) no carryover of the seller's allowance for loan losses and (ii) an adjustment of the recorded investment to reflect an
appropriate market rate of interest, given the remaining term, risk profile and grade assigned to each loan. This adjustment is
accreted into earnings as a yield adjustment, using methods approximating the effective yield method, over the remaining life of
each loan.
Purchased credit impaired loans are accounted for individually. The Company estimates the amount and timing of expected cash
flows for each loan, and the expected cash flows in excess of the amount paid is recorded as interest income over the remaining
life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded
(nonaccretable difference).
Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the
carrying amount, an impairment loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater
than the carrying amount, it is recognized as part of future interest income through an increase in accretable yield.
Purchased Loan Pools
Purchased loan pools include groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted
transactions. Purchased loan pools are reported at their outstanding principal balances plus purchase premiums, net of accumulated
amortization. Interest income is accrued on the outstanding principal balance. The accrual of interest on loans is discontinued
when, in management’s opinion, the borrower may be unable to make payments as they become due, unless the loan is well secured
and in the process of collection.
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses charged to expense. Loan losses are charged against
the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to
the allowance.
The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified
loans, as well as probable incurred losses in the balance of the loan portfolio. The allowance for loan losses is evaluated on a
regular basis by management and is based upon management’s periodic review of various risks in the loan portfolio highlighted
by historical experience, the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans,
current economic conditions that may affect the borrower’s ability to pay, estimated value of any underlying collateral and prevailing
economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision
as more information becomes available.
The allowance for loan losses evaluation does not include the effects of expected losses on specific loans or groups of loans that
are related to future events or expected changes in economic conditions. While management uses the best information available
to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic
conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s
allowance for loan losses and may require the Bank to make additions to the allowance based on their judgment about information
available to them at the time of their examinations.
The allowance consists of specific and general components. The specific component includes loans management considers impaired
and other loans or groups of loans that management has classified with higher risk characteristics. For such loans that are classified
as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired
loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical
loss experience adjusted for qualitative factors.
F- 13
The allowance for loan losses represents a reserve for probable incurred losses in the loan portfolio. The adequacy of the allowance
for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing,
past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company
segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In
addition, based on internal reviews and external reviews performed by independent loan reviewers and regulatory authorities, the
Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of
loans. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant
emphasis on data such as risk ratings, current loan quality trends, current economic conditions and other factors in the markets
where the Company operates. Factors considered include, among others, current valuations of real estate in their markets,
unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.
The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored
by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total
loan portfolio. Commercial insurance premium loans, overdraft protection loans and certain mortgage loans and consumer loans
serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which
five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage
factor of historical losses, calculated by loan type, and adjusted for qualitative factors to be applied to the balance of loans by risk
rating and loan type, to determine the adequate amount of reserve. Many of the larger loans require an annual review by an
independent loan officer in the Company’s internal loan review department. Assigned risk ratings are adjusted based on various
factors including changes in borrower’s financial condition, the number of days past due and general economic conditions. The
calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed quarterly by the independent
internal loan review department.
Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent
recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions
Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are
charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan
is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an
appraisal. However, when a loan has guarantor support, and the guarantor demonstrates willingness and capacity to support the
debt, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued.
If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off
and any further collections are treated as recoveries. In all situations, when a loan is downgraded to a loan risk rating of 9 (Loss
per the regulatory guidance), the uncollectible portion is charged-off.
Loan Commitments and Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and standby letters of
credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering
customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Premises and Equipment
Land is carried at cost. Other premises and equipment are carried at cost, less accumulated depreciation computed on the straight-
line method over the estimated useful lives of the assets. In general, estimated lives for buildings are up to 40 years, furniture and
equipment useful lives range from three to 20 years and the lives of software and computer related equipment range from three
to five years. Leasehold improvements are amortized over the life of the related lease, or the related assets, whichever is
shorter. Expenditures for major improvements of the Company’s premises and equipment are capitalized and depreciated over
their estimated useful lives. Minor repairs, maintenance and improvements are charged to operations as incurred. When assets are
sold or disposed of, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected
in earnings.
F- 14
FDIC Loss-Share Receivable/Payable
In connection with the Company’s FDIC-assisted acquisitions, the Company has recorded an FDIC loss-share receivable to reflect
the indemnification provided by the FDIC. Since the indemnified items are covered loans and covered foreclosed assets, which
are initially measured at fair value, the FDIC loss-share receivable is also initially measured and recorded at fair value, and is
calculated by discounting the cash flows expected to be received from the FDIC. These cash flows are estimated by multiplying
estimated losses by the reimbursement rates as set forth in the loss-sharing agreements. The balance of the FDIC loss-share
receivable and the accretion (or amortization) thereof is adjusted periodically to reflect changes in expectations of discounted cash
flows, expense reimbursements under the loss-sharing agreements and other factors. The Company is accreting (or amortizing)
its FDIC loss-share receivable over the shorter of the contractual term of the indemnification agreement (ten years for the single
family loss-sharing agreements, and five years for the non-single family loss-sharing agreements) or the remaining life of the
indemnified asset.
Pursuant to the clawback provisions of the loss-sharing agreements for the Company’s FDIC-assisted acquisitions, the Company
may be required to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-sharing
agreement. The amount of the clawback provision for each acquisition is measured and recorded at fair value. It is calculated as
the difference between management’s estimated losses on covered loans and covered foreclosed assets and the loss threshold
contained in each loss-sharing agreement, multiplied by the applicable clawback provisions contained in each loss-sharing
agreement. This clawback amount, which is payable to the FDIC upon termination of the applicable loss-sharing agreement, is
then discounted back to net present value. To the extent that actual losses on covered loans and covered foreclosed assets are less
than estimated losses, the applicable clawback payable to the FDIC upon termination of the loss-sharing agreements will increase.
To the extent that actual losses on covered loans and covered foreclosed assets are more than estimated losses, the applicable
clawback payable to the FDIC upon termination of the loss-sharing agreements will decrease. The balance of the FDIC clawback
payable and the amortization thereof are adjusted periodically to reflect changes in expected losses on covered assets and the
impact of such changes on the clawback payable and other factors.
Goodwill and Intangible Assets
Goodwill represents the excess of cost over the fair value of the net assets purchased in business combinations. Goodwill is required
to be tested annually for impairment or whenever events occur that may indicate that the recoverability of the carrying amount is
not probable. In the event of an impairment, the amount by which the carrying amount exceeds the fair value is charged to
earnings. The Company performs its annual impairment testing of goodwill in the fourth quarter of each year.
Intangible assets include core deposit premiums from various past bank acquisitions as well as intangible assets recorded in
connection with the USPF acquisition for insurance agent relationships, the "US Premium Finance" trade name and a non-compete
agreement.
Core deposit premiums acquired in various past bank acquisitions are based on the established value of acquired customer
deposits. The core deposit premium is initially recognized based on a valuation performed as of the acquisition date and is amortized
over an estimated useful life of seven to ten years.
The insurance agent relationships, the "US Premium Finance" trade name and non-compete agreement intangible assets acquired
in the USPF acquisition are based on the established values as of the acquisition date and are being amortized over estimated
useful lives of eight years, seven years and three years, respectively.
Amortization periods for intangible assets are reviewed annually in connection with the annual impairment testing of goodwill.
Cash Value of Bank Owned Life Insurance
The Company has purchased life insurance policies on certain officers. The life insurance is recorded at the amount that can be
realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or
other amounts due that are probable at settlement.
F- 15
Other Real Estate Owned
Foreclosed assets acquired through or in lieu of loan foreclosure are held for sale and are initially recorded at fair value less
estimated cost to sell. Any write-down to fair value at the time of transfer to foreclosed assets is charged to the allowance for loan
losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of
carrying amount or fair value less cost to sell. Costs of improvements are capitalized up to the fair value of the property, whereas
costs relating to holding foreclosed assets and subsequent adjustments to the value are charged to operations.
Income Taxes
Deferred income tax assets and liabilities are determined using the liability method. Under this method, the net deferred tax asset
or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various
balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the assets and
liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by
such assets is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not
that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies.
The Company currently evaluates income tax positions judged to be uncertain. A loss contingency reserve is accrued if it is probable
that the tax position will be challenged with a tax examination being presumed to occur, it is probable that the future resolution
of the challenge will confirm that a loss has been incurred, and the amount of such loss can be reasonably estimated.
The Company recognizes interest and penalties related to income tax matters in other noninterest expenses.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when
the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Share-Based Compensation
The Company accounts for its stock compensation plans using a fair value based method whereby compensation cost is measured
at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
The Company recorded approximately $6.2 million, $3.3 million, and $2.3 million of share-based compensation cost in 2018,
2017 and 2016, respectively.
Treasury Stock
The Company’s repurchases of shares of its common stock are recorded at cost as treasury stock and result in a reduction of
shareholders' equity.
Earnings Per Share
Basic earnings per share are computed by dividing net income allocated to common shareholders by the weighted-average number
of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income
allocated to common shareholders by the sum of the weighted-average number of shares of common stock outstanding and the
effect of the issuance of potential common shares that are dilutive. Potential common shares consist of stock options and restricted
shares for the years ended December 31, 2018, 2017 and 2016, and are determined using the treasury stock method. The Company
has determined that its outstanding non-vested stock awards are participating securities, and all dividends on these awards are
paid similar to other dividends.
F- 16
Presented below is a summary of the components used to calculate basic and diluted earnings per share.
(dollars in thousands, shares in thousands)
Net income available to common shareholders
Years Ended December 31,
2017
2018
2016
$
121,027
$
73,548
$
72,100
Weighted average number of common shares outstanding
Effect of dilutive stock options
Effect of dilutive restricted stock awards
Weighted average number of common shares outstanding used to calculate diluted
earnings per share
43,142
6
100
43,248
36,828
62
254
37,144
34,347
108
247
34,702
For the years ended December 31, 2018, 2017 and 2016, the Company has not excluded any potential common shares with strike
prices that would cause them to be anti-dilutive.
Derivative Instruments and Hedging Activities
The goal of the Company’s interest rate risk management process is to minimize the volatility in the net interest margin caused
by changes in interest rates. Derivative instruments are used to hedge certain assets or liabilities as a part of this process. The
Company is required to recognize certain contracts and commitments as derivatives when the characteristics of those contracts
and commitments meet the definition of a derivative. All derivative instruments are required to be carried at fair value on the
balance sheet.
The Company’s hedging strategies include utilizing an interest rate swap classified as a cash flow hedge. Cash flow hedges relate
to converting the variability in future interest payments on a floating rate liability to fixed payments. When effective, the fair value
of cash flow hedges is carried as a component of other comprehensive income rather than an income statement item.
The Company had a cash flow hedge with notional amount of $37.1 million at December 31, 2018 and 2017 for the purpose of
converting the variable rate on certain junior subordinated debentures to a fixed rate. The fair value of this instrument amounted
to an asset of $102,000 as of December 31, 2018 and a liability of $381,000 as of December 31, 2017. No material hedge
ineffectiveness from cash flow hedges was recognized in the statement of income. All components of each derivative’s gain or
loss are included in the assessment of hedge effectiveness. The interest rate swap matures in September 2020.
Mortgage Banking Derivatives
The Company maintains a risk management program to manage interest rate risk and pricing risk associated with its mortgage
lending activities. Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward
commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. The fair value of the
interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected
exercise of the commitment before the loan is funded. In order to hedge the change in interest rates resulting from its commitments
to fund the loans, the Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks
are entered into. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date
the interest on the loan is locked. Changes in the fair values of these derivatives are included in mortgage banking activity in the
Company's consolidated statement of income. The fair value of these instruments amounted to an asset of approximately $2,537,000
and $2,888,000 at December 31, 2018 and 2017, respectively, and a derivative liability of approximately $1,276,000 and $67,000
at December 31, 2018 and 2017, respectively.
Comprehensive Income
The Company’s comprehensive income consists of net income, changes in the net unrealized holding gains and losses of securities
available for sale, unrealized gain or loss on the effective portion of cash flow hedges and the realized gain or loss recognized due
to the sale or unwind of cash flow hedges prior to their contractual maturity date. These amounts are carried in accumulated other
comprehensive income (loss) on the consolidated statements of comprehensive income and are presented net of taxes.
F- 17
Fair Value Measures
Fair values of assets and liabilities are estimated using relevant market information and other assumptions, as more fully disclosed
in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit
risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or
in market conditions could significantly affect these estimates.
Operating Segments
The Company has five reportable segments, the Banking Division, the Retail Mortgage Division, the Warehouse Lending Division,
the SBA Division and the Premium Finance Division. The Banking Division derives its revenues from the delivery of full service
financial services to include commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its
revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending
Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying
one-to-four family residential mortgage loans and residential mortgage servicing rights. The SBA Division derives its revenues
from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination
and servicing of commercial insurance premium finance loans.
The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units
because of the different products and services they provide. The Company evaluates performance and allocates resources based
on profit or loss from operations. There are no material intersegment sales or transfers.
Accounting Standards Adopted in 2018
ASU 2018-02 - Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income ("ASU 2018-02"). Issued in February 2018, ASU 2018-02 seeks to help entities
reclassify certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs
Act of 2017 (the "Tax Reform Act"), enacted on December 22, 2017. ASU 2018-02 was issued in response to concerns regarding
current accounting guidance that requires deferred tax assets and deferred tax liabilities to be adjusted for the effect of a change
in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment
date, even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally
recognized in other comprehensive income, rather than net income, and as a result the stranded tax effects would not reflect the
appropriate tax rate. The amendments of ASU 2018-02 allow an entity to make a reclassification from accumulated other
comprehensive income to retained earnings for the stranded tax effects, which is the difference between the historical corporate
income tax rate of 35.0% and the newly enacted corporate income tax rate of 21.0%. ASU 2018-02 is effective for fiscal years,
and interim periods within those years, beginning after December 31, 2018; however, public business entities are allowed to early
adopt the amendments of ASU 2018-02 in any interim period for which the financial statements have not yet been issued. The
amendments of ASU 2018-02 may be applied either at the beginning of the period (annual or interim) of adoption or retrospectively
to each of the period(s) in which the effect of the change in the U.S. federal corporate tax rate in the Tax Reform Act is recognized.
As a result of the remeasurement of the Company's deferred tax assets and deferred tax liabilities following the enactment of the
Tax Reform Act, accumulated other comprehensive loss included $392,000 of stranded tax effects at December 31, 2017. The
Company early adopted ASU 2018-02 during the first quarter of 2018 and made an election to reclassify the stranded tax effects
from accumulated other comprehensive loss to retained earnings at the beginning of the period of adoption. The reclassification
of the stranded tax effects resulted in an increase of $392,000 in accumulated other comprehensive loss and a corresponding
increase of $392,000 in retained earnings.
ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU
2017-12"). The purposes of ASU 2017-12 are to (1) improve the transparency and understandability of information conveyed in
financial statements about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging
relationships with the economic objectives of those risk management activities and (2) reduce the complexity of and simplify the
application of hedge accounting by preparers. ASU 2017-12 is effective for interim and annual reporting periods beginning after
December 15, 2018 with early adoption in an interim period permitted. ASU 2017-12 requires a modified retrospective transition
method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component
of equity in the statement of financial position as of the beginning of the fiscal year of adoption. During the first quarter of 2018,
the Company early adopted the provisions of ASU 2017-12, and the adoption did not have a material impact on the Company's
consolidated financial statements.
ASU 2017-09 – Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU
2017-09 clarifies when changes to the terms of a share-based award must be accounted for as a modification. Companies must
F- 18
apply the modification accounting guidance if any of the following change: the share-based award’s fair value, vesting provisions
or classification as an equity instrument or a liability instrument. The new guidance should reduce diversity in practice and result
in fewer changes to the terms of share-based awards being accounted for as modifications, as the guidance will allow companies
to make certain non-substantive changes to share-based awards without accounting for them as modifications. ASU 2017-09 is
effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. During the
first quarter of 2018, the Company adopted the provisions of ASU 2017-09, and the adoption did not have a material impact on
the Company's consolidated financial statements.
ASU 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01
provides a framework to use in determining when a set of assets and activities is a business. The standard provides more consistency
in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more
operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017.
During the first quarter of 2018, the Company adopted the provisions of ASU 2017-01, and the adoption did not have a material
impact on the Company's consolidated financial statements.
ASU 2016-01 – Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU
2016-01"). ASU 2016-01 (1) requires equity investments that do not result in consolidation and are not accounted for under the
equity method to be measured at fair value with changes recognized through net income; (2) simplifies the impairment assessment
of equity investments without readily determinable fair values by allowing a qualitative assessment similar to those performed on
long-lived assets, goodwill or intangibles to be utilized at each reporting period; (3) eliminates the use of the entry price method
requiring all preparers to utilize the exit price notion consistent with Topic 820, Fair Value Measurement in disclosing the fair
value of financial instruments measured at amortized cost; (4) requires separate disclosure within other comprehensive income
of changes in the fair value of liabilities due to instrument-specific credit risk when the fair value option has been elected; and (5)
requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on
the balance sheet or in the accompanying notes to the financial statements. ASU 2016-01 is effective for annual reporting periods
beginning after December 15, 2017, and interim periods. During the first quarter of 2018, the Company adopted ASU 2016-01.
Other than changing from the entry price method to an exit price notion in disclosing fair value of financial instruments at amortized
cost, the adoption did not have a material impact on the Company's consolidated financial statements.
ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). On January 1, 2018, the Company adopted ASU
2014-09 and all subsequent amendments to the ASU (collectively "ASC 606") which (1) creates a single framework for recognizing
revenue from contracts with customers that fall within its scope and (2) revises when it is appropriate to recognize a gain (loss)
from the transfer of nonfinancial assets, such as other real estate owned ("OREO"). The majority of the Company's revenues come
from interest income and other sources, including loans, leases, investment securities and derivative financial instruments, that
are outside the scope of ASC 606. With the exception of gains/losses on the sale of OREO, the Company's services that fall within
the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Company satisfies its obligations
to the customer. Services within the scope of ASC 606 reported in noninterest income include service charges on deposit accounts,
debit card interchange fees, and ATM fees. The net of gains and losses on the sale of OREO are recorded in credit resolution
related expenses in the Company's consolidated statement of income and comprehensive income. The adoption of ASC 606 did
not change the timing or amount of revenue recognized for in-scope revenue streams. Accordingly, no cumulative effect adjustment
was recorded under the modified retrospective transition method. See Note 15 for further discussion on the Company's accounting
policies for revenue sources within the scope of ASC 606.
Accounting Standards Pending Adoption
ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for
Implementation Costs incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15
requires that application development stage implementation costs incurred in a Cloud Computing Arrangement ("CCA") that are
service contracts be capitalized and amortized over the term of the hosting arrangement including renewal option terms if the
customer entity is reasonably certain to exercise the option. Costs incurred in the preliminary project and post-implementation
stages are expensed as incurred. Training costs and certain data conversion costs also cannot be capitalized for a CCA that is a
service contract. Amortization expense of capitalized implementation costs will be presented in the same income statement caption
as the CCA fees. Similarly, capitalized implementation costs will be presented in the same balance sheet caption as any prepaid
CCA fees and cash flows from capitalized implementation costs will be classified in the statement of cash flows in the same manner
as payments made for the CCA fees. The requirements of ASU 2018-15 should be applied either retrospectively or prospectively
to all implementation costs incurred after the adoption date. ASU 2018-15 is effective for interim and annual periods beginning
after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on
the Company’s consolidated balance sheet, consolidated statement of income and comprehensive income, consolidated statement
of shareholders’ equity and consolidated statement of cash flows, but it is not expected to have a material impact.
F- 19
ASU 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair
Value Measurement ("ASU 2018-13). ASU 2018-13 changes fair value measurement disclosure requirements by removing certain
requirements, modifying certain requirements and adding certain new requirements. Disclosure requirements removed include
the following: transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for determining when transfers between
any of the three levels have occurred; the valuation processes for Level 3 measurements; and the changes in unrealized gains or
losses presented in earnings for Level 3 instruments held at end of the reporting period. Disclosure requirements that have been
modified include the following: for investments in certain entities that calculate net asset value, an entity is required to disclose
the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse only if the investee
has communicated the timing to the entity or announced the timing publicly; and clarification that the Level 3 measurement
uncertainty disclosure should communicate information about the uncertainty at the balance sheet date. New disclosure
requirements include the following: the changes in unrealized gains and losses for the period included in other comprehensive
income for recurring Level 3 instruments held at the end of the reporting period; and the range and weighted average of significant
unobservable inputs used for Level 3 measurements or disclosure of other quantitative information in place of the weighted average
to the extent that it would be a more reasonable and rational method to reflect the distribution of unobservable inputs. ASU 2018-13
is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is
currently evaluating the impact this standard will have on the Company’s fair value measurement disclosures, but it is not expected
to have a material impact.
ASU 2017-04 – Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04
eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim,
goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment
charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the
loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects
of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill
impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying
amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for
a reporting unit to determine if the quantitative impairment test is necessary. The standard must be adopted using a prospective
basis and the nature and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective
for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is
permitted on testing dates after January 1, 2017. The Company is currently evaluating the impact this ASU will have on the
Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other
instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach
with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to
financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which
include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13
simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding
an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need
to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of
origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption
is permitted for interim and annual reporting periods beginning after December 15, 2018. Upon adoption, ASU 2016-13 provides
for a modified retrospective transition by means of a cumulative effect adjustment to equity as of the beginning of the period in
which the guidance is effective. While the Company is currently evaluating the impact this ASU will have on the results of
operations, financial position and disclosures, the Company expects to recognize a one-time cumulative effect adjustment to equity
and the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. The
Company has established a steering committee which includes the appropriate members of management to evaluate the impact
this ASU will have on Company’s financial position, results of operations and financial statement disclosures and determine the
most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the
amendments. This committee has contracted with the software vendor of choice for implementation, established an implementation
time-line, conducts regular meetings to monitor the project's status, and continues to stay current on implementation issues and
concerns. During the third quarter of 2018, work began with the software vendor to source and test required data feeds. During
the fourth quarter of 2018, work with the software vendor continued with sourcing of required data from the Company's loan
systems and testing of data feeds. Additionally, the committee has engaged consulting services from a leading international
accounting professional services firm to assist management with the technical accounting, internal control, and project management
aspects of the Company's CECL implementation.
F- 20
ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively
requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset
and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide
greater insight into the nature of an entity’s leasing activities. The standard may be adopted using a modified retrospective transition
method with a cumulative effect adjustment to equity as of the beginning of the period in which it is adopted. Alternatively, the
standard may be adopted using an optional transition method which the Company intends to use in its adoption of the new lease
accounting standard. Under the optional transition method, the initial application of the provisions of ASU 2016-02 are applied
as the date of adoption, resulting in no adjustment to amounts reported in prior periods. ASU 2016-02 is effective for annual
reporting periods beginning after December 15, 2018, and interim periods within those annual periods. The Company has several
leased facilities, which are currently treated as operating leases, and are not currently shown on the Company’s consolidated
balance sheet. After ASU 2016-02 is implemented, the Company will begin reporting these lease agreements on the balance sheet
as a right-of-use asset and a corresponding liability. During the fourth quarter of 2018, the Company contracted with a software
vendor for software to be used in both the implementation and ongoing accounting under the new lease accounting standard. The
Company has completed its inventory of operating leases that fall under the new lease accounting guidance and is preparing to
load data pertaining to each lease into the software in order to be in compliance with the new lease accounting standard for its
first quarter 2019 reporting. Based on the inventory of its operating leases, the Company does not expect the adoption of ASU
2016-02 to have a material impact on the Company's consolidated balance sheet, consolidated statements of income, shareholders’
equity or cash flows. The Company estimates an increase in the range of $30.0 million to $35.0 million to both total assets and
total liabilities as a result of adopting ASU 2016-02 in the first quarter of 2019.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform with the current year presentations.
NOTE 2. PENDING ACQUISITION
On December 17, 2018, the Company and Fidelity Southern Corporation, a Georgia corporation ("Fidelity"), entered into an
Agreement and Plan of Merger (the "Fidelity Merger Agreement") pursuant to which Fidelity will merge into Ameris, with Ameris
as the surviving entity and immediately thereafter, Fidelity Bank, a Georgia bank wholly owned by Fidelity, will be merged into
Ameris Bank, with Ameris Bank as the surviving entity. Fidelity Bank operates 69 full-service banking locations, 50 of which
are located in Georgia and 19 of which are located Florida, providing financial products and services to customers primarily in
the metropolitan markets of Atlanta, Georgia, and Jacksonville, Orlando, Tallahassee, and Sarasota-Bradenton, Florida. Under
the terms of the Fidelity Merger Agreement, Fidelity's shareholders will receive 0.80 shares of Ameris common stock for each
share of Fidelity common stock they hold. Each outstanding Fidelity restricted stock award will fully vest and be converted into
the right to receive 0.80 shares of the Ameris common stock for each share of Fidelity common stock underlying such award. Each
outstanding Fidelity stock option will fully vest and be converted into an option to purchase shares of Ameris common stock, with
the number of underlying shares and per share exercise price of such option adjusted to reflect the exchange ratio of 0.80. The
estimated purchase price is $750.7 million in the aggregate based upon the $34.02 per share closing price of the Ameris common
stock as of December 14, 2018. The merger is subject to customary closing conditions, including the receipt of regulatory approvals
and the approval of Ameris and Fidelity shareholders. The transaction is expected to close during the second quarter of 2019. As
of December 31, 2018, Fidelity reported assets of $4.73 billion, gross loans of $3.92 billion and deposits of $3.98 billion. The
purchase price will be allocated among the net assets of Fidelity acquired as appropriate, with the remaining balance being reported
as goodwill.
NOTE 3. BUSINESS COMBINATIONS
In accounting for business combinations, the Company uses the acquisition method of accounting in accordance with ASC 805,
Business Combinations. Under the acquisition method of accounting, assets acquired, liabilities assumed and consideration
exchanged are recorded at their respective acquisition date fair values. Any identifiable intangible assets that are acquired in a
business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately
if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented
or exchanged separately from the entity). If the consideration given exceeds the fair value of the net assets received, goodwill is
recognized. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding
methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after
the closing date of the acquisition as additional information regarding the closing date fair values becomes available. In addition,
management will assess and record the deferred tax assets and deferred tax liabilities resulting from differences in the carrying
value of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes, including
F- 21
acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise
recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of
the Internal Revenue Code of 1986, as amended.
Hamilton State Bancshares, Inc.
On June 29, 2018, the Company completed its acquisition of Hamilton State Bancshares, Inc. ("Hamilton"), a bank holding
company headquartered in Hoschton, Georgia. Upon consummation of the acquisition, Hamilton was merged with and into the
Company, with Ameris as the surviving entity in the merger. At that time, Hamilton's wholly owned banking subsidiary, Hamilton
State Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as
Hamilton State Bank had a total of 28 full-service branches located in Atlanta, Georgia and the surrounding area, as well as in
Gainesville, Georgia. Under the terms of the merger agreement, Hamilton's shareholders received 0.16 shares of Ameris common
stock and $0.93 in cash for each share of Hamilton voting common stock or nonvoting common stock they previously held. As
a result, the Company issued 6,548,385 common shares at a fair value of $349.4 million and paid $47.8 million in cash to the
former shareholders of Hamilton as merger consideration.
As of December 31, 2018, the Company recorded a preliminary allocation of the purchase price to Hamilton's tangible and
identifiable intangible assets acquired and liabilities assumed based on estimated fair values as of June 29, 2018. The following
table presents the assets acquired and liabilities assumed of Hamilton as of June 29, 2018, and their fair value estimates. The
Company continues its evaluation of the facts and circumstances available as of June 29, 2018, to assign fair values to assets
acquired and liabilities assumed which could result in further adjustments to the fair values presented below. Because final external
valuations were not complete as of December 31, 2018, management continues to evaluate fair value adjustments related to loans,
premises, intangibles, interest-bearing deposits, other borrowings, subordinated deferrable interest debentures, other liabilities and
deferred tax assets.
F- 22
The following table presents the assets acquired and liabilities of Hamilton assumed as of June 29, 2018 and their fair value
estimates.
(dollars in thousands)
Assets
Cash and due from banks
Federal funds sold and interest-bearing deposits in banks
Time deposits in other banks
Investment securities
Other investments
Loans
Less allowance for loan losses
Loans, net
Other real estate owned
Premises and equipment
Other intangible assets, net
Cash value of bank owned life insurance
Deferred income taxes, net
Other assets
Total assets
Liabilities
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Other borrowings
Subordinated deferrable interest debenture
Other liabilities
Total liabilities
Net identifiable assets acquired over (under) liabilities
assumed
Goodwill
Net assets acquired over liabilities assumed
Consideration:
Ameris Bancorp common shares issued
Price per share of the Company's common stock
Company common stock issued
Cash exchanged for shares
Fair value of total consideration transferred
Explanation of fair value adjustments
$
$
$
$
$
As Recorded
by Hamilton
Initial
Fair Value
Adjustments
Subsequent
Adjustments
As Recorded
by Ameris
$
14,405
$
102,156
11,558
288,206
2,094
1,314,264
(11,183)
1,303,081
847
27,483
18,755
4,454
12,445
13,053
—
—
—
(2,376) (a)
—
(15,528) (b)
11,183 (c)
(4,345)
—
—
(2,755) (d)
—
(6,308) (e)
—
$
(478) (j)
$
—
—
—
—
13,927
102,156
11,558
285,830
2,094
(696) (k)
1,298,040
—
(696)
—
(723) (l)
7,610 (m)
—
343 (n)
(17) (o)
—
1,298,040
847
26,760
23,610
4,454
6,480
13,036
$
1,798,537
$
(15,784)
$
6,039
$
1,788,792
$
381,039
$
—
—
$
381,039
1,201,324
1,582,363
10,687
3,093
10,460
1,606,603
(1,896) (f)
(1,896)
(66) (g)
(658) (h)
2,391 (i)
(229)
191,934
—
191,934
$
(15,555)
220,713
205,158
4,783 (p)
4,783
286 (q)
(143) (r)
—
4,926
1,113
(1,070)
$
43
$
1,204,211
1,585,250
10,907
2,292
12,851
1,611,300
177,492
219,643
397,135
6,548,385
53.35
349,356
47,779
397,135
(a) Adjustment reflects the fair value adjustments of the portfolio of investment securities as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loan portfolio, net of
the reversal of Hamilton's unamortized accounting adjustments from their prior acquisitions, loan premiums, loan
discounts, deferred loan origination costs and deferred loan origination fees.
(c) Adjustment reflects the elimination of Hamilton's allowance for loan losses.
(d) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts, net of reversal of
Hamilton's remaining intangible assets from its past acquisitions.
(e) Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities
for financial reporting purposes and their basis for federal income tax purposes.
(f) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired deposits.
F- 23
(g) Adjustment reflects the reversal of Hamilton's unamortized accounting adjustments for other borrowings from its past
acquisitions.
(h) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debenture at the acquisition date.
(i) Adjustment reflects the fair value adjustment to the FDIC loss-share clawback liability included in other liabilities.
(j) Subsequent to acquisition, cash and due from banks were adjusted for Hamilton reconciling items.
(k) Adjustment reflects additional recording of fair value adjustments to the acquired loan portfolio.
(l) Adjustment reflects the recording of fair value adjustment to premises and equipment.
(m) Adjustment reflects additional recording of fair value adjustments to the core deposit intangible on the acquired core
deposit accounts.
(n) Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired assets
and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
(o) Adjustment reflects the fair value adjustment to other assets.
(p) Adjustment reflects additional recording of fair value adjustments on the acquired deposits.
(q) Adjustment reflects the fair value adjustment to other borrowings.
(r) Adjustment reflects additional recording of fair value adjustments to the subordinated deferrable interest debenture.
Goodwill of $219.6 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in
the Hamilton acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be
deductible for tax purposes.
In the acquisition, the Company purchased $1.30 billion of loans at fair value, net of $16.2 million, or 1.23%, estimated discount
to the outstanding principal balance. Of the total loans acquired, management identified $18.3 million that were considered to be
credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required
principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the
acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted
for estimated prepayments.
(dollars in thousands)
Contractually required principal and interest
Non-accretable difference
Cash flows expected to be collected
Accretable yield
Total purchased credit-impaired loans acquired
$
$
21,223
(2,090)
19,133
(794)
18,339
The following table presents the acquired loan data for the Hamilton acquisition.
(dollars in thousands)
Fair Value of
Acquired Loans at
Acquisition Date
Gross Contractual
Amounts Receivable
at Acquisition Date
Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
Acquired receivables subject to ASC 310-30
Acquired receivables not subject to ASC 310-30
$
$
18,339
1,279,701
$
$
21,223
1,441,534
$
$
2,090
—
F- 24
Atlantic Coast Financial Corporation
On May 25, 2018, the Company completed its acquisition of Atlantic Coast Financial Corporation ("Atlantic"), a bank holding
company headquartered in Jacksonville, Florida. Upon consummation of the acquisition, Atlantic was merged with and into the
Company, with Ameris as the surviving entity in the merger. At that time, Atlantic's wholly owned banking subsidiary, Atlantic
Coast Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as
Atlantic Coast Bank had a total of 12 full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida,
Waycross, Georgia and Douglas, Georgia. Under the terms of the merger agreement, Atlantic's shareholders received 0.17 shares
of Ameris common stock and $1.39 in cash for each share of Atlantic common stock they previously held. As a result, the Company
issued 2,631,520 common shares at a fair value of $147.8 million and paid $21.5 million in cash to the former shareholders of
Atlantic as merger consideration.
As of December 31, 2018, the Company recorded a preliminary allocation of the purchase price to Atlantic's tangible and identifiable
intangible assets acquired and liabilities assumed based on estimated fair values as of May 25, 2018. The following table presents
the assets acquired and liabilities assumed of Atlantic as of May 25, 2018, and their fair value estimates. The Company continues
its evaluation of the facts and circumstances available as of May 25, 2018, to assign fair values to assets acquired and liabilities
assumed which could result in further adjustments to the fair values presented below. Because final external valuations were not
complete as of December 31, 2018, management continues to evaluate fair value adjustments related to loans, intangibles, interest-
bearing deposits, other liabilities and deferred tax assets.
F- 25
The following table presents the assets acquired and liabilities of Atlantic assumed as of May 25, 2018 and their fair value estimates.
(dollars in thousands)
Assets
Cash and due from banks
Federal funds sold and interest-bearing deposits in banks
Investment securities
Other investments
Loans held for sale
Loans
Less allowance for loan losses
Loans, net
Other real estate owned
Premises and equipment
Other intangible assets, net
Cash value of bank owned life insurance
Deferred income taxes, net
Other assets
Total assets
Liabilities
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Other borrowings
Other liabilities
Total liabilities
Net identifiable assets acquired over (under) liabilities
assumed
Goodwill
Net assets acquired over liabilities assumed
Consideration:
Ameris Bancorp common shares issued
Price per share of the Company's common stock
Company common stock issued
Cash exchanged for shares
Fair value of total consideration transferred
____________________________________________________________
Explanation of fair value adjustments
As Recorded
by Atlantic
Initial
Fair Value
Adjustments
Subsequent
Adjustments
As Recorded
by Ameris
—
—
—
—
—
$
3,990
22,149
35,126
9,576
358
(2,478) (k)
755,704
—
(2,478)
—
—
1,551 (l)
—
342 (m)
—
(585)
—
1,025 (n)
1,025
—
—
1,025
(1,610)
1,610
$
$
—
755,704
1,041
10,896
7,488
18,182
6,833
2,970
874,313
69,761
515,406
585,167
204,475
8,354
797,996
76,317
92,970
$
—
$
169,287
$
3,990
$
22,149
35,186
9,576
358
777,605
(8,573)
769,032
1,837
12,591
—
18,182
5,782
3,604
$
—
—
(60) (a)
—
—
(19,423) (b)
8,573 (c)
(10,850)
(796) (d)
(1,695) (e)
5,937 (f)
—
709 (g)
(634) (h)
882,287
$
(7,389)
$
$
$
$
$
$
$
$
—
(554) (i)
(554)
—
(13) (j)
(567)
(6,822)
91,360
84,538
69,761
$
514,935
584,696
204,475
8,367
797,538
84,749
—
84,749
$
2,631,520
56.15
147,760
21,527
169,287
(a) Adjustment reflects the fair value adjustments of the portfolio of investment securities as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loan portfolio, net of
the reversal of Atlantic's unamortized accounting adjustments from loan premiums, loan discounts, deferred loan
origination costs and deferred loan origination fees.
(c) Adjustment reflects the elimination of Atlantic's allowance for loan losses.
(d) Adjustment reflects the fair value adjustment based on the Company's evaluation of the acquired OREO portfolio.
(e) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired premises and equipment.
(f) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(g) Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities
for financial reporting purposes and their basis for federal income tax purposes.
(h) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired other assets.
(i) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired deposits.
(j) Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired other liabilities.
F- 26
(k) Adjustment reflects additional recording of fair value adjustments of the acquired loan portfolio.
(l) Adjustment reflects additional recording of fair value adjustments to the core deposit intangible on the acquired core
deposit accounts.
(m) Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired assets
and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
(n) Adjustment reflects additional fair value adjustments on the acquired deposits.
Goodwill of $93.0 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in
the Atlantic acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be
deductible for tax purposes.
In the acquisition, the Company purchased $755.7 million of loans at fair value, net of $21.9 million, or 2.82%, estimated discount
to the outstanding principal balance. Of the total loans acquired, management identified $10.8 million that were considered to be
credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required
principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the
acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted
for estimated prepayments.
(dollars in thousands)
Contractually required principal and interest
Non-accretable difference
Cash flows expected to be collected
Accretable yield
Total purchased credit-impaired loans acquired
$
$
16,077
(4,115)
11,962
(1,199)
10,763
The following table presents the acquired loan data for the Atlantic acquisition.
(dollars in thousands)
Fair Value of
Acquired Loans at
Acquisition Date
Gross Contractual
Amounts Receivable
at Acquisition Date
Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
Acquired receivables subject to ASC 310-30
Acquired receivables not subject to ASC 310-30
$
$
10,763
744,941
$
$
16,077
1,041,768
$
$
4,115
—
US Premium Finance Holding Company
On January 31, 2018, the Company closed on the purchase of the final 70% of the outstanding shares of common stock of USPF,
completing its acquisition of USPF and making USPF a wholly owned subsidiary of the Company. Through a series of three
acquisition transactions that closed on January 18, 2017, January 3, 2018 and January 31, 2018, the Company issued a total of
1,073,158 shares of its common stock at a fair value of $55.9 million and paid $21.4 million in cash to the former shareholders
of USPF. Pursuant to the terms of the Stock Purchase Agreement dated January 25, 2018 under which Company purchased the
final 70% of the outstanding shares of common stock of USPF, the selling shareholders of USPF may receive additional cash
payments aggregating up to $5.8 million based on the achievement by the Company's premium finance division of certain income
targets, between January 1, 2018 and June 30, 2019. As of the January 31, 2018 acquisition date, the present value of the contingent
earn-out consideration expected to be paid was $5.7 million. Including the fair value of the Company's common stock issued,
cash paid and the present value of the contingent earn-out consideration expected to be paid, the aggregate purchase price of USPF
amounted to $83.0 million.
Prior to the January 31, 2018 completion of the acquisition, the Company's 30% investment in USPF was carried at its $23.9
million original cost basis. Once the acquisition was completed, the $83.0 million aggregate purchase price equaled the fair value
of USPF which was determined utilizing the incremental projected earnings. Accordingly, no gain or loss was recorded by the
Company in the consolidated statement of income and comprehensive income as a result of remeasuring to fair value the prior
minority equity investment in USPF held by the Company immediately before the business combination was completed.
As of September 30, 2018, the Company finalized its allocation of the purchase price to USPF's assets acquired and liabilities
assumed based on estimated fair values as of January 31, 2018. The assets acquired include only identifiable intangible assets
F- 27
related to insurance agent relationships that lead to referral of insurance premium finance loans to USPF, the "US Premium
Finance" trade name and a non-compete agreement with a former USPF shareholder.
The following table presents the assets acquired and liabilities assumed of USPF as of January 31, 2018, and their fair value
estimates.
(dollars in thousands)
Assets
Intangible asset - insurance agent relationships
Intangible asset - US Premium Finance trade name
Intangible asset - non-compete agreement
Total assets
Liabilities
Deferred tax liability
Total liabilities
Net identifiable assets acquired over liabilities assumed
Goodwill
Net assets acquired over liabilities assumed
Consideration:
Ameris Bancorp common shares issued
Price per share of the Company's common stock
(weighted average)
Company common stock issued
Cash exchanged for shares
Present value of contingent earn-out consideration
expected to be paid
Fair value of total consideration transferred
____________________________________________________________
Explanation of fair value adjustments
As Recorded
by USPF
Initial
Fair Value
Adjustments
Subsequent
Adjustments
As Recorded
by Ameris
$
$
$
$
$
$
$
$
$
— $
20,000 (a)
$
2,351 (e)
$
22,351
—
—
1,136 (b)
178 (c)
(42) (f)
(16) (g)
— $
21,314
$
2,293
— $
5,492 (d)
424 (h)
—
—
—
— $
5,492
15,822
67,159
82,981
424
1,869
(1,869)
—
$
1,094
162
23,607
5,916
5,916
17,691
65,290
82,981
$
$
$
1,073,158
52.047
55,855
21,421
5,705
82,981
(a) Adjustment reflects the recording of the fair value of the insurance agent relationships intangible.
(b) Adjustment reflect the recording of the fair value of the trade name intangible.
(c) Adjustment reflects the recording of the fair value of the non-compete agreement intangible.
(d) Adjustment reflects the deferred taxes on the differences in the carrying values of acquired intangible assets for financial
reporting purposes and their basis for federal income tax purposes.
(e) Adjustment reflects additional fair value adjustment for the insurance agent relationships intangible.
(f) Adjustment reflects additional fair value adjustment for the trade name intangible.
(g) Adjustment reflects additional fair value adjustment for the non-compete agreement intangible.
(h) Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired intangible
assets for financial reporting purposes and their basis for federal income tax purposes.
Goodwill of $65.3 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in
the USPF acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be
deductible for tax purposes.
During the second quarter of 2018, the Company recorded $2.0 million in other noninterest income in the consolidated statements
of income to reflect a decrease in the estimated contingent consideration liability. During the fourth quarter of 2018, the Company
recorded $2.5 million in other noninterest income in the consolidated statements of income to reflect a further decrease in the
estimated contingent consideration liability. These decreases in the estimated contingent consideration liability were based on
projected results of the premium finance division for the entire measurement period from January 1, 2018 through June 30, 2019.
F- 28
Jacksonville Bancorp, Inc.
On March 11, 2016, the Company completed its acquisition of Jacksonville Bancorp, Inc. (“JAXB”), a bank holding company
headquartered in Jacksonville, Florida. Upon consummation of the acquisition, JAXB was merged with and into the Company,
with Ameris as the surviving entity in the merger. At that time, JAXB’s wholly owned banking subsidiary, The Jacksonville Bank
(“Jacksonville Bank”), was also merged with and into the Bank. The acquisition expanded the Company’s existing market presence,
as Jacksonville Bank had a total of eight full-service branches located in Jacksonville and Jacksonville Beach, Duval County,
Florida. Under the terms of the merger, JAXB’s common shareholders received 0.5861 shares of Ameris common stock or $16.50
in cash for each share of JAXB common stock or nonvoting common stock they previously held, subject to the total consideration
being allocated 75% stock and 25% cash. As a result, the Company issued 2,549,469 common shares at a fair value of $72.5
million and paid $23.9 million in cash to former shareholders of JAXB.
During the third and fourth quarters of 2016, management revised its initial estimates regarding the valuation of loans, other real
estate owned, premises and equipment, core deposit intangible and other assets acquired. In addition, management assessed and
recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for
financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss
carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods
where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code
of 1986, as amended.
The following table presents the assets acquired and liabilities of JAXB assumed as of March 11, 2016 and their fair value estimates.
(dollars in thousands)
Assets
Cash and cash equivalents
Federal funds sold and interest-bearing balances
Investment securities
Other investments
Loans
Less allowance for loan losses
Loans, net
Other real estate owned
Premises and equipment
Intangible assets
Other assets
Total assets
Liabilities
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Other borrowings
Subordinated deferrable interest debentures
Other liabilities
Total liabilities
Net identifiable assets acquired over (under) liabilities
assumed
Goodwill
Net assets acquired over (under) liabilities assumed
Consideration:
Ameris Bancorp common shares issued
Price per share of the Company's common stock
Company common stock issued
Cash exchanged for shares
Fair value of total consideration transferred
As Recorded
by JAXB
Initial Fair
Value
Adjustments
Subsequent
Fair Value
Adjustments
As Recorded
by Ameris
$
$
$
$
—
—
(942) (a)
—
(15,746) (b)
12,613 (c)
(3,133)
(1,035) (d)
—
5,566 (e)
23,266 (f)
23,722
—
421 (g)
421
84 (h)
(3,393) (i)
—
(2,888)
26,610
31,375
57,985
$
$
$
$
—
—
—
—
553 (j)
—
553
88 (k)
(119) (l)
(1,108) (m)
(3,524) (n)
(4,110)
—
—
—
—
—
—
—
(4,110)
4,110
—
$
$
$
$
9,704
7,027
59,894
2,458
401,638
—
401,638
1,926
4,679
4,746
33,883
525,955
123,399
277,960
401,359
48,434
12,901
2,354
465,048
60,907
35,485
96,392
$
$
$
$
$
$
$
$
9,704
7,027
60,836
2,458
416,831
(12,613)
404,218
2,873
4,798
288
14,141
506,343
123,399
277,539
400,938
48,350
16,294
2,354
467,936
38,407
—
38,407
2,549,469
28.42
72,455
23,937
96,392
F- 29
Explanation of fair value adjustments
(a) Adjustment reflects the fair value adjustments of the portfolio of securities available for sale as of the acquisition date.
(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, net of
the reversal of JAXB remaining fair value adjustments from their prior acquisitions.
(c) Adjustment reflects the elimination of JAXB’s allowance for loan losses.
(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio, which
is based largely on contracted sale prices.
(e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
(f) Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities
for financial reporting purposes and their basis for federal income tax purposes and the reversal of JAXB valuation
allowance established on their deferred tax assets.
(g) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired deposits.
(h) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the liability for other borrowings.
(i) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date,
net of the reversal of JAXB remaining fair value adjustments from their prior acquisitions.
(j) Adjustment reflects additional recording of fair value adjustment of the acquired loan portfolio.
(k) Adjustment reflects additional recording of fair value adjustment of other real estate owned.
(l) Adjustment reflects recording of fair value adjustment of the premises and equipment.
(m) Adjustment reflects adjustment to the core deposit intangible on the acquired core deposit accounts.
(n) Adjustment reflects additional recording of deferred taxes on the difference in the carrying values of acquired assets
and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
Goodwill of $35.5 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in
the JAXB acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be
deductible for tax purposes.
In the acquisition, the Company purchased $401.6 million of loans at fair value, net of $15.2 million, or 3.64%, estimated discount
to the outstanding principal balance. Of the total loans acquired, management identified $27.0 million that were considered to be
credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required
principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of
acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted
for estimated prepayments.
(dollars in thousands)
Contractually required principal and interest
Non-accretable difference
Cash flows expected to be collected
Accretable yield
Total purchased credit-impaired loans acquired
The following table presents the acquired loan data for the JAXB acquisition.
(dollars in thousands)
Acquired receivables subject to ASC 310-30
Acquired receivables not subject to ASC 310-30
F- 30
$
$
42,314
(9,181)
33,133
(6,182)
26,951
Fair Value of
Acquired
Loans at
Acquisition
Date
Gross
Contractual
Amounts
Receivable at
Acquisition
Date
$
$
26,951
374,687
$
$
42,314
488,346
Best Estimate
at Acquisition
Date of
Contractual
Cash Flows
Not Expected
to be Collected
9,181
$
—
$
Pro Forma Financial Information
The results of operations of Hamilton, Atlantic, USPF and JAXB subsequent to the respective acquisition dates are included in
the Company’s consolidated statements of income.
The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the
Hamilton, Atlantic and USPF acquisitions had occurred on January 1, 2017, unadjusted for potential cost savings.
(dollars in thousands, except per share data)
Net interest income and noninterest income
Net income
Net income available to common shareholders
Income per common share available to common shareholders – basic
Income per common share available to common shareholders – diluted
Average number of shares outstanding, basic
Average number of shares outstanding, diluted
NOTE 4. INVESTMENT SECURITIES
Year Ended December 31,
$
$
$
$
$
2018
514,885
134,486
134,486
2.83
2.83
47,460
47,566
$
$
$
$
$
2017
477,500
97,686
97,686
2.08
2.07
46,959
47,275
The amortized cost and estimated fair value of securities available for sale along with gross unrealized gains and losses are
summarized as follows:
(dollars in thousands)
December 31, 2018
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
December 31, 2017
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
$
$
$
$
149,670
67,123
982,183
1,198,976
135,968
46,659
630,666
813,293
$
$
$
$
1,367
718
4,172
6,257
1,989
721
1,762
4,472
$
$
$
$
(304) $
(527)
(11,979)
(12,810) $
150,733
67,314
974,376
1,192,423
(163) $
(237)
(6,492)
(6,892) $
137,794
47,143
625,936
810,873
The following table shows the gross unrealized losses and estimated fair value of securities aggregated by category and length
of time that securities have been in a continuous unrealized loss position at December 31, 2018 and 2017.
(dollars in thousands)
December 31, 2018
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
December 31, 2017
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Total debt securities
Less Than 12 Months
12 Months or More
Total
Estimated
Fair
Value
Unrealized
Losses
Estimated
Fair
Value
Unrealized
Losses
Estimated
Fair
Value
Unrealized
Losses
$
$
$
$
23,784
17,291
119,745
160,820
33,976
3,465
262,353
299,794
$
$
$
$
(52) $
(111)
(580)
(743) $
33,873
17,952
435,749
487,574
(115) $
(35)
(2,401)
(2,551) $
4,725
18,853
190,368
213,946
F- 31
$
$
$
$
(252) $
(416)
(11,399)
(12,067) $
57,657
35,243
555,494
648,394
(48) $
(202)
(4,091) $
(4,341) $
38,701
22,318
452,721
513,740
$
$
$
$
(304)
(527)
(11,979)
(12,810)
(163)
(237)
(6,492)
(6,892)
As of December 31, 2018, the Company’s security portfolio consisted of 531 securities, 293 of which were in an unrealized loss
position. The majority of the unrealized losses are related to the Company’s mortgage-backed securities as discussed below.
At December 31, 2018, the Company held 239 mortgage-backed securities that were in an unrealized loss position, all of which
were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in
interest rates, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities
and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider
these securities to be other-than-temporarily impaired at December 31, 2018.
At December 31, 2018, the Company held 41 state, county and municipal securities and 13 corporate securities that were in an
unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and
because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities
before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at
December 31, 2018.
During 2018 and 2017, the Company received timely and current interest and principal payments on all of the securities classified
as corporate debt securities. The Company’s investments in subordinated debt include investments in regional and super-regional
banks on which the Company prepares regular analysis through review of financial information or credit ratings. Investments in
preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled
investment structures. The Company did not have investments in “pooled” trust preferred securities at December 31, 2018 or 2017.
Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-
temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such
evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities
have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent
third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee
in its determination regarding the status of impairment. The Company does not intend to sell these investment securities at an
unrealized loss position at December 31, 2018, and it is more likely than not that the Company will not be required to sell these
securities prior to recovery or maturity. Therefore, at December 31, 2018, these investments are not considered impaired on an
other-than-temporary basis.
The amortized cost and estimated fair value of debt securities available for sale as of December 31, 2018, by contractual maturity
are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages
underlying the securities may be called or repaid without penalty. Securities not due at a single maturity date are shown separately.
Therefore, these securities are not included in the maturity categories in the following maturity summary.
(dollars in thousands)
Due in one year or less
Due from one year to five years
Due from five to ten years
Due after ten years
Mortgage-backed securities
Amortized
Cost
Estimated
Fair
Value
$
$
16,900
86,338
84,383
29,172
982,183
1,198,976
$
$
16,907
86,234
85,595
29,311
974,376
1,192,423
Securities with a carrying value of approximately $510.0 million and $403.3 million at December 31, 2018 and 2017, respectively,
serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or
permitted by law.
Gains and losses on sales of securities available for sale consist of the following:
(dollars in thousands)
Gross gains on sales of securities
Gross losses on sales of securities
Net realized gains on sales of securities available for sale
F- 32
For the Years Ended
December 31,
2017
2016
2018
$
$
390
(301)
89
$
$
38
(1)
37
$
$
312
(218)
94
Total gain (loss) on securities reported on the consolidated statements of income is comprised of the following:
(dollars in thousands)
Net realized gains on sales of securities available for sale
Unrealized holding losses on equity securities
Total gain (loss) on securities
NOTE 5. LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans
For the Years Ended
December 31,
2018
2017
2016
$
$
$
89
(126)
(37) $
37
—
37
$
$
94
—
94
The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans,
commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South
Carolina. During 2015 and 2016, the Bank purchased residential mortgage loan pools collateralized by properties located outside
our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began
purchasing from unrelated third parties consumer installment home improvement loans made to borrowers throughout the United
States. As of December 31, 2018 and 2017, the net carrying value of these consumer installment home improvement loans was
approximately $399.9 million and $273.7 million, respectively, and such loans are reported in the consumer installment loan
category. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to
borrowers throughout the United States and began a division to originate, administer and service these types of loans. As of
December 31, 2018 and 2017, the net carrying value of commercial insurance premium finance loans was approximately $413.5
million and $482.5 million, respectively, and such loans are reported in the commercial, financial and agricultural loan category.
The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is
primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control,
such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the
relative risk in the real estate portfolio.
A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial
portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s
loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate
conditions in the Bank’s primary market area.
Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop
production, commercial insurance premium finance and other business purposes. Commercial, financial and agricultural loans
also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as
accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit
history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary
sources of repayment on commercial, financial and agricultural loans.
Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction
and development loans include loans for the development of residential neighborhoods, one-to-four family home residential
construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied
properties. The Company limits its construction lending risk through adherence to established underwriting procedures.
Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland
and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space.
Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential
mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The
Company's residential loans represent permanent mortgage financing and are secured by residential properties located within the
Bank's market areas, along with warehouse lines of credit secured by residential mortgages.
Consumer installment loans and other loans include home improvement loans, automobile loans, boat and recreational vehicle
financing, and both secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral
can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment
of the loan in the case of default.
F- 33
Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable
categories are presented in the following table, excluding purchased loans.
(dollars in thousands)
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
December 31,
2018
1,316,359
671,198
1,814,529
1,403,000
455,371
5,660,457
$
$
2017
1,362,508
624,595
1,535,439
1,009,461
324,511
4,856,514
$
$
Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing
agreement with the FDIC. Purchased loans totaling $2.59 billion and $861.6 million at December 31, 2018 and 2017, respectively,
are not included in the above schedule.
The carrying value of purchased loans are shown below according to major loan type as of the end of the years shown.
(dollars in thousands)
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
2018
2017
$
$
372,686
227,900
1,337,859
623,199
27,188
2,588,832
$
$
$
$
74,378
65,513
468,246
250,539
2,919
861,595
2017
1,069,191
(3,411)
—
11,308
(5,023)
(210,470)
861,595
A rollforward of purchased loans for the years ended December 31, 2018 and 2017 is shown below.
(dollars in thousands)
Balance, January 1
Charge-offs
Additions due to acquisitions
Accretion
Transfers to purchased other real estate owned
Payments received
Ending balance
2018
861,595
(1,803)
2,053,744
11,918
(6,396)
(330,226)
2,588,832
$
$
The following is a summary of changes in the accretable discounts of purchased loans during years ended December 31, 2018
and 2017:
(dollars in thousands)
Balance, January 1
Additions due to acquisitions
Accretion
Accretable discounts removed due to charge-offs
Transfers between non-accretable and accretable discounts, net
Ending balance
2018
2017
$
$
20,192
30,037
(11,918)
(42)
2,227
40,496
$
$
30,624
—
(11,308)
(17)
893
20,192
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-
assisted transactions. As of December 31, 2018, purchased loan pools totaled $262.6 million and consisted of whole-loan, adjustable
rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $260.5 million and $2.1
million of remaining purchase premium paid at acquisition. As of December 31, 2017, purchased loan pools totaled $328.2 million
with principal balances totaling $324.4 million and $3.8 million of purchase premium paid at acquisition.
As of December 31, 2018, all loans in purchased loan pools were performing current loans risk-rated 3 (Good Credit). As of
December 31, 2018, purchased pool loans had no loans on nonaccrual status and had no loans classified as troubled debt
restructurings.
F- 34
As of December 31, 2017, purchased loan pools included principal balance of $904,000 risk-rated (Substandard), while all other
loans included in purchased loan pools were performing current loans risk-rated 3 (Good Credit). As of December 31, 2017,
purchased pool loans had no loans on nonaccrual status and had one loan classified as an accruing troubled debt restructuring with
a principal balance of $904,000.
At December 31, 2018 and 2017, the Company had allocated $732,000 and $1.1 million, respectively, of allowance for loan losses
for the purchased loan pools.
As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual
loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation
that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent
mortgage lending standards to assess each individual loan file. Additional research was conducted in order to assess the real estate
market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review,
an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios.
Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review
were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.
Nonaccrual and Past Due Loans
A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful.
Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest
income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual
status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and
future payments are reasonably assured. Past due loans are loans whose principal or interest is past due 30 days or more. In some
cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different
from the original contractual terms.
The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans.
(dollars in thousands)
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
The following table presents an analysis of purchased loans accounted for on a nonaccrual basis.
(dollars in thousands)
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
2018
1,199
6,119
5,534
10,769
486
24,107
$
$
F- 35
2018
2017
$
$
1,412
892
4,654
10,465
529
17,952
$
$
$
$
1,306
554
2,665
9,194
483
14,202
2017
813
3,139
5,685
5,743
48
15,428
The following table presents an analysis of past due loans, excluding purchased loans as of December 31, 2018 and 2017.
Loans
30-59
Days
Past Due
Loans
60-89
Days
Past Due
Loans 90
or More
Days
Past Due
Total
Loans
Past Due
Current
Loans
Total
Loans
Loans 90
Days or
More
Past Due
and
Still
Accruing
$
6,479
$
5,295
$
4,763
$
16,537
$ 1,299,822
$ 1,316,359
$
3,808
1,218
1,625
11,423
2,344
23,089
$
481
530
4,631
1,167
12,104
$
725
3,645
8,923
735
18,791
2,424
5,800
24,977
4,246
53,984
668,774
1,808,729
1,378,023
451,125
$ 5,606,473
671,198
1,814,529
1,403,000
455,371
$ 5,660,457
$
$
$
—
—
—
414
4,222
Loans
30-59
Days
Past Due
Loans
60-89
Days
Past Due
Loans 90
or More
Days
Past Due
Total
Loans
Past Due
Current
Loans
Total
Loans
Loans 90
Days or
More
Past Due
and
Still
Accruing
$
8,124
$
3,285
$
6,978
$
18,387
$ 1,344,121
$ 1,362,508
$
5,991
810
869
8,772
1,556
20,131
$
$
23
787
2,941
472
7,508
288
1,940
7,041
329
16,576
1,121
3,596
18,754
2,357
44,215
623,474
1,531,843
990,707
322,154
$ 4,812,299
624,595
1,535,439
1,009,461
324,511
$ 4,856,514
$
$
$
—
—
—
—
5,991
(dollars in thousands)
As of December 31, 2018
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
(dollars in thousands)
As of December 31, 2017
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
The following table presents an analysis of purchased past due loans as of December 31, 2018 and 2017.
Loans
30-59
Days
Past Due
Loans
60-89
Days
Past Due
Loans 90
or More
Days
Past Due
Total
Loans
Past Due
Current
Loans
Total
Loans
Loans 90
Days or
More
Past Due
and
Still
Accruing
$
421
$
416
$
1,015
$
1,852
$
370,834
$
372,686
$
627
1,935
12,531
679
16,193
$
$
370
736
2,407
237
4,166
5,273
1,698
7,005
249
15,240
$
6,270
4,369
21,943
1,165
35,599
221,630
1,333,490
601,256
26,023
$ 2,553,233
227,900
1,337,859
623,199
27,188
$ 2,588,832
$
$
—
—
—
—
—
—
(dollars in thousands)
As of December 31, 2018
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
F- 36
Loans
30-59
Days
Past Due
Loans
60-89
Days
Past Due
Loans 90
or More
Days
Past Due
Total
Loans
Past Due
Current
Loans
Total
Loans
Loans 90
Days or
More
Past Due
and
Still
Accruing
$
— $
33
$
760
$
793
$
73,585
$
74,378
$
87
1,190
2,722
57
4,056
$
31
701
1,585
4
2,354
$
2,517
2,724
2,320
43
8,364
2,635
4,615
6,627
104
14,774
$
$
62,878
463,631
243,912
2,815
846,821
$
65,513
468,246
250,539
2,919
861,595
$
$
—
—
—
—
—
—
(dollars in thousands)
As of December 31, 2017
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect
all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual
status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and
interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s
capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient
to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value.
The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings
greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below
include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific
valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows
using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments
on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which
case interest is recognized on a cash basis.
F- 37
The following is a summary of information pertaining to impaired loans, excluding purchased loans:
(dollars in thousands)
Nonaccrual loans
Troubled debt restructurings not included above
Total impaired loans
Interest income recognized on impaired loans
Foregone interest income on impaired loans
As of and For the Years Ended
December 31,
2017
2016
2018
$
$
$
$
17,952
9,323
27,275
827
853
$
$
$
$
14,202
13,599
27,801
1,867
950
$
$
$
$
18,114
14,209
32,323
1,033
977
The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of December 31,
2018 and 2017.
(dollars in thousands)
As of December 31, 2018
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Unpaid
Contractual
Principal
Balance
Recorded
Investment
With No
Allowance
Recorded
Investment
With
Allowance
Total
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
$
1,902
$
1,155
$
513
$
1,668
$
4
$
1,637
1,378
8,950
16,885
561
29,676
$
613
867
5,144
545
8,324
$
424
6,649
11,365
—
18,951
$
1,037
7,516
16,509
545
27,275
$
3
1,591
867
—
2,465
$
984
7,879
15,029
534
26,063
$
(dollars in thousands)
As of December 31, 2017
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Unpaid
Contractual
Principal
Balance
Recorded
Investment
With No
Allowance
Recorded
Investment
With
Allowance
Total
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
$
1,453
$
734
$
613
$
1,347
$
145
$
2,173
1,467
10,646
17,416
523
31,505
$
471
729
4,828
488
7,250
$
500
8,873
10,565
—
20,551
$
971
9,602
15,393
488
27,801
$
48
1,047
1,005
—
2,245
$
1,122
11,053
14,930
541
29,819
$
F- 38
The following is a summary of information pertaining to purchased impaired loans:
(dollars in thousands)
Nonaccrual loans
Troubled debt restructurings not included above
Total impaired loans
Interest income recognized on impaired loans
Foregone interest income on impaired loans
As of and For the Years Ended
December 31,
2017
2016
2018
$
$
$
$
24,107
18,740
42,847
2,203
1,483
$
$
$
$
15,428
20,472
35,900
1,625
1,239
$
$
$
$
22,966
23,543
46,509
2,755
1,637
The following table presents an analysis of information pertaining to purchased impaired loans as of December 31, 2018 and 2017.
(dollars in thousands)
As of December 31, 2018
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Unpaid
Contractual
Principal
Balance
Recorded
Investment
With No
Allowance
Recorded
Investment
With
Allowance
Total
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
$
5,717
$
473
$
757
$
1,230
$
— $
836
13,714
14,766
24,839
526
59,562
$
623
1,115
8,185
486
10,882
$
6,511
10,581
14,116
—
31,965
$
7,134
11,696
22,301
486
42,847
$
476
684
773
—
1,933
$
5,712
12,349
21,433
229
40,559
$
(dollars in thousands)
As of December 31, 2017
Commercial, financial and agricultural
Real estate – construction and
development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
Credit Quality Indicators
Unpaid
Contractual
Principal
Balance
Recorded
Investment
With No
Allowance
Recorded
Investment
With
Allowance
Total
Recorded
Investment
Related
Allowance
Average
Recorded
Investment
$
4,170
$
70
$
744
$
814
$
400
$
827
9,060
14,596
20,867
57
48,750
$
282
1,224
6,574
48
8,198
$
3,875
11,173
11,910
—
27,702
$
4,157
12,397
18,484
48
35,900
$
1,114
906
821
—
3,241
$
3,877
15,329
20,743
41
40,817
$
The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a
description of the general characteristics of the grades:
Grade 1 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by
cash or cash equivalents.
Grade 2 – Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a Good Credit.
Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.
Grade 3 – Good Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable
loan structures and demonstrate ability to repay.
Grade 4 – Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more
than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations,
untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect,
the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal,
F- 39
fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing,
acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions
which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower;
or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.
Grade 5 – Fair Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information
that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.
Grade 6 – Other Assets Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve
management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the
asset or in the Company’s credit position at some future date.
Grade 7 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying
capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by
the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be
characterized by past due performance, operating losses or questionable collateral values.
Grade 8 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added
provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values,
highly questionable or improbable.
Grade 9 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance
as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage
value, but rather it is not practical or desirable to defer writing it off.
The following table presents the loan portfolio, excluding purchased loans, by risk grade as of December 31, 2018 and 2017 (in
thousands).
As of December 31, 2018
Risk Grade
1 - Prime credit
2 - Strong credit
3 - Good credit
4 - Satisfactory credit
5 - Fair credit
6 - Other assets especially mentioned
7 - Substandard
8 - Doubtful
9 - Loss
Total
Commercial,
Financial
and
Agricultural
530,864
$
452,250
174,811
137,038
13,714
5,130
2,552
—
—
1,316,359
$
Real Estate -
Construction
and
Development
40
$
681
74,657
582,456
6,264
4,091
3,009
—
—
671,198
$
Real Estate -
Commercial
and
Farmland
$
$
500
37,079
888,433
814,068
30,364
20,959
23,126
—
—
1,814,529
Real Estate -
Residential
16
$
33,043
1,246,383
94,143
8,634
4,881
15,900
—
—
1,403,000
$
Consumer
Installment
10,744
$
48
23,844
419,983
78
57
617
—
—
455,371
$
Total
542,164
523,101
2,408,128
2,047,688
59,054
35,118
45,204
—
—
5,660,457
$
$
F- 40
As of December 31, 2017
Risk Grade
1 - Prime credit
2 - Strong credit
3 - Good credit
4 - Satisfactory credit
5 - Fair credit
6 - Other assets especially mentioned
7 - Substandard
8 - Doubtful
9 - Loss
Total
Commercial,
Financial
and
Agricultural
539,899
$
568,557
125,740
117,358
330
5,236
5,381
7
—
1,362,508
$
Real Estate -
Construction
and
Development
$
— $
1,005
59,318
552,918
4,474
4,207
2,673
—
—
624,595
$
$
Real Estate -
Commercial
and
Farmland
5,790
68,507
966,391
454,506
6,408
15,108
18,729
—
—
1,535,439
Real Estate -
Residential
47
$
49,742
843,178
88,537
5,781
5,339
16,837
—
—
1,009,461
$
Consumer
Installment
9,243
$
670
39,352
274,462
3
185
596
—
—
324,511
$
Total
554,979
688,481
2,033,979
1,487,781
16,996
30,075
44,216
7
—
4,856,514
$
$
The following table presents the purchased loan portfolio by risk grade as of December 31, 2018 and 2017 (in thousands).
As of December 31, 2018
Risk Grade
1 - Prime credit
2 - Strong credit
3 - Good credit
4 - Satisfactory credit
5 - Fair credit
6 - Other assets especially mentioned
7 - Substandard
8 - Doubtful
9 - Loss
Total
As of December 31, 2017
Risk Grade
1 - Prime credit
2 - Strong credit
3 - Good credit
4 - Satisfactory credit
5 - Fair credit
6 - Other assets especially mentioned
7 - Substandard
8 - Doubtful
9 - Loss
Total
Commercial,
Financial
and
Agricultural
90,205
$
2,648
20,489
215,096
14,445
11,601
18,202
—
—
372,686
$
Commercial,
Financial
and
Agricultural
3,358
$
4,541
8,517
43,085
—
13,718
1,159
—
—
74,378
$
$
$
Real Estate -
Construction
and
Development
$
Real Estate -
Commercial
and
Farmland
Real Estate -
Residential
— $
—
18,022
195,079
2,728
1,459
10,612
—
—
227,900
$
— $
7,407
230,089
1,034,943
29,468
10,063
25,889
—
—
1,337,859
$
Consumer
Installment
570
164
2,410
23,177
35
94
738
—
—
27,188
$
— $
74,398
385,279
118,082
16,937
7,231
21,272
—
—
623,199
Real Estate -
Construction
and
Development
$
Real Estate -
Commercial
and
Farmland
Real Estate -
Residential
— $
—
13,014
39,877
2,306
4,076
6,240
—
—
65,513
$
— $
5,047
186,187
230,570
6,081
13,637
26,724
—
—
468,246
$
Consumer
Installment
606
240
1,166
711
—
53
143
—
—
2,919
$
— $
91,270
50,988
70,837
11,349
5,637
20,458
—
—
250,539
Total
90,775
84,617
656,289
1,586,377
63,613
30,448
76,713
—
—
2,588,832
Total
3,964
101,098
259,872
385,080
19,736
37,121
54,724
—
—
861,595
$
$
$
$
F- 41
Troubled Debt Restructurings
The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties
and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates,
principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company
has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of
the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most
typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an
extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately
stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest,
allowed the net cash flows to service the debt under the modified terms.
The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the
borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key
factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and
the current valuation of the collateral. If the appraisal in file is older than six months, an evaluation must be made as to the continued
reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can
be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection
of the collateral to validate the current condition.
The Company’s policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade
of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan
payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments
under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered
non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan
policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid,
and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured
and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit
evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit
Officer.
In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed
as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in 2018
and 2017 totaling $111.7 million and $103.0 million, respectively, under such parameters.
As of December 31, 2018 and 2017, the Company had a balance of $11.0 million and $15.6 million, respectively, in troubled debt
restructurings, excluding purchased loans. The Company has recorded $890,000 and $2.8 million in previous charge-offs on such
loans at December 31, 2018 and 2017, respectively. The Company’s balance in the allowance for loan losses allocated to such
troubled debt restructurings was $820,000 and $1.4 million at December 31, 2018 and 2017, respectively. At December 31, 2018,
the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled
restructurings.
During the year ending December 31, 2018 and 2017, the Company modified loans as troubled debt restructurings, excluding
purchased loans, with principal balances of $2.3 million and $4.2 million, respectively, and these modifications did not have a
material impact on the Company's allowance for loan losses. The following table presents the loans by class modified as troubled
debt restructurings, excluding purchased loans, which occurred during the year ending December 31, 2018 and 2017.
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
December 31, 2018
December 31, 2017
#
11
1
2
13
6
33
Balance
(in thousands)
348
$
3
440
1,430
35
2,256
$
#
2
—
7
12
11
32
Balance
(in thousands)
7
$
—
3,516
656
33
4,212
$
F- 42
Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $1.3 million and $1.6 million at
December 31, 2017 and 2016 defaulted during the year ended December 31, 2018 and 2017, respectively, and these defaults did
not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings
by class that defaulted (defined as 30 days past due) during the year ending December 31, 2018 and 2017.
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
December 31, 2018
December 31, 2017
#
8
1
1
16
7
33
Balance
(in thousands)
107
$
—
246
911
34
1,298
$
#
2
2
4
12
7
27
Balance
(in thousands)
47
$
261
419
838
22
1,587
$
The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified
separately as accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Accruing Loans
Non-Accruing Loans
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
5
5
12
71
6
99
Balance
(in thousands)
256
$
145
2,863
6,043
16
9,323
$
#
14
1
3
20
24
62
Balance
(in thousands)
138
$
2
426
1,119
69
1,754
$
As of December 31, 2017
Accruing Loans
Non-Accruing Loans
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
4
6
17
74
4
105
Balance
(in thousands)
41
$
417
6,937
6,199
5
13,599
$
#
12
2
5
18
33
70
Balance
(in thousands)
120
$
34
204
1,508
98
1,964
$
As of December 31, 2018 and 2017, the Company had a balance of $22.2 million and $24.9 million, respectively, in troubled debt
restructurings included in purchased loans. The Company has recorded $940,000 and $1.2 million, respectively, in previous charge-
offs on such loans at December 31, 2018 and 2017. At December 31, 2018, the Company did not have any commitments to lend
additional funds to debtors whose terms have been modified in troubled restructurings.
F- 43
During the year ending December 31, 2018 and 2017, the Company modified purchased loans as troubled debt restructurings,
with principal balances of $2.5 million and $3.6 million, respectively, and these modifications did not have a material impact on
the Company’s allowance for loan losses. The following table presents the purchased loans by class modified as troubled debt
restructurings, which occurred during the year ending December 31, 2018 and 2017.
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
December 31, 2018
December 31, 2017
#
4
—
1
27
2
34
Balance
(in thousands)
63
$
—
71
2,351
14
2,499
$
#
1
—
4
18
—
23
Balance
(in thousands)
5
$
—
1,311
2,319
—
3,635
$
Troubled debt restructurings included in purchased loans with an outstanding balance of $2.5 million and $742,000 defaulted
during the years ended December 31, 2018 and 2017, respectively, and these defaults did not have a material impact on the
Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined
as 30 days past due) during the year ending December 31, 2018 and 2017.
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
December 31, 2018
December 31, 2017
#
—
—
1
25
—
26
Balance
(in thousands)
—
$
—
71
2,400
—
2,471
$
#
1
—
2
9
1
13
Balance
(in thousands)
5
$
—
282
452
3
742
$
The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as
accrual and non-accrual at December 31, 2018 and 2017.
As of December 31, 2018
Accruing Loans
Non-Accruing Loans
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
1
4
12
115
—
132
Balance
(in thousands)
31
$
1,015
6,162
11,532
—
18,740
$
#
3
5
7
24
4
43
Balance
(in thousands)
32
$
293
1,685
1,424
17
3,451
$
As of December 31, 2017
Accruing Loans
Non-Accruing Loans
Loan Class
Commercial, financial and agricultural
Real estate – construction and development
Real estate – commercial and farmland
Real estate – residential
Consumer installment
Total
#
—
3
14
117
—
134
Balance
(in thousands)
—
$
1,018
6,713
12,741
—
20,472
$
#
3
6
10
25
2
46
Balance
(in thousands)
16
$
340
2,582
1,462
5
4,405
$
As of December 31, 2018, there were no loans in purchased loan pools that had been modified as troubled debt restructurings. As
of December 31, 2017, the Company had one loan in purchased loan pools that had been modified as a troubled debt restructuring.
As of December 31, 2017, this modified loan had a balance of $904,000 and was on accrual status.
F- 44
Related Party Loans
In the ordinary course of business, the Company has granted loans to certain directors and their affiliates. Company policy prohibits
loans to executive officers. Changes in related party loans are summarized as follows:
(dollars in thousands)
Balance, January 1
Advances
Repayments
Transactions due to changes in related parties
Ending balance
Allowance for Loan Losses
December 31,
2018
2017
$
$
2,145
257
(944)
—
1,458
$
$
3,167
654
(1,676)
—
2,145
The following table details activity in the allowance for loan losses by portfolio segment for the periods indicated. Allocation of
a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Commercial,
Financial
and
Agricultural
Real Estate –
Construction
and
Development
Real Estate –
Commercial
and
Farmland
Real Estate -
Residential
Consumer
Installment
Purchased
Loans
Purchased
Loan
Pools
Total
(dollars in thousands)
Twelve months ended
December 31, 2018
Balance, January 1, 2018
$
3,631
$
3,629
$
7,501
$
4,786
$
1,916
$
3,253
$
1,075
$
25,791
Provision for loan losses
Loans charged off
Recoveries of loans previously
charged off
10,690
(13,803)
3,769
277
(292)
120
1,636
(338)
176
1,002
(771)
5,569
(4,189)
(2,164)
(1,738)
346
499
2,582
(343)
16,667
—
—
(21,131)
7,492
Balance, December 31, 2018
$
4,287
$
3,734
$
8,975
$
5,363
$
3,795
$
1,933
$
732
$
28,819
Period-end amount allocated
to:
Loans individually evaluated for
impairment(1)
Loans collectively evaluated for
impairment
Ending balance
Loans:
Individually evaluated for
impairment(1)
Collectively evaluated for
impairment
Acquired with deteriorated
credit quality
$
$
$
570
$
3
$
1,591
$
867
$
— $
1,933
$
— $
4,964
3,717
3,731
7,384
4,496
3,795
—
4,287
$
3,734
$
8,975
$
5,363
$
3,795
$
1,933
$
732
732
23,855
$
28,819
3,211
$
424
$
6,649
$
11,364
$
— $
32,244
$
— $
53,892
1,313,148
670,774
1,807,880
1,391,636
455,371
2,468,996
262,625
8,370,430
—
—
—
—
—
87,592
—
87,592
Ending balance
$
1,316,359
$
671,198
$
1,814,529
$
1,403,000
$
455,371
$ 2,588,832
$ 262,625
$ 8,511,914
(1) At December 31, 2018, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled
debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled
debt restructurings.
F- 45
Commercial,
Financial
and
Agricultural
Real Estate –
Construction
and
Development
Real Estate –
Commercial
and
Farmland
Real Estate -
Residential
Consumer
Installment
Purchased
Loans
Purchased
Loan
Pools
Total
(dollars in thousands)
Twelve months ended
December 31, 2017
Balance, January 1, 2017
$
2,192
$
2,990
$
7,662
$
6,786
$
827
$
1,626
$
1,837
$
23,920
Provision for loan losses
Loans charged off
Recoveries of loans previously
charged off
3,019
(2,850)
1,270
488
(95)
246
508
(853)
184
(86)
(2,151)
2,591
(1,618)
2,606
(2,900)
237
116
1,921
(762)
8,364
—
—
(10,467)
3,974
Balance, December 31, 2017
$
3,631
$
3,629
$
7,501
$
4,786
$
1,916
$
3,253
$
1,075
$
25,791
Period-end amount allocated
to:
Loans individually evaluated
for impairment(1)
Loans collectively evaluated for
impairment
Ending balance
Loans:
Individually evaluated for
impairment(1)
Collectively evaluated for
impairment
Acquired with deteriorated
credit quality
$
$
$
465
$
48
$
1,047
$
1,028
$
— $
3,253
$
177
$
6,018
3,166
3,581
6,454
3,758
1,916
—
898
19,773
3,631
$
3,629
$
7,501
$
4,786
$
1,916
$
3,253
$
1,075
$
25,791
2,971
$
500
$
8,873
$
10,818
$
— $
28,165
$
904
$
52,231
1,359,537
624,095
1,526,566
998,643
324,511
718,447
327,342
5,879,141
—
—
—
—
—
114,983
—
114,983
Ending balance
$ 1,362,508
$
624,595
$
1,535,439
$
1,009,461
$
324,511
$ 861,595
$ 328,246
$ 6,046,355
(1) At December 31, 2017, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled
debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled
debt restructurings.
F- 46
Commercial,
Financial
and
Agricultural
Real Estate –
Construction
and
Development
Real Estate –
Commercial
and
Farmland
Real Estate -
Residential
Consumer
Installment
Purchased
Loans
Purchased
Loan
Pools
Total
(dollars in thousands)
Twelve months ended
December 31, 2016
Balance, January 1, 2016
$
1,144
$
5,009
$
7,994
$
4,760
$
1,574
$
— $
581
$
21,062
Provision for loan losses
Loans charged off
Recoveries of loans previously
charged off
2,647
(1,999)
(1,921)
(588)
400
490
107
(708)
269
2,757
(1,122)
391
Balance, December 31, 2016
$
2,192
$
2,990
$
7,662
$
6,786
$
(523)
(351)
127
827
(232)
(1,559)
3,417
1,256
—
—
4,091
(6,327)
5,094
$
1,626
$
1,837
$
23,920
Period-end amount allocated
to:
Loans individually evaluated
for impairment(1)
Loans collectively evaluated for
impairment
Ending balance
Loans:
Individually evaluated for
impairment(1)
Collectively evaluated for
impairment
Acquired with deteriorated
credit quality
$
$
$
120
$
266
$
1,502
$
2,893
$
— $
1,626
$
— $
6,407
2,072
2,724
6,160
3,893
2,192
$
2,990
$
7,662
$
6,786
$
827
827
—
1,837
17,513
$
1,626
$
1,837
$
23,920
501
$
659
$
12,423
$
12,697
$
— $
34,141
$
— $
60,421
966,637
362,386
1,393,796
768,321
109,401
886,516
568,314
5,055,371
—
—
—
—
—
148,534
—
148,534
Ending balance
$
967,138
$
363,045
$
1,406,219
$
781,018
$
109,401
$ 1,069,191
$ 568,314
$ 5,264,326
(1) At December 31, 2016, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled
debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled
debt restructurings.
NOTE 6. OTHER REAL ESTATE OWNED
The following is a summary of the activity in other real estate owned during years ended December 31, 2018 and 2017:
(dollars in thousands)
Balance, January 1
Loans transferred to other real estate owned
Net gains (losses) on sale and write-downs recorded in statement of income
Sales proceeds
Other
Ending balance
2018
2017
8,464
4,124
(611)
(4,697)
(62)
7,218
$
$
10,874
4,372
(862)
(5,920)
—
8,464
$
$
The following is a summary of the activity in purchased other real estate owned during years ended December 31, 2018 and 2017:
(dollars in thousands)
Balance, January 1
Loans transferred to other real estate owned
Acquired in acquisitions
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-
sharing agreements
Net gains (losses) on sale and write-downs recorded in statement of income
Sales proceeds
Ending balance
2018
2017
9,011
6,396
1,888
17
(690)
(7,087)
9,535
$
$
12,540
5,023
—
86
362
(9,000)
9,011
$
$
F- 47
NOTE 7. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
(dollars in thousands)
Land
Buildings and leasehold improvements
Furniture and equipment
Construction in progress
Accumulated depreciation
December 31,
2018
2017
$
$
49,518
110,623
53,425
3,312
216,878
(71,468)
145,410
$
$
39,299
95,771
48,809
757
184,636
(66,898)
117,738
Depreciation expense was approximately $10.0 million, $9.2 million, and $9.5 million for the years ended December 31, 2018,
2017 and 2016, respectively.
At December 31, 2018, estimated costs to complete construction projects in progress and other binding commitments for capital
expenditures were not a material amount.
Leases
The Company has entered into various operating leases for certain branch locations, loan production offices, and corporate support
services. Generally, these leases have initial lease terms of ten years or less with up to two renewal options.
Rental expense amounted to approximately $7.9 million, $4.9 million, and $4.5 million for the years ended December 31, 2018,
2017 and 2016, respectively. Future minimum lease commitments under the Company’s operating leases, excluding any renewal
options, are summarized as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
$
$
6,386
5,181
4,523
4,000
2,983
8,312
31,385
F- 48
NOTE 8. GOODWILL AND INTANGIBLE ASSETS
The change in the carrying value of goodwill for the years ended December 31, 2018 and 2017 is summarized below for both the
total Company and by the Company's reportable segments.
(dollars in thousands)
Consolidated
Carrying amount of goodwill at beginning of year
Additions related to acquisitions in current year
Carrying amount of goodwill at end of year
Banking Division
Carrying amount of goodwill at beginning of year
Additions related to acquisitions in current year
Carrying amount of goodwill at end of year
Premium Finance Division
Carrying amount of goodwill at beginning of year
Additions related to acquisitions in current year
Carrying amount of goodwill at end of year
December 31,
2018
2017
125,532
377,902
503,434
125,532
312,612
438,144
$
$
$
$
— $
65,290
65,290
$
125,532
—
125,532
125,532
—
125,532
—
—
—
$
$
$
$
$
$
During 2018, the Company recorded goodwill totaling $377.9 million comprised of $219.6 million, $93.0 million and $65.3 million
related to the acquisitions of Hamilton, Atlantic and USPF, respectively.
Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value.
At December 31, 2018, the Banking Division had positive equity and the Company's qualitative assessment indicated that it was
more likely than not that the Banking Division's fair value exceeded it carrying value, resulting in no goodwill impairment.
At December 31, 2018, the Premium Finance Division had positive equity but the Company’s qualitative assessment did not
indicate that it was more likely than not that the reporting unit’s fair value exceeded its carrying value. Therefore, the Company
proceeded to the two step impairment test. Step 1 includes the determination of the carrying value of the reporting unit, including
the goodwill and intangible assets, and estimating fair value of the reporting unit. If the carrying amount of a reporting unit exceeds
its fair value, Step 2 determines the impairment. Step 1 was completed for the Premium Finance Division by updating the original
cash flow model used to value the division with current customer information, margin assumptions, and future growth. The
resulting fair value of the Premium Finance Division exceeded its carrying value, indicating no goodwill impairment and eliminating
the need to do Step 2.
The carrying value of intangible assets as of December 31, 2018 and 2017 was $58.7 million and $13.5 million, respectively.
Intangible assets are comprised core deposit intangibles, an insurance agent relationships intangible, a "US Premium Finance"
trade name intangible, and a non-compete agreement intangible. During 2018, the Company recorded core deposit intangible
assets of $23.6 million and $7.5 million associated with the Hamilton acquisition and the Atlantic acquisition, respectively. The
amortization period used for core deposit intangibles ranges from seven to ten years. Also during 2018, in connection with the
USPF acquisition, the Company recorded an insurance agent relationships intangible asset of $22.4 million, a "US Premium
Finance" trade name intangible asset of $1.1 million and a non-compete agreement intangible asset of $162,000. The amortization
periods used for the insurance agent relationships, the "US Premium Finance" trade name, and the non-compete agreement
intangible assets are eight years, seven years and three years, respectively.
F- 49
Following is a summary of information related to acquired intangible assets:
(dollars in thousands)
Amortized intangible assets:
Core deposit premiums
Insurance agent relationships
US Premium Finance trade name
Non-compete agreement
As of December 31, 2018
As of December 31, 2017
Gross
Amount
Accumulated
Amortization
Gross
Amount
Accumulated
Amortization
$
$
57,348
22,351
1,094
162
80,955
$
$
19,512
2,561
143
50
22,266
$
$
26,250
—
—
—
26,250
$
$
12,754
—
—
—
12,754
The Premium Finance Division loans decreased $72.2 million from $482.5 million at December 31, 2017 to $410.4 million at
December 31, 2018, indicating the insurance agent relationships intangible asset could be impaired. A detail analysis of acquired
insurance agent relationships was performed to update retention assumptions. These new assumptions were used to calculate
expected future cash flows from the acquired insurance agent relationships. The updated undiscounted cash flows exceeded the
carrying value of the insurance agent relationships intangible asset, indicating no impairment.
The aggregate amortization expense for intangible assets was approximately $9.5 million, $3.9 million, and $4.4 million for the
years ended December 31, 2018, 2017 and 2016, respectively.
The estimated amortization expense for each of the next five years is as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
NOTE 9. DEPOSITS
The scheduled maturities of time deposits at December 31, 2018 are as follows:
(dollars in thousands)
2019
2020
2021
2022
2023
Thereafter
$
$
$
$
12,022
10,491
8,520
6,887
6,067
14,702
58,689
1,894,332
334,574
60,185
55,960
21,692
1,089
2,367,832
The aggregate amount of time deposits in denominations of $250,000 or more at December 31, 2018 and 2017 was $423.6 million
and $235.8 million, respectively.
As of December 31, 2018, the Company had brokered deposits of $846.7 million. As of December 31, 2017, the Company had
brokered deposits of $228.6 million.
Deposits from principal officers, directors, and their affiliates at December 31, 2018 and 2017 were $8.0 million and $6.2 million,
respectively.
F- 50
NOTE 10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received
under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the securities underlying
these agreements are included in investment securities in the Company’s consolidated balance sheets. At December 31, 2018 and
2017, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on
a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on
a daily basis and is required to transfer additional securities if the market value of the securities fall below the repurchase agreement
price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the
market value of the securities sold under agreements to repurchase.
The following is a summary of securities sold under repurchase agreements for the years ended December 31, 2018, 2017 and
2016:
(dollars in thousands)
Average daily balance during the year
Average interest rate during the year
Maximum month-end balance during the year
Weighted average interest rate at year-end
For the Years Ended December 31,
2017
2018
2016
$
$
15,692
0.15%
23,270
0.14%
$
$
28,694
0.20%
49,836
0.18%
$
$
44,324
0.22%
56,203
0.19%
The following is a summary of the Company’s securities sold under agreements to repurchase at December 31, 2018 and 2017:
(dollars in thousands)
Securities sold under agreements to repurchase
December 31,
2018
December 31,
2017
$
20,384
$
30,638
At December 31, 2018, the investment securities underlying these agreements were comprised of mortgage-backed securities. At
December 31, 2017, the investment securities underlying these agreements were comprised of state, county and municipal securities
and mortgage-backed securities.
NOTE 11. OTHER BORROWINGS
Other borrowings consist of the following:
(dollars in thousands)
Federal Home Loan Bank ("FHLB") borrowings:
Daily Rate Credit with a variable interest rate (1.59% at December 31, 2017)
Convertible Flipper Advance due May 22, 2019; current interest rate of 4.68%
Principal Reducing Advance due June 20, 2019; fixed interest rate of 1.274%
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095%
Fixed Rate Advance due January 8, 2018; fixed interest rate of 1.39%
Subordinated notes payable:
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,074 and
$1,205, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate
thereafter at three-month LIBOR plus 3.616%
Other debt:
Advance from correspondent bank due October 5, 2019; fixed interest rate of 4.25%
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed
interest rate of 2.09%
Advances under revolving credit agreement with a regional bank due September 26, 2020; secured
by subsidiary bank stock; variable interest rate at 90-day LIBOR plus 3.50% (6.24% at December 31,
2018)
December 31,
2018
2017
$
— $
1,514
500
1,434
993
1,858
—
25,000
—
—
—
—
—
150,000
73,926
73,795
20
1,529
49
1,710
70,000
151,774
$
—
250,554
$
F- 51
The advances from the FHLB are collateralized by a blanket lien on all eligible first mortgage loans and other specific loans in
addition to FHLB stock. At December 31, 2018, $1.93 billion was available for borrowing on lines with the FHLB.
At December 31, 2018, the Company had a revolving credit arrangement with a regional bank with a maximum line amount of
$100.0 million. This line of credit is secured by subsidiary bank stock, expires on September 26, 2020, and bears a variable interest
rate of 90-day LIBOR plus 3.50%. At December 31, 2018, there was $30.0 million available for borrowing under the revolving
credit arrangement.
As of December 31, 2018, the Bank maintained credit arrangements with various financial institutions to purchase federal funds
up to $117.0 million.
The Bank also participates in the Federal Reserve discount window borrowings program. At December 31, 2018, the Bank had
$1.64 billion of loans pledged at the Federal Reserve discount window and had $1.14 billion available for borrowing.
Subordinated Notes Payable
On March 13, 2017, the Company completed the public offering and sale of $75.0 million in aggregate principal amount of its
5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 (the “subordinated notes”). The subordinated notes were sold to the
public at par pursuant to an underwriting agreement and were issued pursuant to an indenture and a supplemental indenture. The
subordinated notes will mature on March 15, 2027 and through March 14, 2022 will bear a fixed rate of interest of 5.75% per
annum, payable semi-annually in arrears on September 15 and March 15 of each year. Beginning March 15, 2022, the interest rate
on the subordinated notes resets quarterly to a floating rate per annum equal to the then-current three-month LIBOR plus 3.616%,
payable quarterly in arrears on June 15, September 15, December 15, and March 15 of each year to the maturity date or earlier
redemption.
On any scheduled interest payment date beginning March 15, 2022, the Company may, at its option, redeem the subordinated
notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
The subordinated notes are unsecured and rank equally with all other unsecured subordinated indebtedness of the Company,
including any subordinated indebtedness issued in the future under the indenture governing the subordinated notes. The
subordinated notes are subordinated in right of payment to all senior indebtedness of the Company. The subordinated notes are
obligations of the Company only and are not guaranteed by any subsidiaries, including the Bank. Additionally, the subordinated
notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries,
meaning that creditors of the Company’s subsidiaries (including, in the case of the Bank, its depositors) generally will be paid
from those subsidiaries’ assets before holders of the subordinated notes have any claim to those assets.
For regulatory capital adequacy purposes, the subordinated notes qualify as Tier 2 capital for the Company. If in the future the
subordinated notes no longer qualify as Tier 2 capital, the subordinated notes may be redeemed by the Company at a redemption
price equal to 100% of the principal amount plus accrued and unpaid interest, subject to prior approval by the Board of Governors
of the Federal Reserve System.
NOTE 12. SUBORDINATED DEFERRABLE INTEREST DEBENTURES
During 2005, the Company acquired First National Banc Statutory Trust I, a statutory trust subsidiary of First National Banc, Inc.,
whose sole purpose was to issue $5,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month
LIBOR plus 2.80% (5.60% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred
securities have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning
in April 2009. There are certain circumstances (as described in the trust agreement) in which the securities may be redeemed within
the first five years at the Company’s option. The aggregate principal amount of trust preferred certificates outstanding at
December 31, 2018 was $5,000,000. The aggregate principal amount of debentures outstanding was $5,155,000. The Company’s
investment in the common stock of the trust was $155,000 and is included in other assets.
During 2006, the Company formed Ameris Statutory Trust I, issuing trust preferred certificates in the aggregate principal amount
of $36,000,000. The related debentures issued by the Company were in the aggregate principal amount of $37,114,000. Both the
trust preferred securities and the related debentures bear interest at 3-Month LIBOR plus 1.63% (4.42% at December 31,
2018). Distributions on the trust preferred securities are paid quarterly, with interest on the debentures being paid on the
corresponding dates. The trust preferred securities mature on December 15, 2036 and are redeemable at the Company’s option
F- 52
beginning September 15, 2011. The Company’s investment in the common stock of the trust was $1,114,000 and is included in
other assets.
During 2013, the Company acquired Prosperity Banking Capital Trust I, a statutory trust subsidiary of Prosperity, whose sole
purpose was to issue $5,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 2.57% (4.97% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in July
2009. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $5,000,000. The
aggregate principal amount of debentures outstanding was $5,155,000, and is being carried at $3,567,000 on the Company’s
balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $155,000
and is included in other assets.
During 2013, the Company acquired Prosperity Bank Statutory Trust II, a statutory trust subsidiary of Prosperity, whose sole
purpose was to issue $4,500,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 3.15% (5.97% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
March 2008. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $4,500,000. The
aggregate principal amount of debentures outstanding was $4,640,000, and is being carried at $3,513,000 on the Company’s
balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $140,000
and is included in other assets.
During 2013, the Company acquired Prosperity Bank Statutory Trust III, a statutory trust subsidiary of Prosperity, whose sole
purpose was to issue $10,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 1.60% (4.39% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
March 2011. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $10,000,000. The
aggregate principal amount of debentures outstanding was $10,310,000, and is being carried at $5,989,000 on the Company’s
balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $310,000
and is included in other assets.
During 2013, the Company acquired Prosperity Bank Statutory Trust IV, a statutory trust subsidiary of Prosperity, whose sole
purpose was to issue $10,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 1.54% (4.33% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
December 2012. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was
$5,000,000. The aggregate principal amount of debentures outstanding was $5,155,000, and is being carried at $3,372,000 on the
Company’s balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was
$310,000 and is included in other assets.
During 2014, the Company acquired Coastal Bankshares Statutory Trust I, a statutory trust subsidiary of Coastal, whose sole
purpose was to issue $5,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 3.15% (5.59% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
October 2008. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was
$5,000,000. The aggregate principal amount of debentures outstanding was $5,155,000, and is being carried at $4,013,000 on the
Company’s balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was
$155,000 and is included in other assets.
During 2014, the Company acquired Coastal Bankshares Statutory Trust II, a statutory trust subsidiary of Coastal, whose sole
purpose was to issue $10,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 1.60% (4.39% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
December 2010. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was
$10,000,000. The aggregate principal amount of debentures outstanding was $10,310,000, and is being carried at $6,421,000 on
the Company’s balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust
was $310,000 and is included in other assets.
During 2015, the Company acquired Merchants & Southern Statutory Trust I, a statutory trust subsidiary of Merchants, whose
sole purpose was to issue $3,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
F- 53
plus 1.90% (4.69% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
March 2010. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $3,000,000. The
aggregate principal amount of debentures outstanding was $3,093,000, and is being carried at $2,068,000 on the Company’s
balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $93,000
and is included in other assets.
During 2015, the Company acquired Merchants & Southern Statutory Trust II, a statutory trust subsidiary of Merchants, whose
sole purpose was to issue $3,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 1.50% (4.29% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in June
2011. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $3,000,000. The
aggregate principal amount of debentures outstanding was $3,093,000, and is being carried at $1,910,000 on the Company’s
balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $93,000
and is included in other assets.
During 2016, the Company acquired Atlantic BancGroup, Inc. Statutory Trust I, a statutory trust subsidiary of JAXB, whose sole
purpose was to issue $3,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 1.50% (4.29% at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities
have a maturity of 30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in
September 2015. The aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was
$3,000,000. The aggregate principal amount of debentures outstanding was $3,093,000, and is being carried at $1,844,000 on the
Company’s balance sheet net of unamortized purchase discount. The Company’s investment in the common stock of the trust was
$93,000 and is included in other assets.
During 2016, the Company acquired Jacksonville Statutory Trust I, a statutory trust subsidiary of JAXB, whose sole purpose was
to issue $4,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 2.63% (5.42%
at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities have a maturity of
30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in June 2009. The aggregate
principal amount of trust preferred certificates outstanding at December 31, 2018 was $4,000,000. The aggregate principal amount
of debentures outstanding was $4,124,000, and is being carried at $3,191,000 on the Company’s balance sheet net of unamortized
purchase discount. The Company’s investment in the common stock of the trust was $124,000 and is included in other assets.
During 2016, the Company acquired Jacksonville Statutory Trust II, a statutory trust subsidiary of JAXB, whose sole purpose was
to issue $3,000,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.73% (4.52%
at December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities have a maturity of
30 years and are redeemable at the Company’s option on any quarterly interest payment date beginning in December 2011. The
aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $3,000,000. The aggregate
principal amount of debentures outstanding was $3,093,000, and is being carried at $2,042,000 on the Company’s balance sheet
net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $93,000 and is included
in other assets.
During 2016, the Company acquired Jacksonville Bancorp, Inc. Statutory Trust III, a statutory trust subsidiary of JAXB, whose
sole purpose was to issue $7,550,000 principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR
plus 3.75% (6.54% at December 31, 2018). The trust preferred securities have a maturity of 30 years and are redeemable at the
Company’s option on any quarterly interest payment date beginning in June 2013. The aggregate principal amount of trust preferred
certificates outstanding at December 31, 2018 was $7,550,000. The aggregate principal amount of debentures outstanding was
$7,784,000, and is being carried at $6,673,000 on the Company’s balance sheet net of unamortized purchase discount. The
Company’s investment in the common stock of the trust was $234,000 and is included in other assets.
During 2018, the Company acquired Cherokee Statutory Trust I, a statutory trust subsidiary of Hamilton, whose sole purpose was
to issue principal amount of trust preferred securities at a rate per annum equal to the 3-Month LIBOR plus 1.50% (4.29% at
December 31, 2018) through a pool sponsored by a national brokerage firm. The trust preferred securities have a maturity of 30
years and are redeemable at the Company’s option on any quarterly interest payment date beginning in December 2010. The
aggregate principal amount of trust preferred certificates outstanding at December 31, 2018 was $3,093,000. The aggregate
principal amount of debentures outstanding was $3,000,000, and is being carried at $2,315,000 on the Company’s balance sheet
net of unamortized purchase discount. The Company’s investment in the common stock of the trust was $93,000 and is included
in other assets.
F- 54
Under applicable accounting standards, the assets and liabilities of such trusts, as well as the related income and expenses, are
excluded from the Company’s consolidated financial statements. However, the subordinated debentures issued by the Company
and purchased by the trusts remain on the consolidated balance sheets. In addition, the related interest expense continues to be
included in the consolidated statements of income. For regulatory capital purposes, the trust preferred securities qualify as a
component of Tier 1 Capital.
NOTE 13. SHAREHOLDERS' EQUITY
Common Stock Repurchase Program
On October 25, 2018, the Company announced that its Board of Directors has authorized the Company to repurchase up to $100.0
million of its outstanding common stock. Repurchases of shares, which are authorized to occur over the next twelve months, will
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 December 31, 2018, no shares of the Company's common stock had been repurchased under the program.
Hamilton Acquisition
On June 29, 2018, the Company issued 6,548,385 shares of its common stock to the shareholders of Hamilton. Such shares had
a value of $53.35 per share at the time of issuance, resulting in an increase in shareholders’ equity of $349.4 million.
For additional information regarding the Hamilton acquisition, see Note 3.
Atlantic Acquisition
On May 25, 2018, the Company issued 2,631,520 shares of its common stock to the shareholders of Atlantic. Such shares had a
value of $56.15 per share at the time of issuance, resulting in an increase in shareholders’ equity of $147.8 million.
For additional information regarding the Atlantic acquisition, see Note 3.
USPF Acquisition
On January 18, 2017, in exchange for 4.99% of the outstanding shares of common stock of USPF, the Company issued 128,572
unregistered shares of its common stock to a selling shareholder of USPF. A registration statement was filed with the Securities
and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the
128,572 common shares, valued at $45.45 per share at the time of issuance, resulted in an increase in shareholders’ equity of $5.8
million.
On January 3, 2018, in exchange for 25.01% of the outstanding shares of common stock of USPF, the Company issued 114,285
unregistered shares of its common stock and paid $12.5 million in cash to a selling shareholder of USPF. The issuance of the
114,285 common shares, valued at $48.55 per share at the time of issuance, resulted in an increase in shareholders’ equity of $5.5
million.
On January 31, 2018, in exchange for the final 70% of the outstanding shares of common stock of USPF, the Company issued
830,301 unregistered shares of its common stock and paid $8.9 million in cash to the selling shareholders of USPF. The issuance
of the 830,301 common shares, valued at $53.55 per share at the time of issuance, resulted in an increase in shareholders’ equity
of $44.5 million. The selling shareholders of USPF may receive additional cash payments aggregating up to $5.8 million based
on the achievement by the Company's premium finance division of certain income targets, between January 1, 2018 and June 30,
2019.
On February 16, 2018, a registration statement was filed with the Securities and Exchange Commission to register the resale or
other disposition of the combined 944,586 shares issued on January 3, 2018 and January 31, 2018.
For additional information regarding the USPF acquisition, see Note 3.
F- 55
2017 Public Offering
On March 6, 2017, the Company completed an underwritten public offering of 2,012,500 shares of the Company’s common stock
at a price to the public of $46.50 per share. The Company received net proceeds from the issuance of approximately $88.7 million,
after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceeds of
the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the
Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 discussed in Note 11.
NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) for the Company consists of changes in net unrealized gains and losses on
investment securities available for sale and interest rate swap derivatives. The reclassification for gains included in net income is
recorded in net gain (loss) on securities in the consolidated statements of income. The following tables present a summary of the
accumulated other comprehensive income balances, net of tax, as of December 31, 2018, 2017 and 2016.
(dollars in thousands)
Balance, December 31, 2017
Reclassification to retained earnings due to change in federal corporate tax
rate
Adjusted balance, January 1, 2018
Reclassification for gains included in net income, net of tax
Current year changes, net of tax
Balance, December 31, 2018
(dollars in thousands)
Balance, December 31, 2016
Reclassification for gains included in net income, net of tax
Current year changes, net of tax
Balance, December 31, 2017
(dollars in thousands)
Balance, December 31, 2015
Reclassification for gains included in net income, net of tax
Current year changes, net of tax
Balance, December 31, 2016
Unrealized
Gain (Loss)
on Derivatives
292
$
(53)
239
—
112
351
$
Unrealized
Gain (Loss)
on Derivatives
176
$
—
116
292
$
$
$
$
$
Unrealized
Gain (Loss)
on Securities
Accumulated
Other
Comprehensive
Income (Loss)
(1,572) $
(339)
(1,911)
(70)
(3,196)
(5,177) $
(1,280)
(392)
(1,672)
(70)
(3,084)
(4,826)
Unrealized
Gain (Loss)
on Securities
Accumulated
Other
Comprehensive
Income (Loss)
(1,234) $
(24)
(314)
(1,572) $
(1,058)
(24)
(198)
(1,280)
Unrealized
Gain (Loss)
on Derivatives
152
$
—
24
176
$
$
$
Unrealized
Gain (Loss)
on Securities
Accumulated
Other
Comprehensive
Income (Loss)
$
3,201
(61)
(4,374)
(1,234) $
3,353
(61)
(4,350)
(1,058)
NOTE 15. – REVENUE FROM CONTRACTS WITH CUSTOMERS
With the exception of gains/losses on the sale of OREO discussed below, revenue from contracts with customers ("ASC 606
Revenue") is recorded in the service charges on deposit accounts category and the other service charges, commissions and fees
category in the Company's consolidated statement of income as part of noninterest income. Substantially all ASC 606 Revenue
is recorded in the Banking Division. The following provides information on these noninterest income categories that contain ASC
606 Revenue for the periods indicated.
F- 56
(dollars in thousands)
Service charges on deposit accounts
ASC 606 revenue items
Debit card interchange fees
Overdraft fees
Other service charges on deposit accounts
Total ASC 606 revenue included in service charges on deposits accounts
Total service charges on deposit accounts
Other service charges, commissions and fees
ASC 606 revenue items
ATM fees
Total ASC 606 revenue included in other service charges, commission and fees
Other
Total other service charges, commission and fees
For the Years Ended
December 31,
2017
2016
2018
$
$
$
$
18,945
18,267
8,916
46,128
46,128
2,721
2,721
282
3,003
$
$
$
$
16,086
17,736
8,232
42,054
42,054
2,575
2,575
297
2,872
$
$
$
$
15,588
19,447
7,710
42,745
42,745
3,004
3,004
571
3,575
Debit Card Interchange Fees - The Company earns debit card interchange fees from debit cardholder transactions conducted
through various payment networks. Interchange fees from debit cardholders transactions represent a percentage of the underlying
transaction amount and are recognized daily, concurrently with the transaction processing services provided to the debit cardholder.
Overdraft Fees - Overdraft fees are recognized at the point in time that the overdraft occurs.
Other Service Charges on Deposit Accounts - Other service charges on deposit accounts include both transaction-based fees and
account maintenance fees. Transaction based fees, which include wire transfer fees, stop payment charges, statement rendering,
and automated clearing house ("ACH") fees, are recognized at the time the transaction is executed as that is the point in time the
Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned
over the course of a month, representing the period over which the Company satisfies the performance obligation.
ATM Fees - Transaction-based ATM usage fees are recognized at the time the transaction is executed as that is the point at which
the Company satisfies the performance obligation.
Gains/Losses on the Sale of OREO - The net gains and losses on sales of OREO are recorded in credit resolution related expenses
in the Company's consolidated statement of income. The Company records a gain or loss from the sale of OREO when control
of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the
sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract
and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and
the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. The Company does not provide
financing for the sale of OREO unless these criteria are met and the OREO can be derecognized. The following provides information
on net gains (losses) recognized on the sale of OREO for the periods indicated.
(dollars in thousands)
Net gains (losses) recognized on sale of OREO
For the Years Ended
December 31,
2017
2016
2018
$
(459) $
850
$
(227)
F- 57
NOTE 16. INCOME TAXES
The income tax expense in the consolidated statements of income consists of the following:
(dollars in thousands)
Current – federal
Current - state
Deferred - federal
Deferred - state
Remeasurement of deferred tax assets and deferred tax liabilities at reduced federal
corporate tax rate
For the Years Ended December 31,
2017
2018
2016
$
$
$
27,714
1,375
496
878
—
30,463
$
$
33,074
5,230
3,874
(5,069)
13,625
50,734
$
28,749
3,550
2,460
(1,613)
—
33,146
The Company’s income tax expense differs from the amounts computed by applying the federal income tax statutory rates to
income before income taxes. A reconciliation of the differences is as follows:
(dollars in thousands)
Federal income statutory rate
Tax at federal income tax rate
Change resulting from:
For the Years Ended December 31,
2017
2018
2016
21%
35%
35%
$
31,813
$
43,499
$
36,836
State income tax, net of federal benefit
Tax-exempt interest
Increase in cash value of bank owned life insurance
Excess tax benefit from stock compensation
Nondeductible merger expenses
Other
Remeasurement of deferred tax assets and deferred tax liabilities at reduced
federal corporate tax rate
Provision for income taxes
1,965
(3,095)
(382)
(602)
1,002
(238)
(680)
(4,390)
(556)
(939)
—
175
—
30,463
$
13,625
50,734
$
$
695
(3,916)
(607)
—
—
138
—
33,146
F- 58
The components of deferred income taxes are as follows:
(dollars in thousands)
Deferred tax assets
Allowance for loan losses
Deferred compensation
Deferred gain on interest rate swap
Unrealized loss on interest rate swap
Nonaccrual interest
Purchase accounting adjustments
Goodwill and intangible assets
Other real estate owned
Net operating loss tax carryforward
AMT credit carryforward
Unrealized loss on securities available for sale
FDIC-assisted transaction adjustments
Capitalized costs, accrued expenses and other
Deferred tax liabilities
Premises and equipment
Mortgage servicing rights
Subordinated debentures
FDIC-assisted transaction adjustments
Goodwill and intangible assets
Unrealized gain on interest rate swap
$
December 31,
2018
2017
$
7,222
3,467
56
—
107
13,144
—
2,980
19,277
1,339
2,792
2,501
2,851
55,736
4,597
3,716
5,259
—
7,017
21
20,610
6,704
1,494
114
80
5
5,631
4,909
3,203
17,853
813
508
—
1,144
42,458
4,064
1,885
5,147
3,042
—
—
14,138
Net deferred tax asset
$
35,126
$
28,320
At December 31, 2018, the Company had federal net operating loss carryforwards of approximately $75.92 million which expire
at various dates from 2027 to 2035. At December 31, 2018, the Company had state net operating loss carryforwards of approximately
$70.20 million which expire at various dates from 2027 to 2035. The federal net operating loss carryforwards are subject to
limitations pursuant to Section 382 of the Internal Revenue Code and are expected to be recovered over the next 17 years. The
state net operating loss carryforwards are subject to similar limitations and are expected to be recovered over the next 17 years.
Deferred tax assets are recognized for net operating losses because the benefit is more likely than not to be realized.
The Company did not record any interest and penalties related to income taxes for the years ended December 31, 2018, 2017 and
2016, and the Company did not have any amount accrued for interest and penalties at December 31, 2018, 2017 and 2016.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the various states. The Company
is no longer subject to examination by taxing authorities for years before 2015.
NOTE 17. EMPLOYEE BENEFIT PLANS
The Company has established a retirement plan for eligible employees. The Ameris Bancorp 401(k) Profit Sharing Plan allows a
participant to defer a portion of his compensation and provides that the Company will match a portion of the deferred
compensation. The Plan also provides for non-elective and discretionary contributions. All full-time and part-time employees are
eligible to participate in the Plan provided they have met the eligibility requirements. An employee is eligible to participate in the
Plan after 30 days of employment and having attained an age of 18 years.
The aggregate expense under the Plan charged to operations during 2018, 2017 and 2016 amounted to $2,945,000, $2,213,000
and $2,053,000, respectively.
F- 59
NOTE 18. DEFERRED COMPENSATION PLANS
The Company and the Bank have entered into separate deferred compensation arrangements and supplemental executive retirement
plans with certain executive officers and directors. The plans call for certain amounts payable at retirement, death or disability. The
estimated present value of the deferred compensation is being accrued over the expected service period. The Company and the
Bank have purchased life insurance policies which they intend to use to fund these liabilities. The cash surrender value of the life
insurance was $104.1 million and $79.6 million at December 31, 2018 and 2017, respectively. Accrued deferred compensation of
$769,000 and $874,000 at December 31, 2018 and 2017, respectively, is included in other liabilities. Accrued supplemental
executive retirement plan liabilities of $5,474,000 and $4,962,000 at December 31, 2018 and 2017, respectively, is also included
in other liabilities. Aggregate compensation expense under the plans was $739,000, $1,416,000 and $1,127,000 per year for 2018,
2017 and 2016, respectively, which is included in salaries and employee benefits.
NOTE 19. SHARE-BASED COMPENSATION
The Company awards its employees and directors various forms of share-based incentives under certain plans approved by its
shareholders. Awards granted under the plans may be in the form of qualified or nonqualified stock options, restricted stock, stock
appreciation rights (“SARs”), long-term incentive compensation units consisting of cash and common stock, or any combination
thereof within the limitations set forth in the plans. The plans provide that the aggregate number of shares of the Company’s
common stock which may be subject to award may not exceed 2,985,000 subject to adjustment in certain circumstances to prevent
dilution. At December 31, 2018, there were 804,855 shares available to be issued under the plans.
All stock options have an exercise price that is equal to the closing fair market value of the Company’s stock on the date the options
were granted. Options granted under the plans generally vest over a five-year period and have a 10-year maximum term. Most
options granted since 2005 contain performance-based vesting conditions.
The Company did not grant any options during 2018, 2017 or 2016. As of December 31, 2018, there was no unrecognized
compensation cost related to nonvested share-based compensation arrangements granted related to performance or non-
performance-based options.
As of December 31, 2018, the Company has 161,746 outstanding restricted shares granted under the plans as compensation to
certain employees. These shares carry dividend and voting rights. Sales of these shares are restricted prior to the date of vesting,
which is one to five years from the date of the grant. Shares issued under the plans are recorded at their fair market value on the
date of their grant. The compensation expense is recognized on a straight-line basis over the related vesting period. In 2018, 2017
and 2016, compensation expense related to these grants was approximately $6,241,000, $3,316,000, and $2,261,000, respectively.
The total income tax benefit related to these grants was approximately $818,000, $698,000 and $721,000 in 2018, 2017 and 2016,
respectively. Approximately $822,000 of the compensation expense recorded for the year ending December 31, 2018 for restricted
stock awards was related to performance-based restricted stock that was not yet granted as of December 31, 2018, and was therefore
recorded in other liabilities rather than in shareholders' equity on the Company's consolidated balance sheet as of December 31,
2018.
It is the Company’s policy to issue new shares for stock option exercises and restricted stock rather than issue treasury shares. The
Company recognizes share-based compensation expense on a straight-line basis over the options’ related vesting term. The
Company did not record any share-based compensation expense related to stock options during 2018, 2017 and 2016. The total
income tax benefit related to stock options was approximately $24,000, $248,000 and $177,000 in 2018, 2017 and 2016,
respectively.
The fair value of each share-based compensation grant is estimated on the date of grant using the Black-Scholes option-pricing
model.
F- 60
A summary of the activity of non-performance-based and performance-based options as of December 31, 2018 is presented below.
Non-Performance-Based
Performance-Based
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
$ (000)
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
$ (000)
Shares
Under option, beginning of
year
Granted
Exercised
Forfeited
Under option, end of year
Exercisable at end of year
$
47,294
—
(47,294)
—
— $
— $
14.76
—
14.76
—
—
—
37,013
—
(29,014)
(288)
7,711
7,711
$
$
$
7.36
—
7.47
7.47
6.94
6.94
$
653
— $
— $
—
—
$
$
$
$
0.11
0.11
217
2
308
308
A summary of the activity of non-performance-based and performance-based options as of December 31, 2017 is presented
below.
Non-Performance-Based
Performance-Based
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
$ (000)
Shares
Under option, beginning of
year
Granted
Exercised
Forfeited
Under option, end of year
Exercisable at end of year
58,603
—
(11,309)
—
47,294
47,294
$
$
$
14.76
—
14.76
—
14.76
14.76
$
$
$
167
1,519
1,519
0.14
0.14
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
$ (000)
$
$
$
15.06
—
17.62
21.35
7.36
7.36
$
$
$
1,803
1,463
1,463
1.07
1.07
Shares
142,910
—
(102,309)
(3,588)
37,013
37,013
A summary of the status of the Company’s restricted stock awards as of and for the years ended December 31, 2018, and 2017
is presented below.
Nonvested shares at beginning of year
Granted
Vested
Forfeited
Nonvested shares at end of year
2018
2017
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Grant Date
Fair Value
Shares
$
33.24
53.37
33.21
49.52
43.40
$
279,727
84,147
(85,587)
(472)
277,815
26.10
46.93
23.30
47.60
33.24
Shares
277,815
89,855
(195,344)
(10,580)
161,746
The balance of unearned compensation related to restricted stock grants as of December 31, 2018, 2017 and 2016 was approximately
$3,342,000, $4,489,000, and $3,878,000, respectively. At December 31, 2018, the cost is expected to be recognized over a weighted-
average period of 1.3 years.
NOTE 20. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Cash Flow Hedge
During 2010, the Company entered into an interest rate swap to lock in a fixed rate as opposed to the contractual variable interest
rate on certain junior subordinated debentures. The interest rate swap contract has a notional amount of $37.1 million and is hedging
the variable rate on certain junior subordinated debentures described in Note 12 of the consolidated financial statements. The
Company receives a variable rate of the 90-day LIBOR rate plus 1.63% and pays a fixed rate of 4.11%. The swap matures in
September 2020.
F- 61
This contract is classified as a cash flow hedge of an exposure to changes in the cash flow of a recognized liability. At December 31,
2018 and 2017, the fair value of the remaining instrument totaled an asset of $102,000 and a liability of $381,000, respectively.
As a cash flow hedge, the change in fair value of a hedge that is deemed to be highly effective is recognized in other comprehensive
income and the portion deemed to be ineffective is recognized in earnings. As of December 31, 2018, the hedge is deemed to be
highly effective. Interest expense recorded on this swap transaction totaled $122,000, $484,000, and $678,000 during 2018, 2017,
and 2016 and is reported as a component of interest expense on other borrowings. At December 31, 2018, the Company expected
$83,000 of the unrealized gain to be reclassified as a decrease of interest expense during the next 12 months.
Mortgage Banking Derivatives
The Company maintains a risk management program to manage interest rate risk and pricing risk associated with its mortgage
lending activities. This program includes the use of forward contracts and other derivatives that are used to offset changes in value
of the mortgage inventory due to changes in market interest rates. As a normal part of its operations, the Company enters into
derivative contracts such as forward sale commitments and IRLCs to economically hedge risks associated with overall price risk
related to IRLCs and mortgage loans held for sale carried at fair value. These mortgage banking derivatives are not designated in
hedge relationships. At December 31, 2018, the Company had approximately $81.8 million of IRLCs and $163.2 million of forward
commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was
reflected as a derivative asset of $2.6 million and a derivative liability of $1.3 million. At December 31, 2017, the Company had
approximately $86.1 million of IRLCs and $158.3 million of forward commitments for the future delivery of residential mortgage
loans. The fair value of these mortgage banking derivatives was reflected as a derivative asset of $2.9 million and a derivative
liability of $67,000. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments.
Changes in the fair values of these mortgage-banking derivatives are included in net gains on sales of mortgage loans.
The net gains (losses) relating to free-standing mortgage banking derivative instruments used for risk management are summarized
below as of December 31, 2018, 2017 and 2016.
(dollars in thousands)
Forward contracts related to mortgage loans held for
sale
Interest rate lock commitments
Location
Mortgage banking
activity
Mortgage banking
activity
December 31,
2018
December 31,
2017
December 31,
2016
$
$
(1,276) $
(12) $
2,537
$
2,833
$
1,285
3,029
The following table reflects the amount and market value of mortgage banking derivatives included in the consolidated balance
sheets as of December 31, 2018 and 2017.
(dollars in thousands)
Included in other assets:
2018
2017
Notional
Amount
Fair Value
Notional
Amount
Fair Value
Forward contracts related to mortgage loans held for sale
Interest rate lock commitments
Total included in other assets
Included in other liabilities:
Forward contracts related to mortgage loans held for sale
Total included in other liabilities
$
$
$
$
— $
— $
81,833
81,833
163,189
163,189
$
$
$
2,537
2,537
1,276
1,276
$
$
$
31,500
86,149
117,649
126,750
126,750
$
$
$
$
55
2,833
2,888
67
67
NOTE 21. FAIR VALUE MEASURES
The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced
liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted
market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is
based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an
immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes
certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented may not necessarily represent the underlying fair value of the Company.
F- 62
The Company's loans held for sale are carried at fair value and are comprised of the following:
(dollars in thousands)
Mortgage loans held for sale
SBA loans held for sale
Total loans held for sale
December 31,
2018
2017
$
$
107,428
3,870
111,298
$
$
190,445
6,997
197,442
The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent
difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of
the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as
servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale
is recorded on an accrual basis in the consolidated statement of income under the heading interest income – interest and fees on
loans. The servicing value is included in the fair value of the IRLCs with borrowers. The mark to market adjustments related to
mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. Net gains of $4.1
million, $4.6 million and $2.2 million resulting from fair value changes of these mortgage loans were recorded in income during
the years ended December 31, 2018, 2017 and 2016, respectively. A net gain of $1.8 million, a net loss of $3.0 million and a net
loss of $4.2 million resulting from changes in the fair value and the related derivative financial instruments used to hedge exposure
to the market-related risks associated with these mortgage loans were recorded in income during the years ended December 31,
2018, 2017 and 2016, respectively. These amounts do not reflect changes in fair values of related derivative instruments used to
hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans
held for sale and the related derivative instruments are recorded in mortgage banking activity in the consolidated statements of
income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the
short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is
nominal.
The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale
measured at fair value as of December 31, 2018 and 2017.
(dollars in thousands)
Aggregate fair value of mortgage loans held for sale
Aggregate unpaid principal balance
Past due loans of 90 days or more
Nonaccrual loans
December 31,
2018
2017
$
$
$
$
107,428
103,319
$
$
— $
— $
190,445
185,814
—
—
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine
fair value disclosures. Securities available for sale, loans held for sale and derivative financial instruments are recorded at fair
value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring
basis, such as impaired loans and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other
financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are
traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
F- 63
The following methods and assumptions were used by the Company in estimating the fair value of its assets and liabilities recorded
at fair value and for estimating the fair value of its financial instruments:
Cash and Due From Banks, Federal Funds Sold and Interest-Bearing Deposits in Banks, and Time Deposits in Other
Banks: The carrying amount of cash and due from banks, federal funds sold and interest-bearing deposits in banks, and time
deposits in other banks approximates fair value.
Investment Securities Available for Sale: The fair value of securities available for sale is determined by various valuation
methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the
valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices
of securities with similar characteristics, or discounted cash flows. Level 2 securities include certain U.S. agency bonds, mortgage-
backed securities, collateralized mortgage and debt obligations, and municipal securities. The Level 2 fair value pricing is provided
by an independent third party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 of the hierarchy and may include certain residual municipal securities
and other less liquid securities.
Loans Held for Sale: The Company records loans held for sale at fair value. The fair value of loans held for sale is determined
on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation
hierarchy.
Loans: The fair value for loans held for investment is estimated using an exit price methodology. An exit price methodology
considers expected cash flows that take into account contractual loan terms, as applicable, prepayment expectations, probability
of default, loss severity in the event of default, recovery lag and, in the case of variable rate loans, expectations for future interest
rate movements. These cash flows are present valued at a risk adjusted discount rate, which considers the cost of funding, liquidity,
servicing costs, and other factors. Because observable quoted prices seldom exist for identical or similar assets carried in loans
held for investment, Level 3 inputs are primarily used to determine fair value exit pricing. The fair value of impaired loans is
estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to
be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note
will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by
Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for
loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is
confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market
appraisals.
Other Real Estate Owned: The fair value of OREO is determined using certified appraisals and internal evaluations that value
the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does
not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has
determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels
that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that
OREO should be classified as Level 3.
Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable and accrued interest payable
approximates fair value.
Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair
value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest
rates currently being offered for certificates of similar maturities.
Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of securities sold under
agreements to repurchase approximates fair value and is classified as Level 1. The carrying amount of variable rate other borrowings
approximates fair value and is classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted
contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and is classified as Level
2.
Subordinated Deferrable Interest Debentures: The fair value of the Company’s trust preferred securities is based on discounted
cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.
FDIC Loss-Share Payable: Because the FDIC will reimburse the Company for certain acquired loans should the Company
experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized
F- 64
at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The
shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an
appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to
be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated
cash flows associated with these loans.
Pursuant to the clawback provisions of the loss-sharing agreements for the Company’s FDIC-assisted acquisitions, the Company
may be required to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-sharing
agreement. The amount of the clawback provision for each acquisition is measured and recorded at fair value. The clawback
amount, which is payable to the FDIC upon termination of the applicable loss-sharing agreement, is discounted using an appropriate
discount rate.
Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using
variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.
Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these
instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected
cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and
uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is
determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected
variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived
from observable market interest rate curves).
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective
counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the
effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as
collateral postings, thresholds, mutual puts and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current
credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of December 31, 2018 and 2017 , the
Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative
positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As
a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and
the level within the fair value hierarchy in which the fair value measurements fall as of December 31, 2018 and 2017.
(dollars in thousands)
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Loans held for sale
Derivative financial instruments
Mortgage banking derivative instruments
Total recurring assets at fair value
Mortgage banking derivative instruments
Total recurring liabilities at fair value
Recurring Basis
Fair Value Measurements
December 31, 2018
Fair Value
Level 1
Level 2
Level 3
$
$
$
150,733
67,314
974,376
111,298
102
2,537
1,306,360
1,276
1,276
$
$
$
— $
—
—
—
—
—
— $
—
— $
150,733
65,814
974,376
111,298
102
2,537
1,304,860
1,276
1,276
$
$
$
—
1,500
—
—
—
—
1,500
—
—
F- 65
(dollars in thousands)
State, county and municipal securities
Corporate debt securities
Mortgage-backed securities
Loans held for sale
Mortgage banking derivative instruments
Total recurring assets at fair value
Derivative financial instruments
Mortgage banking derivative instruments
Total recurring liabilities at fair value
Recurring Basis
Fair Value Measurements
December 31, 2017
Fair Value
Level 1
Level 2
Level 3
$
$
$
$
137,794
47,143
625,936
197,442
2,888
1,011,203
381
67
448
$
$
$
$
— $
—
—
—
—
— $
— $
—
— $
137,794
45,643
625,936
197,442
2,888
1,009,703
381
67
448
$
$
$
$
—
1,500
—
—
—
1,500
—
—
—
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the
general classification of such instruments pursuant to the valuation hierarchy as of December 31, 2018 and 2017.
(dollars in thousands)
Impaired loans carried at fair value
Other real estate owned
Purchased other real estate owned
Total nonrecurring assets at fair value
(dollars in thousands)
Impaired loans carried at fair value
Other real estate owned
Purchased other real estate owned
Total nonrecurring assets at fair value
Nonrecurring Basis
Fair Value Measurements
December 31, 2018
Fair Value
Level 1
Level 2
Level 3
28,653
408
9,535
38,596
$
$
— $
—
—
— $
— $
—
—
— $
28,653
408
9,535
38,596
Nonrecurring Basis
Fair Value Measurements
December 31, 2017
Fair Value
Level 1
Level 2
Level 3
27,684
$
323
9,011
37,018
$
— $
—
—
— $
— $
—
—
— $
27,684
323
9,011
37,018
$
$
$
$
The inputs used to determine estimated fair value of impaired loans include market conditions, loan term, underlying collateral
characteristics and discount rates. The inputs used to determine fair value of other real estate owned include market conditions,
estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the years ended December 31, 2018 and 2017, there was not a change in the methods and significant assumptions used to
estimate fair value.
F- 66
The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets.
(dollars in thousands)
As of December 31, 2018
Recurring:
Fair
Value
Valuation
Technique
Unobservable
Inputs
Range of
Discounts
Weighted
Average
Discount
Investment securities available for sale
$
1,500
Discounted par values
Credit quality of
underlying issuer
0%
0%
Nonrecurring:
Impaired loans
Other real estate owned
$
28,653
Third party appraisals
and discounted cash
flows
$
408
Third party appraisals
and sales contracts
Purchased other real estate owned
$
9,535
Third party appraisals
Collateral
discounts and
discount rates
Collateral
discounts and
estimated
costs to sell
Collateral
discounts and
estimated
costs to sell
3% - 53%
30%
15% - 69%
31%
6% - 74%
39%
As of December 31, 2017
Recurring:
Investment securities available for sale
$
1,500
Discounted par values
Credit quality of
underlying issuer
0%
0%
Nonrecurring:
Impaired loans
Other real estate owned
$
27,684
Third party appraisals
and discounted cash
flows
$
323
Third party appraisals
and sales contracts
Purchased other real estate owned
$
9,011
Third party appraisals
Collateral
discounts and
discount rates
Collateral
discounts and
estimated
costs to sell
Collateral
discounts and
estimated
costs to sell
20% - 90%
24%
15% - 15%
15%
10% to 74%
26%
F- 67
The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial
statements, were as follows. The methods used to estimate the fair value of financial instruments at December 31, 2017
approximated an entry price. In accordance with the adoption of ASU 2016-01, the methods utilized to estimate the fair value of
financial instruments at December 31, 2018 represent an approximation of exit price; however, an actual price derived in an active
market may differ.
(dollars in thousands)
Financial assets:
Cash and due from banks
Federal funds sold and interest-bearing accounts
Time deposits in other banks
Loans, net
Accrued interest receivable
Financial liabilities:
Deposits
Securities sold under agreements to repurchase
Other borrowings
Subordinated deferrable interest debentures
FDIC loss-share payable
Accrued interest payable
(dollars in thousands)
Financial assets:
Cash and due from banks
Federal funds sold and interest-bearing accounts
Loans, net
Accrued interest receivable
Financial liabilities:
Deposits
Securities sold under agreements to repurchase
Other borrowings
Subordinated deferrable interest debentures
FDIC loss-share payable
Accrued interest payable
Fair Value Measurements
December 31, 2018
Level 1
Level 2
Level 3
Total
172,036
507,491
—
—
—
—
20,384
—
—
—
—
$
— $
—
10,812
—
5,456
— $
—
—
8,365,293
31,514
172,036
507,491
10,812
8,365,293
36,970
9,645,617
—
152,873
90,180
—
5,669
—
—
—
—
19,576
—
9,645,617
20,384
152,873
90,180
19,576
5,669
Carrying
Amount
$
$
172,036
507,491
10,812
8,454,442
36,970
9,649,313
20,384
151,774
89,187
19,487
5,669
Fair Value Measurements
December 31, 2017
Carrying
Amount
Level 1
Level 2
Level 3
Total
$
$
$
139,313
191,345
5,992,880
26,005
139,313
191,345
—
26,005
— $
—
—
—
— $
—
5,960,963
—
139,313
191,345
5,960,963
26,005
6,625,845
30,638
250,554
85,550
8,803
3,258
—
30,638
—
—
—
3,258
6,627,773
—
271,759
74,243
—
—
—
—
—
—
9,548
—
6,627,773
30,638
251,759
74,243
9,548
3,258
NOTE 22. COMMITMENTS AND CONTINGENT LIABILITIES
Loan Commitments
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They
involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated
balance sheets.
F- 68
The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of the
Company’s commitments is as follows:
(dollars in thousands)
Commitments to extend credit
Unused home equity lines of credit
Financial standby letters of credit
Mortgage interest rate lock commitments
Mortgage forward contracts with positive fair value
$
December 31,
$
2018
1,671,419
112,310
24,596
81,833
—
2017
1,109,806
69,788
11,389
86,149
31,500
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates of one year or
less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the
customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved
in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances
which the Company deems necessary. The Company has not been required to perform on any material financial standby letters
of credit and the Company has not incurred any losses on financial standby letters of credit for the years ended December 31, 2018
and 2017.
Other Commitments
As of December 31, 2018, a $75.0 million letter of credit issued by the Federal Home Loan Bank was used to guarantee the Bank’s
performance related to a portion of its public fund deposit balances.
Included in other liabilities in the Company's consolidated balance sheet is $18.1 million as of December 31, 2017 which represents
an accrued liability for an additional 25.01% investment in USPF. This accrued liability was settled on January 3, 2018 by payment
of $12.5 million in cash and the Company's issuance of 114,285 shares of its common stock.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but
which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal
counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such
proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well
as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates
that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would
be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the
guarantee would be disclosed.
A former borrower of the Company filed a claim related to a loan previously made by the Company asserting lender liability. The
case was tried without a jury and an order was issued by the court against the Company awarding the borrower approximately
$2.9 million on August 8, 2013. The judgment was appealed to the South Carolina Court of Appeals. On May 24, 2017, the Court
of Appeals filed its decision and unanimously found in favor of the Company and reversed the trial court judgment. The plaintiff
filed a petition for rehearing with the Court of Appeals, which has been denied. The plaintiff filed a writ of certiorari asking the
F- 69
Supreme Court of South Carolina to hear the case, and this request was denied on February 1, 2018. The case is now concluded
in favor of the Company. The Company has not and will not incur any loss as a result of this case.
NOTE 23. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval. At
December 31, 2018, $67.2 million of retained earnings were available for dividend declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary,
actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the
Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-
sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum
amounts and ratios of total, Tier 1 capital and Common Equity Tier 1 capital, as defined by the regulations, to risk-weighted assets,
as defined, and of Tier 1 capital to average assets, as defined. The final rules implementing the Basel Committee on Banking
Supervision’s capital guidelines for U.S. banks (the “Basel III rules”) became effective for the Company on January 1, 2015 with
full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.
Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital
ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer
for 2018 is 1.875%. The capital conservation buffer for 2017 was 1.250%. The net realized gain or loss on available for sale
securities is not included in computing regulatory capital. Management believes that, as of December 31, 2018 and 2017, the
Company and the Bank met all capital adequacy requirements to which they are subject.
As of December 31, 2018 and 2017, the most recent notification from the regulatory authorities categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in
the following table. There are no conditions or events since that notification that management believes have changed the Bank’s
category. Prompt corrective action provisions are not applicable to bank holding companies.
F- 70
The Company’s and Bank’s actual capital amounts and ratios are presented in the following table.
Actual
For Capital Adequacy
Purposes
To Be Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
As of December 31, 2018
Tier 1 Leverage Ratio (tier 1 capital to average
assets):
Consolidated
Ameris Bank
$
984,620
$ 1,127,926
9.166% $
10.506% $
429,690
429,428
4.000%
4.000% $
536,785
—N/A—
5.00%
CET1 Ratio (common equity tier 1 capital to risk
weighted assets):
Consolidated
Ameris Bank
Tier 1 Capital Ratio (tier 1 capital to risk weighted
assets):
$
895,433
$ 1,127,926
10.070% $
12.716% $
566,859
565,486
6.375%
6.375% $
576,573
—N/A—
6.50%
Consolidated
Ameris Bank
$
984,620
$ 1,127,926
11.073% $
12.716% $
700,237
698,541
7.875%
7.875% $
709,629
—N/A—
8.00%
Total Capital Ratio (total capital to risk weighted
assets):
Consolidated
Ameris Bank
$ 1,087,364
$ 1,156,745
12.229% $
13.041% $
878,075
875,948
9.875%
9.875% $
887,036
—N/A—
10.00%
As of December 31, 2017
Tier 1 Leverage Ratio (tier 1 capital to average
assets):
Consolidated
Ameris Bank
CET1 Ratio (common equity tier 1 capital to risk
weighted assets):
Consolidated
Ameris Bank
Tier 1 Capital Ratio (tier 1 capital to risk weighted
assets):
Consolidated
Ameris Bank
Total Capital Ratio (total capital to risk weighted
assets):
Consolidated
Ameris Bank
$
$
$
$
$
$
$
$
741,159
805,238
9.713% $
10.564% $
305,231
304,904
4.000%
4.000% $
381,131
—N/A—
5.00%
658,529
805,238
10.291% $
12.644% $
367,940
366,186
5.750%
5.750% $
413,949
—N/A—
6.50%
741,159
805,238
11.582% $
12.644% $
463,925
461,712
7.250%
7.250% $
509,476
—N/A—
8.00%
840,745
831,029
13.139% $
13.049% $
591,904
589,081
9.250%
9.250% $
636,845
—N/A—
10.00%
The December 31, 2018 The CET1 Ratios, the Tier 1 Capital Ratios, and the Total Capital Ratios displayed in the above table
under the heading “For Capital Adequacy Purposes” include a capital conservation buffer of 1.875% for December 31, 2018 and
1.250% for December 31, 2017.
F- 71
NOTE 24. SEGMENT REPORTING
The following table presents selected financial information with respect to the Company’s reportable business segments for the
years ended December 31, 2018, 2017 and 2016.
(dollars in thousands)
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Salaries and employee benefits
Occupancy and equipment expenses
Data processing and communications expenses
Other expenses
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Year Ended
December 31, 2018
Banking
Division
Retail
Mortgage
Division
Warehouse
Lending
Division
SBA
Division
Premium
Finance
Division
$
$
323,757
38,199
285,558
4,486
58,694
100,716
26,112
27,026
71,788
225,642
114,124
23,607
90,517
$
$
37,146
13,686
23,460
584
48,260
39,469
2,440
1,425
6,998
50,332
20,804
4,335
16,469
$
$
14,522
5,434
9,088
—
2,021
547
2
122
238
909
10,200
2,142
8,058
$
$
7,672
2,617
5,055
1,137
4,858
2,870
234
19
1,137
4,260
4,516
948
3,568
$
$
30,229
9,998
20,231
10,460
4,579
5,691
343
1,793
4,677
12,504
1,846
(569)
2,415
$
$
Total
413,326
69,934
343,392
16,667
118,412
149,293
29,131
30,385
84,838
293,647
151,490
30,463
121,027
Total assets
Goodwill
Other intangible assets, net
$ 9,290,437
438,144
$
37,836
$
$ 1,153,615
$
$
$
— $
— $
360,839
$
— $
— $
139,671
$ 498,953
65,290
20,853
— $
— $
(dollars in thousands)
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Salaries and employee benefits
Occupancy and equipment expenses
Data processing and communications expenses
Other expenses
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Total assets
Goodwill
Other intangible assets, net
$ 11,443,515
503,434
$
58,689
$
Total
294,347
34,222
260,125
8,364
104,457
120,016
24,069
27,869
59,982
231,936
124,282
50,734
73,548
$
$
Year Ended
December 31, 2017
Banking
Division
Retail
Mortgage
Division
Warehouse
Lending
Division
SBA
Division
Premium
Finance
Division
$
5,293
1,549
3,744
(111)
6,277
3,126
215
21
738
4,100
6,032
2,111
3,921
$
28,924
4,726
24,198
731
112
4,507
197
962
8,629
14,295
9,284
3,257
6,027
101,737
$ 486,399
$
$
231,111
20,392
210,719
6,787
51,416
78,857
21,436
25,177
46,192
171,662
83,686
36,518
47,168
$ 6,431,151
125,532
$
13,496
$
$
$
$
$
$
21,318
5,731
15,587
771
44,913
32,996
2,217
1,611
4,260
41,084
18,645
6,526
12,119
$
$
7,701
1,824
5,877
186
1,739
530
4
98
163
795
6,635
2,322
4,313
$
$
598,355
$
— $
— $
238,561
$
— $
— $
F- 72
— $
— $
$ 7,856,203
125,532
13,496
— $
— $
(dollars in thousands)
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Salaries and employee benefits
Occupancy and equipment expenses
Data processing and communications expenses
Other expenses
Total noninterest expense
Income before income tax expense
Income tax expense
Net income
Total assets
Goodwill
Other intangible assets, net
Year Ended
December 31, 2016
Banking
Division
Retail
Mortgage
Division
Warehouse
Lending
Division
SBA
Division
Premium
Finance
Division
Total
239,065
19,694
219,371
4,091
105,801
106,837
24,397
24,591
60,010
215,835
105,246
33,146
72,100
$
$
3,959
739
3,220
847
5,681
2,705
254
4
712
3,675
4,379
1,533
2,846
$
$
1,064
—
1,064
108
—
—
2
44
269
315
641
224
417
90,908
$ 373,097
— $
— $
$ 6,892,031
125,532
17,428
— $
— $
$
$
213,246
14,762
198,484
1,973
53,168
72,824
22,209
23,140
54,438
172,611
77,068
23,283
53,785
$ 5,879,859
125,532
$
17,428
$
$
$
$
$
$
14,110
3,469
10,641
573
45,162
30,689
1,928
1,300
4,485
38,402
16,828
5,891
10,937
$
$
6,686
724
5,962
590
1,790
619
4
103
106
832
6,330
2,215
4,115
$
$
358,497
$
— $
— $
189,670
$
— $
— $
F- 73
NOTE 25. CONDENSED FINANCIAL INFORMATION OF AMERIS BANCORP (PARENT COMPANY ONLY)
Condensed Balance Sheets
December 31, 2018 and 2017
(dollars in thousands)
Assets
Cash and due from banks
Investment in subsidiaries
Other assets
Total assets
Liabilities
Other liabilities
Other borrowings
Subordinated deferrable interest debentures
Total liabilities
Shareholders' equity
Total liabilities and shareholders' equity
2018
2017
$
$
$
$
6,977
1,684,810
9,169
1,700,956
11,496
143,926
89,187
244,609
1,456,347
1,700,956
$
$
$
$
4,409
953,815
31,221
989,445
25,621
73,795
85,550
184,966
804,479
989,445
Condensed Statements of Income
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
Income
Dividends from subsidiaries
Other income
Total income
Expense
Interest expense
Other expense
Total expense
Income (loss) before taxes and equity in undistributed income of subsidiaries
Income tax benefit
Income (loss) before equity in undistributed income of subsidiaries
Equity in undistributed income of subsidiaries
Net income
2018
2017
2016
$
$
$
46,000
4,726
50,726
— $
132
132
12,670
8,578
21,248
29,478
5,051
34,529
86,498
121,027
$
9,065
4,612
13,677
(13,545)
10,622
(2,923)
76,471
73,548
$
34,631
208
34,839
6,280
2,825
9,105
25,734
2,972
28,706
43,394
72,100
F- 74
Condensed Statements of Cash Flows
Years Ended December 31, 2018, 2017 and 2016
(dollars in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2018
2017
2016
$
121,027
$
73,548
$
72,100
Share-based compensation expense
Undistributed earnings of subsidiaries
Increase (decrease) in interest payable
Decrease (increase) in tax receivable
Provision for deferred taxes
Other operating activities
Total adjustments
Net cash provided by operating activities
INVESTING ACTIVITIES
Investment in subsidiary
Net cash proceeds received from (paid for) acquisitions
Net cash used in investing activities
FINANCING ACTIVITIES
Issuance of common stock
Purchase of treasury shares
Dividends paid common stock
Proceeds from other borrowings
Repayment of other borrowings
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest
Cash paid (received) during the year for income taxes
6,241
(86,498)
313
1,436
195
(2,051)
(80,364)
40,663
—
(90,542)
(90,542)
—
(2,062)
(16,405)
70,000
—
914
52,447
3,316
(76,471)
1,142
5,176
(4,620)
1,230
(70,227)
3,321
(110,000)
—
(110,000)
88,656
(886)
(14,650)
73,692
(38,850)
2,669
110,631
2,568
4,409
6,977
$
3,952
457
4,409
$
2,261
(43,394)
(63)
(3,224)
508
(528)
(44,440)
27,660
—
(23,205)
(23,205)
—
(1,225)
(8,584)
14,000
(15,000)
964
(9,845)
(5,390)
5,847
457
12,357
$
(7,500) $
7,923
$
(11,000) $
6,343
—
$
$
$
F- 75
NOTE 26. QUARTERLY FINANCIAL DATA (unaudited)
The following table sets forth certain consolidated quarterly financial information of the Company. During the second quarter of
2018, Company recorded approximately $15.1 million of after-tax merger and conversion charges and approximately $4.5 million
of after-tax executive retirement benefits. During the fourth quarter of 2017, the Company recorded approximately $13.6 million
of additional income tax expense attributable to the remeasurement of deferred tax assets and deferred tax liabilities at a reduced
federal corporate tax rate. During the third quarter of 2017, the Company recorded approximately $3.1 million of after-tax
compliance resolution expense.
(dollars in thousands, except per share data)
Selected Income Statement Data
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Noninterest expense
Merger and conversion charges
Income before income taxes
Income tax
Net income
Per Share Data
Net income – basic
Net income – diluted
Common dividends - cash
(dollars in thousands, except per share data)
Selected Income Statement Data
Interest income
Interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Noninterest expense
Merger and conversion charges
Income before income taxes
Income tax
Net income
Per Share Data
Net income – basic
Net income – diluted
Common dividends - cash
Quarters Ended December 31, 2018
4
3
2
1
$
$
$
122,749
23,195
99,554
3,661
95,893
30,470
74,813
997
50,553
7,017
43,536
0.92
0.91
0.10
$
$
$
121,119
22,081
99,038
2,095
96,943
30,171
72,077
276
54,761
13,317
41,444
0.87
0.87
0.10
89,946
13,947
75,999
9,110
66,889
31,307
67,995
18,391
11,810
2,423
9,387
0.24
0.24
0.10
Quarters Ended December 31, 2017
4
3
2
$
$
$
79,564
10,041
69,523
2,536
66,987
23,563
58,916
421
31,213
22,063
9,150
0.25
0.24
0.10
$
$
$
76,322
9,467
66,855
1,787
65,068
26,999
63,675
92
28,300
8,142
20,158
0.54
0.54
0.10
71,411
8,254
63,157
2,205
60,952
28,189
55,739
—
33,402
10,315
23,087
0.62
0.62
0.10
$
$
$
$
$
$
79,512
10,711
68,801
1,801
67,000
26,464
58,263
835
34,366
7,706
26,660
0.70
0.70
0.10
67,050
6,460
60,590
1,836
58,754
25,706
52,691
402
31,367
10,214
21,153
0.59
0.59
0.10
1
$
$
$
$
$
$
F- 76
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
SIGNATURES
Date: March 1, 2019
AMERIS BANCORP
By:
/s/ Dennis J. Zember Jr.
Dennis J. Zember Jr.,
President and Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in their capacities indicated on March 1, 2019.
/s/ Dennis J. Zember Jr
Dennis J. Zember Jr., President, and Chief Executive Officer
(principal executive officer)
/s/ Nicole S. Stokes
Nicole S. Stokes, Executive Vice President and Chief
Financial Officer
(principal accounting and financial officer)
/s/ William I. Bowen, Jr.
William I. Bowen, Jr., Director
/s/ R. Dale Ezzell
R. Dale Ezzell, Director
/s/ Leo J. Hill
Leo J. Hill, Director
/s/ Daniel B. Jeter
Daniel B. Jeter, Director
/s/ Robert P. Lynch
Robert P. Lynch, Director
/s/ Elizabeth A. McCague
Elizabeth A. McCague, Director
/s/ William H. Stern
William H. Stern, Director
/s/ Jimmy D. Veal
Jimmy D. Veal, Director
F- 77
This page is intentionally left blank.
Common Stock and Dividend Information
Ameris Bancorp Common Stock is listed on the Nasdaq Global Select Market under the symbol “ABCB”. The following table sets forth
the dividends declared and the low and high sales prices for the common stock as quoted on Nasdaq during 2018.
CALENDAR PERIOD
______________________________________________________________________
2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
SALES PRICE
Low
High
$47.90 $59.05
$50.20 $58.10
$45.15 $54.35
$29.97 $47.25
$0.10
$0.10
$0.10
$0.10
DIVIDENDS
SHAREHOLDER SERVICES
Computershare is Ameris Bancorp’s stock transfer agent and administers all matters related to our stock. You may contact them via:
First Class, Registered or Certified Mail:
Overnight Delivery:
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
Computershare Investor Services
462 South 4th Street, Suite 1600
Louisville, KY 40202
Shareholder Services Number: (800) 568-3476
Investor Centre™ portal: www.computershare.com/investor
If your shares are held in a brokerage account, please contact your broker or financial advisor.
AVAILABILITY OF INFORMATION
Upon written request, Ameris Bancorp will provide, without charge, a copy of the Annual Report on Form 10-K, including the financial
statements and the financial statement schedules, required to be filed with the Securities and Exchange Commission for the fiscal year 2018.
Please direct requests to:
Ameris Bancorp
Investor Relations
1301 Riverplace Boulevard, Suite 2600
Jacksonville, FL 32207
investor.relations@amerisbank.com
ANNUAL MEETING OF SHAREHOLDERS
The 2019 Annual Meeting of Shareholders of Ameris Bancorp will be held on May 14, 2019 at 11:30 AM (ET), at The Cornell Club–
New York, located at 6 East 44th Street, New York, NY 10017.
Mixed Sources: Produced
using sustainable methods with
materials from well-managed
forests, controlled sources or
recycled wood or fi ber.
ANNUAL REPORT 2018 | 171
AMERIS BANK’S REACH
Banking Communities
Proud to have banking offices located in a variety of communities throughout Alabama,
Florida, Georgia, North Carolina, South Carolina and Tennessee.
ALABAMA
Abbeville
Auburn*
Birmingham*
Dothan
Eufaula
Montgomery*
FLORIDA
Blountstown
Crawfordville
Cross City
Defuniak Springs
Fernandina Beach*
Fleming Island
Gainesville
High Springs
Jacksonville
Jacksonville Beach
Keystone Heights
Lake City
Live Oak
Lynn Haven
Melrose
Neptune Beach
Ocala
Orange Park
Ormond Beach
Palatka
Palm Coast
Panama City
Panama City Beach
St. Augustine
Tallahassee
Trenton
GEORGIA
Acworth
Albany
Alpharetta*
Atlanta
Brunswick
Buena Vista
Butler
Cairo
Canton
Cartersville
Colquitt
Cordele
Doerun
Donalsonville
Douglas
Douglasville
Dublin
Duluth*
Ellaville
Ellenwood
Gainesville
Hinesville
Hoschton
Jackson
Jefferson
Jekyll Island
Lithia Springs
Locust Grove
Lyons
Marietta
McDonough
Monticello
Moultrie
Oakwood
Ocilla
Pooler
Quitman
Richmond Hill
Rincon
Savannah
Smyrna
St. Marys
St. Simons Island
Stockbridge
Thomasville
Tifton
Valdosta
Vidalia
Waycross
Woodstock
NORTH CAROLINA
Winston Salem*
SOUTH CAROLINA
Beaufort
Charleston
Columbia
Greenville
Irmo
Lexington
Mt. Pleasant
Myrtle Beach*
Summerville
TENNESSEE
Franklin*
Business Development
Our family of employees extends throughout the United States, with business development
occurring in:
Arizona
California
Illinois
Louisiana
Maryland
Missisippi
New Hampshire
New Jersey
New York
Texas
Washington
172 | AMERIS BANCORP
*Denotes mortgage-only locations
AMERIS BANK’S REACH
Number of Ameris Bank Customers
1
200
ANNUAL REPORT 2018 | 173
310 First Street, SE
PO Box 3668
Moultrie, GA 31776
(P) 229.890.1111 | (F) 229.890.2235
amerisbank.com
002CSN9BD9 Annual Report/10K Wrap