UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



	ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2019



	¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13901

AMERIS BANCORP

(Exact name of registrant as specified in its charter)



GEORGIA	58-1456434
(State of incorporation)	(IRS Employer ID No.)

310 FIRST STREET, S.E., MOULTRIE, GA 31768

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

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 ý No ¨

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ý No ¨

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	ý	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	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 Exchange Act). Yes ¨ No ý

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1 per share	ABCB	Nasdaq Global Select Market

There were ~~37,231,049~~47,585,309 shares of Common Stock outstanding as of ~~November 3, 2017.~~May 1, 2019.

AMERIS BANCORP

TABLE OF CONTENTS



		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018	1

	Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2019 and ~~Nine-Month Periods Ended September 30, 2017 and 2016~~2018	2

	Consolidated Statements of Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	3

	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	4144

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	6467

Item 4.	Controls and Procedures.	6567

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	6568

Item 1A.	Risk Factors.	6568

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	6568

Item 3.	Defaults Upon Senior Securities.	6568

Item 4.	Mine Safety Disclosures.	6568

Item 5.	Other Information.	6568

Item 6.	Exhibits.	6670

Signatures		6771

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(dollars in thousands, except per share data)


	September 30, 2017			December 31, 2016			March 31, 2019			December 31, 2018
Assets
Cash and due from banks	$	131,071		$	127,164		$	144,801		$	172,036
Federal funds sold and interest-bearing deposits in banks	112,844			71,221			712,199			507,491
Cash and cash equivalents							857,000			679,527

Time deposits in other banks							7,371			10,812
Investment securities available for sale, at fair value	819,593			822,735			1,234,435			1,192,423
Other investments	47,977			29,464			15,157			14,455
Loans held for sale, at fair value	137,392			105,924			112,070			111,298

Loans	4,574,678			3,626,821			5,756,358			5,660,457
Purchased loans	917,126			1,069,191			2,472,271			2,588,832
Purchased loan pools	465,218			568,314			253,710			262,625
Loans, net of unearned income	5,957,022			5,264,326			8,482,339			8,511,914
Allowance for loan losses	(25,966		)	(23,920		)	(28,659		)	(28,819		)
Loans, net	5,931,056			5,240,406			8,453,680			8,483,095

Other real estate owned, net	9,391			10,874			6,014			7,218
Purchased other real estate owned, net	9,946			12,540			10,857			9,535
Total other real estate owned, net	19,337			23,414			16,871			16,753

Premises and equipment, net	119,458			121,217			141,698			145,410
Goodwill	125,532			125,532			501,308			503,434
Other intangible assets, net	14,437			17,428			55,557			58,689
Cash value of bank owned life insurance							104,597			104,096
Deferred income taxes, net	39,365			40,776			33,295			35,126
Cash value of bank owned life insurance	79,241			78,053
Other assets	72,517			88,697			123,236			88,397
Total assets	$	7,649,820		$	6,892,031		$	11,656,275		$	11,443,515

Liabilities
Deposits:
Noninterest-bearing	$	1,718,022		$	1,573,389		$	2,753,173		$	2,520,016
Interest-bearing	4,177,482			4,001,774			7,047,702			7,129,297
Total deposits	5,895,504			5,575,163			9,800,875			9,649,313
Securities sold under agreements to repurchase	14,156			53,505			4,259			20,384
Other borrowings	808,572			492,321			151,454			151,774
Subordinated deferrable interest debentures	85,220			84,228			89,529			89,187
FDIC loss-share payable, net							18,834			19,487
Other liabilities	44,447			40,377			95,740			57,023
Total liabilities	6,847,899			6,245,594			10,160,691			9,987,168

Commitments and Contingencies (Note 9)
Commitments and Contingencies (Note 14)

Shareholders’ Equity
Preferred stock, stated value $1,000 (5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016)	—			—
Common stock, par value $1 (100,000,000 shares authorized; 38,705,910 and 36,377,807 shares issued at September 30, 2017 and December 31, 2016, respectively)	38,706			36,378
Preferred stock, stated value $1,000 (5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2019 and December 31, 2018)							—			—
Common stock, par value $1 (100,000,000 shares authorized; 49,126,427 and 49,014,925 shares issued at March 31, 2019 and December 31, 2018, respectively)							49,126			49,015
Capital surplus	506,779			410,276			1,053,190			1,051,584
Retained earnings	267,694			214,454			412,005			377,135
Accumulated other comprehensive income (loss), net of tax	3,241			(1,058		)
Treasury stock, at cost (1,474,861 shares and 1,456,333 shares at September 30, 2017 and December 31, 2016, respectively)	(14,499		)	(13,613		)
Accumulated other comprehensive loss, net of tax							(1,178		)	(4,826		)
Treasury stock, at cost (1,541,118 shares and 1,514,984 shares at March 31, 2019 and December 31, 2018, respectively)							(17,559		)	(16,561		)
Total shareholders’ equity	801,921			646,437			1,495,584			1,456,347
Total liabilities and shareholders’ equity	$	7,649,820		$	6,892,031		$	11,656,275		$	11,443,515

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (unaudited)

(dollars in thousands, except per share data)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
	2017		2016			2017			2016			2019			2018
Interest income
Interest and fees on loans	$	70,462	$	57,322		$	197,447		$	160,677		$	112,401		$	73,267
Interest on taxable securities	5,062		4,336			15,057			13,476			9,043			5,207
Interest on nontaxable securities	392		397			1,209			1,297			156			322
Interest on deposits in other banks and federal funds sold	406		155			1,070			659			3,329			716
Total interest income	76,322		62,210			214,783			176,109			124,929			79,512

Interest expense
Interest on deposits	5,136		3,074			13,479			8,730			21,684			6,772
Interest on other borrowings	4,331		2,069			10,702			5,287			3,850			3,939
Total interest expense	9,467		5,143			24,181			14,017			25,534			10,711

Net interest income	66,855		57,067			190,602			162,092			99,395			68,801
Provision for loan losses	1,787		811			5,828			2,381			3,408			1,801
Net interest income after provision for loan losses	65,068		56,256			184,774			159,711			95,987			67,000

Noninterest income
Service charges on deposit accounts	10,535		11,358			31,714			31,709			11,646			10,228
Mortgage banking activity	13,340		14,067			38,498			38,420			13,828			11,900
Other service charges, commissions and fees	699		791			2,137			2,869			768			719
Gain on sale of securities	—		—			37			94
Gain on securities												66			37
Other noninterest income	2,425		2,648			8,508			8,437			4,463			3,580
Total noninterest income	26,999		28,864			80,894			81,529			30,771			26,464

Noninterest expense
Salaries and employee benefits	32,583		27,982			89,509			81,700			38,370			32,089
Occupancy and equipment expense	6,036		5,989			18,059			18,060			8,204			6,198
Data processing and communications costs	7,050		6,185			20,650			18,347			8,391			7,135
Credit resolution-related expenses	1,347		1,526			2,879			5,089			911			549
Advertising and marketing expense	1,247		1,249			3,612			2,908			1,741			1,229
Amortization of intangible assets	941		993			2,990			3,332			3,132			934
Merger and conversion charges	92		—			494			6,359			2,057			835
Other noninterest expenses	14,471		9,275			34,406			25,363			12,619			10,129
Total noninterest expense	63,767		53,199			172,599			161,158			75,425			59,098

Income before income tax expense	28,300		31,921			93,069			80,082			51,333			34,366
Income tax expense	8,142		10,364			28,671			26,159			11,428			7,706
Net income	20,158		21,557			64,398			53,923			39,905			26,660

Other comprehensive income
Net unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax expense (benefit) of $966, ($1,481), $2,348 and $4,160	1,795		(2,752		)	4,361			7,724
Reclassification adjustment for gains on investment securities included in earnings, net of tax of $0, $0, $13 and $33	—		—			(24		)	(61		)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax expense (benefit) of $14, $130, ($21) and ($306)	25		241			(38		)	(567		)
Other comprehensive income	1,820		(2,511		)	4,299			7,096
Other comprehensive income (loss)
Net unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax expense (benefit) of $1,028 and ($2,500)												3,867			(9,403		)
Reclassification adjustment for gains on investment securities included in earnings, net of tax of ($12) and ($8)												(46		)	(29		)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax expense (benefit) of ($46) and $75												(173		)	281
Other comprehensive income (loss)												3,648			(9,151		)
Total comprehensive income	$	21,978	$	19,046		$	68,697		$	61,019		$	43,553		$	17,509

Basic earnings per common share	$	0.54	$	0.62		$	1.76		$	1.58		$	0.84		$	0.70
Diluted earnings per common share	$	0.54	$	0.61		$	1.74		$	1.56		$	0.84		$	0.70
Dividends declared per common share	$	0.10	$	0.10		$	0.30		$	0.20		$	0.10		$	0.10
Weighted average common shares outstanding (in thousands)
Basic	37,225		34,870			36,690			34,156			47,366			37,967
Diluted	37,553		35,195			37,017			34,470			47,456			38,250

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (unaudited)

(dollars in thousands)


	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016					Three Months Ended March 31, 2019
	Shares		Amount			Shares		Amount
Common Stock
											Common Stock								Accumulated Other Comprehensive Loss, Net of Tax				Treasury Stock
											Shares	Amount		Capital Surplus		Retained Earnings						Shares			Amount				Total Shareholders' Equity
Balance at beginning of period	36,377,807		$	36,378		33,625,162		$	33,625		49,014,925	$	49,015	$	1,051,584	$	377,135		Accumulated Other Comprehensive Loss, Net of Tax	$	(4,826	)		1,514,984			$	(16,561	)		$	1,456,347
Issuance of common stock	2,141,072		2,141			2,549,469		2,549
Issuance of restricted shares	84,147		84			125,581		126			103,794	103		812		—			—				—			—				915
Cancellation of restricted shares	(472	)	—			(7,085	)	(7		)
Proceeds from exercise of stock options	103,356		103			54,510		55			7,708	8		46		—			—				—			—				54
Issued at end of period	38,705,910		$	38,706		36,347,637		$	36,348

Capital Surplus
Balance at beginning of period			$	410,276				$	337,349
Share-based compensation			2,419					1,586			—	—		748		—			—				—			—				748
Issuance of common shares, net of issuance costs of $4,925 and $0			92,359					69,906
Issuance of restricted shares			(84		)			(126		)
Cancellation of restricted shares			—					7
Proceeds from exercise of stock options			1,809					908
Balance at end of period			$	506,779				$	409,630

Retained Earnings
Balance at beginning of period			$	214,454				$	152,820
Purchase of treasury shares											—	—		—		—			—				26,134			(998		)		(998		)
Net income			64,398					53,923			—	—		—		39,905			—				—			—				39,905
Dividends on common shares			(11,158		)			(6,974		)	—	—		—		(4,759		)	—				—			—				(4,759		)
Cumulative effect of change in accounting for leases											—	—		—		(276		)	—				—			—				(276		)
Other comprehensive income (loss) during the period											—	—		—		—			3,648				—			—				3,648
Balance at end of period			$	267,694				$	199,769		49,126,427	$	49,126	$	1,053,190	$	412,005		$	(1,178	)		1,541,118			$	(17,559	)		$	1,495,584

Accumulated Other Comprehensive Income, Net of Tax
Unrealized gains (losses) on securities and derivatives:
Balance at beginning of period			$	(1,058	)			$	3,353
Other comprehensive income during the period			4,299					7,096
Balance at end of period			$	3,241				$	10,449

Treasury Stock
Balance at beginning of period	1,456,333		$	(13,613	)	1,413,777		$	(12,388	)
Purchase of treasury shares	18,528		(886		)	42,556		(1,225		)
Balance at end of period	1,474,861		$	(14,499	)	1,456,333		$	(13,613	)

Total Shareholders’ Equity			$	801,921				$	642,583



	Three Months Ended March 31, 2018

	Common Stock									Accumulated Other Comprehensive Loss, Net of Tax			Treasury Stock
	Shares	Amount		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Tax			Shares	Amount			Total Shareholders' Equity
Balance at beginning of period	38,734,873	$	38,735	$	508,404		$	273,119		$	(1,280	)	1,474,861	$	(14,499	)	$	804,479
Issuance of common stock for acquisition	944,586	944		49,067			—			—			—	—			50,011
Issuance of restricted shares	77,755	78		(78		)	—			—			—	—			—
Proceeds from exercise of stock options	62,704	63		750			—			—			—	—			813
Share-based compensation	—	—		897			—			—			—	—			897
Purchase of treasury shares	—	—		—			—			—			17,976	(960		)	(960		)
Net income	—	—		—			26,660			—			—	—			26,660
Dividends on common shares	—	—		—			(3,833		)	—			—	—			(3,833		)
Reclassification of stranded income tax effects from accumulated other comprehensive income	—	—		—			392			(392		)	—	—			—
Cumulative effect of change in accounting for derivatives	—	—		—			28			—			—	—			28
Other comprehensive income (loss) during the period	—	—		—			—			(9,151		)	—	—			(9,151		)
Balance at end of period	39,819,918	$	39,820	$	559,040		$	296,366		$	(10,823	)	1,492,837	$	(15,459	)	$	868,944

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2019			2018
Operating Activities
Net income	$	64,398		$	53,923		$	39,905		$	26,660
Adjustments reconciling net income to net cash provided by operating activities:
Adjustments reconciling net income to net cash provided by (used in) operating activities:
Depreciation	6,918			7,041			2,623			2,274
Net losses on sale or disposal of premises and equipment	956			112
Net losses on sale or disposal of premises and equipment including write-downs							348			583
Net write-downs on other assets							571			—
Provision for loan losses	5,828			2,381			3,408			1,801
Net losses on sale of other real estate owned including write-downs	501			1,844			9			33
Share-based compensation expense	2,419			1,586			1,152			1,441
Amortization of intangible assets	2,990			3,332			3,132			934
Amortization of operating lease right-of-use assets							1,547			—
Provision for deferred taxes	(962		)	(6,369		)	2,963			2,432
Net amortization of investment securities available for sale	4,815			5,086			819			1,595
Net gains on securities available for sale	(37		)	(94		)
Net gain on securities							(66		)	(37		)
Accretion of discount on purchased loans	(9,023		)	(12,926		)	(2,980		)	(1,571		)
Amortization of premium on purchased loan pools	2,943			4,149			348			511
Net accretion (amortization) on other borrowings	62			(57		)
Amortization of subordinated deferrable interest debentures	992			1,123
Accretion on other borrowings							18			33
Accretion on subordinated deferrable interest debentures							342			331
Originations of mortgage loans held for sale	(1,113,188		)	(1,051,812		)	(296,197		)	(358,038		)
Payments received on mortgage loans held for sale	799			1,167			194			367
Proceeds from sales of mortgage loans held for sale	961,831			982,898			305,473			377,748
Net gains on sale of mortgage loans held for sale	(36,451		)	(41,935		)	(11,484		)	(6,759		)
Originations of SBA loans	(25,720		)	(57,462		)	(9,515		)	(7,168		)
Proceeds from sales of SBA loans	23,952			21,656			11,870			10,497
Net gains on sale of SBA loans	(3,423		)	(3,054		)	(1,113		)	(918		)
Increase in cash surrender value of BOLI	(1,188		)	(1,318		)
Changes in FDIC loss-share receivable/payable, net of cash payments received	1,974			10,277
Increase in cash surrender value of bank owned life insurance							(501		)	(366		)
Changes in FDIC loss-share payable, net of cash payments							1,141			785
Change attributable to other operating activities	12,931			16,202			5,670			(4,671		)
Net cash used in operating activities	(95,683		)	(62,250		)
Net cash provided by (used in) operating activities							59,677			48,497

Investing Activities, net of effects of business combinations
Purchase of securities available for sale	(83,090		)	(134,786		)
Proceeds from maturities of time deposits in other banks							3,441			—
Purchases of securities available for sale							(146,874		)	(121,865		)
Proceeds from prepayments and maturities of securities available for sale	85,036			93,513			43,942			33,970
Proceeds from sales of securities available for sale	3,090			53,026			64,995			36,685
Net increase in other investments	(12,669		)	(13,050		)	(694		)	(13,809		)
Net increase in loans, excluding purchased loans	(786,548		)	(556,182		)	(101,360		)	(134,063		)
Payments received on purchased loans	155,033			186,319			116,834			43,971
Purchases of loan pools	—			(151,481		)
Payments received on purchased loan pools	95,533			115,409			8,567			16,158
Purchases of premises and equipment	(3,016		)	(8,250		)	(1,550		)	(1,133		)
Proceeds from sales of premises and equipment	16			207			275			427
Proceeds from sales of other real estate owned	11,989			18,329			2,610			3,106
Payments received from (payments to) FDIC under loss-share agreements	(97		)	4,770
Net cash proceeds paid in acquisitions	—			(7,205		)
Payments paid to FDIC under loss-share agreements							(1,794		)	(333		)
Net cash and cash equivalents paid in acquisitions							—			(21,421		)
Net cash used in investing activities	(534,723		)	(399,381		)	(11,608		)	(158,307		)

				(Continued)						(Continued)

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2019			2018
Financing Activities, net of effects of business combinations
Net increase in deposits	$	320,341		$	25,448
Net increase (decrease) in deposits							$	151,562		$	(179,680	)
Net decrease in securities sold under agreements to repurchase	(39,349		)	(20,938		)	(16,125		)	(7,368		)
Proceeds from other borrowings	1,687,692			339,500			—			455,000
Repayment of other borrowings	(1,371,503		)	(53,513		)	(338		)	(150,052		)
Issuance of common stock	88,656			—
Proceeds from exercise of stock options	1,912			963			54			813
Dividends paid - common stock	(10,927		)	(5,096		)	(4,751		)	(3,726		)
Purchase of treasury shares	(886		)	(1,225		)	(998		)	(960		)
Net cash provided by financing activities	675,936			285,139			129,404			114,027

Net increase (decrease) in cash and cash equivalents	45,530			(176,492		)
Net increase in cash and cash equivalents							177,473			4,217
Cash and cash equivalents at beginning of period	198,385			390,563			679,527			330,658
Cash and cash equivalents at end of period	$	243,915		$	214,071		$	857,000		$	334,875

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	23,369		$	13,791		$	25,741		$	11,602
Income taxes	28,212			30,969			49			2
Loans (excluding purchased loans) transferred to other real estate owned	4,043			2,101			264			1,176
Purchased loans transferred to other real estate owned	4,294			6,262			2,523			457
Loans transferred from loans held for sale to loans held for investment	165,352			94,601			—			73,374
Loans transferred from loans held for investment to loans held for sale							—			2,796
Loans provided for the sales of other real estate owned	1,334			1,471			75			—
Initial recognition of operating lease right-of-use assets							27,286			—
Initial recognition of operating lease liabilities							29,651			—
Assets acquired in business acquisitions	—			561,440			1,335			82,981
Liabilities assumed in business acquisitions	—			465,048			(792		)	5,705
Issuance of common stock in acquisitions	—			72,455			—			50,011
Issuance of common stock in exchange for equity investment in US Premium Finance Holding Company	5,844			—
Change in unrealized gain (loss) on securities available for sale, net of tax	4,337			7,724			3,821			(9,432		)
Change in unrealized gain (loss) on cash flow hedge, net of tax	(38		)	(567		)	(173		)	281

				(Concluded)						(Concluded)

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

~~September 30, 2017~~March 31, 2019

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Nature of Business

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At ~~September 30, 2017,~~March 31, 2019, the Bank operated 97114 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company, while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

Basis of Presentation

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments, ~~(consisting~~consisting of normal recurring ~~accruals)~~adjustments, which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended ~~September 30, 2017~~March 31, 2019 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

~~Accounting Policy Update~~Cash and Cash Equivalents

~~Other Investments~~ – ~~Other investments~~For purposes of reporting cash flows, cash and cash equivalents include ~~Federal Home Loan~~cash on hand, cash items in process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold. The Bank ~~(“FHLB”) stock,~~is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank ~~stock~~of Atlanta. The reserve requirement as of March 31, 2019 and December 31, 2018 was $52.7 million and $61.2 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.

Intangible Assets

Intangible assets include core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a ~~minority equity investment~~valuation performed as of the consummation date and is amortized over an estimated useful life of seven to ten years. Intangible assets also include insurance agent relationships, trade name and non-compete agreement intangible assets acquired in the acquisition of US Premium Finance Holding ~~Company,~~Company. These agent relationship, trade name and non-compete agreement intangible assets were initially recognized based on a ~~Florida corporation (“USPF”). These investments do not have readily determinable fair values~~valuation performed as of the consummation date and are carried at cost. They are periodically reviewed for impairment based on ultimate recovery of par value or cost basis. Both stock and cash dividends are reported as income. For additional information regarding the Company’s minority equity investment in USPF, see Note 2.amortized over estimated useful lives ranging from three to eight years.

Reclassifications

Certain reclassifications of prior year amounts have been made to conform with the current year presentations. The reclassifications had no effect on net income or shareholders' equity as previously reported.

Accounting Standards Adopted in ~~2017~~2019

ASU ~~2016-09~~2016-02 – ~~Improvements to Employee Share-Based Payment Accounting~~Leases (Topic 842) (“ASU ~~2016-09”~~2016-02”). ASU ~~2016-09 simplifies various aspects of how share-based payments are accounted~~2016-02 amends the existing standards for and presented in the financial statements. Under ASU 2016-09, companies will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. The standard eliminates the requirementlease accounting effectively requiring that ~~excess tax benefits~~most leases be ~~realized before companies can recognize them. The excess tax benefits will be reported as an operating activity~~carried on the ~~statement~~balance sheets of ~~cash flows, and~~ the cash paid to a tax authority when shares are withheld to satisfy a company’s statutory income tax withholding obligation will be reported as a financing activity on its statement of cash. In addition, the standard increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. ASU 2016-09 permits companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. The Company has electedrelated lessees by requiring them to recognize ~~forfeitures as they occur.~~a right-of-use asset and a corresponding lease liability. ASU ~~2016-09 became effective on January 1, 2017~~2016-02 includes qualitative and ~~did not have a material impact on the consolidated financial statements.~~quantitative disclosure requirements intended to provide

~~Accounting Standards Pending Adoption~~

~~ASU 2017-12 –~~ ~~"Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ ~~("ASU 2017-12"). The purposes~~greater insight into the nature 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 requiresleasing activities. The standard may be adopted using a modified retrospective transition method ~~in which the Company will recognize the~~with a 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. The Company is currently evaluating the provisions of ASU 2017-12 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.

~~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 apply the modification accounting guidance if any of the following change: the shard-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. ASU 2017-09 is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

~~ASU 2017-08 –~~ ~~“Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~ (“ASU 2017-08”). ASU 2017-08 shortens the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. Under the current guidance, entities generally amortize the premium on a callable debt security as an adjustment of yield over the contractual life (to maturity date) of the instrument. This ASU does not require any accounting change in the accounting for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, ASU 2017-08 provides for a modified retrospective transition by means of 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 where 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 adopted ASU 2016-02 during the first quarter of 2019 and elected the optional transition method. The Company also elected the package of practical expedients provided in the guidance which permits the Company to not reassess under the new standard the prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the hindsight practical expedient to determine lease term and in assessing impairment of the Company's right-of-use asset. The adoption of ASU 2016-02 resulted in the recognition of a right-of-use asset of $27.3 million, a lease liability of $29.7 million and a cumulative effect decrease to retained earnings of $276,000. The right-of-use asset and lease liability are recorded in the consolidated balance sheets in other assets and other liabilities, respectively.

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 ~~adopted.~~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 ~~provisions~~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.

ASU ~~2017-08~~2018-13– Fair Value Measurement (Topic 820): Disclosure Framework – Changes to ~~determine~~ the ~~potential~~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 ~~the new~~this standard will have on the Company’s ~~results of operations, financial position and~~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 ~~qualitative~~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 ~~standard~~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 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. The Company is currently evaluating the impact this standard 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 measured at amortized cost 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. The Company will adopt the new guidance on January 1, 2020. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a ~~cumulative-effect~~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 ~~standard~~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 impact of implementation will be influenced by the composition, characteristics and quality of our portfolios, as well as the economic conditions and forecasts at the adoption date.

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. An evaluation of accounting policies is in progress and it has been determined that current policy elections will need to be modified. This committee has ~~identified~~contracted with the software vendor of choice for implementation, established an implementation ~~timeline~~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. During the first quarter of 2019, four CECL work streams have been established: accounting and reporting, credit risk modeling, systems and data, and processes and controls. Significant attention has been devoted to each of these areas detailing current processes, determining areas requiring attention, and developing timelines to address those areas. Identification of financial assets in scope for ASU 2016-13 is substantially complete.

~~ASU 2016-02~~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.At March 31, 2019, Fidelity Bank operated 70 full-service banking locations, 51 of which were located in Georgia and 19 of which were 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 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 Company's common stock as of December 14, 2018, the last trading date before announcement. The merger is subject to customary closing conditions, including the receipt of regulatory approvals. 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, ~~Leases (Topic 842)~~Business Combinations ~~(“ASU 2016-02”)~~. ~~ASU 2016-02 amends~~Under the ~~existing standards for lease~~acquisition method of accounting, ~~effectively requiring most leases be carried~~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 ~~balance sheets~~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 ~~related lessees by requiring them~~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 ~~recognize~~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 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 ~~right-of-use asset~~bank holding company headquartered in Hoschton, Georgia. Upon consummation of the acquisition, Hamilton was merged with and ~~a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight~~ into the ~~nature~~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 ~~an entity’s leasing activities.~~ 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.

The ~~standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity~~following table presents the assets acquired and liabilities assumed of Hamilton as of June 29, 2018, and their fair value estimates. The fair value estimates are subject to refinement for up to one year after the ~~beginning~~closing date of the ~~period in which it is adopted. ASU 2016-02 is effective~~acquisition for ~~annual reporting periods beginning after December 15, 2018,~~new information obtained about facts and ~~interim periods within those annual periods with early adoption permitted.~~circumstances that existed at the acquisition date. The Company ~~has several leased facilities,~~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 ~~are currently treated~~could result in further adjustments to the fair values presented below. Because final external valuations were not complete as ~~operating leases,~~of March 31, 2019, management continues to evaluate fair value adjustments related to loans, premises, intangibles, interest-bearing deposits, other borrowings, subordinated deferrable interest debentures, other liabilities and ~~are not currently shown~~deferred tax assets.



(dollars in thousands)	As Recorded by Hamilton			Initial Fair Value Adjustments				Subsequent Adjustments				As Recorded by Ameris
Assets
Cash and due from banks	$	14,405		$	—			$	(478	)	(j)	$	13,927
Federal funds sold and interest-bearing deposits in banks	102,156			—				—				102,156
Time deposits in other banks	11,558			—				—				11,558
Investment securities	288,206			(2,376		)	(a)	—				285,830
Other investments	2,094			—				—				2,094
Loans	1,314,264			(15,528		)	(b)	(696		)	(k)	1,298,040
Less allowance for loan losses	(11,183		)	11,183			(c)	—				—
Loans, net	1,303,081			(4,345		)		(696		)		1,298,040
Other real estate owned	847			—				—				847
Premises and equipment	27,483			—				(723		)	(l)	26,760
Other intangible assets, net	18,755			(2,755		)	(d)	7,610			(m)	23,610
Cash value of bank owned life insurance	4,454			—				—				4,454
Deferred income taxes, net	12,445			(6,308		)	(e)	343			(n)	6,480
Other assets	13,053			—				(17		)	(o)	13,036
Total assets	$	1,798,537		$	(15,784	)		$	6,039			$	1,788,792
Liabilities
Deposits:
Noninterest-bearing	$	381,039		$	—			$	—			$	381,039
Interest-bearing	1,201,324			(1,896		)	(f)	4,783			(p)	1,204,211
Total deposits	1,582,363			(1,896		)		4,783				1,585,250
Other borrowings	10,687			(66		)	(g)	286			(q)	10,907
Subordinated deferrable interest debentures	3,093			(658		)	(h)	(143		)	(r)	2,292
Other liabilities	10,460			2,391			(i)	—				12,851
Total liabilities	1,606,603			(229		)		4,926				1,611,300
Net identifiable assets acquired over (under) liabilities assumed	191,934			(15,555		)		1,113				177,492
Goodwill	—			220,713				(1,070		)		219,643
Net assets acquired over liabilities assumed	$	191,934		$	205,158			$	43			$	397,135
Consideration:
Ameris Bancorp common shares issued	6,548,385
Price per share of the Company's common stock	$	53.35
Company common stock issued	$	349,356
Cash exchanged for shares	$	47,779
Fair value of total consideration transferred	$	397,135

Explanation of fair value adjustments


(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.


(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 ~~Company’s consolidated balance sheet. After ASU 2016-02~~excess of the purchase price over the fair value of net assets acquired, was recorded in the Hamilton acquisition and is ~~implemented,~~ the ~~Company expects to begin reporting these lease agreements on the balance sheet as a right-of-use asset~~result of expected operational synergies and a corresponding liability. The Company is currently evaluating the impact this standard will have on the Company’s consolidated statement of income and comprehensive income, consolidated statement of stockholders’ equity and consolidated statement of cash flows, but itother factors. This goodwill is not expected to ~~have a material impact.~~be deductible for tax purposes.

~~ASU 2014-09 –~~ ~~Revenue from Contracts with Customers~~ ~~(“ASU 2014-09”). ASU 2014-09 provides guidance~~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 ~~an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects~~were considered to be ~~entitled~~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	$	21,223
Non-accretable difference	(2,090		)
Cash flows expected to be collected	19,133
Accretable yield	(794		)
Total purchased credit-impaired loans acquired	$	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	$	18,339	$	21,223	$	2,090
Acquired receivables not subject to ASC 310-30	$	1,279,701	$	1,441,534	$	—

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 ~~exchange~~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 ~~those goods or services. ASU 2014-09 is effective prospectively,~~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.

The following table presents the assets acquired and liabilities assumed of Atlantic as of May 25, 2018, and their fair value estimates. The fair value estimates are subject to refinement for ~~annual~~up to one year after the closing date of the acquisition for new information obtained about facts and ~~interim periods, beginning after December 15, 2017. Management has substantially completed~~circumstances that existed at the acquisition date. The Company continues its evaluation of the ~~impact ASU 2014-09 will have on~~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 ~~Company’s consolidated financial statements. Based on this evaluation~~fair values presented below. Because final external valuations were not complete as of March 31, 2019, management continues to ~~date, management has determined that~~evaluate fair value adjustments related to loans, intangibles, interest-bearing deposits, other liabilities and deferred tax assets.



(dollars in thousands)	As Recorded by Atlantic			Initial Fair Value Adjustments				Subsequent Adjustments				As Recorded by Ameris
Assets
Cash and due from banks	$	3,990		$	—			$	—			$	3,990
Federal funds sold and interest-bearing deposits in banks	22,149			—				—				22,149
Investment securities	35,186			(60		)	(a)	—				35,126
Other investments	9,576			—				—				9,576
Loans held for sale	358			—				—				358
Loans	777,605			(19,423		)	(b)	(2,478		)	(k)	755,704
Less allowance for loan losses	(8,573		)	8,573			(c)	—				—
Loans, net	769,032			(10,850		)		(2,478		)		755,704
Other real estate owned	1,837			(796		)	(d)	—				1,041
Premises and equipment	12,591			(1,695		)	(e)	—				10,896
Other intangible assets, net	—			5,937			(f)	1,551			(l)	7,488
Cash value of bank owned life insurance	18,182			—				—				18,182
Deferred income taxes, net	5,782			709			(g)	1,595			(m)	8,086
Other assets	3,604			(634		)	(h)	82			(n)	3,052
Total assets	$	882,287		$	(7,389	)		$	750			$	875,648
Liabilities
Deposits:
Noninterest-bearing	$	69,761		$	—			$	—			$	69,761
Interest-bearing	514,935			(554		)	(i)	1,025			(o)	515,406
Total deposits	584,696			(554		)		1,025				585,167
Other borrowings	204,475			—				—				204,475
Other liabilities	8,367			(13		)	(j)	—				8,354
Total liabilities	797,538			(567		)		1,025				797,996
Net identifiable assets acquired over (under) liabilities assumed	84,749			(6,822		)		(275		)		77,652
Goodwill	—			91,360				275				91,635
Net assets acquired over liabilities assumed	$	84,749		$	84,538			$	—			$	169,287
Consideration:
Ameris Bancorp common shares issued	2,631,520
Price per share of the Company's common stock	$	56.15
Company common stock issued	$	147,760
Cash exchanged for shares	$	21,527
Fair value of total consideration transferred	$	169,287

Explanation of fair value adjustments


(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.


(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 acquired other assets.


(o)	Adjustment reflects additional fair value adjustments on the acquired deposits.

Goodwill of $91.6 million, which is the ~~revenue streams~~excess of the ~~Company within~~purchase price over the ~~scope~~fair value of ~~ASU 2014-09,~~net assets acquired, was recorded in the ~~new accounting guidance will not change~~Atlantic acquisition and is the ~~timing or amount~~result of ~~revenue recognized. The adoption of ASU 2014-09~~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 ~~a material impact on~~been adjusted for estimated prepayments.



(dollars in thousands)
Contractually required principal and interest	$	16,077
Non-accretable difference	(4,115		)
Cash flows expected to be collected	11,962
Accretable yield	(1,199		)
Total purchased credit-impaired loans acquired	$	10,763

The following table presents the ~~Company's consolidated financial statements.~~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	$	10,763	$	16,077	$	4,115
Acquired receivables not subject to ASC 310-30	$	744,941	$	1,041,768	$	—

~~NOTE 2 – INVESTMENT IN~~

US ~~PREMIUM FINANCE HOLDING COMPANY~~Premium Finance Holding Company

On ~~December 15, 2016,~~January 31, 2018, the ~~Bank entered into a Management and License Agreement with William J. Villari and USPF pursuant to which Mr. Villari will manage a division~~Company closed on the purchase of the Bank to be operated under the name “US Premium Finance” and which is to be engaged in the business of soliciting, originating, servicing, administering and collecting loans made for purposes of funding insurance premiums and other loans made to persons engaged in the insurance business.

~~Also on December 15, 2016, the Company entered into a Stock Purchase Agreement with Mr. Villari pursuant to which the Company agreed to purchase from Mr. Villari 4.99%~~final 70% of the outstanding shares of common stock of ~~USPF. As consideration for such shares,~~US Premium Finance Holding Company, a Florida corporation ("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 ~~agreed to issue to Mr. Villari 128,572 unregistered~~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 ~~a private placement transaction pursuant~~cash to the ~~exemptions from registration provided in Section 4(a)(2)~~former shareholders of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. Those transactions closed on January 18, 2017, and a registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of the shares of common stock that were issued to Mr. Villari.

~~The Company’s 4.99% investment in USPF was valued at $5.8 million, based upon the closing price of the Company’s common stock immediately prior~~USPF. Pursuant to the ~~parties’ execution~~terms of the Stock Purchase Agreement ~~as follows:~~dated January 25, 2018 under which the 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.

The following table presents the assets acquired and liabilities assumed of USPF as of January 31, 2018 at their initial and subsequent fair value estimates, as recorded by the Company. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The assets acquired include only identifiable intangible assets 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.

(dollars in thousands, except per share amount)
Ameris common shares issued 128,572
Price per share of the Company's common stock $ 45.45
Fair value of consideration transferred $ 5,844



(dollars in thousands)	As Recorded by USPF		Initial Fair Value Adjustments			Subsequent Adjustments				As Recorded by Ameris
Assets
Intangible asset - insurance agent relationships	$	—	$	20,000	(a)	$	2,351		(e)	$	22,351
Intangible asset - US Premium Finance trade name	—		1,136		(b)	(42		)	(f)	1,094
Intangible asset - non-compete agreement	—		178		(c)	(16		)	(g)	162
Total assets	$	—	$	21,314		$	2,293			$	23,607
Liabilities
Deferred tax liability	$	—	$	5,492	(d)	$	(368	)	(h)	$	5,124
Total liabilities	—		5,492			(368		)		5,124
Net identifiable assets acquired over liabilities assumed	—		15,822			2,661				18,483
Goodwill	—		67,159			(2,661		)		64,498
Net assets acquired over liabilities assumed	$	—	$	82,981		$	—			$	82,981
Consideration:
Ameris Bancorp common shares issued	1,073,158
Price per share of the Company's common stock (weighted average)	$	52.047
Company common stock issued	$	55,855
Cash exchanged for shares	$	21,421
Present value of contingent earn-out consideration expected to be paid	$	5,705
Fair value of total consideration transferred	$	82,981

Explanation of fair value adjustments


(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.

~~Because USPF does not have a readily determinable~~Goodwill of $64.5 million, which is the excess of the purchase price over the fair value ~~and Ameris does not exercise significant influence over~~of net assets acquired, was recorded in the USPF ~~the investment is carried at cost~~acquisition and is ~~included~~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 ~~investments~~noninterest income in the consolidated statements of income and comprehensive 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 and comprehensive 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. No additional adjustment to the estimated contingent consideration liability was considered necessary for the first quarter of 2019.

Pro Forma Financial Information

The results of operations of USPF subsequent to its acquisition date are included in the Company’s consolidated ~~balance sheet.~~statements of income and comprehensive income. The ~~net carrying value of~~following unaudited pro forma information reflects the Company’s ~~investment in USPF was $5.8 million~~estimated consolidated results of operations as ~~of September 30, 2017.~~if the acquisition had occurred on January 1, 2017, unadjusted for potential cost savings.



	Three Months Ended March 31,
(dollars in thousands, except per share data; shares in thousands)		2018
Net interest income and noninterest income		$	95,265
Net income		$	26,876
Net income available to common shareholders		$	26,876
Income per common share available to common shareholders – basic		$	0.70
Income per common share available to common shareholders – diluted		$	0.70
Average number of shares outstanding, basic		38,246
Average number of shares outstanding, diluted		38,529

NOTE 34 – INVESTMENT SECURITIES

The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government-sponsored mortgage-backed securities and state, county and municipal securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale, along with unrealized gains and losses, are summarized as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2017
U.S. government sponsored agencies	$	1,000	$	4	$	—		$	1,004
March 31, 2019
State, county and municipal securities	140,190		3,271		(74		)	143,387		$	106,468	$	1,312	$	(40	)	$	107,740
Corporate debt securities	46,704		661		(116		)	47,249		56,901		412		(161		)	57,152
Mortgage-backed securities	626,927		3,774		(2,748		)	627,953		1,072,783		5,867		(9,107		)	1,069,543
Total debt securities	$	814,821	$	7,710	$	(2,938	)	$	819,593	$	1,236,152	$	7,591	$	(9,308	)	$	1,234,435

December 31, 2016
U.S. government sponsored agencies	$	999	$	21	$	—		$	1,020
December 31, 2018
State, county and municipal securities	149,899		2,605		(469		)	152,035		$	149,670	$	1,367	$	(304	)	$	150,733
Corporate debt securities	32,375		167		(370		)	32,172		67,123		718		(527		)	67,314
Mortgage-backed securities	641,362		2,700		(6,554		)	637,508		982,183		4,172		(11,979		)	974,376
Total debt securities	$	824,635	$	5,493	$	(7,393	)	$	822,735	$	1,198,976	$	6,257	$	(12,810	)	$	1,192,423

The amortized cost and estimated fair value of ~~available-for-sale~~available for sale securities at ~~September 30, 2017~~March 31, 2019 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are ~~not included in the following maturity summary.~~shown separately.


(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	14,094	$	14,205	$	14,170	$	14,178
Due from one year to five years	57,385		58,204		60,032		60,448
Due from five to ten years	77,194		79,093		67,648		68,541
Due after ten years	39,221		40,138		21,519		21,725
Mortgage-backed securities	626,927		627,953		1,072,783		1,069,543
	$	814,821	$	819,593	$	1,236,152	$	1,234,435

Securities with a carrying value of approximately ~~$238.6~~$477.8 million serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law at ~~September 30, 2017,~~March 31, 2019, compared with ~~$618.2~~$510.0 million at December 31, ~~2016.~~2018.

The following table details the gross unrealized losses and estimated fair value of securities aggregated by category and duration of continuous unrealized loss position at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~

2018.


	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
September 30, 2017
U.S. government sponsored agencies	$	—	$	—		$	—	$	—		$	—	$	—
March 31, 2019
State, county and municipal securities	11,333		(18		)	4,240		(56		)	15,573		(74		)	$	5,641	$	(3	)	$	13,157	$	(37	)	$	18,798	$	(40	)
Corporate debt securities	8,131		(35		)	10,854		(81		)	18,985		(116		)	9,168		(60		)	8,049		(101		)	17,217		(161		)
Mortgage-backed securities	225,258		(1,685		)	54,465		(1,063		)	279,723		(2,748		)	78,426		(174		)	478,497		(8,933		)	556,923		(9,107		)
Total debt securities	$	244,722	$	(1,738	)	$	69,559	$	(1,200	)	$	314,281	$	(2,938	)	$	93,235	$	(237	)	$	499,703	$	(9,071	)	$	592,938	$	(9,308	)

December 31, 2016
U.S. government sponsored agencies	$	—	$	—		$	—	$	—		$	—	$	—
December 31, 2018
State, county and municipal securities	47,647		(469		)	—		—			47,647		(469		)	$	23,784	$	(52	)	$	33,873	$	(252	)	$	57,657	$	(304	)
Corporate debt securities	18,377		(363		)	493		(7		)	18,870		(370		)	17,291		(111		)	17,952		(416		)	35,243		(527		)
Mortgage-backed securities	414,300		(6,177		)	11,791		(377		)	426,091		(6,554		)	119,745		(580		)	435,749		(11,399		)	555,494		(11,979		)
Total debt securities	$	480,324	$	(7,009	)	$	12,284	$	(384	)	$	492,608	$	(7,393	)	$	160,820	$	(743	)	$	487,574	$	(12,067	)	$	648,394	$	(12,810	)

As of ~~September 30, 2017,~~March 31, 2019, the Company’s securities portfolio consisted of ~~421~~488 securities, ~~119~~246 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities, as discussed below.

At ~~September 30, 2017,~~March 31, 2019, the Company held ~~101~~225 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 illiquidity, 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 ~~September 30, 2017.~~March 31, 2019.

At ~~September 30, 2017,~~March 31, 2019, the Company held ~~nine~~13 state, county and municipal securities and ~~nine~~eight corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, 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 ~~September 30, 2017.~~March 31, 2019.

The Company’s investments in corporate debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and 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 ~~September 30, 2017~~March 31, 2019 or December 31, ~~2016.~~2018.

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 conditions 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 believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at ~~September 30, 2017,~~March 31, 2019, 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 ~~September 30, 2017,~~March 31, 2019, these investments are not considered impaired on an other-than-temporary basis.

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


(dollars in thousands)	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Gross gains on sales of securities	$	38		$	312		$	522		$	332
Gross losses on sales of securities	(1		)	(218		)	(464		)	(295		)
Net realized gains on sales of securities available for sale	$	37		$	94		$	58		$	37

Sales proceeds	$	3,090		$	53,026		$	64,995		$	36,685

Total gain on securities reported on the consolidated statements of income and comprehensive income is comprised of the following for the three months ended March 31, 2019 and 2018:



(dollars in thousands)	March 31, 2019		March 31, 2018
Net realized gains on sales of securities available for sale	$	58	$	37
Unrealized holding gains on equity securities	8		—
Total gain on securities	$	66	$	37

NOTE 45 – LOANS

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. The Bank purchased residential mortgage loan pools during 2015 and 2016 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 an unrelated third ~~party~~parties consumer installment home improvement loans made to borrowers throughout the United States. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the net carrying value of these consumer installment home improvement loans was approximately ~~$148.0~~$382.5 million and ~~$60.8~~$399.9 million, ~~respectively.~~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 to originate, administer and service these types of loans. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the net carrying value of commercial insurance premium loans was approximately ~~$487.9~~$487.0 million and ~~$353.9~~$413.5 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.~~space as well as farmland. 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 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.

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)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	1,307,209	$	967,138	$	1,382,907	$	1,316,359
Real estate – construction and development	550,189		363,045		676,563		671,198
Real estate – commercial and farmland	1,558,882		1,406,219		1,894,937		1,814,529
Real estate – residential	969,289		781,018		1,365,482		1,403,000
Consumer installment	183,314		96,915		436,469		455,371
Other	5,795		12,486
	$	4,574,678	$	3,626,821	$	5,756,358	$	5,660,457

Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased loans totaling ~~$917.1 million~~$2.47 billion and ~~$1.07~~$2.59 billion at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, are not included in the above schedule.

Purchased loans are shown below according to major loan type as of the end of the periods shown:


(dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	80,895	$	96,537	$	327,972	$	372,686
Real estate – construction and development	68,583		81,368		239,413		227,900
Real estate – commercial and farmland	500,169		576,355		1,280,515		1,337,859
Real estate – residential	264,312		310,277		597,735		623,199
Consumer installment	3,167		4,654		26,636		27,188
	$	917,126	$	1,069,191	$	2,472,271	$	2,588,832

A rollforward of purchased loans for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is shown below:


(dollars in thousands)	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Balance, January 1	$	1,069,191		$	909,083		$	2,588,832		$	861,595
Charge-offs, net of recoveries	(1,761		)	(3,122		)
Additions due to acquisitions	—			402,942
Charge-offs							(184		)	(151		)
Accretion	9,023			12,926			2,980			1,571
Transfers to purchased other real estate owned	(4,294		)	(6,262		)	(2,523		)	(457		)
Payments received	(155,033		)	(186,276		)
Other	—			90
Payments received, net of principal advances							(116,834		)	(43,971		)
Ending balance	$	917,126		$	1,129,381		$	2,472,271		$	818,587

The following is a summary of changes in the accretable discounts of purchased loans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


(dollars in thousands)	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Balance, January 1	$	30,624		$	33,848		$	40,496		$	20,192
Additions due to acquisitions	—			9,991
Accretion	(9,023		)	(12,926		)	(2,980		)	(1,571		)
Accretable discounts removed due to charge-offs	(15		)	(161		)
Transfers between non-accretable and accretable discounts, net	923			2,544			(1,869		)	146
Ending balance	$	22,509		$	33,296		$	35,647		$	18,767

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of ~~September 30, 2017,~~March 31, 2019, purchased loan pools totaled ~~$465.2~~$253.7 million and consisted of whole-loan ~~adjustable rate~~ residential mortgages on properties outside the Company’s markets, with principal balances totaling ~~$459.1~~$252.0 million and ~~$6.1~~$1.7 million of remaining purchase premium paid at acquisition. As of December 31, ~~2016,~~2018, purchased loan pools totaled ~~$568.3~~$262.6 million with principal balances totaling ~~$559.4~~$260.5 million and ~~$8.9~~$2.1 million of remaining purchase premium paid at acquisition.

At ~~September 30, 2017 and December~~March 31, ~~2016, one loan in the~~2019, purchased loan pools ~~with a~~included principal ~~balance~~balances of ~~$915,000 and $925,000, respectively, was classified as a troubled debt restructuring and~~$400,000 risk-rated grade ~~40,~~7 (Substandard), while all other loans included in the purchased loan pools were performing current loans risk-rated grade ~~20. During the second quarter~~3 (Good Credit). At March 31, 2019,

purchased loan pools included principal balances of ~~2017, this~~$400,000 on nonaccrual status and had no loans accounted for as troubled debt ~~restructuring defaulted on its restructured terms and was placed~~restructurings.

At December 31, 2018, all loans in purchased loan pools were performing current loans risk-rated grade 3 (Good Credit). At December 31, 2018, purchased loan pools had no loans on nonaccrual ~~status.~~ status and had no loans classified as troubled debt restructurings.

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company had allocated ~~$1.5 million~~$697,000 and ~~$1.8 million,~~$732,000, 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 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 against 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)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	2,409	$	1,814	$	1,349	$	1,412
Real estate – construction and development	735		547		1,244		892
Real estate – commercial and farmland	5,705		8,757		3,496		4,654
Real estate – residential	5,984		6,401		11,118		10,465
Consumer installment	492		595		426		529
	$	15,325	$	18,114	$	17,633	$	17,952

The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:


(dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	2,086	$	692	$	3,857	$	1,199
Real estate – construction and development	3,255		2,611		5,933		6,119
Real estate – commercial and farmland	6,974		10,174		5,061		5,534
Real estate – residential	6,646		9,476		8,402		10,769
Consumer installment	88		13		593		486
	$	19,049	$	22,966	$	23,846	$	24,107

The following table presents an analysis of past-due loans, excluding purchased past-due loans as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


(dollars in thousands)	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		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
September 30, 2017
March 31, 2019
Commercial, financial and agricultural	$	5,388	$	2,488	$	5,025	$	12,901	$	1,294,308	$	1,307,209	$	2,941	$	5,270	$	2,784	$	4,222	$	12,276	$	1,370,631	$	1,382,907	$	3,416
Real estate – construction and development	341		52		517		910		549,279		550,189		—		957		531		692		2,180		674,383		676,563		—
Real estate – commercial and farmland	2,369		1,097		5,203		8,669		1,550,213		1,558,882		—		2,784		3,276		2,652		8,712		1,886,225		1,894,937		—
Real estate – residential	3,293		1,938		4,165		9,396		959,893		969,289		—		13,394		1,287		9,895		24,576		1,340,906		1,365,482		—
Consumer installment loans	1,034		408		338		1,780		181,534		183,314		—
Other	—		—		—		—		5,795		5,795		—
Consumer installment															1,752		929		541		3,222		433,247		436,469		260
Total	$	12,425	$	5,983	$	15,248	$	33,656	$	4,541,022	$	4,574,678	$	2,941	$	24,157	$	8,807	$	18,002	$	50,966	$	5,705,392	$	5,756,358	$	3,676

December 31, 2016
December 31, 2018
Commercial, financial and agricultural	$	565	$	82	$	1,293	$	1,940	$	965,198	$	967,138	$	—	$	6,479	$	5,295	$	4,763	$	16,537	$	1,299,822	$	1,316,359	$	3,808
Real estate – construction and development	908		446		439		1,793		361,252		363,045		—		1,218		481		725		2,424		668,774		671,198		—
Real estate – commercial and farmland	6,329		1,711		6,945		14,985		1,391,234		1,406,219		—		1,625		530		3,645		5,800		1,808,729		1,814,529		—
Real estate – residential	6,354		1,282		5,302		12,938		768,080		781,018		—		11,423		4,631		8,923		24,977		1,378,023		1,403,000		—
Consumer installment loans	624		263		350		1,237		95,678		96,915		—
Other	—		—		—		—		12,486		12,486		—
Consumer installment															2,344		1,167		735		4,246		451,125		455,371		414
Total	$	14,780	$	3,784	$	14,329	$	32,893	$	3,593,928	$	3,626,821	$	—	$	23,089	$	12,104	$	18,791	$	53,984	$	5,606,473	$	5,660,457	$	4,222

The following table presents an analysis of purchased past-due loans as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


(dollars in thousands)	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		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
September 30, 2017
March 31, 2019
Commercial, financial and agricultural	$	2,674	$	2	$	288	$	2,964	$	77,931	$	80,895	$	—	$	3,551	$	45	$	1,209	$	4,805	$	323,167	$	327,972	$	—
Real estate – construction and development	1,221		935		1,713		3,869		64,714		68,583		—		1,112		—		5,473		6,585		232,828		239,413		—
Real estate – commercial and farmland	2,842		1,318		1,823		5,983		494,186		500,169		—		3,003		170		2,403		5,576		1,274,939		1,280,515		—
Real estate – residential	3,308		440		3,435		7,183		257,129		264,312		—		7,488		1,747		5,317		14,552		583,183		597,735		—
Consumer installment loans	1		4		43		48		3,119		3,167		—
Consumer installment															732		97		269		1,098		25,538		26,636		—
Total	$	10,046	$	2,699	$	7,302	$	20,047	$	897,079	$	917,126	$	—	$	15,886	$	2,059	$	14,671	$	32,616	$	2,439,655	$	2,472,271	$	—

December 31, 2016
December 31, 2018
Commercial, financial and agricultural	$	113	$	18	$	593	$	724	$	95,813	$	96,537	$	—	$	421	$	416	$	1,015	$	1,852	$	370,834	$	372,686	$	—
Real estate – construction and development	161		11		2,518		2,690		78,678		81,368		—		627		370		5,273		6,270		221,630		227,900		—
Real estate – commercial and farmland	2,034		326		7,152		9,512		566,843		576,355		—		1,935		736		1,698		4,369		1,333,490		1,337,859		—
Real estate – residential	4,566		698		6,835		12,099		298,178		310,277		—		12,531		2,407		7,005		21,943		601,256		623,199		—
Consumer installment loans	22		—		13		35		4,619		4,654		—
Consumer installment															679		237		249		1,165		26,023		27,188		—
Total	$	6,896	$	1,053	$	17,111	$	25,060	$	1,044,131	$	1,069,191	$	—	$	16,193	$	4,166	$	15,240	$	35,599	$	2,553,233	$	2,588,832	$	—

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.

The following is a summary of information pertaining to impaired loans, excluding purchased loans:


	As of and for the Period Ended						As of and for the Period Ended
(dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2019		December 31, 2018		March 31, 2018
Nonaccrual loans	$	15,325	$	18,114	$	16,570	$	17,633	$	17,952	$	14,420
Troubled debt restructurings not included above	12,452		14,209		14,013		11,463		9,323		11,375
Total impaired loans	$	27,777	$	32,323	$	30,583	$	29,096	$	27,275	$	25,795

Quarter-to-date interest income recognized on impaired loans	$	297	$	225	$	252	$	182	$	202	$	239
Year-to-date interest income recognized on impaired loans	$	857	$	1,033	$	808
Quarter-to-date foregone interest income on impaired loans	$	233	$	267	$	239	$	209	$	217	$	190
Year-to-date foregone interest income on impaired loans	$	753	$	977	$	710

The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of ~~September 30, 2017,~~March 31, 2019, December 31, ~~2016~~2018 and ~~September 30, 2016:~~March 31, 2018:


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
September 30, 2017
March 31, 2019
Commercial, financial and agricultural	$	2,924	$	1,121	$	1,331	$	2,452	$	379	$	2,478	$	2,380	$	1,761	$	871	$	593	$	1,464	$	180	$	1,566
Real estate – construction and development	1,655		532		627		1,159		81		1,179		1,160		1,727		621		764		1,385		209		1,211
Real estate – commercial and farmland	11,451		536		9,938		10,474		806		10,669		11,416		7,066		663		5,788		6,451		578		6,984
Real estate – residential	15,211		4,558		8,636		13,194		1,058		13,683		14,814		19,693		6,893		12,466		19,359		712		17,934
Consumer installment loans	538		498		—		498		—		507		554
Consumer installment															453		437		—		437		—		491
Total	$	31,779	$	7,245	$	20,532	$	27,777	$	2,324	$	28,516	$	30,324	$	30,700	$	9,485	$	19,611	$	29,096	$	1,679	$	28,186


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
December 31, 2016
December 31, 2018
Commercial, financial and agricultural	$	3,068	$	204	$	1,656	$	1,860	$	134	$	1,613	$	1,684	$	1,902	$	1,155	$	513	$	1,668	$	4	$	1,736
Real estate – construction and development	2,047		—		1,233		1,233		273		1,590		2,018		1,378		613		424		1,037		3		1,229
Real estate – commercial and farmland	13,906		6,811		6,065		12,876		1,503		12,948		12,845		8,950		867		6,649		7,516		1,591		7,537
Real estate – residential	15,482		2,238		13,503		15,741		3,080		15,525		14,453		16,885		5,144		11,365		16,509		867		14,719
Consumer installment loans	671		—		613		613		5		576		506
Consumer installment															561		545		—		545		—		584
Total	$	35,174	$	9,253	$	23,070	$	32,323	$	4,995	$	32,252	$	31,506	$	29,676	$	8,324	$	18,951	$	27,275	$	2,465	$	25,805


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
September 30, 2016
March 31, 2018
Commercial, financial and agricultural	$	2,568	$	252	$	1,114	$	1,366	$	118	$	1,736	$	1,640	$	1,874	$	985	$	602	$	1,587	$	136	$	1,467
Real estate – construction and development	2,972		—		1,946		1,946		537		2,001		2,214		746		567		127		694		1		833
Real estate – commercial and farmland	14,015		5,499		7,520		13,019		873		12,776		12,837		9,515		522		7,639		8,161		1,216		7,753
Real estate – residential	14,350		2,046		11,667		13,713		2,648		13,686		13,516		14,908		4,912		9,946		14,858		980		14,891
Consumer installment loans	586		—		539		539		6		492		479
Consumer installment															526		495		—		495		—		492
Total	$	34,491	$	7,797	$	22,786	$	30,583	$	4,182	$	30,691	$	30,686	$	27,569	$	7,481	$	18,314	$	25,795	$	2,333	$	25,436

The following is a summary of information pertaining to purchased impaired loans:


	As of and for the Period Ended						As of and for the Period Ended
(dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2019		December 31, 2018		March 31, 2018
Nonaccrual loans	$	19,049	$	22,966	$	23,827	$	23,846	$	24,107	$	15,940
Troubled debt restructurings not included above	20,205		23,543		21,117		19,443		18,740		20,649
Total impaired loans	$	39,254	$	46,509	$	44,944	$	43,289	$	42,847	$	36,589

Quarter-to-date interest income recognized on impaired loans	$	493	$	377	$	1,493	$	672	$	918	$	696
Year-to-date interest income recognized on impaired loans	$	1,246	$	2,755	$	2,378
Quarter-to-date foregone interest income on impaired loans	$	356	$	354	$	346	$	520	$	451	$	245
Year-to-date foregone interest income on impaired loans	$	958	$	1,637	$	1,283

The following table presents an analysis of information pertaining to purchased impaired loans as of ~~September 30, 2017,~~March 31, 2019, December 31, ~~2016~~2018 and ~~September 30, 2016:~~March 31, 2018:


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
September 30, 2017
March 31, 2019
Commercial, financial and agricultural	$	5,333	$	345	$	1,741	$	2,086	$	800	$	1,128	$	831	$	11,125	$	2,795	$	1,094	$	3,889	$	—	$	2,560
Real estate – construction and development	9,268		1,189		3,088		4,277		537		3,885		3,807		13,295		605		6,339		6,944		497		7,039
Real estate – commercial and farmland	16,492		1,516		11,766		13,282		1,140		13,658		16,063		13,448		1,546		9,618		11,164		670		11,431
Real estate – residential	22,462		7,224		12,297		19,521		762		20,088		21,308		22,825		8,823		11,876		20,699		629		21,500
Consumer installment loans	97		88		—		88		—		58		40
Consumer installment															680		593		—		593		—		540
Total	$	53,652	$	10,362	$	28,892	$	39,254	$	3,239	$	38,817	$	42,049	$	61,373	$	14,362	$	28,927	$	43,289	$	1,796	$	43,070


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
December 31, 2016
December 31, 2018
Commercial, financial and agricultural	$	5,031	$	370	$	322	$	692	$	—	$	783	$	2,206	$	5,717	$	473	$	757	$	1,230	$	—	$	1,101
Real estate – construction and development	24,566		493		3,477		3,970		153		3,888		4,279		13,714		623		6,511		7,134		476		7,240
Real estate – commercial and farmland	36,174		3,598		15,036		18,634		385		17,806		19,872		14,766		1,115		10,581		11,696		684		13,514
Real estate – residential	27,022		7,883		15,306		23,189		1,088		23,201		23,163		24,839		8,185		14,116		22,301		773		23,146
Consumer installment loans	37		24		—		24		—		51		96
Consumer installment															526		486		—		486		—		487
Total	$	92,830	$	12,368	$	34,141	$	46,509	$	1,626	$	45,729	$	49,616	$	59,562	$	10,882	$	31,965	$	42,847	$	1,933	$	45,488


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment
September 30, 2016
March 31, 2018
Commercial, financial and agricultural	$	5,097	$	648	$	225	$	873	$	—	$	838	$	2,251	$	4,050	$	52	$	744	$	796	$	396	$	805
Real estate – construction and development	24,253		296		3,509		3,805		184		3,946		4,075		9,012		426		3,720		4,146		913		4,152
Real estate – commercial and farmland	41,098		1,861		15,116		16,977		402		18,196		19,569		12,590		861		10,230		11,091		767		11,744
Real estate – residential	26,908		7,473		15,740		23,213		935		23,103		22,893		22,820		8,426		12,093		20,519		745		19,502
Consumer installment loans	98		76		—		76		—		80		105
Consumer installment															46		37		—		37		—		43
Total	$	97,454	$	10,354	$	34,590	$	44,944	$	1,521	$	46,163	$	48,893	$	48,518	$	9,802	$	26,787	$	36,589	$	2,821	$	36,246

Credit Quality Indicators

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 101 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 152 – ~~Good~~Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a ~~Satisfactory~~Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 203 – ~~Satisfactory~~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 234 – ~~Performing, Under-Collateralized 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 25 – Minimum Acceptable~~Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a ~~Satisfactory~~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, 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 305 – 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 ~~Asset~~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 407 – 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 508 – 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 609 – 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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (in thousands):

Risk
Grade Commercial,
Financial and
Agricultural Real Estate -
Construction and
Development Real Estate -
Commercial and
Farmland Real Estate -
Residential Consumer
Installment
Loans Other Total
September 30, 2017
10 $ 495,116
$ —
$ 6,029
$ 49
$ 9,068
$ —
$ 510,262
15 559,781
959
75,462
55,759
256
—
692,217
20 117,904
48,640
1,005,945
800,557
24,332
5,795
2,003,173
23 343
4,403
4,242
5,986
3
—
14,977
25 121,558
488,956
431,862
86,702
148,891
—
1,277,969
30 8,350
4,458
17,568
5,674
93
—
36,143
40 4,150
2,773
17,774
14,562
671
—
39,930
50 7
—
—
—
—
—
7
60 —
—
—
—
—
—
—
Total $ 1,307,209
$ 550,189
$ 1,558,882
$ 969,289
$ 183,314
$ 5,795
$ 4,574,678

December 31, 2016
10 $ 397,093
$ —
$ 8,814
$ 125
$ 8,532
$ —
$ 414,564
15 376,323
5,390
102,893
54,136
405
—
539,147
20 97,057
36,307
889,539
609,583
25,026
12,486
1,669,998
23 366
6,803
8,533
7,470
14
—
23,186
25 92,066
307,903
357,151
88,370
62,098
—
907,588
30 144
719
22,986
5,197
126
—
29,172
40 4,089
5,923
16,303
16,038
714
—
43,067
50 —
—
—
99
—
—
99
60 —
—
—
—
—
—
—
Total $ 967,138
$ 363,045
$ 1,406,219
$ 781,018
$ 96,915
$ 12,486
$ 3,626,821



Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
March 31, 2019
1	$	528,386	$	—	$	724	$	694	$	10,842	$	540,646
2	521,486		516		33,656		31,944		20		587,622
3	152,722		66,180		923,222		1,206,722		23,269		2,372,115
4	161,089		593,309		834,693		98,050		401,672		2,088,813
5	13,131		11,560		56,333		6,741		20		87,785
6	3,557		1,415		23,534		4,372		71		32,949
7	2,536		3,583		22,775		16,959		575		46,428
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	1,382,907	$	676,563	$	1,894,937	$	1,365,482	$	436,469	$	5,756,358

December 31, 2018
1	$	530,864	$	40	$	500	$	16	$	10,744	$	542,164
2	452,250		681		37,079		33,043		48		523,101
3	174,811		74,657		888,433		1,246,383		23,844		2,408,128
4	137,038		582,456		814,068		94,143		419,983		2,047,688
5	13,714		6,264		30,364		8,634		78		59,054
6	5,130		4,091		20,959		4,881		57		35,118
7	2,552		3,009		23,126		15,900		617		45,204
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	1,316,359	$	671,198	$	1,814,529	$	1,403,000	$	455,371	$	5,660,457

The following table presents the purchased loan portfolio by risk grade as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 (in thousands):

Risk
Grade

Commercial,
Financial and
Agricultural

Real Estate -
Construction and
Development

Real Estate -
Commercial and
Farmland

Real Estate -
Residential

Consumer
Installment
Loans
Other Total
September 30, 2017
10 $ 3,377
$ —
$ —
$ —
$ 662
$ —
$ 4,039
15 4,969
—
5,327
96,570
231
—
107,097
20 9,497
13,548
198,960
52,646
1,204
—
275,855
23 —
2,302
6,936
10,621
—
—
19,859
25 47,822
40,500
243,216
79,374
864
—
411,776
30 12,817
7,617
22,829
7,378
55
—
50,696
40 2,413
4,616
22,901
17,723
151
—
47,804
50 —
—
—
—
—
—
—
60 —
—
—
—
—
—
—
Total $ 80,895
$ 68,583
$ 500,169
$ 264,312
$ 3,167
$ —
$ 917,126

December 31, 2016
10 $ 5,722
$ —
$ —
$ —
$ 814
$ —
$ 6,536
15 1,266
—
7,619
31,331
570
—
40,786
20 16,204
10,686
194,168
111,712
1,583
—
334,353
23 22
3,643
9,019
14,791
—
—
27,475
25 67,123
56,006
323,242
121,379
1,276
—
569,026
30 5,072
7,271
15,039
7,605
45
—
35,032
40 1,128
3,762
27,268
23,459
366
—
55,983
50 —
—
—
—
—
—
—
60 —
—
—
—
—
—
—
Total $ 96,537
$ 81,368
$ 576,355
$ 310,277
$ 4,654
$ —
$ 1,069,191



Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
March 31, 2019
1	$	80,138	$	—	$	—	$	—	$	544	$	80,682
2	5,313		—		9,446		70,003		142		84,904
3	20,562		12,759		270,517		371,501		2,379		677,718
4	168,472		207,413		913,144		116,762		22,562		1,428,353
5	22,982		4,765		48,763		13,847		34		90,391
6	10,614		4,598		15,816		7,441		130		38,599
7	19,891		9,878		22,829		18,181		839		71,618
8	—		—		—		—		—		—
9	—		—		—		—		6		6
Total	$	327,972	$	239,413	$	1,280,515	$	597,735	$	26,636	$	2,472,271

December 31, 2018
1	$	90,205	$	—	$	—	$	—	$	570	$	90,775
2	2,648		—		7,407		74,398		164		84,617
3	20,489		18,022		230,089		385,279		2,410		656,289
4	215,096		195,079		1,034,943		118,082		23,177		1,586,377
5	14,445		2,728		29,468		16,937		35		63,613
6	11,601		1,459		10,063		7,231		94		30,448
7	18,202		10,612		25,889		21,272		738		76,713
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	372,686	$	227,900	$	1,337,859	$	623,199	$	27,188	$	2,588,832

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 the 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 that 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 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 and 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 the first ~~nine~~three months of ~~2017~~2019 and ~~2016~~2018 totaling ~~$36.6~~$26.9 million and ~~$58.2~~$28.6 million, respectively, under such parameters.

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company had a balance of ~~$14.2~~$12.9 million and ~~$18.2~~$11.0 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded ~~$2.8 million~~$893,000 and ~~$1.2 million~~$890,000 in previous charge-offs on such loans at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was ~~$1.2 million~~$728,000 and ~~$3.1 million~~$820,000 at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. At ~~September 30, 2017,~~March 31, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of ~~$783,000~~$2.2 million and ~~$2.9~~$1.2 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	4	5	$	59	1	$	7	2	$	125
Real estate – construction and development	—	—		2	251		—	—		1	4
Real estate – commercial and farmland	2	226		4	1,658		1	33		1	303
Real estate – residential	10	526		7	887		7	2,109		2	710
Consumer installment	6	27		9	44		3	12		2	13
Total	19	$	783	27	$	2,899	12	$	2,161	8	$	1,155

Troubled debt restructurings, excluding purchased loans, with an outstanding balance of ~~$1.2~~$837,000 and $3.0 million ~~and $793,000~~ defaulted during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents for loans, excluding purchased loans, the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	58	5	$	51	—	$	—	—	$	—
Real estate – construction and development	1	25		—	—		—	—		—	—
Real estate – commercial and farmland	4	200		5	517		—	—		2	1,971
Real estate – residential	12	878		3	219		7	837		17	1,047
Consumer installment	7	25		2	6		—	—		—	—
Total	28	$	1,186	15	$	793	7	$	837	19	$	3,018

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


September 30, 2017	Accruing Loans			Non-Accruing Loans
March 31, 2019							Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	44	13	$	129	3	$	116	14	$	138
Real estate – construction and development	7	424		2	34		4	142		1	2
Real estate – commercial and farmland	16	4,769		5	210		13	2,954		4	450
Real estate – residential	78	7,209		16	1,212		78	8,240		19	832
Consumer installment	4	6		36	130		5	11		22	63
Total	109	$	12,452	72	$	1,715	103	$	11,463	60	$	1,485


December 31, 2016	Accruing Loans			Non-Accruing Loans
December 31, 2018							Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	47	15	$	114	5	$	256	14	$	138
Real estate – construction and development	8	686		2	34		5	145		1	2
Real estate – commercial and farmland	16	4,119		5	2,970		12	2,863		3	426
Real estate – residential	82	9,340		15	739		71	6,043		20	1,119
Consumer installment	7	17		32	130		6	16		24	69
Total	117	$	14,209	69	$	3,987	99	$	9,323	62	$	1,754

As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the Company had a balance of ~~$26.0~~$22.3 million and ~~$28.1~~$22.2 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded ~~$1.5~~$1.1 million and $940,000 in previous charge-offs on such loans at ~~both September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018, respectively. At ~~September 30, 2017,~~March 31, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, the Company modified purchased loans as troubled debt restructurings, with principal balances of ~~$1.0 million~~$773,000 and ~~$1.9 million,~~$186,000, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	—	$	—	1	$	76	—	$	—	1	$	7
Real estate – construction and development	—	—		—	—		—	—		—	—
Real estate – commercial and farmland	—	—		3	708		—	—		—	—
Real estate – residential	8	1,005		8	1,130		10	740		2	179
Consumer installment	—	—		—	—		3	33		—	—
Total	8	$	1,005	12	$	1,914	13	$	773	3	$	186

Troubled debt restructurings included in purchased loans with an outstanding balance of ~~$2.3 million~~$831,000 and ~~$733,000~~$906,000 defaulted during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss.

The following table presents purchased loan troubled debt restructurings by class that defaulted (defined as 30 days past due) during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	5	2	$	76	1	$	3	—	$	—
Real estate – construction and development	—	—		1	10		—	—		—	—
Real estate – commercial and farmland	5	1,945		1	207		1	163		1	351
Real estate – residential	7	333		11	440		8	637		8	555
Consumer installment	1	3		—	—		2	28		—	—
Total	14	$	2,286	15	$	733	12	$	831	9	$	906

The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.


September 30, 2017	Accruing Loans			Non-Accruing Loans
March 31, 2019							Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	—	$	—	3	$	18	1	$	31	3	$	29
Real estate – construction and development	3	1,022		6	349		4	1,011		4	268
Real estate – commercial and farmland	15	6,308		11	3,834		12	6,104		7	1,577
Real estate – residential	119	12,875		25	1,627		119	12,297		21	917
Consumer installment	—	—		2	6		—	—		7	50
Total	137	$	20,205	47	$	5,834	136	$	19,443	42	$	2,841


December 31, 2016	Accruing Loans			Non-Accruing Loans
December 31, 2018							Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	1	4	$	91	1	$	31	3	$	32
Real estate – construction and development	6	1,358		3	30		4	1,015		5	293
Real estate – commercial and farmland	20	8,460		5	2,402		12	6,162		7	1,685
Real estate – residential	123	13,713		33	2,077		115	11,532		24	1,424
Consumer installment	3	11		1	—		—	—		4	17
Total	153	$	23,543	46	$	4,600	132	$	18,740	43	$	3,451

Allowance for Loan Losses

The allowance for loan losses represents an allowance 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 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. 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 adjust 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 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 the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.

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. ~~Mortgage warehouse lines of credit, overdraft protection loans, commercial~~Commercial insurance premium finance loans, overdraft protection loans, and certain ~~consumer~~residential mortgage loans and ~~mortgage~~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 to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of ~~$500,000.~~$1,000,000, as well as selective sampling of loans below this threshold. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans

may be identified as having deteriorating

credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings 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 Company’s Chief Financial Officer and 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~~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~~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~~charged off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, 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~~charged off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 609 (Loss per the regulatory guidance), the uncollectible portion is ~~charged-off.~~charged off.

The following tables detail activity in the allowance for loan losses by portfolio segment for the ~~three and nine-month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2019, the year ended December 31, ~~2016~~2018 and the ~~three and nine-month periods~~three-month period ended ~~September 30, 2016.~~March 31, 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment Loans and Other			Purchased Loans			Purchased Loan Pools			Total			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
Three Months Ended September 30, 2017
Balance, June 30, 2017	$	3,302		$	3,756		$	7,869		$	5,605		$	1,155		$	1,791		$	1,623		$	25,101
Three Months Ended March 31, 2019
Balance, December 31, 2018																									$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819
Provision for loan losses	910			(587		)	68			127			670			745			(146		)	1,787			1,180			218			841			(240		)	1,870			(426		)	(35		)	3,408
Loans charged off	(1,091		)	(1		)	(18		)	(852		)	(320		)	(161		)	—			(2,443		)	(2,004		)	(25		)	(1,253		)	(20		)	(1,893		)	(184		)	—			(5,379		)
Recoveries of loans previously charged off	409			126			26			56			17			887			—			1,521			1,065			1			4			104			164			473			—			1,811
Balance, September 30, 2017	$	3,530		$	3,294		$	7,945		$	4,936		$	1,522		$	3,262		$	1,477		$	25,966

Nine Months Ended September 30, 2017:
Balance, December 31, 2016	$	2,192		$	2,990		$	7,662		$	6,786		$	827		$	1,626		$	1,837		$	23,920
Provision for loan losses	2,535			155			540			(9		)	1,539			1,428			(360		)	5,828
Loans charged off	(1,896		)	(95		)	(413		)	(2,031		)	(922		)	(1,472		)	—			(6,829		)
Recoveries of loans previously charged off	699			244			156			190			78			1,680			—			3,047
Balance, September 30, 2017	$	3,530		$	3,294		$	7,945		$	4,936		$	1,522		$	3,262		$	1,477		$	25,966
Balance, March 31, 2019																									$	4,528		$	3,928		$	8,567		$	5,207		$	3,936		$	1,796		$	697		$	28,659

Period-end allocation:
Loans individually evaluated for impairment ⁽¹⁾	$	509		$	81		$	1,380		$	1,058		$	—		$	3,262		$	105		$	6,395		$	680		$	209		$	578		$	712		$	—		$	1,796		$	1		$	3,976
Loans collectively evaluated for impairment	3,021			3,213			6,565			3,878			1,522			—			1,372			19,571			3,848			3,719			7,989			4,495			3,936			—			696			24,683
Ending balance	$	3,530		$	3,294		$	7,945		$	4,936		$	1,522		$	3,262		$	1,477		$	25,966		$	4,528		$	3,928		$	8,567		$	5,207		$	3,936		$	1,796		$	697		$	28,659

Loans:
Individually evaluated for impairment⁽¹⁾	$	3,204		$	627		$	10,512		$	8,636		$	—		$	32,032		$	915		$	55,926		$	2,699		$	764		$	5,788		$	12,466		$	—		$	29,097		$	400		$	51,214
Collectively evaluated for impairment	1,304,005			549,562			1,548,370			960,653			189,109			763,271			464,303			5,779,273			1,380,208			675,799			1,889,149			1,353,016			436,469			2,361,145			253,310			8,349,096
Acquired with deteriorated credit quality	—			—			—			—			—			121,823			—			121,823			—			—			—			—			—			82,029			—			82,029
Ending balance	$	1,307,209		$	550,189		$	1,558,882		$	969,289		$	189,109		$	917,126		$	465,218		$	5,957,022		$	1,382,907		$	676,563		$	1,894,937		$	1,365,482		$	436,469		$	2,472,271		$	253,710		$	8,482,339

(1) At ~~September 30, 2017,~~March 31, 2019, 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.


(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development				Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment Loans and Other			Purchased Loans			Purchased Loan Pools		Total			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
Twelve Months Ended December 31, 2016
Balance, January 1, 2016	$	1,144		$	5,009			$	7,994		$	4,760		$	1,574		$	—		$	581	$	21,062
Twelve Months Ended December 31, 2018
Balance, December 31, 2017																									$	3,631		$	3,629		$	7,501		$	4,786		$	1,916		$	3,253		$	1,075		$	25,791
Provision for loan losses	2,647			(1,921		)		107			2,757			(523		)	(232		)	1,256		4,091			10,690			277			1,636			1,002			5,569			(2,164		)	(343		)	16,667
Loans charged off	(1,999		)	(588		)		(708		)	(1,122		)	(351		)	(1,559		)	—		(6,327		)	(13,803		)	(292		)	(338		)	(771		)	(4,189		)	(1,738		)	—			(21,131		)
Recoveries of loans previously charged off	400			490				269			391			127			3,417			—		5,094			3,769			120			176			346			499			2,582			—			7,492
Balance, December 31, 2016	$	2,192		$	2,990			$	7,662		$	6,786		$	827		$	1,626		$	1,837	$	23,920
Balance, December 31, 2018																									$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819

Period-end allocation:
Loans individually evaluated for impairment⁽¹⁾	$	120		$	266			$	1,502		$	2,893		$	—		$	1,626		$	—	$	6,407		$	570		$	3		$	1,591		$	867		$	—		$	1,933		$	—		$	4,964
Loans collectively evaluated for impairment	2,072			2,724				6,160			3,893			827			—			1,837		17,513			3,717			3,731			7,384			4,496			3,795			—			732			23,855
Ending balance	$	2,192		$	2,990			$	7,662		$	6,786		$	827		$	1,626		$	1,837	$	23,920		$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819

Loans:
Individually evaluated for impairment ⁽¹⁾	$	501		$	659			$	12,423		$	12,697		$	—		$	34,141		$	—	$	60,421		$	3,211		$	424		$	6,649		$	11,364		$	—		$	32,244		$	—		$	53,892
Collectively evaluated for impairment	966,637			362,386				1,393,796			768,321			109,401			886,516			568,314		5,055,371			1,313,148			670,774			1,807,880			1,391,636			455,371			2,468,996			262,625			8,370,430
Acquired with deteriorated credit quality	—			—			��	—			—			—			148,534			—		148,534			—			—			—			—			—			87,592			—			87,592
Ending balance	$	967,138		$	363,045			$	1,406,219		$	781,018		$	109,401		$	1,069,191		$	568,314	$	5,264,326		$	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, ~~2016,~~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.


(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment Loans and Other			Purchased Loans			Purchased Loan Pools		Total			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
Three Months Ended September 30, 2016
Balance, June 30, 2016	$	1,667		$	3,599		$	7,459		$	4,263		$	2,160		$	1,387		$	1,199	$	21,734
Three Months Ended March 31, 2018
Balance, December 31, 2017																								$	3,631		$	3,629		$	7,501		$	4,786		$	1,916		$	3,253		$	1,075		$	25,791
Provision for loan losses	677			(521		)	(554		)	2,649			(1,595		)	(654		)	809		811			783			(171		)	689			177			1,151			(747		)	(81		)	1,801
Loans charged off	(326		)	(60		)	—			(292		)	(74		)	(699		)	—		(1,451		)	(1,449		)	—			(142		)	(198		)	(962		)	(121		)	—			(2,872		)
Recoveries of loans previously charged off	119			131			13			40			78			1,488			—		1,869			656			114			24			182			67			437			—			1,480
Balance, September 30, 2016	$	2,137		$	3,149		$	6,918		$	6,660		$	569		$	1,522		$	2,008	$	22,963

Nine Months Ended September 30, 2016:
Balance, December 31, 2015	$	1,144		$	5,009		$	7,994		$	4,760		$	1,574		$	—		$	581	$	21,062
Provision for loan losses	1,987			(2,010		)	(559		)	2,415			(932		)	53			1,427		2,381
Loans charged off	(1,273		)	(324		)	(708		)	(883		)	(192		)	(1,261		)	—		(4,641		)
Recoveries of loans previously charged off	279			474			191			368			119			2,730			—		4,161
Balance, September 30, 2016	$	2,137		$	3,149		$	6,918		$	6,660		$	569		$	1,522		$	2,008	$	22,963
Balance, March 31, 2018																								$	3,621		$	3,572		$	8,072		$	4,947		$	2,172		$	2,822		$	994		$	26,200

Period-end allocation:
Loans individually evaluated for impairment⁽¹⁾	$	107		$	529		$	883		$	2,629		$	—		$	1,522		$	—	$	5,670		$	533		$	1		$	1,216		$	980		$	—		$	2,822		$	176		$	5,728
Loans collectively evaluated for impairment	2,030			2,620			6,035			4,031			569			—			2,008		17,293			3,088			3,571			6,856			3,967			2,172			—			818			20,472
Ending balance	$	2,137		$	3,149		$	6,918		$	6,660		$	569		$	1,522		$	2,008	$	22,963		$	3,621		$	3,572		$	8,072		$	4,947		$	2,172		$	2,822		$	994		$	26,200

Loans:
Individually evaluated for impairment ⁽¹⁾	$	424		$	1,154		$	11,699		$	11,571		$	—		$	34,991		$	—	$	59,839		$	2,147		$	126		$	7,639		$	9,946		$	—		$	28,167		$	902		$	48,927
Collectively evaluated for impairment	625,523			327,154			1,285,883			755,362			72,269			939,243			624,886		4,630,320			1,385,290			631,378			1,629,015			1,070,082			316,363			683,784			318,696			6,034,608
Acquired with deteriorated credit quality	—			—			—			—			—			155,147			—		155,147			—			—			—			—			—			106,636			—			106,636
Ending balance	$	625,947		$	328,308		$	1,297,582		$	766,933		$	72,269		$	1,129,381		$	624,886	$	4,845,306		$	1,387,437		$	631,504		$	1,636,654		$	1,080,028		$	316,363		$	818,587		$	319,598		$	6,190,171

(1) At ~~September 30, 2016,~~March 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.

~~NOTE 5 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS~~

From October 2009 through July 2012, the Company participated in ten FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include the following:



~~Bank Acquired~~	~~Location~~	~~Branches~~	~~Date Acquired~~
~~American United Bank (“AUB”)~~	~~Lawrenceville, Ga.~~	1	~~October 23, 2009~~
~~United Security Bank (“USB”)~~	~~Sparta, Ga.~~	2	~~November 6, 2009~~
~~Satilla Community Bank (“SCB”)~~	~~St. Marys, Ga.~~	1	~~May 14, 2010~~
~~First Bank of Jacksonville (“FBJ”)~~	~~Jacksonville, Fl.~~	2	~~October 22, 2010~~
~~Tifton Banking Company (“TBC”)~~	~~Tifton, Ga.~~	1	~~November 12, 2010~~
~~Darby Bank & Trust (“DBT”)~~	~~Vidalia, Ga.~~	7	~~November 12, 2010~~
~~High Trust Bank (“HTB”)~~	~~Stockbridge, Ga.~~	2	~~July 15, 2011~~
~~One Georgia Bank (“OGB”)~~	~~Midtown Atlanta, Ga.~~	1	~~July 15, 2011~~
~~Central Bank of Georgia (“CBG”)~~	~~Ellaville, Ga.~~	5	~~February 24, 2012~~
~~Montgomery Bank & Trust (“MBT”)~~	~~Ailey, Ga.~~	2	~~July 6, 2012~~

The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition.

However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

~~FASB ASC 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ (“ASC 310-30”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310-30 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, then the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, then the Company records a provision for loan loss in its consolidated statements of income and comprehensive income.

Each acquisition with loss-sharing agreements has separate agreements for the single family residential assets (“SFR”) and the non-single family assets (“NSF”). The SFR agreements cover losses and recoveries for ten years. The NSF agreements are for eight years. During the first five years, losses and recoveries are covered. During the final three years, only recoveries, net of expenses, are covered. The AUB SFR agreement was terminated during 2012 and Ameris received a payment of $87,000. The AUB and USB NSF agreements passed their five-year anniversaries during the fourth quarter of 2014, the SCB NSF agreement passed its five-year anniversary during the second quarter of 2015, the FBJ, TBC and DBT NSF agreements passed their five-year anniversaries during the fourth quarter of 2015, the HTB and OGB NSF agreements passed their five-year anniversaries during the third quarter of 2016, and the CBG NSF passed its five-year anniversary during the first quarter of 2017. Losses will no longer be reimbursed on these agreements. MBT did not have a loss-sharing agreement.

At September 30, 2017, the Company’s FDIC loss-sharing payable totaled $8.2 million, which is comprised of an accrued clawback liability of $9.6 million, less $419,000 in current activity incurred but not yet received from the FDIC (net charge-offs offset by reimbursable expenses) and remaining indemnification of $1.0 million (for reimbursements associated with anticipated losses in future quarters).

~~The following table summarizes components of all covered assets at September 30, 2017 and December 31, 2016 and their origin:~~

(dollars in thousands)
Covered
Loans

Less: Fair
Value
Adjustments

Total
Covered
Loans
OREO
Less: Fair
Value
Adjustments

Total
Covered
OREO

Total
Covered
Assets

FDIC Loss-
Share
Receivable
(Payable)
September 30, 2017

AUB $ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
USB 2,763
12
2,751
—
—
—
2,751
(1,752 )
SCB 2,541
27
2,514
—
—
—
2,514
(169 )
FBJ 3,647
394
3,253
—
—
—
3,253
(312 )
DBT 9,663
356
9,307
81
—
81
9,388
(4,442 )
TBC 1,667
—
1,667
—
—
—
1,667
(8 )
HTB 1,856
28
1,828
—
—
—
1,828
27
OGB 930
31
899
—
—
—
899
(1,032 )
CBG 10,329
678
9,651
161
—
161
9,812
(502 )
Total $ 33,396
$ 1,526
$ 31,870
$ 242
$ —
$ 242
$ 32,112
$ (8,190 )

December 31, 2016

AUB $ —
$ —
$ —
$ —
$ —
$ —
$ —
$ (27 )
USB 3,199
13
3,186
51
—
51
3,237
(1,642 )
SCB 4,019
51
3,968
—
—
—
3,968
(32 )
FBJ 3,767
452
3,315
—
—
—
3,315
(234 )
DBT 12,166
565
11,601
—
—
—
11,601
(4,591 )
TBC 1,679
—
1,679
—
—
—
1,679
(33 )
HTB 1,913
33
1,880
—
—
—
1,880
734
OGB 1,077
32
1,045
—
—
—
1,045
(993 )
CBG 33,449
1,963
31,486
1,161
4
1,157
32,643
505
Total $ 61,269
$ 3,109
$ 58,160
$ 1,212
$ 4
$ 1,208
$ 59,368
$ (6,313 )

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. As of September 30, 2017 and December 31, 2016, the Company has recorded a clawback liability of $9.6 million and $9.3 million, respectively, which represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-share agreement.

~~Changes in the FDIC shared-loss payable for the nine months ended September 30, 2017 and 2016 are as follows:~~

(dollars in thousands) September 30,
2017 September 30,
2016
Beginning balance, January 1 $ (6,313 ) $ 6,301
Payments to (received from) FDIC 97
(4,770 )
Amortization (747 ) (3,351 )
Changes in clawback liability (326 ) (682 )
Increase in receivable due to:

Net recoveries on covered loans (1,097 ) (4,118 )
Loss (gain) on covered other real estate owned (76 ) 203
Reimbursable expenses on covered assets 401
604
Other activity, net (129 ) (1,962 )
Ending balance $ (8,190 ) $ (7,775 )

~~The FDIC loss-sharing payable is included in other liabilities in the consolidated balance sheets. The FDIC loss-sharing receivable is included in other assets in the consolidated balance sheets.~~

NOTE 6 – OTHER REAL ESTATE OWNED

The following is a summary of the activity in ~~other real estate owned~~OREO during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


(dollars in thousands)	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Beginning balance, January 1	$	10,874		$	16,147		$	7,218		$	8,464
Loans transferred to other real estate owned	4,043			2,101			264			1,176
Net gains (losses) on sale and write-downs recorded in statement of income	(766		)	(1,276		)	(100		)	101
Sales proceeds	(4,760		)	(6,580		)	(1,368		)	(495		)
Other							—			(75		)
Ending balance	$	9,391		$	10,392		$	6,014		$	9,171

The following is a summary of the activity in purchased ~~other real estate owned~~OREO during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:


(dollars in thousands)	September 30, 2017			September 30, 2016			March 31, 2019			March 31, 2018
Beginning balance, January 1	$	12,540		$	19,344		$	9,535		$	9,011
Loans transferred to other real estate owned	4,294			6,262			2,523			457
Acquired in acquisitions	—			1,838
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-sharing agreements	76			—			(31		)	—
Net gains (losses) on sale and write-downs recorded in statement of income	265			(568		)	91			(134		)
Sales proceeds	(7,229		)	(11,750		)	(1,242		)	(2,611		)
Other							(19		)	—
Ending balance	$	9,946		$	15,126		$	10,857		$	6,723

NOTE 7 – 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 investment securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, 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~~falls 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 the Company’s securities sold under agreements to repurchase at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.


(dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Securities sold under agreements to repurchase	$	14,156	$	53,505	$	4,259	$	20,384

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the investment securities underlying these agreements were comprised of ~~state, county and municipal securities and~~ mortgage-backed securities.

NOTE 8 – OTHER BORROWINGS

The Company has, from time to time, utilized certain borrowing arrangements to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At September 30, 2017 and December 31, 2016, there were $808.6 million and $492.3 million, respectively, in outstanding other borrowings.

Other borrowings consist of the following:

(dollars in thousands) September 30,
2017 December 31,
2016
FHLB borrowings:

Daily Rate Credit from FHLB with a variable interest rate (1.32% at September 30, 2017 and 0.80% at December 31, 2016) $ 168,000
$ 150,000
Advance from FHLB due October 6, 2017; fixed interest rate of 1.16% 565,000
—
Advance from FHLB due January 6, 2017; fixed interest rate of 0.56% —
292,500
Advance from FHLB due January 9, 2017; fixed interest rate of 1.40% —
4,002
Advance from FHLB due May 30, 2017; fixed interest rate of 1.23% —
5,006
Subordinated notes payable:

Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,238; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616% 73,762
—
Other debt:

Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25% 56
77
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09% 1,754
1,886
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% (4.43% at December 31, 2016) —
38,000
Advances under revolving credit agreement with a regional bank due January 7, 2017; fixed interest rate of 8.00% —
850
Total $ 808,572
$ 492,321



(dollars in thousands)	March 31, 2019		December 31, 2018
FHLB borrowings:
Convertible Flipper Advance due May 22, 2019; current interest rate of 4.68%	$	1,505	$	1,514
Principal Reducing Advance due June 20, 2019; fixed interest rate of 1.274%	250		500
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%	1,431		1,434
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%	990		993
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095%	1,822		1,858
Subordinated notes payable:
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,041 and $1,074, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%	73,959		73,926
Other debt:
Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25%	13		20
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09%	1,484		1,529
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% (6.13% at March 31, 2019)	70,000		70,000
Total	$	151,454	$	151,774

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 ~~September 30, 2017, $347.4 million~~March 31, 2019, $2.04 billion was available for borrowing on lines with the FHLB.

At March 31, 2019, 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 ~~30, 2017,~~26, 2020, and bears a variable interest rate of 90-day LIBOR plus 3.50%. At March 31, 2019, there was $30.0 million ~~was~~ available for borrowing under the revolving credit ~~agreement with a regional bank, secured by subsidiary bank stock.~~arrangement.

As of ~~September 30, 2017,~~March 31, 2019, the ~~Company~~Bank maintained credit arrangements with various financial institutions to purchase federal funds up to ~~$82.0~~$117.0 million.

The ~~Company~~Bank also participates in the Federal Reserve discount window borrowings program. At ~~September 30, 2017,~~March 31, 2019, the Company had ~~$1.04~~$1.60 billion of loans pledged at the Federal Reserve discount window and had ~~$678.1 million~~$1.11 billion available for borrowing.

~~Subordinated Notes Payable~~

NOTE 9 – SHAREHOLDERS’ EQUITY

Common Stock Repurchase Program

On ~~March 13, 2017,~~October 25, 2018, the Company ~~completed~~announced that its Board of Directors authorized the ~~public offering and sale of $75.0~~Company to repurchase up to $100.0 million ~~in aggregate principal amount~~ of its ~~5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 (the “subordinated notes”).~~outstanding common stock. Repurchases of shares, which are authorized to occur within the succeeding twelve months, must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The ~~subordinated notes were sold~~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 March 31, 2019, 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 ~~public~~shareholders of Hamilton. Such shares had a value of $53.35 per share at ~~par pursuant to~~the time of issuance, resulting in 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~~increase in shareholders’ equity 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,~~$349.4 million.

For additional information regarding 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.

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 ~~regulatory capital adequacy purposes,~~additional information regarding the ~~subordinated notes qualify as Tier 2 capital~~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 ~~Company. If~~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 ~~future~~selling shareholders of USPF. The issuance of the ~~subordinated notes no longer qualify as Tier 2 capital,~~830,301 common shares, valued at $53.55 per share at the ~~subordinated notes~~time of issuance, resulted in an increase in shareholders’ equity of $44.5 million. The selling shareholders of USPF may ~~be redeemed~~receive additional cash payments aggregating up to $5.8 million based on the achievement by the ~~Company at~~Company's premium finance division of certain income targets, between January 1, 2018 and June 30, 2019.

On February 16, 2018, a ~~redemption price equal~~registration statement was filed with the Securities and Exchange Commission to ~~100%~~register the resale or other disposition of the ~~principal amount plus accrued~~combined 944,586 shares issued on January 3, 2018 and ~~unpaid interest, subject to prior approval by~~January 31, 2018.

For additional information regarding the ~~Board of Governors of the Federal Reserve System.~~USPF acquisition, see Note 3.

NOTE 910 – ~~COMMITMENTS AND CONTINGENCIES~~ACCUMULATED OTHER COMPREHENSIVE LOSS

~~Loan Commitments~~

Accumulated other comprehensive income (loss) for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The ~~Company~~reclassification of gains included in net income is ~~a party to financial instruments with off-balance-sheet risk~~recorded in gain on securities in the ~~normal course~~consolidated statement of ~~business to meet the financing needs of its customers. These financial instruments include commitments to extend credit~~income 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 Company’s balance sheets.~~

comprehensive income. 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.

Afollowing tables present a summary of the ~~Company’s commitments is~~accumulated other comprehensive loss balances, net of tax, as ~~follows:~~of March 31, 2019 and 2018:

(dollars in thousands) September 30,
2017 December 31,
2016
Commitments to extend credit $ 1,096,702
$ 1,101,257
Unused home equity lines of credit 63,951
62,586
Financial standby letters of credit 13,192
14,257
Mortgage interest rate lock commitments 113,056
91,426
Mortgage forward contracts with positive fair value —
150,000



(dollars in thousands)	Unrealized Gain (Loss) on Derivatives			Unrealized Gain (Loss) on Securities			Accumulated Other Comprehensive Loss
Balance, December 31, 2018	$	351		$	(5,177	)	$	(4,826	)
Reclassification for gains included in net income, net of tax	—			(46		)	(46		)
Current year changes, net of tax	(173		)	3,867			3,694
Balance, March 31, 2019	$	178		$	(1,356	)	$	(1,178	)



(dollars in thousands)	Unrealized Gain (Loss) on Derivatives			Unrealized Gain (Loss) on Securities			Accumulated Other Comprehensive Loss
Balance, December 31, 2017	$	292		$	(1,572	)	$	(1,280	)
Reclassification to retained earnings due to change in federal corporate tax rate	(53		)	(339		)	(392		)
Adjusted balance, January 1, 2018	239			(1,911		)	(1,672		)
Reclassification for gains included in net income, net of tax	—			(29		)	(29		)
Current year changes, net of tax	281			(9,403		)	(9,122		)
Balance, March 31, 2018	$	520		$	(11,343	)	$	(10,823	)

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.

~~Other Commitments~~

~~As of September 30, 2017, a $75.0 million letter of credit issued by the FHLB was used to guarantee the Bank’s performance related to public fund deposit balances.~~

~~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 has filed a claim related to a loan previously made by the Company asserting lender liability. The case was tried without a jury and a judgment 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 has a filed a petition for rehearing with the Court of Appeals, which has been denied. The plaintiff has filed a writ of certiorari asking the Supreme Court of South Carolina to hear the case. The Company believes the likelihood the Supreme Court will hear the case is not probable, and, accordingly the Company does not expect to incur any loss as a result of this case. Accordingly, the Company has not established any reserves related to this legal matter. In the event that the Company's assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.

NOTE 1011 – ~~SHAREHOLDERS’ EQUITY~~WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings per share have been computed based on the following weighted average number of common shares outstanding:



	Three Months Ended March 31,
(share data in thousands)	2019	2018
Average common shares outstanding	47,366	37,967
Common share equivalents:
Stock options	—	18
Nonvested restricted share grants	90	265
Average common shares outstanding, assuming dilution	47,456	38,250

~~On January 18, 2017,~~For the three-month periods ended March 31, 2019 and 2018, there were no potential common shares with strike prices that would cause them to be anti-dilutive.

NOTE 12 – LEASES

The Company has entered into various operating leases for certain branch locations, ATM locations, loan production offices, and corporate support services locations with terms extending through June 2028. Generally, these leases have initial lease terms of ten years or less. Many of the leases have one or more lease renewal options. The exercise of lease renewal options is at our sole discretion. The Company does not consider exercise of any lease renewal options reasonably certain. Certain of our lease agreements contain early termination options. No renewal options or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities. Certain of our lease agreements provide for periodic adjustments to rental payments for inflation. As the majority of the Company's leases do not provide an implicit rate, the Company ~~issued 128,572 unregistered shares~~uses its incremental borrowing rate at the commencement date in determining the present value of ~~its common stock to William J. Villari in exchange for 4.99%~~lease payments. The incremental borrowing rate is based on the term of the ~~outstanding shares~~lease. Incremental borrowing rates on January 1, 2019 were used for operating leases that commenced prior to that date. Leases with an initial term of ~~common stock~~12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. At March 31, 2019, the Company had no leases classified as finance leases.

Operating lease cost was $1.8 million for the three months ended March 31, 2019. For the three months ended March 31, 2019, the Company had no sublease income offsetting operating lease cost. Variable rent expense and short-term lease expense were not material for the three months ended March 31, 2019.

The following table presents the impact of ~~USPF. A registration statement was filed with~~leases on the ~~Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance~~Company's consolidated balance sheet at March 31, 2019:



(dollars in thousands)	Location	March 31, 2019
Operating lease right-of-use assets	Other assets	$	25,739
Operating lease liabilities	Other liabilities	28,080

Future maturities of the ~~128,572 common shares was valued at $45.45 per share, resulting in an increase in shareholders’ equity of $5.8 million. For additional information regarding the investment in USPF, see Note 2.~~Company's operating lease liabilities are summarized as follows:

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.



(dollars in thousands)
Twelve Months Ended March 31,	Lease Liability
2020	$	6,025
2021	5,175
2022	4,679
2023	4,244
2024	3,307
After March 31, 2024	7,467
Total lease payments	$	30,897
Less: Interest	(2,817		)
Present value of lease liabilities	$	28,080

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 8.



Supplemental lease information
(dollars in thousands)	March 31, 2019
Weighted-average remaining lease term (years)	6.4
Weighted-average discount rate	2.93		%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (cash payments)	$	1,775
Operating cash flows from operating leases (lease liability reduction)	$	1,571
Operating lease right-of-use assets obtained in exchange for leases entered into during the period	$	—

~~NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME~~

Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of September 30, 2017 and 2016:

(dollars in thousands)
Unrealized
Gain (Loss)
on Derivatives

Unrealized
Gain (Loss)
on Securities

Accumulated
Other Comprehensive
Income (Loss)
Balance, January 1, 2017 $ 176
$ (1,234 ) $ (1,058 )
Reclassification for gains included in net income, net of tax —
(24 ) (24 )
Current year changes, net of tax (38 ) 4,361
4,323
Balance, September 30, 2017 $ 138
$ 3,103
$ 3,241

(dollars in thousands)

Unrealized
Gain (Loss)
on Derivatives

Unrealized
Gain (Loss)
on Securities

Accumulated
Other Comprehensive
Income (Loss)
Balance, January 1, 2016 $ 152
$ 3,201
$ 3,353
Reclassification for gains included in net income, net of tax —
(61 ) (61 )
Current year changes, net of tax (567 ) 7,724
7,157
Balance, September 30, 2016 $ (415 ) $ 10,864
$ 10,449

~~NOTE 12 – WEIGHTED AVERAGE SHARES OUTSTANDING~~

~~Earnings per share have been computed based on the following weighted average number of common shares outstanding:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(share data in thousands) 2017 2016 2017 2016
Average common shares outstanding 37,225
34,870
36,690
34,156
Common share equivalents:

Stock options 70
108
70
100
Nonvested restricted share grants 258
217
257
214
Average common shares outstanding, assuming dilution 37,553
35,195
37,017
34,470

~~For the three and nine-month periods ended September 30, 2017 and 2016, there were no potential common shares with strike prices that would cause them to be anti-dilutive.~~

NOTE 13 – 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.

The ~~Company’s~~Company's loans held for sale are carried at fair value and are comprised of the following:


(dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Mortgage loans held for sale	$	132,201	$	105,924	$	109,442	$	107,428
SBA loans held for sale	5,191		—		2,628		3,870
Total loans held for sale	$	137,392	$	105,924	$	112,070	$	111,298

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 statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“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~~losses of ~~$5.7 million~~$150,000 and ~~$4.9~~$1.6 million resulting from fair value changes of these mortgage loans were recorded in income during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, respectively. ~~The amount does not reflect~~Net gains of $2.5 million and $1.6 million resulting from changes in the fair ~~values~~value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage ~~loans.~~loans were recorded in income during the three months ended March 31, 2019 and 2018, respectively. The change in fair value of both mortgage loans held for sale and the related derivative financial instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive 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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


(dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Aggregate fair value of mortgage loans held for sale	$	132,201	$	105,924	$	109,442	$	107,428
Aggregate unpaid principal balance	126,503		103,691		105,482		103,319
Past-due loans of 90 days or more	—		—		—		—
Nonaccrual loans	—		—		—		—

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, ~~mortgage~~ loans held for sale and ~~derivatives~~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.

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 ~~Accounts:~~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.

~~Other Investments:~~ FHLB stock, Federal Reserve Bank stock and the Company’s minority equity investment in USPF are included in other investment securities at original cost basis. These investments do not have readily determinable fair values and are carried at original cost basis. It is not practical to determine the fair value of these investments due to restrictions placed on transferability. These investments are periodically evaluated for impairment based on ultimate recovery of par value or cost basis. Cost basis approximates fair value for these investments.

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 ~~carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The~~ fair value ~~of fixed-rate~~for loans held for investment is estimated ~~based on discounted contractual~~using an exit price methodology. An exit price methodology considers expected cash flows ~~using~~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 ~~rates currently being offered~~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 ~~with similar terms~~held for investment, Level 3 inputs are primarily used to ~~borrowers with similar credit quality.~~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 ~~other real estate owned (“OREO”)~~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 ~~other real estate owned~~OREO should be classified as Level 3.

~~Intangible Assets:~~Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposits: ~~Intangible assets consist~~The carrying amount of ~~core~~demand deposits, savings deposits and variable-rate certificates of deposit ~~premiums acquired in connection with business combinations and are~~approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on ~~the established value~~discounted contractual cash flows using interest rates currently being offered for certificates of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of seven to ten years.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 ~~Receivable/~~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 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/payable~~receivable is impacted by changes in estimated cash flows associated with these loans.

~~Accrued Interest Receivable/Payable:~~ 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 ~~carrying~~ amount of ~~accrued interest receivable~~the clawback provision for each acquisition is measured and ~~accrued interest payable approximates fair value.~~

~~Cash Value of Bank Owned Life Insurance:~~ ~~The carrying value of cash value of bank owned life insurance approximates fair value.~~

~~Deposits:~~ ~~The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates~~recorded at fair value. The ~~fair value of fixed-rate certificates of deposit~~clawback amount, which is ~~estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.~~

~~Securities Sold under Agreements~~payable to ~~Repurchase and Other Borrowings:~~ The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value and are 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 are classified as Level 2.~~

~~Subordinated Deferrable Interest Debentures:~~ ~~The fair value~~FDIC upon termination of the ~~Company’s trust preferred securities~~applicable loss-sharing agreement, is ~~based primarily upon~~ discounted ~~cash flows~~ using ~~rates for securities with similar terms and remaining maturities and are classified as Level 2.~~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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, 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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


	Recurring Basis Fair Value Measurements								Recurring Basis Fair Value Measurements
	September 30, 2017								March 31, 2019
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. government sponsored agencies	$	1,004	$	—	$	1,004	$	—
State, county and municipal securities	143,387		—		143,387		—		$	107,740	$	—	$	107,740	$	—
Corporate debt securities	47,249		—		45,749		1,500		57,152		—		55,652		1,500
Mortgage-backed securities	627,953		—		627,953		—		1,069,543		—		1,069,543		—
Loans held for sale	137,392		—		137,392		—		112,070		—		112,070		—
Mortgage banking derivative instruments	3,836		—		3,836		—		5,118		—		5,118		—
Total recurring assets at fair value	$	960,821	$	—	$	959,321	$	1,500	$	1,351,623	$	—	$	1,350,123	$	1,500
Financial liabilities:
Derivative financial instruments	$	723	$	—	$	723	$	—	$	31	$	—	$	31	$	—
Mortgage banking derivative instruments	237		—		237		—		1,315		—		1,315		—
Total recurring liabilities at fair value	$	960	$	—	$	960	$	—	$	1,346	$	—	$	1,346	$	—


	Recurring Basis Fair Value Measurements								Recurring Basis Fair Value Measurements
	December 31, 2016								December 31, 2018
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. government sponsored agencies	$	1,020	$	—	$	1,020	$	—
State, county and municipal securities	152,035		—		152,035		—		$	150,733	$	—	$	150,733	$	—
Corporate debt securities	32,172		—		30,672		1,500		67,314		—		65,814		1,500
Mortgage-backed securities	637,508		—		637,508		—		974,376		—		974,376		—
Loans held for sale	105,924		—		105,924		—		111,298		—		111,298		—
Derivative financial instruments									102		—		102		—
Mortgage banking derivative instruments	4,314		—		4,314		—		2,537		—		2,537		—
Total recurring assets at fair value	$	932,973	$	—	$	931,473	$	1,500	$	1,306,360	$	—	$	1,304,860	$	1,500
Financial liabilities:
Derivative financial instruments	$	978	$	—	$	978	$	—
Mortgage banking derivative instruments									$	1,276	$	—	$	1,276	$	—
Total recurring liabilities at fair value	$	978	$	—	$	978	$	—	$	1,276	$	—	$	1,276	$	—

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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


	Nonrecurring Basis Fair Value Measurements								Nonrecurring Basis Fair Value Measurements
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
September 30, 2017
March 31, 2019
Impaired loans carried at fair value									$	31,397	$	—	$	—	$	31,397
Purchased other real estate owned									10,857		—		—		10,857
Total nonrecurring assets at fair value									$	42,254	$	—	$	—	$	42,254

December 31, 2018
Impaired loans carried at fair value	$	28,790	$	—	$	—	$	28,790	$	28,653	$	—	$	—	$	28,653
Other real estate owned	435		—		—		435		408		—		—		408
Purchased other real estate owned	9,946		—		—		9,946		9,535		—		—		9,535
Total nonrecurring assets at fair value	$	39,171	$	—	$	—	$	39,171	$	38,596	$	—	$	—	$	38,596

December 31, 2016
Impaired loans carried at fair value	$	28,253	$	—	$	—	$	28,253
Other real estate owned	1,172		—		—		1,172
Purchased other real estate owned	12,540		—		—		12,540
Total nonrecurring assets at fair value	$	41,965	$	—	$	—	$	41,965

The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of ~~other real estate owned~~OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and the year ended December 31, ~~2016,~~2018, there was not a change in the methods and significant assumptions used to estimate fair value.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 ~~assets and liabilities:~~assets:


(dollars in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts	Weighted Average Discount	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts	Weighted Average Discount
September 30, 2017
March 31, 2019
Recurring:
Investment securities available for sale							$	1,500	Discounted par values	Credit quality of underlying issuer	0%	0%
Nonrecurring:
Impaired loans							$	31,397	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	20% - 92%	27%
Purchased other real estate owned							$	10,857	Third-party appraisals	Collateral discounts and estimated costs to sell	10% - 75%	36%

December 31, 2018
Recurring:
Investment securities available for sale	$	1,500	Discounted par values	Credit quality of underlying issuer	0%	0%	$	1,500	Discounted par values	Credit quality of underlying issuer	0%	0%
Nonrecurring:
Impaired loans	$	28,790	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	10% - 100%	25%	$	28,653	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	3% - 53%	30%
Other real estate owned	$	435	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 20%	13%	$	408	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 69%	31%
Purchased other real estate owned	$	9,946	Third-party appraisals	Collateral discounts and estimated costs to sell	10% - 74%	16%	$	9,535	Third-party appraisals	Collateral discounts and estimated costs to sell	6% - 74%	39%

December 31, 2016
Recurring:
Investment securities available for sale	$	1,500	Discounted par values	Credit quality of underlying issuer	0%	0%
Nonrecurring:
Impaired loans	$	28,253	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	15% - 100%	28%
Other real estate owned	$	1,172	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 74%	22%
Purchased other real estate owned	$	12,540	Third-party appraisals	Collateral discounts and estimated costs to sell	10% - 74%	15%

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as ~~follows:~~follows.


			Fair Value Measurements										Fair Value Measurements
			September 30, 2017										March 31, 2019
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	131,071	$	131,071	$	—	$	—	$	131,071	$	144,801	$	144,801	$	—	$	—	$	144,801
Federal funds sold and interest-bearing accounts	112,844		112,844		—		—		112,844
Federal funds sold and interest-bearing deposits in banks											712,199		712,199		—		—		712,199
Time deposits in other banks											7,371		—		7,371		—		7,371
Loans, net	5,902,267		—		—		5,871,518		5,871,518		8,422,283		—		—		8,357,110		8,357,110
Accrued interest receivable	25,068		25,068		—		—		25,068		37,411		—		5,366		32,045		37,411
Financial liabilities:
Deposits	$	5,895,504	$	—	$	5,896,989	$	—	$	5,896,989	$	9,800,875	$	—	$	9,797,905	$	—	$	9,797,905
Securities sold under agreements to repurchase	14,156		14,156		—		—		14,156		4,259		4,259		—		—		4,259
Other borrowings	808,572		—		809,810		—		809,810		151,454		—		152,655		—		152,655
Subordinated deferrable interest debentures	85,220		—		70,984		—		70,984		89,529		—		88,900		—		88,900
FDIC loss-share payable	8,190		—		—		9,077		9,077		18,834		—		—		18,847		18,847
Accrued interest payable	2,313		2,313		—		—		2,313		5,462		—		5,462		—		5,462



			Fair Value Measurements
			December 31, 2018
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	172,036	$	172,036	$	—	$	—	$	172,036
Federal funds sold and interest-bearing deposits in banks	507,491		507,491		—		—		507,491
Time deposits in other banks	10,812		—		10,812		—		10,812
Loans, net	8,454,442		—		—		8,365,293		8,365,293
Accrued interest receivable	36,970		—		5,456		31,514		36,970
Financial liabilities:
Deposits	$	9,649,313	$	—	$	9,645,617	$	—	$	9,645,617
Securities sold under agreements to repurchase	20,384		20,384		—		—		20,384
Other borrowings	151,774		—		152,873		—		152,873
Subordinated deferrable interest debentures	89,187		—		90,180		—		90,180
FDIC loss-share payable	19,487		—		—		19,576		19,576
Accrued interest payable	5,669		—		5,669		—		5,669

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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 Company’s balance sheets.

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)	March 31, 2019		December 31, 2018
Commitments to extend credit	$	1,818,407	$	1,671,419
Unused home equity lines of credit	105,780		112,310
Financial standby letters of credit	25,599		24,596
Mortgage interest rate lock commitments	158,141		81,833

Fair Value Measurements
December 31, 2016
(dollars in thousands)
Carrying
Amount
Level 1 Level 2 Level 3 Total
Financial assets:

Cash and due from banks $ 127,164
$ 127,164
$ —
$ —
$ 127,164
Federal funds sold and interest-bearing accounts 71,221
71,221
—
—
71,221
Loans, net 5,212,153
—
—
5,236,034
5,236,034
Accrued interest receivable 22,278
22,278
—
—
22,278
Financial liabilities:

Deposits $ 5,575,163
$ —
$ 5,575,288
$ —
$ 5,575,288
Securities sold under agreements to repurchase 53,505
53,505
—
—
53,505
Other borrowings 492,321
—
492,321
—
492,321
Subordinated deferrable interest debentures 84,228
—
67,321
—
67,321
FDIC loss-share payable 6,313
—
—
8,243
8,243
Accrued interest payable 1,501
1,501
—
—
1,501

Other Commitments

As of March 31, 2019, a $75.0 million letter of credit issued by the FHLB was used to guarantee the Bank’s performance related to public fund deposit balances.

Contingencies

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

~~NOTE 14 – SEGMENT REPORTING~~

The Company has the following five reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including 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. 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.

~~The following tables present selected financial information with respect to the Company’s reportable business segments for the three months ended September 30, 2017 and 2016:~~

Three Months Ended
September 30, 2017
(dollars in thousands) Banking
Division Retail
Mortgage
Division Warehouse
Lending
Division SBA
Division Premium
Finance
Division Total
Interest income $ 59,130
$ 5,862
$ 2,022
$ 1,413
$ 7,895
$ 76,322
Interest expense 5,530
1,597
487
432
1,421
9,467
Net interest income 53,600
4,265
1,535
981
6,474
66,855
Provision for loan losses 1,037
262
215
(1 ) 274
1,787
Noninterest income 13,007
12,257
583
1,130
22
26,999
Noninterest expense

Salaries and employee benefits 20,554
9,792
129
858
1,250
32,583
Equipment and occupancy expenses 5,384
555
1
54
42
6,036
Data processing and telecommunications expenses 6,357
425
28
9
231
7,050
Other expenses 14,905
1,001
51
63
2,078
18,098
Total noninterest expense 47,200
11,773
209
984
3,601
63,767
Income before income tax expense 18,370
4,487
1,694
1,128
2,621
28,300
Income tax expense 4,850
1,475
580
394
843
8,142
Net income $ 13,520
$ 3,012
$ 1,114
$ 734
$ 1,778
$ 20,158

Total assets $ 6,296,159
$ 531,897
$ 236,024
$ 94,531
$ 491,209
$ 7,649,820
Goodwill 125,532
—
—
—
—
125,532
Other intangible assets, net 14,437
—
—
—
—
14,437

Three Months Ended
September 30, 2016
(dollars in thousands)
Banking
Division

Retail
Mortgage
Division

Warehouse
Lending
Division

SBA
Division

Premium
Finance
Division
Total
Interest income $ 55,369
$ 3,679
$ 2,073
$ 1,089
$ —
$ 62,210
Interest expense 3,716
1,054
225
148
—
5,143
Net interest income 51,653
2,625
1,848
941
—
57,067
Provision for loan losses 57
447
94
213
—
811
Noninterest income 13,949
13,198
555
1,162
—
28,864
Noninterest expense

Salaries and employee benefits 18,323
8,940
103
616
—
27,982
Equipment and occupancy expenses 5,490
433
1
65
—
5,989
Data processing and telecommunications expenses 5,794
364
26
1
—
6,185
Other expenses 11,533
1,303
26
181
—
13,043
Total noninterest expense 41,140
11,040
156
863
—
53,199
Income before income tax expense 24,405
4,336
2,153
1,027
—
31,921
Income tax expense 7,733
1,518
754
359
—
10,364
Net income $ 16,672
$ 2,818
$ 1,399
$ 668
$ —
$ 21,557

Total assets $ 5,841,207
$ 356,755
$ 203,334
$ 92,199
$ —
$ 6,493,495
Goodwill 122,545
—
—
—
—
122,545
Other intangible assets, net 18,472
—
—
—
—
18,472

~~The following tables present selected financial information with respect to the Company’s reportable business segments for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended
September 30, 2017
(dollars in thousands)
Banking
Division

Retail
Mortgage
Division

Warehouse
Lending
Division

SBA
Division

Premium
Finance
Division
Total
Interest income $ 170,036
$ 14,890
$ 4,968
$ 3,884
$ 21,005
$ 214,783
Interest expense 14,510
4,179
1,074
1,111
3,307
24,181
Net interest income 155,526
10,711
3,894
2,773
17,698
190,602
Provision for loan losses 4,510
617
159
98
444
5,828
Noninterest income 38,974
35,823
1,340
4,663
94
80,894
Noninterest expense

Salaries and employee benefits 58,757
24,771
403
2,339
3,239
89,509
Equipment and occupancy expenses 16,068
1,684
3
159
145
18,059
Data processing and telecommunications expenses 18,778
1,182
80
12
598
20,650
Other expenses 34,355
3,030
137
533
6,326
44,381
Total noninterest expense 127,958
30,667
623
3,043
10,308
172,599
Income before income tax expense 62,032
15,250
4,452
4,295
7,040
93,069
Income tax expense 17,801
5,337
1,559
1,503
2,471
28,671
Net income $ 44,231
$ 9,913
$ 2,893
$ 2,792
$ 4,569
$ 64,398

Nine Months Ended
September 30, 2016
(dollars in thousands)
Banking
Division

Retail
Mortgage
Division

Warehouse
Lending
Division

SBA
Division

Premium
Finance
Division
Total
Interest income $ 158,682
$ 9,992
$ 4,714
$ 2,721
$ —
$ 176,109
Interest expense 10,726
2,383
458
450
—
14,017
Net interest income 147,956
7,609
4,256
2,271
—
162,092
Provision for loan losses 1,471
540
94
276
—
2,381
Noninterest income 39,702
36,126
1,328
4,373
—
81,529
Noninterest expense

Salaries and employee benefits 55,740
23,591
399
1,970
—
81,700
Equipment and occupancy expenses 16,541
1,326
3
190
—
18,060
Data processing and telecommunications expenses 17,299
974
71
3
—
18,347
Other expenses 39,040
3,392
77
542
—
43,051
Total noninterest expense 128,620
29,283
550
2,705
—
161,158
Income before income tax expense 57,567
13,912
4,940
3,663
—
80,082
Income tax expense 18,278
4,870
1,729
1,282
—
26,159
Net income $ 39,289
$ 9,042
$ 3,211
$ 2,381
$ —
$ 53,923

~~NOTE 15 – REGULATORY MATTERS~~

On December 16, 2016, the Bank entered into a Stipulation to the Issuance of a Consent Order with its bank regulatory agencies, the FDIC and the Georgia Department of Banking and Finance (the “GDBF”), consenting to the issuance of a consent order (the “Order”) relating to the Bank’s Bank Secrecy Act (together with its implementing regulations, the “BSA”) compliance program. In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices related to its BSA compliance program.

Under the terms of the Order, the Bank or its board of directors is required to take certain affirmative actions to comply with the Bank’s obligations under the BSA. These include, but are not limited to, the following: strengthening the board of directors’ oversight of BSA activities; enhancing and adopting a revised BSA compliance program; completing a BSA risk assessment; developing a revised system of internal controls designed to ensure full compliance with the BSA; reviewing and revising customer due diligence and risk assessment processes, policies and procedures; developing, adopting and implementing effective BSA training programs; assessing BSA staffing needs and resources and appointing a qualified BSA officer; establishing an independent BSA testing program; ensuring that all reports required by the BSA are accurately and properly filed; and engaging an independent firm to review past account activity to determine whether suspicious activity was properly identified and reported.

Prior to implementation, certain of the actions required by the Order were subject to review by, and approval or non-objection from, the FDIC and the GDBF. The Order will remain in effect and be enforceable until it is modified, terminated, suspended or

set aside by the FDIC and the GDBF. The Bank expects that it will continue to meet the required actions within the time periods specified in the Order based upon ongoing communications with its regulators.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~Cautionary Note Regarding Forward-Looking Statements~~

Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: legislative and regulatory initiatives; additional competition in our markets; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by us; state and federal banking regulations; changes in or application of environmental and other laws and regulations to which we are subject; political, legal and economic conditions and developments; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather, natural disasters and other catastrophic events; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.

~~Overview~~

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of September 30, 2017, as compared with December 31, 2016, and operating results for the three- and nine-month periods ended September 30, 2017 and 2016. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

This discussion contains certain performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management of the Company uses these non-GAAP measures in its analysis of the Company’s performance. These measures are useful when evaluating the underlying performance and efficiency of the Company’s operations and balance sheet. The Company’s management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company’s management believes that investors may use these non-GAAP financial measures to evaluate the Company’s financial performance without the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Non-GAAP measures include tangible common equity, tangible book value per common share, adjusted operating net income, and adjusted operating net income per diluted share. The Company calculates the regulatory capital ratios using current regulatory report instructions. The Company’s management uses these measures to assess the quality of capital and believes that investors may find them useful in their evaluation of the Company. These capital measures may or may not be necessarily comparable to similar capital measures that may be presented by other companies.

The following table sets forth unaudited selected financial data for the previous five quarters. This data should be read in conjunction with the unaudited consolidated financial statements and the notes thereto and the information contained in this Item 2.

Nine Months Ended
(in thousands, except share and per share data) Third
Quarter
2017 Second
Quarter
2017 First
Quarter
2017 Fourth
Quarter
2016 Third
Quarter
2016 September 30,
2017 September 30,
2016
Results of Operations:
Net interest income $ 66,855
$ 63,157
$ 60,590
$ 57,279
$ 57,067
$ 190,602
$ 162,092
Net interest income (tax equivalent) 68,668
64,773
62,108
58,897
58,024
195,549
164,726
Provision for loan losses 1,787
2,205
1,836
1,710
811
5,828
2,381
Non-interest income 26,999
28,189
25,706
24,272
28,864
80,894
81,529
Non-interest expense 63,767
55,739
53,093
54,677
53,199
172,599
161,158
Income tax expense 8,142
10,315
10,214
6,987
10,364
28,671
26,159
Net income available to common shareholders 20,158
23,087
21,153
18,177
21,557
64,398
53,923
Selected Average Balances:

Investment securities $ 864,456
$ 866,960
$ 862,616
$ 856,671
$ 857,433
$ 864,684
$ 840,688
Loans held for sale 126,798
110,933
77,617
102,926
105,859
105,296
96,340
Loans 4,379,082
3,994,213
3,678,149
3,145,714
2,897,771
4,018,597
2,642,498
Purchased loans 937,595
973,521
1,034,983
1,101,907
1,199,175
982,033
1,147,821
Purchased loan pools 475,742
516,949
547,057
590,617
629,666
513,750
629,118
Earning assets 6,892,939
6,584,386
6,347,807
5,925,634
5,780,455
6,610,374
5,490,525
Assets 7,461,367
7,152,024
6,915,965
6,573,344
6,330,350
7,180,330
6,030,181
Deposits 5,837,154
5,671,394
5,491,324
5,490,657
5,221,219
5,667,891
5,102,729
Shareholders’ equity 796,856
774,664
695,830
653,991
640,382
756,153
599,817
Period-End Balances:

Investment securities $ 867,570
$ 861,188
$ 866,715
$ 852,199
$ 862,702
$ 867,570
$ 862,702
Loans held for sale 137,392
146,766
105,637
105,924
126,263
137,392
126,263
Loans 4,574,678
4,230,228
3,785,480
3,626,821
3,091,039
4,574,678
3,091,039
Purchased loans 917,126
950,499
1,006,935
1,069,191
1,129,381
917,126
1,129,381
Purchased loan pools 465,218
490,114
529,099
568,314
624,886
465,218
624,886
Earning assets 7,074,828
6,816,606
6,525,911
6,293,670
5,925,072
7,074,828
5,925,072
Total assets 7,649,820
7,397,858
7,094,856
6,892,031
6,493,495
7,649,820
6,493,495
Deposits 5,895,504
5,793,397
5,642,369
5,575,163
5,306,098
5,895,504
5,306,098
Shareholders’ equity 801,921
782,682
758,216
646,437
642,583
801,921
642,583
Per Common Share Data:

Earnings per share - basic $ 0.54
0.62
0.59
0.52
0.62
1.76
1.58
Earnings per share - diluted $ 0.54
0.62
0.59
0.52
0.61
1.74
1.56
Book value per common share $ 21.54
$ 21.03
$ 20.42
$ 18.51
$ 18.42
$ 21.54
$ 18.42
Tangible book value per common share $ 17.78
$ 17.24
$ 16.60
$ 14.42
$ 14.38
$ 17.78
$ 14.38
End of period shares outstanding 37,231,049
37,222,904
37,128,714
34,921,474
34,891,304
37,231,049
34,891,304

Nine Months Ended
(in thousands, except share and per share data) Third
Quarter
2017 Second
Quarter
2017 First
Quarter
2017 Fourth
Quarter
2016 Third
Quarter
2016 September 30,
2017 September 30,
2016
Weighted Average Shares Outstanding:

Basic 37,225,418
37,162,810
35,664,420
34,915,459
34,869,747
36,689,934
34,155,556
Diluted 37,552,667
37,489,348
36,040,240
35,293,035
35,194,739
37,017,486
34,470,101
Market Price:

High intraday price $ 51.28
$ 49.80
$ 49.50
$ 47.70
$ 36.20
$ 51.28
$ 36.20
Low intraday price $ 41.05
$ 42.60
$ 41.60
$ 34.61
$ 28.90
$ 41.05
$ 24.96
Closing price for quarter $ 48.00
$ 48.20
$ 46.10
$ 43.60
$ 34.95
$ 48.00
$ 34.95
Average daily trading volume 168,911
169,617
242,982
191,894
166,841
193,555
211,351
Cash dividends declared per share $ 0.10
$ 0.10
$ 0.10
$ 0.10
$ 0.10
$ 0.30
$ 0.20
Closing price to book value 2.23
2.29
2.26
2.36
1.90
2.23
1.90
Performance Ratios:

Return on average assets 1.07 % 1.29 % 1.24 % 1.10 % 1.35 % 1.20 % 1.19 %
Return on average common equity 10.04 % 11.95 % 12.33 % 11.06 % 13.39 % 11.39 % 12.01 %
Average loans to average deposits 101.41 % 98.66 % 97.20 % 89.99 % 92.55 % 99.15 % 88.50 %
Average equity to average assets 10.68 % 10.83 % 10.06 % 9.95 % 10.12 % 10.53 % 9.95 %
Net interest margin (tax equivalent) 3.95 % 3.95 % 3.97 % 3.95 % 3.99 % 3.96 % 4.01 %
Efficiency ratio 67.94 % 61.02 % 61.52 % 67.05 % 61.91 % 63.57 % 66.15 %

Non-GAAP Measures Reconciliation -

Tangible book value per common share:

Total shareholders’ equity $ 801,921
$ 782,682
$ 758,216
$ 646,437
$ 642,583
$ 801,921
$ 642,583
Less:

Goodwill 125,532
125,532
125,532
125,532
122,545
125,532
122,545
Other intangible assets, net 14,437
15,378
16,391
17,428
18,472
14,437
18,472
Tangible common equity $ 661,952
$ 641,772
$ 616,293
$ 503,477
$ 501,566
$ 661,952
$ 501,566
End of period shares outstanding 37,231,049
37,222,904
37,128,714
34,921,474
34,891,304
37,231,049
34,891,304
Book value per common share $ 21.54
$ 21.03
$ 20.42
$ 18.51
$ 18.42
$ 21.54
$ 18.42
Tangible book value per common share 17.78
17.24
16.60
14.42
14.38
17.78
14.38

~~Results of Operations for the Three Months Ended September 30, 2017 and 2016~~

~~Consolidated Earnings and Profitability~~

Ameris reported net income available to common shareholders of $20.2 million, or $0.54 per diluted share, for the quarter ended September 30, 2017, compared with $21.6 million, or $0.61 per diluted share, for the same period in 2016. The Company’s return on average assets and average shareholders’ equity were 1.07% and 10.04%, respectively, in the third quarter of 2017, compared with 1.35% and 13.39%, respectively, in the third quarter of 2016. During the third quarter of 2017 the Company incurred pre-tax merger and conversion charges of $92,000, pre-tax BSA compliance resolution expenses of $4.7 million, pre-tax Hurricane Irma expenses of $410,000, and pre-tax losses on the sale of premises of $91,000. During the third quarter of 2016, the Company incurred pre-tax losses on the sale of premises of $238,000. Excluding these merger and conversion charges, compliance resolution expenses, Hurricane Irma expenses, and losses on the sale of premises, the Company’s net income would have been $23.6 million, or $0.63 per diluted share, for the third quarter of 2017 and $21.7 million, or $0.62 per diluted share, for the third quarter of 2016.

~~Below is a reconciliation of adjusted operating net income to net income, as discussed above.~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data) 2017 2016 2017 2016
Net income available to common shareholders $ 20,158
$ 21,557
$ 64,398
$ 53,923
Adjustment items:

Merger and conversion charges 92
—
494
6,359
Certain compliance resolution expenses 4,729
—
4,729
—
Financial impact of Hurricane Irma 410
—
410
—
Losses on the sale of premises 91
238
956
562
Tax effect of management adjusted charges (1,863 ) (83 ) (2,306 ) (2,422 )
After tax management-adjusted charges 3,459
155
4,283
4,499
Adjusted operating net income $ 23,617
$ 21,712
$ 68,681
$ 58,422

Weighted average common shares outstanding - diluted 37,552,667
35,194,739
37,017,486
34,470,101
Earnings per diluted share $ 0.54
$ 0.61
$ 1.74
$ 1.56
Adjusted operating net income per diluted share $ 0.63
$ 0.62
$ 1.86
$ 1.69

Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the third quarter of 2017 and 2016, respectively:

Three Months Ended
September 30, 2017
(dollars in thousands)
Banking
Division

Retail
Mortgage
Division

Warehouse
Lending
Division

SBA
Division

Premium
Finance
Division
Total
Interest income $ 59,130
$ 5,862
$ 2,022
$ 1,413
$ 7,895
$ 76,322
Interest expense 5,530
1,597
487
432
1,421
9,467
Net interest income 53,600
4,265
1,535
981
6,474
66,855
Provision for loan losses 1,037
262
215
(1 ) 274
1,787
Noninterest income 13,007
12,257
583
1,130
22
26,999
Noninterest expense

Salaries and employee benefits 20,554
9,792
129
858
1,250
32,583
Equipment and occupancy expenses 5,384
555
1
54
42
6,036
Data processing and telecommunications expenses 6,357
425
28
9
231
7,050
Other expenses 14,905
1,001
51
63
2,078
18,098
Total noninterest expense 47,200
11,773
209
984
3,601
63,767
Income before income tax expense 18,370
4,487
1,694
1,128
2,621
28,300
Income tax expense 4,850
1,475
580
394
843
8,142
Net income $ 13,520
$ 3,012
$ 1,114
$ 734
$ 1,778
$ 20,158

~~Net Interest Income and Margins~~

The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the three months ended September 30, 2017 and 2016. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35% federal tax rate.

Quarter Ended
September 30,
2017 2016
(dollars in thousands)
Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate Paid

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate Paid
Assets

Interest-earning assets:

Federal funds sold and interest-bearing deposits in banks $ 109,266
$ 406
1.47% $ 90,551
$ 155
0.68%
Investment securities 864,456
5,665
2.60% 857,433
4,872
2.26%
Loans held for sale 126,798
1,131
3.54% 105,859
826
3.10%
Loans 4,379,082
53,394
4.84% 2,897,771
33,672
4.62%
Purchased loans 937,595
14,048
5.94% 1,199,175
19,296
6.40%
Purchased loan pools 475,742
3,491
2.91% 629,666
4,346
2.75%
Total interest-earning assets 6,892,939
78,135
4.50% 5,780,455
63,167
4.35%
Noninterest-earning assets 568,428

549,895

Total assets $ 7,461,367

$ 6,330,350

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Savings and interest-bearing demand deposits $ 3,162,448
$ 2,963
0.37% $ 2,787,323
$ 1,719
0.25%
Time deposits 1,020,239
2,173
0.85% 887,685
1,355
0.61%
Federal funds purchased and securities sold under agreements to repurchase 19,414
11
0.22% 37,305
18
0.19%
FHLB advances 608,413
1,849
1.21% 265,202
393
0.59%
Other borrowings 75,590
1,183
6.21% 49,345
479
3.86%
Subordinated deferrable interest debentures 85,040
1,288
6.01% 83,719
1,179
5.60%
Total interest-bearing liabilities 4,971,144
9,467
0.76% 4,110,579
5,143
0.50%
Demand deposits 1,654,467

1,546,211

Other liabilities 38,900

33,178

Shareholders’ equity 796,856

640,382

Total liabilities and shareholders’ equity $ 7,461,367

$ 6,330,350

Interest rate spread

3.74%

3.85%
Net interest income
$ 68,668

$ 58,024

Net interest margin

3.95%

3.99%

On a tax-equivalent basis, net interest income for the third quarter of 2017 was $68.7 million, an increase of $10.6 million, or 18.3%, compared with $58.0 million reported in the same quarter in 2016. The higher net interest income is a result of growth in average interest earning assets which increased $1.11 billion, or 19.2%, from $5.78 billion in the third quarter of 2016 to $6.89 billion for the third quarter of 2017. The Company’s net interest margin decreased during the third quarter of 2017 to 3.95%, compared with 3.99% reported in the third quarter of 2016 but remained stable compared with 3.95% reported in the second quarter of 2017.

Total interest income, on a tax-equivalent basis, increased to $78.1 million during the third quarter of 2017, compared with $63.2 million in the same quarter of 2016. Yields on earning assets increased to 4.50% during the third quarter of 2017, compared with 4.35% reported in the third quarter of 2016. During the third quarter of 2017, loans comprised 85.9% of earning assets, compared with 83.6% in the same quarter of 2016. This increase is a result of growth in average legacy loans which increased $1.48 billion, or 51.1%, to $4.38 billion in the third quarter 2017 from $2.90 billion in the same period of 2016. Yields on legacy loans increased to 4.84% in the third quarter of 2017, compared with 4.62% in the same period of 2016. The yield on purchased loans decreased from 6.40% in the third quarter of 2016 to 5.94% during the third quarter of 2017. Accretion income for the third quarter of 2017 was $2.7 million, compared with $3.6 million in the third quarter of 2016. Excluding the effect of accretion on purchased loans, the yield on purchased loans was 5.21% for the third quarter of 2016, compared with 4.79% in the same period of 2017. Yields on purchased loan pools increased from 2.75% in the third quarter of 2016 to 2.91% in the same period in 2017. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.

The yield on total interest-bearing liabilities increased from 0.50% in the third quarter of 2016 to 0.76% in the third quarter of 2017. Total funding costs, inclusive of noninterest bearing demand deposits, increased to 0.57% in the third quarter of 2017, compared with 0.36% during the third quarter of 2016. Deposit costs increased from 0.23% in the third quarter of 2016 to 0.35% in the third quarter of 2017. Non-deposit funding costs increased from 1.89% in the third quarter of 2016 to 2.18% in the third quarter of 2017. The increase in non-deposit funding costs was driven primarily by an increased utilization of short-term FHLB advances coupled with an increase in the average rate paid on other borrowings related to the March 2017 issuance of $75.0 million of 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 82.5% of total deposits in the third quarter of 2017, compared with 83.0% during the third quarter of 2016. Average balances of interest bearing deposits and their respective costs for the third quarter of 2017 and 2016 are shown below:

Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016
(dollars in thousands)
Average
Balance

Average
Cost

Average
Balance

Average
Cost
NOW $ 1,201,151
0.20% $ 1,085,828
0.16%
MMDA 1,682,306
0.55% 1,435,151
0.34%
Savings 278,991
0.07% 266,344
0.07%
Retail CDs < $100,000 437,641
0.62% 431,570
0.45%
Retail CDs > $100,000 582,598
1.01% 451,115
0.75%
Brokered CDs —
—% 5,000
0.64%
Interest-bearing deposits $ 4,182,687
0.49% $ 3,675,008
0.33%

~~Provision for Loan Losses~~

The Company’s provision for loan losses during the third quarter of 2017 amounted to $1.8 million, compared with $2.2 million in the second quarter of 2017 and $811,000 in the third quarter of 2016. At September 30, 2017, classified loans still accruing totaled $45.8 million, compared with $43.3 million at December 31, 2016. Non-performing assets as a percentage of total assets decreased from 0.94% at December 31, 2016 to 0.75% at September 30, 2017. Net charge-offs on legacy loans during the third quarter of 2017 were approximately $1.6 million, or 0.15% of average legacy loans on an annualized basis, compared with approximately $371,000, or 0.05%, in the third quarter of 2016. The Company’s allowance for loan losses allocated to legacy loans at September 30, 2017 was $21.2 million, or 0.46% of legacy loans, compared with $20.5 million, or 0.56% of legacy loans, at December 31, 2016. The Company’s total allowance for loan losses at September 30, 2017 was $26.0 million, or 0.44% of total loans, increasing from $23.9 million, or 0.45% of total loans, at December 31, 2016.

~~Noninterest Income~~

Total non-interest income for the third quarter of 2017 was $27.0 million, a decrease of $1.9 million, or 6.5%, from the $28.9 million reported in the third quarter of 2016. Service charges on deposit accounts in the third quarter of 2017 decreased $823,000, or 7.2%, to $10.5 million, compared with $11.4 million in the third quarter of 2016. This decrease in service charge revenue was primarily attributable to lower overdraft fee income. Income from mortgage-related activities decreased $727,000, or 5.2%, from $14.1 million in the third quarter of 2016 to $13.3 million in the third quarter of 2017. Total production in the third quarter of 2017 amounted to $401.7 million, compared with $410.8 million in the same quarter of 2016, while spread (gain on sale) decreased to 3.30% in the current quarter compared with 3.69% in the same quarter of 2016. The retail mortgage open pipeline finished the third quarter of 2017 at $158.4 million, compared with $174.3 million at the beginning of the third quarter of 2017 and $145.4 million at the end of the third quarter of 2016. Other service charges, commissions and fees decreased $92,000, or 11.6%, to $699,000 during the third quarter of 2017, compared with $791,000 during the third quarter of 2016. The decrease in other service charges, commissions and fees was primarily attributable to lower ATM fees, reflecting the Company's decision to waive ATM fees for customers during Hurricane Irma. Other non-interest income decreased $223,000, or 8.4%, to $2.4 million for the third quarter of 2017, compared with $2.6 million during the third quarter of 2016. The decrease in other non-interest income was primarily attributable to lower bank owned life insurance income and lower check order fee income.

~~Noninterest Expense~~

Total non-interest expenses for the third quarter of 2017 increased $10.6 million, or 19.9%, to $63.8 million, compared with $53.2 million in the same quarter 2016. Salaries and employee benefits increased $4.6 million, or 16.4%, from $28.0 million in the third quarter of 2016 to $32.6 million in the third quarter of 2017 due to staff additions for the premium finance division, increased staffing related to the Company’s ongoing BSA compliance efforts, higher incentive accruals for production staff, increased commissions in the mortgage and SBA divisions, and staff additions for the equipment finance line of business. Occupancy and

equipment expenses remained stable at $6.0 million for both the third quarter of 2017 and the third quarter of 2016. Tighter controls on expenses held increases in these costs to a minimum. Data processing and telecommunications expense increased $865,000, or 14.0%, to $7.1 million in the third quarter of 2017, compared with $6.2 million in the third quarter of 2016, due to an increase in the number of accounts being processed by our core banking system and additional software fees incurred related to the buildout of our BSA compliance program which we expect to stabilize. Credit resolution-related expenses decreased from $1.5 million in the third quarter of 2016 to $1.3 million in the third quarter of 2017. Other noninterest expenses increased $5.2 million from $9.3 million in the third quarter of 2016 to $14.5 million in the third quarter of 2017 due primarily to consulting fees related to BSA compliance resolution, management and licensing fees associated with the premium finance division and loan servicing fees associated with consumer installment home improvement loans serviced by an unrelated third party.

~~Income Taxes~~

Income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the third quarter of 2017, the Company reported income tax expense of $8.1 million, compared with $10.4 million in the same period of 2016. This decrease in income tax expense is directly correlated to the decrease in pre-tax income for the periods. The Company’s effective tax rate for the three months ending September 30, 2017 and 2016 was 28.8% and 32.5%, respectively.

~~Results of Operations for the Nine Months Ended September 30, 2017 and 2016~~

~~Consolidated Earnings and Profitability~~

Ameris reported net income available to common shareholders of $64.4 million, or $1.74 per diluted share, for the nine months ended September 30, 2017, compared with $53.9 million, or $1.56 per diluted share, for the same period in 2016. The Company’s return on average assets and average shareholders’ equity were 1.20% and 11.39%, respectively, for the nine months ended September 30, 2017, compared with 1.19% and 12.01%, respectively, for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, the Company incurred pre-tax merger and conversion charges of $494,000, pre-tax BSA compliance resolution expenses of $4.7 million, pre-tax Hurricane Irma expenses of $410,000, and pre-tax losses on the sale of premises of $956,000. During the nine months ended September 30, 2016, the Company incurred pre-tax merger and conversion charges of $6.4 million and pre-tax losses on the sale of premises of $562,000. Excluding these merger and conversion charges, compliance resolution expenses, Hurricane Irma expenses, and losses on the sale of premises, the Company’s net income would have been $68.7 million, or $1.86 per diluted share, and $58.4 million, or $1.69 per diluted share, for the first nine months of 2017 and 2016, respectively.

~~Below is a reconciliation of adjusted operating net income to net income, as discussed above.~~

~~Interest Income~~

Interest income, on a tax-equivalent basis, for the nine months ended September 30, 2017 was $219.7 million, an increase of $41.0 million, or 22.9%, as compared with $178.7 million for the same period in 2016. Average earning assets for the nine-month period increased $1.12 billion, or 20.4%, to $6.61 billion as of September 30, 2017, compared with $5.49 billion as of September 30, 2016. The increase in average earning assets is due to organic growth in the loan portfolio coupled with acquisition activity during the first quarter of 2016. Yield on average earning assets increased to 4.44% for the nine months ended September 30, 2017, compared with 4.35% in the first nine months of 2016. The increase in the yield on average earning assets was primarily attributable to the growth in legacy loans.

~~Interest Expense~~

Total interest expense for the nine months ended September 30, 2017 amounted to $24.2 million, reflecting a $10.2 million increase from the $14.0 million expense recorded in the same period of 2016. During the nine-month period ended September 30, 2017, the Company’s funding costs increased to 0.51% from 0.35% reported in 2016. Deposit costs increased to 0.32% during the nine-month period ended September 30, 2017, compared with 0.23% during the same period in 2016. Total non-deposit funding costs decreased to 1.99% during the nine-month period ended September 30, 2017, compared with 2.36% during the first nine months of 2016. The decrease in non-deposit funding costs was driven primarily by an increased utilization of lower rate short-term FHLB advances.

~~Net Interest Income~~

The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the nine months ended September 30, 2017 and 2016. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35% federal tax rate.

Nine Months Ended
September 30,
2017 2016
(dollars in thousands)
Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate Paid

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate Paid
Assets

Interest-earning assets:

Federal funds sold and interest-bearing deposits in banks $ 126,014
$ 1,070
1.14% $ 134,060
$ 659
0.66%
Investment securities 864,684
16,917
2.62% 840,688
15,227
2.42%
Loans held for sale 105,296
2,842
3.61% 96,340
2,402
3.33%
Loans 4,018,597
143,806
4.78% 2,642,498
93,887
4.75%
Purchased loans 982,033
43,986
5.99% 1,147,821
53,348
6.21%
Purchased loan pools 513,750
11,109
2.89% 629,118
13,220
2.81%
Total interest-earning assets 6,610,374
219,730
4.44% 5,490,525
178,743
4.35%
Noninterest-earning assets 569,956

539,656

Total assets $ 7,180,330

$ 6,030,181

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Savings and interest-bearing demand deposits $ 3,048,284
$ 7,614
0.33% $ 2,740,368
$ 4,922
0.24%
Time deposits 994,770
5,865
0.79% 872,209
3,808
0.58%
Federal funds purchased and securities sold under agreements to repurchase 29,612
44
0.20% 44,433
77
0.23%
FHLB advances 539,496
3,994
0.99% 126,855
571
0.60%
Other borrowings 66,420
2,900
5.84% 47,809
1,333
3.72%
Subordinated deferrable interest debentures 84,712
3,764
5.94% 79,912
3,306
5.53%
Total interest-bearing liabilities 4,763,294
24,181
0.68% 3,911,586
14,017
0.48%
Demand deposits 1,624,837

1,490,152

Other liabilities 36,046

28,626

Shareholders’ equity 756,153

599,817

Total liabilities and shareholders’ equity $ 7,180,330

$ 6,030,181

Interest rate spread

3.76%

3.87%
Net interest income
$ 195,549

$ 164,726

Net interest margin

3.96%

4.01%

For the year-to-date period ending September 30, 2017, the Company reported $195.5 million of net interest income on a tax-equivalent basis, an increase of $30.8 million, or 18.7%, compared with $164.7 million of net interest income for the same period in 2016. The average balance of earning assets increased $1.12 billion, or 20.4%, from $5.49 billion during the first nine months of 2016 to $6.61 billion during the first nine months of 2017. The increase in average earning assets is due to organic growth in the loan portfolio coupled with acquisition activity during the first quarter of 2016. The Company’s net interest margin decreased to 3.96% in the nine-month period ending September 30, 2017, compared with 4.01% in the same period in 2016. The decrease in the net interest margin was primarily attributable to the increase in yield on interest-bearing liabilities.

~~Provision for Loan Losses~~

The provision for loan losses increased to $5.8 million for the nine months ended September 30, 2017, compared with $2.4 million in the same period in 2016. For the nine-month period ended September 30, 2016, the Company had legacy net charge-offs totaling $3.9 million, compared with $1.9 million for the same period in 2016. Annualized legacy net charge-offs as a percentage of average legacy loans increased to 0.13% during the first nine months of 2017, compared with 0.10% during the first nine months of 2016. For the nine-month period ended September 30, 2017, the Company had total loan net charge-offs totaling $3.8 million, compared with $480,000 for the same period in 2016. Annualized total loan net charge-offs as a percentage of average total loans increased to 0.09% during the first nine months of 2017, compared with 0.01% during the first nine months of 2016. Non-performing assets declined to $57.6 million at September 30, 2017, compared with $66.6 million at September 30, 2016.

~~Noninterest Income~~

Non-interest income for the first nine months of 2017 decreased $635,000, or 0.8%, to $80.9 million, compared with $81.5 million in the same period in 2016. Service charges on deposit accounts remained stable at $31.7 million for both the first nine months of 2017 and the first nine months of 2016. However, service charge revenues on both commercial and consumer accounts increased, while overdraft fee income declined. Income from mortgage banking activity increased slightly from $38.4 million in the first nine months of 2016 to $38.5 million in the first nine months of 2017, due to higher levels of production. Other service charges, commissions and fees decreased $732,000, or 25.5%, to $2.1 million in the first nine months of 2017, compared with $2.9 million in the first nine months of 2016. The decrease in other service charges, commissions and fees was primarily attributable to lower ATM fees and lower brokerage income. Other non-interest income increased slightly from $8.4 million during the first nine months of 2016 to $8.5 million during the first nine months of 2017.

~~Noninterest Expense~~

Total operating expenses for the first nine months of 2017 increased $11.4 million, or 7.1%, to $172.6 million, compared with $161.2 million in the same period in 2016. Salaries and benefits for the first nine months of 2017 increased $7.8 million as compared with the first nine months of 2016 due to staff additions for the premium finance division, increased staffing related to the Company’s ongoing BSA compliance efforts, staff additions for the equipment finance line of business, and the acquisition of Jacksonville Bancorp, Inc. (“JAXB”) during the first quarter of 2016. Occupancy and equipment expenses remained stable at $18.1 million for both the first nine months of 2017 and the first nine months of 2016. Data processing and telecommunications expenses increased from $18.3 million in the first nine months of 2016 to $20.7 million in the first nine months of 2017. Credit resolution-related expenses, including problem loan and OREO expense and OREO write-downs and losses, decreased to $2.9 million for the first nine months of 2017, compared with $5.1 million in the first nine months of 2016. Advertising and marketing expenses increased from $2.9 million for the first nine months of 2016 to $3.6 million for the first nine months of 2017. Amortization of intangible assets for the first nine months of 2017 decreased $342,000 as compared with the first nine months of 2016. Merger and conversion charges were $494,000 and $6.4 million for the nine months ended September 30, 2017 and 2016, respectively, reflecting the first quarter 2016 acquisition of JAXB. Other noninterest expense increased $9.0 million for the first nine months of 2017 as compared with the first nine months of 2016 due primarily to consulting fees related to BSA compliance resolution, management and licensing fees associated with the premium finance division, and loan servicing fees associated with consumer installment home improvement loans serviced by an unrelated third party.

~~Income Taxes~~

In the first nine months of 2017, the Company recorded income tax expense of $28.7 million, compared with $26.2 million in the same period of 2016. This increase in income tax expense is directly correlated to the increase in pre-tax income for the periods. The Company’s effective tax rate for the nine months ended September 30, 2017 and 2016 was 30.8% and 32.7%, respectively.

~~Financial Condition as of September 30, 2017~~NOTE 15 – SEGMENT REPORTING

~~Securities~~

Debt securities with readily determinable fair values 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. Equity securities, including restricted equity securities, are classified as other investment securities and are recorded at the lower of cost or market value.

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.

In determining whether other-than-temporary impairment losses exist, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) 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.

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 and the Company does not intend to sell these investment securities at an unrealized loss position at September 30, 2017, 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 September 30, 2017, these investments are not considered impaired on an other-than temporary basis.

The following table illustrates certain information regarding the Company’s investment portfolio with respect to yields, sensitivities and expected cash flows over the next twelve months assuming constant prepayments and maturities:

(dollars in thousands) Amortized Cost
Fair
Value

Book
Yield

Modified
Duration

Estimated
Cash
Flows
12 Months
September 30, 2017
U.S. government sponsored agencies $ 1,000
$ 1,004
3.20% 0.19 $ 1,000
State, county and municipal securities 140,190
143,387
4.06% 4.82 14,048
Corporate debt securities 46,704
47,249
4.00% 5.34 3,000
Mortgage-backed securities 626,927
627,953
2.34% 3.91 102,846
Total debt securities $ 814,821
$ 819,593
2.73% 4.14 $ 120,894

December 31, 2016

U.S. government sponsored agencies $ 999
$ 1,020
3.20% 0.92 $ 1,000
State, county and municipal securities 149,899
152,035
3.73% 5.34 7,884
Corporate debt securities 32,375
32,172
2.94% 4.87 2,000
Mortgage-backed securities 641,362
637,508
2.38% 4.33 94,081
Total debt securities $ 824,635
$ 822,735
2.65% 4.53 $ 104,965

~~Loans and Allowance for Loan Losses~~

At September 30, 2017, gross loans outstanding (including purchased loans, purchased loan pools, and loans held for sale) were $6.09 billion, an increase from $5.37 billion reported at December 31, 2016. Loans held for sale increased from $105.9 million at December 31, 2016 to $137.4 million at September 30, 2017. Legacy loans (excluding purchased loans and purchased loan pools) increased $947.9 million, from $3.63 billion at December 31, 2016 to $4.57 billion at September 30, 2017, driven primarily by increased growth in commercial, financial and agricultural, construction and development, residential real estate, and commercial real estate loan categories. Purchased loans decreased $152.1 million, from $1.07 billion at December 31, 2016 to $917.1 million at September 30, 2017, due to paydowns of $155.0 million, transfers to other real estate owned of $4.3 million and charge-offs of $1.8 million, partially offset by accretion of $9.0 million. Purchased loan pools decreased $103.1 million, from $568.3 million at December 31, 2016 to $465.2 million at September 30, 2017 due to payments on the portfolio of $95.5 million and premium amortization of $2.9 million during the first nine months of 2017.

The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loan losses in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses onhas the following ~~loan categories: (1)~~five reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial ~~financial~~loans, consumer loans and ~~agricultural; (2) construction~~deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and ~~development related real estate; (3)~~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. 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 and farmland real estate; (4) residential real estate; and (5) consumer. The Company’s management has strategically located its branches in select markets in South and Southeast Georgia, North Florida, Southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.insurance premium finance loans.

The ~~Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio~~Banking, Retail Mortgage, Warehouse Lending, SBA and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past-due loan analysis. This analysis process servesPremium Finance Divisions are managed as ~~a tool to assist management in assessing the overall quality~~separate business units because of the ~~loan portfolio~~different products and ~~the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth~~services they provide. The Company evaluates performance and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged-off.

~~The 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~~allocates resources 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 otherprofit or loss from operations. There are no material intersegment sales or transfers.

factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the market president or lending staff; changes in the volume and severity of past-due and classified loans; changes in the quality of the Company’s corporate loan review system; and other factors management deems appropriate.

At the end of the third quarter of 2017, the allowance for loan losses allocated to legacy loans totaled $21.2 million, or 0.46% of legacy loans, compared with $20.5 million, or 0.56% of legacy loans, at December 31, 2016. The decrease in the allowance for loan losses as a percentage of legacy loans reflects improvement in the credit risk of our portfolio, both from the mix of loan and collateral types and the credit quality of the loan portfolio. Our legacy nonaccrual loans decreased from $18.1 million at December 31, 2016 to $15.3 million at September 30, 2017. For the first nine months of 2017, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.13%, compared with 0.10% for the first nine months of 2016. The total provision for loan losses for the first nine months of 2017 increased to $5.8 million, compared with $2.4 million for the first nine months of 2016. Our ratio of total nonperforming assets to total assets decreased from 0.94% at December 31, 2016 to 0.75% at September 30, 2017.

The balance of the allowance for loan losses allocated to loans collectively evaluated for impairment increased 11.8%, or $2.1 million, during the first nine months of 2017, while the balance of loans collectively evaluated for impairment increased 14.3%, or $723.9 million, during the same period. A significant portion of the loan growth was concentrated in lower risk categories such as commercial premium finance loans and municipal loans which did not require as large of an allowance for loan losses as other categories of loans. In addition to the change of type of loan growth, we also experienced a decline in our historical loss rates across nearly all loan portfolios. We consider a four year loss rate on all loan categories and our charge off ratios have been 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 weak 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 declined 1 basis point from 0.35% at December 31, 2016 to 0.34% at September 30, 2017. The largest decrease was in the legacy construction and development real estate category, which decreased from 0.75% at December 31, 2016 to 0.58% at September 30, 2017. The reason for this decline is the positive trend in net losses within that category.

The balance of the allowance for loan losses allocated to loans individually evaluated for impairment decreased slightly by 0.2%, or $12,000, during the first nine months of 2017, while the balance of loans individually evaluated for impairment decreased 7.4%, or $4.5 million, during the same period. Although the total allowance for loan losses allocated to loans individually evaluated for impairment changed by only $12,000 from December 31, 2016 to September 30, 2017, the amount allocated for the legacy residential real estate category declined by $1.8 million, while the amount allocated for purchased loans increased by $1.6 million.

The following tables present ~~an analysis of the allowance for loan losses as of and for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended
September 30,
(dollars in thousands) 2017 2016
Balance of allowance for loan losses at beginning of period $ 23,920
$ 21,062
Provision charged to operating expense 5,828
2,381
Charge-offs:

Commercial, financial and agricultural 1,896
1,273
Real estate – construction and development 95
324
Real estate – commercial and farmland 413
708
Real estate – residential 2,031
883
Consumer installment and Other 922
192
Purchased loans 1,472
1,261
Purchased loan pools —
—
Total charge-offs 6,829
4,641
Recoveries:

Commercial, financial and agricultural 699
279
Real estate – construction and development 244
474
Real estate – commercial and farmland 156
191
Real estate – residential 190
368
Consumer installment and Other 78
119
Purchased loans 1,680
2,730
Purchased loan pools —
—
Total recoveries 3,047
4,161
Net charge-offs 3,782
480
Balance of allowance for loan losses at end of period $ 25,966
$ 22,963

As of and for the
Nine Months Ended
September 30, 2017
(dollars in thousands)
Legacy
Loans

Purchased
Loans

Purchased
Loan
Pools
Total
Allowance for loan losses at end of period $ 21,227
$ 3,262
$ 1,477
$ 25,966
Net charge-offs (recoveries) for the period 3,990
(208 ) —
3,782
Loan balances:

End of period 4,574,678
917,126
465,218
5,957,022
Average for the period 4,018,597
982,033
513,750
5,514,380
Net charge-offs as a percentage of average loans 0.13 % (0.03 )% 0.00 % 0.09 %
Allowance for loan losses as a percentage of end of period loans 0.46 % 0.36 % 0.32 % 0.44 %

As of and for the
Nine Months Ended
September 30, 2016
(dollars in thousands)
Legacy
Loans

Purchased
Loans

Purchased
Loan
Pools
Total
Allowance for loan losses at end of period $ 19,433
$ 1,522
$ 2,008
$ 22,963
Net charge-offs (recoveries) for the period 1,949
(1,469 ) —
480
Loan balances:

End of period 3,091,039
1,129,381
624,886
4,845,306
Average for the period 2,642,498
1,147,821
629,118
4,419,437
Net charge-offs as a percentage of average loans 0.10 % (0.17 )% 0.00 % 0.01 %
Allowance for loan losses as a percentage of end of period loans 0.63 % 0.13 % 0.32 % 0.47 %

~~Purchased Assets~~

Loans that were acquired in transactions, including those that are covered by the loss-sharing agreements with the FDIC (“purchased loans”), totaled $917.1 million and $1.07 billion at September 30, 2017 and December 31, 2016, respectively. OREO that was acquired in transactions, including OREO that is covered by the loss-sharing agreements with the FDIC, totaled $9.9 million and $12.5 million, at September 30, 2017 and December 31, 2016, respectively.

The Bank initially recorded purchased loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company believes its estimation of credit risk and its adjustments to the carrying balances of the acquired loans are adequate. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. 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 is recognized as interest income prospectively. During the nine months ended September 30, 2017, the Company recorded for purchased loans a provision for loan loss of $745,000. During the nine months ended September 30, 2016, the Company recorded for purchased loans a reduction in provision for loan loss of $654,000 due to recoveries exceeding charge-offs for purchased loans.

~~Purchased loans are shown below according to loan type as of the end of the periods shown:~~

(dollars in thousands) September 30,
2017 December 31, 2016
Commercial, financial and agricultural $ 80,895
$ 96,537
Real estate – construction and development 68,583
81,368
Real estate – commercial and farmland 500,169
576,355
Real estate – residential 264,312
310,277
Consumer installment 3,167
4,654
$ 917,126
$ 1,069,191

~~Purchased Loan Pools~~

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2017, purchased loan pools totaled $465.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $459.1 million and $6.1 million of remaining purchase premium paid at acquisition. As of December 31, 2016, purchased loan pools totaled $568.3 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $559.4 million and $8.9 million of remaining purchase premium paid at acquisition. The Company has allocated approximately $1.5 million and $1.8 million of the allowance for loan losses to the purchased loan pools at September 30, 2017 and December 31, 2016, respectively.

~~Non-Performing Assets~~

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate owned. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

Nonaccrual loans, excluding purchased loans, totaled $15.3 million at September 30, 2017, a decrease of 15.4% from $18.1 million reported at December 31, 2016. Nonaccrual purchased loans totaled $19.0 million at September 30, 2017, a decrease of 17.1%, compared with $23.0 million at December 31, 2016. At September 30, 2017, OREO, excluding purchased OREO, totaled $9.4 million, compared with $10.9 million at December 31, 2016. Purchased OREO totaled $9.9 million at September 30, 2017, compared with $12.5 million at December 31, 2016. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. At the end of the third quarter of 2017, total non-performing assets decreased to 0.75% of total assets, compared with 0.94% at December 31, 2016.

~~Non-performing assets at September 30, 2017 and December 31, 2016 were as follows:~~

(dollars in thousands) September 30,
2017 December 31, 2016
Nonaccrual loans, excluding purchased loans $ 15,325
$ 18,114
Nonaccrual purchased loans 19,049
22,966
Nonaccrual purchased loan pools 915
—
Accruing loans delinquent 90 days or more, excluding purchased loans 2,941
—
Accruing purchased loans delinquent 90 days or more —
—
Foreclosed assets, excluding purchased assets 9,391
10,874
Purchased other real estate owned 9,946
12,540
Total non-performing assets $ 57,567
$ 64,494

~~Troubled Debt Restructurings~~

~~The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing~~selected financial ~~difficulties and (ii) the Company has granted a concession.~~

As of September 30, 2017 and December 31, 2016, the Company had a balance of $14.2 million and $18.2 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 nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 4 $ 44
13 $ 129
Real estate – construction and development 7 424
2 34
Real estate – commercial and farmland 16 4,769
5 210
Real estate – residential 78 7,209
16 1,212
Consumer installment 4 6
36 130
Total 109 $ 12,452
72 $ 1,715

December 31, 2016 Accruing Loans Non-Accruing Loans
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 4 $ 47
15 $ 114
Real estate – construction and development 8 686
2 34
Real estate – commercial and farmland 16 4,119
5 2,970
Real estate – residential 82 9,340
15 739
Consumer installment 7 17
32 130
Total 117 $ 14,209
69 $ 3,987

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 September 30, 2017 and December 31, 2016:

September 30, 2017
Loans Currently Paying
Under Restructured Terms
Loans that have Defaulted Under Restructured Terms
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 8 $ 56
9 $ 117
Real estate – construction and development 6 399
3 59
Real estate – commercial and farmland 17 4,778
4 201
Real estate – residential 80 7,425
14 996
Consumer installment 25 74
15 62
Total 136 $ 12,732
45 $ 1,435

December 31, 2016 Loans Currently Paying
Under Restructured Terms Loans that have Defaulted Under Restructured Terms
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 12 $ 82
7 $ 79
Real estate – construction and development 8 686
2 34
Real estate – commercial and farmland 16 4,119
5 2,970
Real estate – residential 84 9,248
13 831
Consumer installment 25 76
14 71
Total 145 $ 14,211
41 $ 3,985

The following table presents the amount of troubled debt restructurings, excluding purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Type of Concession #
Balance
(in thousands)
#
Balance
(in thousands)
Forbearance of interest 12 $ 2,622
4 $ 172
Forgiveness of principal 3 1,256
— —
Forbearance of principal 5 75
5 644
Rate reduction only 13 1,580
1 29
Rate reduction, forbearance of interest 33 2,431
20 491
Rate reduction, forbearance of principal 7 1,465
35 249
Rate reduction, forgiveness of interest 36 3,023
3 119
Rate reduction, forgiveness of principal — —
4 11
Total 109 $ 12,452
72 $ 1,715

December 31, 2016 Accruing Loans Non-Accruing Loans
Type of Concession #
Balance
(in thousands)
#
Balance
(in thousands)
Forbearance of interest 11 $ 1,685
5 $ 146
Forgiveness of principal 3 1,303
— —
Forbearance of principal 8 2,210
9 315
Rate reduction only 12 1,573
1 29
Rate reduction, forbearance of interest 38 2,618
21 1,647
Rate reduction, forbearance of principal 8 1,734
29 1,506
Rate reduction, forgiveness of interest 37 3,086
3 341
Rate reduction, forgiveness of principal — —
1 3
Total 117 $ 14,209
69 $ 3,987

The following table presents the amount of troubled debt restructurings, excluding purchased loans, by collateral types, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Collateral Type #
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse 3 $ 445
1 $ 80
Raw land 9 723
2 34
Hotel and motel 3 1,411
— —
Office 4 667
— —
Retail, including strip centers 5 2,189
3 85
1-4 family residential 78 7,002
18 1,259
Automobile/equipment/CD 6 13
47 255
Unsecured 1 2
1 2
Total 109 $ 12,452
72 $ 1,715

December 31, 2016 Accruing Loans Non-Accruing Loans
Collateral Type #
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse 5 $ 763
— $ —
Raw land 9 742
2 34
Apartments — —
3 1,505
Hotel and motel 3 1,525
— —
Office 3 477
— —
Retail, including strip centers 4 1,298
— —
1-4 family residential 82 9,340
17 746
Church — —
2 1,465
Automobile/equipment/CD 10 61
44 233
Unsecured 1 3
1 4
Total 117 $ 14,209
69 $ 3,987

As of September 30, 2017 and December 31, 2016, the Company had a balance of $26.0 million and $28.1 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 nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural — $ —
3 $ 18
Real estate – construction and development 3 1,022
6 349
Real estate – commercial and farmland 15 6,308
11 3,834
Real estate – residential 119 12,875
25 1,627
Consumer installment — —
2 6
Total 137 $ 20,205
47 $ 5,834

December 31, 2016 Accruing Loans Non-Accruing Loans
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 1 $ 1
4 $ 91
Real estate – construction and development 6 1,358
3 30
Real estate – commercial and farmland 20 8,460
5 2,402
Real estate – residential 123 13,713
33 2,077
Consumer installment 3 11
1 —
Total 153 $ 23,543
46 $ 4,600

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 September 30, 2017 and December 31, 2016:

September 30, 2017
Loans Currently Paying
Under Restructured Terms
Loans that have Defaulted Under Restructured Terms
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 1 $ 12
2 $ 6
Real estate – construction and development 8 1,365
1 6
Real estate – commercial and farmland 21 8,197
5 1,945
Real estate – residential 127 13,340
17 1,162
Consumer installment 1 3
1 3
Total 158 $ 22,917
26 $ 3,122

December 31, 2016 Loans Currently Paying
Under Restructured Terms Loans that have Defaulted Under Restructured Terms
Loan Class #
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural 3 $ 16
2 $ 76
Real estate – construction and development 8 1,378
1 9
Real estate – commercial and farmland 25 10,862
— —
Real estate – residential 126 13,484
30 2,306
Consumer installment 4 11
— —
Total 166 $ 25,751
33 $ 2,391

The following table presents the amount of troubled debt restructurings included in purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Type of Concession #
Balance
(in thousands)
#
Balance
(in thousands)
Forbearance of interest 4 $ 189
9 $ 1,772
Forgiveness of principal — —
1 63
Forbearance of principal 6 1,934
5 1,588
Forbearance of principal, extended amortization 2 375
1 298
Rate reduction only 72 11,607
16 1,465
Rate reduction, forbearance of interest 19 1,913
10 454
Rate reduction, forbearance of principal 10 2,211
5 194
Rate reduction, forgiveness of interest 24 1,976
— —
Total 137 $ 20,205
47 $ 5,834

December 31, 2016 Accruing Loans Non-Accruing Loans
Type of Concession #
Balance
(in thousands)
#
Balance
(in thousands)
Forbearance of interest 12 $ 3,553
4 $ 207
Forbearance of principal 7 2,003
5 1,528
Forbearance of principal, extended amortization 1 78
1 323
Rate reduction only 78 12,710
13 1,385
Rate reduction, forbearance of interest 20 1,387
19 632
Rate reduction, forbearance of principal 11 1,617
3 231
Rate reduction, forgiveness of interest 24 2,195
1 294
Total 153 $ 23,543
46 $ 4,600

The following table presents the amount of troubled debt restructurings included in purchased loans, by collateral types, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:

September 30, 2017 Accruing Loans Non-Accruing Loans
Collateral Type #
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse 2 $ 369
— $ —
Raw land 3 1,045
7 846
Hotel and motel 1 151
1 497
Office 2 470
2 505
Retail, including strip centers 8 5,074
1 169
1-4 family residential 121 13,096
28 2,356
Church — —
2 1,390
Automobile/equipment/CD — —
6 71
Total 137 $ 20,205
47 $ 5,834

December 31, 2016 Accruing Loans Non-Accruing Loans
Collateral Type #
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse 4 $ 1,532
— $ —
Raw land 7 1,919
4 86
Hotel and motel 1 154
1 558
Office 3 967
— —
Retail, including strip centers 7 4,489
1 197
1-4 family residential 127 14,470
33 2,318
Church — —
1 1,298
Automobile/equipment/CD 4 12
6 143
Total 153 $ 23,543
46 $ 4,600

~~Commercial Lending Practices~~

The federal bank regulatory agencies previously issued interagency guidance on commercial real estate lending and prudent risk management practices. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing or permanent financing of the property. Loans for owner occupied CRE are generally excluded from the CRE guidance.

~~The CRE guidance is applicable when either:~~


~~(1)~~	~~total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or~~


~~(2)~~	total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital.

Banks that are subject to the CRE guidance criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.

~~As of September 30, 2017, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:~~


~~(1)~~	within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;


~~(2)~~	~~on average, CRE loan sizes are generally larger than non-CRE loan types; and~~


~~(3)~~	~~certain construction and development loans may be less predictable and more difficult to evaluate and monitor.~~

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of September 30, 2017 and December 31, 2016. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased loans:

September 30,
2017 December 31,
2016
(dollars in thousands) Balance
% of Total
Loans
Balance
% of Total
Loans
Construction and development loans $ 618,772
10% $ 444,412
8%
Multi-family loans 160,577
3% 130,723
3%
Nonfarm non-residential loans (excluding owner occupied) 1,012,661
17% 985,496
19%
Total CRE Loans (excluding owner occupied)
1,792,010
30% 1,560,631
30%
All other loan types 4,165,012
70% 3,703,695
70%
Total Loans $ 5,957,022
100% $ 5,264,326
100%

The following table outlines the percentage of total CRE loans, net of owner occupied loans, to the Bank’s total risk-based capital, and the Company’s internal concentration limits as of September 30, 2017 and December 31, 2016:

Internal
Limit
Actual
September 30,
2017 December 31,
2016
Construction and development 100% 76% 72%
Commercial real estate 300% 220% 253%

~~Short-Term Investments~~

The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At September 30, 2017, the Company’s short-term investments were $112.8 million, compared with $71.2 million at December 31, 2016. At September 30, 2017, the Company did not have any federal funds sold and all $112.8 million was in interest-bearing deposit balances at correspondent banks and the Federal Reserve Bank of Atlanta.

~~Derivative Instruments and Hedging Activities~~

The Company has a cash flow hedge that matures September 15, 2020 with a notional amount of $37.1 million at September 30, 2017 and December 31, 2016 for the purpose of converting the variable rate on certain junior subordinated debentures to a fixed rate of 4.11%. The fair value of this instrument was a liability of approximately $723,000 and $978,000 at September 30, 2017 and December 31, 2016, respectively.

The Company has fair value hedges with a combined notional amount of $22.7 million at September 30, 2017 for the purpose of hedging the change in fair value of certain fixed rate loans. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $204,000 and a liability of approximately $96,000 at September 30, 2017. At December 31, 2016, the Company had fair value hedges with a combined notional amount of $20.2 million. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $229,000 and a liability of approximately $96,000 at December 31, 2016.

The Company also has forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of approximately $3.8 million and $4.3 million at September 30, 2017 and December 31, 2016, respectively, and a liability of approximately $237,000 and $0 at September 30, 2017 and December 31, 2016, respectively.

No material hedge ineffectiveness from cash flow or fair value hedges was recognized in the statement of operations. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

~~Capital~~

On January 18, 2017, the Company issued 128,572 unregistered shares of its common stock to William J. Villari in exchange for 4.99% of the outstanding shares of common stock 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 was valued at $45.45 per share, resulting in an increase in shareholders’ equity of $5.8 million.

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board (the “FRB”) and the GDBF, and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.

The FRB, the FDIC and the GDBF have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure.

In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the "Basel III Capital Rules"). The Basel III Capital Rules defined a new capital measure called "Common Equity Tier 1" ("CET1"), established that Tier 1 capital consist of Common Equity Tier 1 and "Additional Tier 1 Capital" instruments meeting specified requirements, defined Common Equity Tier 1, established a capital conservation buffer and expanded the scope of the adjustments as compared with existing regulations. The capital conservation buffer is being increased by 0.625% per year until reaching 2.50% by 2019. The capital conservation buffer is being phased in from 0.0% for 2015 to, 0.625% for 2016, 1.25% for 2017, 1.875% for 2018, and 2.50% for 2019. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.

~~The regulatory capital standards are defined by the following key measurements:~~

a) The “Tier 1 Leverage Ratio” is defined as Tier 1 capital to average assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a Tier 1 leverage ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a Tier 1 leverage ratio greater than or equal to 5.00%.

b) The “CET1 Ratio” is defined as Common equity tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a CET1 ratio greater than or equal to 4.50% (5.75% including the 1.25% capital conservation buffer for 2017; 5.125% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a CET1 ratio greater than or equal to 6.50%.

c) The “Tier 1 Capital Ratio” is defined as Tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a Tier 1 capital ratio greater than or equal to 6.00% (7.25% including the 1.25% capital conservation buffer for 2017; 6.625% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a Tier 1 capital ratio greater than or equal to 8.00%.

d) The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00% (9.25% including the 1.25% capital conservation buffer for 2017; 8.625% including the 0.625% capital conservation buffer for 2016). For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.

As of September 30, 2017, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of for the Company and the Bank at September 30, 2017 and December 31, 2016.

September 30,
2017 December 31, 2016
Tier 1 Leverage Ratio (tier 1 capital to average assets)

Consolidated 9.94% 8.68%
Ameris Bank 10.83% 9.27%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)

Consolidated 10.35% 8.32%
Ameris Bank 12.69% 10.35%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)

Consolidated 11.65% 9.69%
Ameris Bank 12.69% 10.35%
Total Capital Ratio (total capital to risk weighted assets)

Consolidated 13.25% 10.11%
Ameris Bank 13.10% 10.77%

~~Interest Rate Sensitivity and Liquidity~~

The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the Asset and Liability Committee (the “ALCO Committee”). The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.

~~The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions~~information with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s ~~balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.~~

~~The normal course of~~reportable business ~~activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework~~segments for the ~~Company. The principal objectives of asset~~three months ended March 31, 2019 and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.2018:



	Three Months Ended March 31, 2019
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	97,874	$	12,512	$	4,804	$	2,174	$	7,565	$	124,929
Interest expense	12,835		6,759		2,114		1,088		2,738		25,534
Net interest income	85,039		5,753		2,690		1,086		4,827		99,395
Provision for loan losses	2,058		136		—		231		983		3,408
Noninterest income	14,370		14,290		379		1,730		2		30,771
Noninterest expense
Salaries and employee benefits	27,932		8,207		161		765		1,305		38,370
Equipment and occupancy expenses	7,281		766		1		59		97		8,204
Data processing and telecommunications expenses	7,592		330		30		2		437		8,391
Other expenses	16,956		2,114		68		349		973		20,460
Total noninterest expense	59,761		11,417		260		1,175		2,812		75,425
Income before income tax expense	37,590		8,490		2,809		1,410		1,034		51,333
Income tax expense	8,775		1,613		590		296		154		11,428
Net income	$	28,815	$	6,877	$	2,219	$	1,114	$	880	$	39,905

Total assets	$	9,457,529	$	1,184,097	$	296,357	$	142,769	$	575,523	$	11,656,275
Goodwill	436,810		—		—		—		64,498		501,308
Other intangible assets, net	35,455		—		—		—		20,102		55,557



	Three Months Ended March 31, 2018
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	60,896	$	6,822	$	2,752	$	1,431	$	7,611	$	79,512
Interest expense	5,537		1,825		897		507		1,945		10,711
Net interest income	55,359		4,997		1,855		924		5,666		68,801
Provision for loan losses	888		217		—		537		159		1,801
Noninterest income	13,099		11,585		397		1,370		13		26,464
Noninterest expense
Salaries and employee benefits	22,068		7,742		138		740		1,401		32,089
Equipment and occupancy expenses	5,477		593		—		58		70		6,198
Data processing and telecommunications expenses	6,304		389		33		9		400		7,135
Other expenses	11,080		1,731		52		236		577		13,676
Total noninterest expense	44,929		10,455		223		1,043		2,448		59,098
Income before income tax expense	22,641		5,910		2,029		714		3,072		34,366
Income tax expense	5,242		1,244		426		150		644		7,706
Net income	$	17,399	$	4,666	$	1,603	$	564	$	2,428	$	26,660

Total assets	$	6,464,130	$	613,706	$	247,257	$	109,011	$	588,724	$	8,022,828
Goodwill	125,532		—		—		—		82,981		208,513
Other intangible assets, net	12,562		—		—		—		—		12,562

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to increase/decrease no more than 20% given a change in selected interest rates of 200 basis points over any 24-month period.

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term assets at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 30% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At September 30, 2017 and December 31, 2016, the net carrying value of the Company’s other borrowings was $808.6 million and $492.3 million, respectively. 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. These subordinated notes are included in other borrowings at September 30, 2017 at a net carrying value of $73.8 million. See Note 8 for additional details on the subordinated notes.

~~The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:~~

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Investment securities available for sale to total deposits 13.90% 14.13% 14.72% 14.76% 15.80%
Loans (net of unearned income) to total deposits 101.04% 97.88% 94.31% 94.42% 91.32%
Interest-earning assets to total assets 92.48% 92.14% 91.98% 91.32% 91.25%
Interest-bearing deposits to total deposits 70.86% 71.12% 70.67% 71.78% 70.54%

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at September 30, 2017 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: general competitive, economic, political and market conditions and fluctuations, including movements in interest rates; competitive pressures on product pricing and services; legislative and regulatory initiatives; additional competition in our markets; changes in state and federal banking laws and regulations to which we are subject; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by us; the successful integration of acquired businesses on a timely basis; the timely realization of expected cost savings and any revenue synergies from acquisition transactions; weather, natural disasters and other catastrophic events; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.

Overview

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of March 31, 2019, as compared with December 31, 2018, and operating results for the three-month periods ended March 31, 2019 and 2018. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

This discussion contains certain performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management of the Company uses these non-GAAP measures in its analysis of the Company’s performance. These measures are useful when evaluating the underlying performance and efficiency of the Company’s operations and balance sheet. The Company’s management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company’s management believes that investors may use these non-GAAP financial measures to evaluate the Company’s financial performance without the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Non-GAAP measures include tangible common equity, tangible book value per common share, adjusted net income, and adjusted net income per diluted share. The Company calculates the regulatory capital ratios using current regulatory report instructions. The Company’s management uses these measures to assess the quality of capital and believes that investors may find them useful in their evaluation of the Company. These capital measures may or may not be necessarily comparable to similar capital measures that may be presented by other companies.

The following table sets forth unaudited selected financial data for the most recent five quarters. This data should be read in conjunction with the unaudited consolidated financial statements and the notes thereto and the information contained in this Item 2.




(in thousands, except share and per share data)	First Quarter 2019		Fourth Quarter 2018		Third Quarter 2018		Second Quarter 2018		First Quarter 2018
Results of Operations:
Net interest income	$	99,395	$	99,554	$	99,038	$	75,999	$	68,801
Net interest income (tax equivalent)	100,453		100,633		100,117		76,943		69,787
Provision for loan losses	3,408		3,661		2,095		9,110		1,801
Noninterest income	30,771		30,470		30,171		31,307		26,464
Noninterest expense	75,425		75,810		72,353		86,386		59,098
Income tax expense	11,428		7,017		13,317		2,423		7,706
Net income available to common shareholders	39,905		43,536		41,444		9,387		26,660
Selected Average Balances:
Investment securities	$	1,225,564	$	1,187,437	$	1,185,225	$	908,782	$	860,419
Loans held for sale	101,521		129,664		151,396		141,875		138,129
Loans	5,867,037		5,819,684		5,703,921		5,198,301		4,902,082
Purchased loans	2,359,280		2,402,610		2,499,393		1,107,184		842,509
Purchased loan pools	257,661		268,568		287,859		310,594		325,113
Earning assets	10,319,954		10,220,747		10,138,029		7,818,525		7,215,742
Assets	11,423,677		11,307,980		11,204,504		8,529,035		7,823,451
Deposits	9,577,574		9,452,944		8,962,170		6,607,518		6,383,513
Shareholders’ equity	1,478,462		1,428,341		1,395,479		974,494		849,346
Period-End Balances:
Investment securities	$	1,249,592	$	1,206,878	$	1,198,499	$	1,198,472	$	880,812
Loans held for sale	112,070		111,298		130,179		137,249		111,135
Loans	5,756,358		5,660,457		5,543,306		5,380,515		5,051,986
Purchased loans	2,472,271		2,588,832		2,711,460		2,812,510		818,587
Purchased loan pools	253,710		262,625		274,752		297,509		319,598
Earning assets	10,563,571		10,348,393		10,340,558		10,110,983		7,393,048
Total assets	11,656,275		11,443,515		11,428,994		11,190,697		8,022,828
Deposits	9,800,875		9,649,313		9,181,363		8,761,593		6,446,165
Shareholders’ equity	1,495,584		1,456,347		1,404,977		1,371,896		868,944
Per Common Share Data:
Earnings per share - basic	$	0.84	$	0.92	$	0.87	$	0.24	$	0.70
Earnings per share - diluted	$	0.84	$	0.91	$	0.87	$	0.24	$	0.70
Book value per common share	$	31.43	$	30.66	$	29.58	$	28.87	$	22.67
Tangible book value per common share	$	19.73	$	18.83	$	17.78	$	17.12	$	16.90
End of period shares outstanding	47,585,309		47,499,941		47,496,966		47,518,662		38,327,081




(in thousands, except share and per share data)	First Quarter 2019			Fourth Quarter 2018			Third Quarter 2018			Second Quarter 2018			First Quarter 2018
Weighted Average Shares Outstanding:
Basic	47,366,296			47,501,150			47,514,653			39,432,021			37,966,781
Diluted	47,456,314			47,593,252			47,685,334			39,709,503			38,250,122
Market Price:
High intraday price	$	42.01		$	47.25		$	54.35		$	58.10		$	59.05
Low intraday price	$	31.27		$	29.97		$	45.15		$	50.20		$	47.90
Closing price for quarter	$	34.35		$	31.67		$	45.70		$	53.35		$	52.90
Average daily trading volume	387,800			375,773			382,622			253,413			235,964
Cash dividends declared per share	$	0.10		$	0.10		$	0.10		$	0.10		$	0.10
Closing price to book value	1.09			1.03			1.54			1.85			2.33
Performance Ratios:
Return on average assets	1.42		%	1.53		%	1.47		%	0.44		%	1.38		%
Return on average common equity	10.95		%	12.09		%	11.78		%	3.86		%	12.73		%
Average loans to average deposits	89.64		%	91.19		%	96.43		%	102.28		%	97.25		%
Average equity to average assets	12.94		%	12.63		%	12.45		%	11.43		%	10.86		%
Net interest margin (tax equivalent)	3.95		%	3.91		%	3.92		%	3.95		%	3.92		%
Efficiency ratio	57.95		%	58.30		%	56.00		%	80.50		%	62.04		%

Non-GAAP Measures Reconciliation -
Tangible book value per common share:
Total shareholders’ equity	$	1,495,584		$	1,456,347		$	1,404,977		$	1,371,896		$	868,944
Less:
Goodwill	501,308			503,434			505,604			504,764			208,513
Other intangible assets, net	55,557			58,689			54,729			53,561			12,562
Tangible common equity	$	938,719		$	894,224		$	844,644		$	813,571		$	647,869
End of period shares outstanding	47,585,309			47,499,941			47,496,966			47,518,662			38,327,081
Book value per common share	$	31.43		$	30.66		$	29.58		$	28.87		$	22.67
Tangible book value per common share	19.73			18.83			17.78			17.12			16.90

Pending Acquisition

On December 17, 2018, the Company and Fidelity entered into 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. At March 31, 2019, Fidelity Bank operated 70 full-service banking locations, 51 of which were located in Georgia and 19 of which were 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, 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 last trading date before announcement. The merger is subject to customary closing conditions, including the receipt of regulatory approvals. 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.

Acquisitions Completed in 2018

During the six months ended June 30, 2018, the Company completed three acquisitions: USPF, Atlantic, and Hamilton.

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.

Under the acquisition method, income and expenses of the acquiree are recognized prospectively beginning from the date of acquisition.

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. For additional information regarding the USPF acquisition see Note 3.

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 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.

In accounting for the Atlantic acquisition, the Company recorded assets (exclusive of goodwill) of $875.6 million, loans held for investment of $755.7 million, deposits of $585.2 million, and other borrowings of $204.5 million. For additional information regarding the Atlantic acquisition see Note 3.

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.

In accounting for the Hamilton acquisition, the Company recorded assets (exclusive of goodwill) of $1.79 billion, investment securities of $285.8 million, loans held for investment of $1.30 billion, and deposits of $1.59 billion. For additional information regarding the Hamilton acquisition see Note 3.

Costs and Requirements for Exceeding $10 Billion in Total Assets

With the completion of the Hamilton acquisition, the Bank surpassed $10 billion in total assets as of the merger's June 29, 2018 closing date. As a result, the Bank is now subject to additional regulations and oversight that can affect both our revenues and expenses.

Such regulations and oversight include becoming subject to: increased expectations with respect to risk management, internal audit, and information security; enhanced stress testing as a component of liquidity and capital planning; the examination and enforcement authority of the Consumer Financial Protection Bureau with respect to consumer and small business products and services; deposit insurance premium assessments based on an FDIC scorecard which takes into account, among other things, the Bank's CAMELS rating and results of asset-related stress testing and funding-related stress testing; and a cap on interchange transaction fees for debit cards, as required by Federal Reserve regulations, which will significantly reduce Ameris Bank's interchange revenue beginning in 2019 after a phase-in period.

We expect to expend additional resources to comply with these additional regulatory requirements. Further possible increased deposit insurance assessments may result in increased expenses. A decrease in the amount of interchange fees we receive on electronic debit interchange transactions will reduce our revenues. Finally, a failure to meet prudential risk management and capital planning standards or compliance with consumer lending laws could, among other things, limit our ability to engage in expansionary activities or make dividend payments to our shareholders.

Results of Operations for the Three Months Ended March 31, 2019 and 2018

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $39.9 million, or $0.84 per diluted share, for the quarter ended March 31, 2019, compared with $26.7 million, or $0.70 per diluted share, for the same period in 2018. The Company’s return on average assets and average shareholders’ equity were 1.42% and 10.95%, respectively, in the first quarter of 2019, compared with 1.38% and 12.73%, respectively, in the first quarter of 2018. During the first quarter of 2019, the Company incurred pre-tax merger and conversion charges of $2.1 million, pre-tax restructuring charges related to branch consolidations of $245,000, pre-tax losses on the sale of premises of $919,000 and pre-tax reduction in financial impact of hurricanes of $89,000. During the first quarter of 2018, the Company incurred pre-tax merger and conversion charges of $835,000 and pre-tax losses on the sale of premises of $583,000. Excluding these merger and conversion charges, restructuring charges, the financial impact of hurricanes and losses on the sale of premises, the Company’s net income would have been $42.6 million, or $0.90 per diluted share, for the first quarter of 2019 and $27.8 million, or $0.73 per diluted share, for the first quarter of 2018.

Below is a reconciliation of adjusted net income to net income, as discussed above.



	Three Months Ended March 31,
(in thousands, except share and per share data)	2019			2018
Net income available to common shareholders	$	39,905		$	26,660
Adjustment items:
Merger and conversion charges	2,057			835
Restructuring charge	245			—
Financial impact of hurricanes	(89		)	—
Loss on the sale of premises	919			583
Tax effect of adjustment items (Note 1)	(450		)	(298		)
After tax adjustment items	2,682			1,120
Adjusted net income	$	42,587		$	27,780

Weighted average common shares outstanding - diluted	47,456,314			38,250,122
Net income per diluted share	$	0.84		$	0.70
Adjusted net income per diluted share	$	0.90		$	0.73

Note 1: A portion of the first quarter 2019 merger and conversion charges is nondeductible for tax purposes.



	Three Months Ended March 31, 2019
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	97,874	$	12,512	$	4,804	$	2,174	$	7,565	$	124,929
Interest expense	12,835		6,759		2,114		1,088		2,738		25,534
Net interest income	85,039		5,753		2,690		1,086		4,827		99,395
Provision for loan losses	2,058		136		—		231		983		3,408
Noninterest income	14,370		14,290		379		1,730		2		30,771
Noninterest expense
Salaries and employee benefits	27,932		8,207		161		765		1,305		38,370
Equipment and occupancy expenses	7,281		766		1		59		97		8,204
Data processing and telecommunications expenses	7,592		330		30		2		437		8,391
Other expenses	16,956		2,114		68		349		973		20,460
Total noninterest expense	59,761		11,417		260		1,175		2,812		75,425
Income before income tax expense	37,590		8,490		2,809		1,410		1,034		51,333
Income tax expense	8,775		1,613		590		296		154		11,428
Net income	$	28,815	$	6,877	$	2,219	$	1,114	$	880	$	39,905



	Three Months Ended March 31, 2018
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	60,896	$	6,822	$	2,752	$	1,431	$	7,611	$	79,512
Interest expense	5,537		1,825		897		507		1,945		10,711
Net interest income	55,359		4,997		1,855		924		5,666		68,801
Provision for loan losses	888		217		—		537		159		1,801
Noninterest income	13,099		11,585		397		1,370		13		26,464
Noninterest expense
Salaries and employee benefits	22,068		7,742		138		740		1,401		32,089
Equipment and occupancy expenses	5,477		593		—		58		70		6,198
Data processing and telecommunications expenses	6,304		389		33		9		400		7,135
Other expenses	11,080		1,731		52		236		577		13,676
Total noninterest expense	44,929		10,455		223		1,043		2,448		59,098
Income before income tax expense	22,641		5,910		2,029		714		3,072		34,366
Income tax expense	5,242		1,244		426		150		644		7,706
Net income	$	17,399	$	4,666	$	1,603	$	564	$	2,428	$	26,660

Net Interest Income and Margins

The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the three months ended March 31, 2019 and 2018. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.



	Quarter Ended March 31,
	2019					2018
(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid
Assets
Interest-earning assets:
Federal funds sold, interest-bearing deposits in banks, and time deposits in other banks	$	508,891	$	3,329	2.65%	$	147,490	$	716	1.97%
Investment securities	1,225,564		9,240		3.06%	860,419		5,615		2.65%
Loans held for sale	101,521		1,152		4.60%	138,129		1,210		3.55%
Loans	5,867,037		77,322		5.34%	4,902,082		58,771		4.86%
Purchased loans	2,359,280		33,011		5.67%	842,509		11,762		5.66%
Purchased loan pools	257,661		1,933		3.04%	325,113		2,424		3.02%
Total interest-earning assets	10,319,954		125,987		4.95%	7,215,742		80,498		4.52%
Noninterest-earning assets	1,103,723					607,709
Total assets	$	11,423,677				$	7,823,451

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits	$	4,630,092	$	11,233	0.98%	$	3,586,369	$	4,526	0.51%
Time deposits	2,402,439		10,451		1.76%	1,016,406		2,246		0.90%
Federal funds purchased and securities sold under agreements to repurchase	15,879		11		0.28%	20,909		9		0.17%
FHLB advances	6,257		44		2.85%	371,556		1,457		1.59%
Other borrowings	145,473		2,227		6.21%	75,553		1,134		6.09%
Subordinated deferrable interest debentures	89,343		1,568		7.12%	85,701		1,339		6.34%
Total interest-bearing liabilities	7,289,483		25,534		1.42%	5,156,494		10,711		0.84%
Demand deposits	2,545,043					1,780,738
Other liabilities	110,689					36,873
Shareholders’ equity	1,478,462					849,346
Total liabilities and shareholders’ equity	$	11,423,677				$	7,823,451
Interest rate spread					3.53%					3.68%
Net interest income			$	100,453				$	69,787
Net interest margin					3.95%					3.92%

On a tax-equivalent basis, net interest income for the first quarter of 2019 was $100.5 million, an increase of $30.7 million, or 43.9%, compared with $69.8 million reported in the same quarter in 2018. The higher net interest income is a result of growth in average interest earning assets which increased $3.10 billion, or 43.0%, from $7.22 billion in the first quarter of 2018 to $10.32 billion for the first quarter of 2019. This growth in interest earning assets resulted primarily from the Atlantic acquisition and the Hamilton acquisition both occurring in the second quarter of 2018, as well as strong growth in average legacy loans which increased $965.0 million, or 19.7%, to $5.87 billion in the first quarter 2019 from $4.90 billion in the same period of 2018. The Company’s net interest margin during the first quarter of 2019 was 3.95%, up three basis points from 3.92% reported in the first quarter of 2018.

Total interest income, on a tax-equivalent basis, increased to $126.0 million during the first quarter of 2019, compared with $80.5 million in the same quarter of 2018. Yields on earning assets increased to 4.95% during the first quarter of 2019, compared with 4.52% reported in the first quarter of 2018. During the first quarter of 2019, loans comprised 83.2% of average earning assets, compared with 86.0% in the same quarter of 2018. Yields on legacy loans increased to 5.34% in the first quarter of 2019, compared with 4.86% in the same period of 2018. The yield on purchased loans increased slightly from 5.66% in the first quarter of 2018 to 5.67% during the first quarter of 2019. Accretion income for the first quarter of 2019 was $2.9 million, compared with $1.4 million in the first quarter of 2018. Excluding the effect of accretion on purchased loans, the yield on purchased loans was 5.18% for the first quarter of 2019, compared with 4.97% in the same period of 2018. Yields on purchased loan pools increased from

3.02% in the first quarter of 2018 to 3.04% in the same period in 2019. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.

The yield on total interest-bearing liabilities increased from 0.84% in the first quarter of 2018 to 1.42% in the first quarter of 2019. Total funding costs, inclusive of noninterest-bearing demand deposits, increased to 1.05% in the first quarter of 2019, compared with 0.63% during the first quarter of 2018. Deposit costs increased from 0.43% in the first quarter of 2018 to 0.92% in the first quarter of 2019. Non-deposit funding costs increased from 2.89% in the first quarter of 2018 to 6.08% in the first quarter of 2019. The increase in non-deposit funding costs was driven primarily by a shift in mix of interest-bearing liabilities to brokered deposits and other borrowings from short-term FHLB advances. Funding from non-CD deposits averaged 74.9% of total deposits in the first quarter of 2019, compared with 84.1% during the first quarter of 2018. Average balances of interest bearing deposits and their respective costs for the first quarter of 2019 and 2018 are shown below:



	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
(dollars in thousands)	Average Balance		Average Cost	Average Balance		Average Cost
NOW	$	1,553,988	0.55%	$	1,337,718	0.29%
MMDA	2,677,015		1.37%	1,970,571		0.73%
Savings	399,089		0.08%	278,080		0.07%
Retail CDs < $100,000	767,405		1.22%	422,771		0.64%
Retail CDs > $100,000	1,124,733		1.81%	593,635		1.08%
Brokered CDs	510,301		2.48%	—		—%
Interest-bearing deposits	$	7,032,531	1.25%	$	4,602,775	0.60%

Provision for Loan Losses

The Company’s provision for loan losses during the first quarter of 2019 amounted to $3.4 million, compared with $1.8 million in the first quarter of 2018. At March 31, 2019, classified loans still accruing decreased to $78.2 million, compared with $81.9 million at December 31, 2018. Non-performing assets as a percentage of total assets decreased from 0.55% at December 31, 2018 to 0.54% at March 31, 2019. Net charge-offs on legacy loans during the first quarter of 2019 were approximately $3.9 million, or 0.27% of average legacy loans on an annualized basis, compared with approximately $1.7 million, or 0.14%, in the first quarter of 2018. The increase in net charge-offs on legacy loans during the first quarter of 2019 was primarily attributable to an increase in charge-offs on consumer installment loans and a $1.2 million commercial real estate loan which was fully charged off during the quarter which previously was specifically reserved for at December 31, 2018. The Company’s allowance for loan losses allocated to legacy loans at March 31, 2019 was $26.2 million, or 0.45% of legacy loans, compared with $26.2 million, or 0.46% of legacy loans, at December 31, 2018. The Company’s total allowance for loan losses at March 31, 2019 was $28.7 million, or 0.34% of total loans, compared with $28.8 million, or 0.34% of total loans, at December 31, 2018.

Noninterest Income

Total noninterest income for the first quarter of 2019 was $30.8 million, an increase of $4.3 million, or 16.3%, from the $26.5 million reported in the first quarter of 2018. Service charges on deposit accounts in the first quarter of 2019 were $11.6 million, increasing by $1.4 million, or 13.9%, compared with $10.2 million in the first quarter of 2018. This increase in service charges on deposit accounts is due primarily to an increase in the number of deposit accounts resulting from the Atlantic and Hamilton acquisitions in the second quarter of 2018. Income from mortgage-related activities was $13.8 million in the first quarter of 2019 consistent with $11.9 million in the first quarter of 2018. Total production in the first quarter of 2019 amounted to $356.0 million, compared with $356.1 million in the same quarter of 2018, while spread (gain on sale) increased to 3.18% in the current quarter compared with 2.62% in the same quarter of 2018. The retail mortgage open pipeline finished the first quarter of 2019 at $200.9 million, compared with $119.2 million at December 31, 2018 and $153.2 million at the end of the first quarter of 2018. Other service charges, commissions and fees increased $49,000, or 6.8%, to $768,000 during the first quarter of 2019, compared with $719,000 during the first quarter of 2018 due primarily to increased ATM fees. Other noninterest income increased $883,000, or 24.7%, to $4.5 million for the first quarter of 2019, compared with $3.6 million during the first quarter of 2018. The increase in other noninterest income was primarily attributable to increases in loan servicing income, bank owned life insurance income and gain on sale of SBA loans.

Noninterest Expense

Total noninterest expenses for the first quarter of 2019 increased $16.3 million, or 27.6%, to $75.4 million, compared with $59.1 million in the same quarter 2018. Salaries and employee benefits increased $6.3 million, or 19.6%, from $32.1 million in the first quarter of 2018 to $38.4 million in the first quarter of 2019 due primarily to an increase of 309, or 21.2%, full-time equivalent employees from 1,457 at March 31, 2018 to 1,766 at March 31, 2019, resulting from staff added as a result of the Atlantic and Hamilton acquisitions which occurred in the second quarter of 2018. Additionally, $245,000 in salaries and employee benefits expense was recorded during the first quarter of 2019 related to restructuring charges related to branch consolidations. Occupancy and equipment expenses increased $2.0 million, or 32.4%, to $8.2 million for the first quarter of 2019, compared with $6.2 million in the first quarter of 2018 due primarily to an increase of 17 branch locations from 97 at March 31, 2018 to 114 at March 31, 2019, resulting from branch locations added as a result of the Atlantic and Hamilton acquisitions partially offset by branches closed during the first quarter of 2019 in connection with announced branch consolidations. Data processing and telecommunications expense increased $1.3 million, or 17.6%, to $8.4 million in the first quarter of 2019, compared with $7.1 million in the first quarter of 2018, due to an increase in core banking system charges related to an increase in the number of accounts being processed by our core banking system as a result of the Atlantic and Hamilton acquisitions. Credit resolution-related expenses increased $362,000, or 65.9%, from $549,000 in the first quarter of 2018 to $911,000 in the first quarter of 2019. Advertising and marketing expense was $1.7 million in the first quarter of 2019, compared with $1.2 million in the first quarter of 2018. Amortization of intangible assets increased $2.2 million, or 235.3%, from $934,000 in the first quarter of 2018 to $3.1 million in the first quarter of 2019 due to additional amortization of intangible assets recorded as part of the USPF, Atlantic and Hamilton acquisitions. Merger and conversion charges were $2.1 million in the first quarter of 2019, compared with $835,000 in the same quarter of 2018. Other noninterest expenses increased $2.5 million, or 24.6%, from $10.1 million in the first quarter of 2018 to $12.6 million in the first quarter of 2019, due primarily to an increase in volume in certain areas related to our acquisitions of Hamilton and Atlantic and increases in variable expenses tied to production in our lines of business.

Income Taxes

Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the first quarter of 2019, the Company reported income tax expense of $11.4 million, compared with $7.7 million in the same period of 2018. The Company’s effective tax rate for the three months ending March 31, 2019 and 2018 was 22.3% and 22.4%, respectively.

Financial Condition as of March 31, 2019

Securities

Debt securities with readily determinable fair values 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. Restricted equity securities, are classified as other investment securities and are carried at cost and are periodically evaluated for impairment based on ultimate recovery of par value or cost basis.

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 and the Company does not intend to sell these investment securities at an unrealized loss position at March 31, 2019, 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 March 31, 2019, these investments are not considered impaired on an other-than temporary basis.



(dollars in thousands)	Amortized Cost		Fair Value		Book Yield	Modified Duration	Estimated Cash Flows 12 Months
March 31, 2019
State, county and municipal securities	$	106,468	$	107,740	3.90%	3.60	$	18,639
Corporate debt securities	56,901		$	57,152	5.15%	5.34	500
Mortgage-backed securities	1,072,783		$	1,069,543	2.84%	3.67	176,008
Total debt securities	$	1,236,152	$	1,234,435	3.04%	3.74	$	195,147

December 31, 2018
State, county and municipal securities	$	149,670	$	150,733	3.80%	3.92	$	21,576
Corporate debt securities	67,123		67,314		4.75%	4.94	500
Mortgage-backed securities	982,183		974,376		2.84%	3.96	144,876
Total debt securities	$	1,198,976	$	1,192,423	3.07%	4.01	$	166,952

Loans and Allowance for Loan Losses

At March 31, 2019, gross loans outstanding (including purchased loans, purchased loan pools, and loans held for sale) were $8.59 billion, a decrease of $28.8 million, or 0.3%, from $8.62 billion reported at December 31, 2018. Loans held for sale increased from $111.3 million at December 31, 2018 to $112.1 million at March 31, 2019. Legacy loans (excluding purchased loans and purchased loan pools) increased $95.9 million, or 1.7%, from $5.66 billion at December 31, 2018 to $5.76 billion at March 31, 2019, driven primarily by growth in the commercial real estate and commercial, financial and agricultural loan categories. Purchased loans decreased $116.6 million, or 4.5%, from $2.59 billion at December 31, 2018 to $2.47 billion at March 31, 2019, due to paydowns of $116.8 million, charge-offs of $184,000 and transfers to OREO of $2.5 million, partially offset by accretion of $2.9 million. Purchased loan pools decreased $8.9 million, or 3.4%, from $262.6 million at December 31, 2018 to $253.7 million at March 31, 2019 due primarily to payments on the portfolio of $8.6 million and premium amortization of $348,000 during the first three months of 2019.

The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past-due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged off.

The 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. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors, which primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

At the end of the first quarter of 2019, the allowance for loan losses allocated to legacy loans totaled $26.2 million, or 0.45% of legacy loans, compared with $26.2 million, or 0.46% of legacy loans, at December 31, 2018. The allowance for loan losses as a percentage of legacy loans was approximately flat from December 31, 2018 to March 31, 2019 as a decrease in the allowance for loan losses allocated to loans individually evaluated for impairment was offset by an increase in the allowance for loan losses allocated to loans collectively for impairment due to legacy loan growth. Our legacy nonaccrual loans decreased from $18.0 million at December 31, 2018 to $17.6 million at March 31, 2019. For the first three months of 2019, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.27%, compared with 0.14% for the first three months of 2018. The total provision for loan losses for the first three months of 2019 was $3.4 million, increasing from $1.8 million recorded for the first three months of 2018. Our ratio of total nonperforming assets to total assets decreased from 0.55% at December 31, 2018 to 0.54% at March 31, 2019.

The balance of the allowance for loan losses allocated to all loans collectively evaluated for impairment increased 3.5%, or $828,000, during the first three months of 2019, while the balance of all loans collectively evaluated for impairment decreased 0.3%, or $21.3 million, during the same period. The decrease in the balance of all loans collectively evaluated for impairment is primarily attributable to paydowns on purchased loans, partially offset by growth in legacy loans. As a percentage of total loans collectively evaluated for impairment, the allowance allocated to those loans increased from 0.28% at December 31, 2018 to 0.30% at March 31, 2019.

The balance of the allowance for loan losses allocated to legacy loans collectively evaluated for impairment increased 3.7%, or $864,000, during the first three months of 2019, while the balance of legacy loans collectively evaluated for impairment increased 1.7%, or $95.8 million, during the same period. As a percentage of legacy loans collectively evaluated for impairment, the allowance allocated to those loans increased one basis point from 0.41% at December 31, 2018 to 0.42% at March 31, 2019 due to the consistency in the mix of loan and collateral types and the overall credit quality of the loan portfolio.

For the allowance allocated to loans collectively evaluated expressed as a percentage of loans evaluated collectively for impairment, the largest change for the first three months of 2019 was noted in the legacy consumer installment loan category, which increased from 0.83% at December 31, 2018 to 0.90% at March 31, 2019 due to increased net charge-offs for the category. We consider a four year loss rate on all loan categories. We adjust the qualitative factors to account for the inherent risks in the portfolio that are not captured in the historical loss rates, such as volatile commodity prices for agriculture products, weather-related risks (droughts and hurricanes), growth rates of certain loan types and other factors management deems appropriate.

The balance of the allowance for loan losses allocated to loans individually evaluated for impairment decreased 19.9%, or $1.0 million, during the first three months of 2019, while the balance of loans individually evaluated for impairment decreased 5.0%, or $2.7 million, during the same period. The decrease in loan balances individually evaluated for impairment was primarily attributable to a decrease of $3.1 million in the purchased loans category. The decrease in the allowance for loan losses allocated to loans individually evaluated for impairment from December 31, 2018 to March 31, 2019 was primarily related to one loan which was specifically reserved for at December 31, 2018 and fully charged off during the quarter.

The following tables present an analysis of the allowance for loan losses as of and for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
(dollars in thousands)	2019		2018
Balance of allowance for loan losses at beginning of period	$	28,819	$	25,791
Provision charged to operating expense	3,408		1,801
Charge-offs:
Commercial, financial and agricultural	2,004		1,449
Real estate – construction and development	25		—
Real estate – commercial and farmland	1,253		142
Real estate – residential	20		198
Consumer installment	1,893		962
Purchased loans	184		121
Total charge-offs	5,379		2,872
Recoveries:
Commercial, financial and agricultural	1,065		656
Real estate – construction and development	1		114
Real estate – commercial and farmland	4		24
Real estate – residential	104		182
Consumer installment	164		67
Purchased loans	473		437
Total recoveries	1,811		1,480
Net charge-offs	3,568		1,392
Balance of allowance for loan losses at end of period	$	28,659	$	26,200



	As of and for the Three Months Ended March 31, 2019
(dollars in thousands)	Legacy Loans			Purchased Loans			Purchased Loan Pools			Total
Allowance for loan losses at end of period	$	26,166		$	1,796		$	697		$	28,659
Net charge-offs (recoveries) for the period	3,857			(289		)	—			3,568
Loan balances:
End of period	5,756,358			2,472,271			253,710			8,482,339
Average for the period	5,867,037			2,359,280			257,661			8,483,978
Net charge-offs as a percentage of average loans	0.27		%	(0.05		)%	0.00		%	0.17		%
Allowance for loan losses as a percentage of end of period loans	0.45		%	0.07		%	0.27		%	0.34		%



	As of and for the Three Months Ended March 31, 2018
(dollars in thousands)	Legacy Loans			Purchased Loans			Purchased Loan Pools			Total
Allowance for loan losses at end of period	$	22,384		$	2,822		$	994		$	26,200
Net charge-offs (recoveries) for the period	1,708			(316		)	—			1,392
Loan balances:
End of period	5,051,986			818,587			319,598			6,190,171
Average for the period	4,902,082			842,509			325,113			6,069,704
Net charge-offs as a percentage of average loans	0.14		%	(0.15		)%	0.00		%	0.09		%
Allowance for loan losses as a percentage of end of period loans	0.44		%	0.34		%	0.31		%	0.42		%

Loans Excluding Purchased Loans



(dollars in thousands)	March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	1,382,907	$	1,316,359
Real estate – construction and development	676,563		671,198
Real estate – commercial and farmland	1,894,937		1,814,529
Real estate – residential	1,365,482		1,403,000
Consumer installment	436,469		455,371
	$	5,756,358	$	5,660,457

The following table summarizes the various loan types comprising the "Commercial, financial and agricultural" loan category displayed in the preceding table.



(dollars in thousands)	March 31, 2019		December 31, 2018
Municipal loans	$	509,464	$	510,600
Premium finance loans	487,980		410,381
Other commercial, financial and agricultural loans	385,463		395,378
	$	1,382,907	$	1,316,359

Purchased Assets

Loans that were acquired in transactions, including those that are covered by the loss-sharing agreements with the FDIC (“purchased loans”), totaled $2.47 billion and $2.59 billion at March 31, 2019 and December 31, 2018, respectively. The decrease in purchased loans of $116.6 million, or 4.5%, resulted primarily from paydowns during the quarter. OREO that was acquired in transactions, including OREO that is covered by the loss-sharing agreements with the FDIC, totaled $10.9 million and $9.5 million, at March 31, 2019 and December 31, 2018, 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 are 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 the 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.

Purchased loans are shown below according to loan type as of the end of the periods shown:



(dollars in thousands)	March 31, 2019		December 31, 2018
Commercial, financial and agricultural	$	327,972	$	372,686
Real estate – construction and development	239,413		227,900
Real estate – commercial and farmland	1,280,515		1,337,859
Real estate – residential	597,735		623,199
Consumer installment	26,636		27,188
	$	2,472,271	$	2,588,832

Purchased Loan Pools

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of March 31, 2019, purchased loan pools totaled $253.7 million and consisted of whole-loan residential mortgages on properties outside the Company’s markets, with principal balances totaling $252.0 million and $1.7 million of remaining purchase premium paid at acquisition. 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. The Company has allocated approximately $697,000 and $732,000 of the allowance for loan losses to the purchased loan pools at March 31, 2019 and December 31, 2018, respectively.

Non-Performing Assets

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and OREO. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

Nonaccrual loans, excluding purchased loans, totaled $17.6 million at March 31, 2019, a decrease of $319,000, or 1.8%, from $18.0 million reported at December 31, 2018. Nonaccrual purchased loans totaled $23.8 million at March 31, 2019, a decrease of $261,000, or 1.1%, compared with $24.1 million at December 31, 2018. Nonaccrual loans within purchased loan pools totaled $400,000 at March 31, 2019, compared with no such loans at December 31, 2018. Accruing loans delinquent 90 days or more, excluding purchased loans, totaled $3.7 million at March 31, 2019, a decrease of $546,000, or 12.9%, compared with $4.2 million at December 31, 2018. At March 31, 2019, OREO, excluding purchased OREO, totaled $6.0 million, a decrease of $1.2 million, or 16.7%, compared with $7.2 million at December 31, 2018. Purchased OREO totaled $10.9 million at March 31, 2019, an increase of $1.3 million, or 13.9%, compared with $9.5 million at December 31, 2018. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. At the end of the first quarter of 2019, total non-performing assets as a percent of total assets decreased to 0.54% compared with 0.55% at December 31, 2018.

Non-performing assets at March 31, 2019 and December 31, 2018 were as follows:



(dollars in thousands)	March 31, 2019		December 31, 2018
Nonaccrual loans, excluding purchased loans	$	17,633	$	17,952
Nonaccrual purchased loans	23,846		24,107
Nonaccrual purchased loan pools	400		—
Accruing loans delinquent 90 days or more, excluding purchased loans	3,676		4,222
Accruing purchased loans delinquent 90 days or more	—		—
Foreclosed assets, excluding purchased assets	6,014		7,218
Purchased other real estate owned	10,857		9,535
Total non-performing assets	$	62,426	$	63,034

Troubled Debt Restructurings

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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 March 31, 2019 and December 31, 2018, the Company had a balance of $12.9 million and $11.1 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 nonaccrual at March 31, 2019 and December 31, 2018:



March 31, 2019	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	3	$	116	14	$	138
Real estate – construction and development	4	142		1	2
Real estate – commercial and farmland	13	2,954		4	450
Real estate – residential	78	8,240		19	832
Consumer installment	5	11		22	63
Total	103	$	11,463	60	$	1,485



December 31, 2018	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	256	14	$	138
Real estate – construction and development	5	145		1	2
Real estate – commercial and farmland	12	2,863		3	426
Real estate – residential	71	6,043		20	1,119
Consumer installment	6	16		24	69
Total	99	$	9,323	62	$	1,754



March 31, 2019	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	9	$	145	8	$	109
Real estate – construction and development	5	143		—	—
Real estate – commercial and farmland	16	3,158		1	246
Real estate – residential	75	7,510		22	1,562
Consumer installment	18	42		9	33
Total	123	$	10,998	40	$	1,950



December 31, 2018	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	10	$	282	9	$	112
Real estate – construction and development	5	147		1	—
Real estate – commercial and farmland	14	3,043		1	246
Real estate – residential	65	5,756		26	1,406
Consumer installment	18	36		12	49
Total	112	$	9,264	49	$	1,813



March 31, 2019	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forgiveness of interest	—	$	—	1	$	55
Forbearance of interest	9	1,339		7	617
Forgiveness of principal	1	681		—	—
Forbearance of principal	11	2,339		4	70
Rate reduction only	12	1,180		1	55
Rate reduction, forbearance of interest	28	2,406		11	318
Rate reduction, forbearance of principal	13	1,357		30	170
Rate reduction, forgiveness of interest	29	2,161		5	199
Rate reduction, forgiveness of principal	—	—		1	1
Total	103	$	11,463	60	$	1,485



December 31, 2018	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forgiveness of interest	—	$	—	1	$	55
Forbearance of interest	9	1,361		5	509
Forgiveness of principal	1	686		—	—
Forbearance of principal	6	360		4	75
Rate reduction only	11	1,155		1	56
Rate reduction, forbearance of interest	27	2,149		13	618
Rate reduction, forbearance of principal	15	1,384		32	175
Rate reduction, forgiveness of interest	30	2,228		5	264
Rate reduction, forgiveness of principal	—	—		1	2
Total	99	$	9,323	62	$	1,754

The following table presents the amount of troubled debt restructurings, excluding purchased loans, by collateral types, classified separately as accrual and nonaccrual at March 31, 2019 and December 31, 2018:



March 31, 2019	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	4	$	535	2	$	165
Raw land	6	431		1	2
Hotel and motel	1	252		1	246
Office	1	159		—	—
Retail, including strip centers	6	1,956		—	—
1-4 family residential	78	8,032		20	871
Automobile/equipment/CD	7	98		34	186
Livestock	—	—		1	14
Unsecured	—	—		1	1
Total	103	$	11,463	60	$	1,485



December 31, 2018	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	5	$	544	1	$	137
Raw land	7	435		1	2
Hotel and motel	1	260		1	246
Office	1	161		—	—
Retail, including strip centers	6	1,980		—	—
1-4 family residential	71	5,835		21	1,161
Automobile/equipment/CD	8	108		36	188
Livestock	—	—		1	18
Unsecured	—	—		1	2
Total	99	$	9,323	62	$	1,754

As of March 31, 2019 and December 31, 2018, the Company had a balance of $22.3 million and $22.2 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 nonaccrual at March 31, 2019 and December 31, 2018:



March 31, 2019	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	31	3	$	29
Real estate – construction and development	4	1,011		4	268
Real estate – commercial and farmland	12	6,104		7	1,577
Real estate – residential	119	12,297		21	917
Consumer installment	—	—		7	50
Total	136	$	19,443	42	$	2,841



December 31, 2018	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	31	3	$	32
Real estate – construction and development	4	1,015		5	293
Real estate – commercial and farmland	12	6,162		7	1,685
Real estate – residential	115	11,532		24	1,424
Consumer installment	—	—		4	17
Total	132	$	18,740	43	$	3,451



March 31, 2019	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	3	$	58	1	$	3
Real estate – construction and development	7	1,277		1	2
Real estate – commercial and farmland	16	7,252		3	428
Real estate – residential	113	10,723		27	2,491
Consumer installment	4	19		3	31
Total	143	$	19,329	35	$	2,955



December 31, 2018	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	63	—	$	—
Real estate – construction and development	8	1,305		1	3
Real estate – commercial and farmland	17	7,576		2	271
Real estate – residential	106	10,040		33	2,916
Consumer installment	3	14		1	3
Total	138	$	18,998	37	$	3,193



March 31, 2019	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forbearance of interest	5	$	457	9	$	1,398
Forbearance of principal	6	2,329		4	233
Forbearance of principal, extended amortization	—	—		1	250
Rate reduction only	70	10,746		6	236
Rate reduction, forbearance of interest	24	2,293		13	332
Rate reduction, forbearance of principal	9	1,740		7	263
Rate reduction, forgiveness of interest	22	1,878		2	129
Total	136	$	19,443	42	$	2,841



December 31, 2018	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forbearance of interest	5	$	224	10	$	1,751
Forbearance of principal	6	2,368		3	226
Forbearance of principal, extended amortization	—	—		1	258
Rate reduction only	73	10,911		6	285
Rate reduction, forbearance of interest	24	2,304		14	356
Rate reduction, forbearance of principal	8	1,635		6	368
Rate reduction, forgiveness of interest	16	1,298		3	207
Total	132	$	18,740	43	$	3,451

The following table presents the amount of troubled debt restructurings included in purchased loans, by collateral types, classified separately as accrual and nonaccrual at March 31, 2019 and December 31, 2018:



March 31, 2019	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	2	$	354	—	$	—
Raw land	2	870		5	653
Hotel and motel	1	144		—	—
Office	2	410		2	445
Retail, including strip centers	5	3,848		—	—
1-4 family residential	122	12,600		23	1,453
Church	1	1,186		1	196
Automobile/equipment/CD	1	31		11	94
Total	136	$	19,443	42	$	2,841



December 31, 2018	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	2	$	356	—	$	—
Raw land	2	873		6	718
Hotel and motel	1	145		—	—
Office	2	419		2	457
Retail, including strip centers	5	3,882		—	—
1-4 family residential	118	11,837		26	2,009
Church	1	1,197		1	201
Automobile/equipment/CD	1	31		8	65
Total	132	$	18,740	43	$	3,450

Commercial Lending Practices

The CRE guidance is applicable when either:


(1)	total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or


(2)	total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital.

As of March 31, 2019, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:


(1)	within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;


(2)	on average, CRE loan sizes are generally larger than non-CRE loan types; and


(3)	certain construction and development loans may be less predictable and more difficult to evaluate and monitor.

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of March 31, 2019 and December 31, 2018. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased loans:



	March 31, 2019			December 31, 2018
(dollars in thousands)	Balance		% of Total Loans	Balance		% of Total Loans
Construction and development loans	$	915,976	11%	$	899,097	11%
Multi-family loans	288,583		3%	276,528		3%
Nonfarm non-residential loans (excluding owner occupied)	1,720,553		20%	1,694,267		20%
Total CRE Loans (excluding owner occupied)	2,925,112		34%	2,869,892		34%
All other loan types	5,557,227		66%	5,642,022		66%
Total Loans	$	8,482,339	100%	$	8,511,914	100%

The following table outlines the percentage of construction and development loans and total CRE loans, net of owner occupied loans, to the Bank’s total risk-based capital, and the Company’s internal concentration limits as of March 31, 2019 and December 31, 2018:



	Internal Limit	Actual
	Internal Limit	March 31, 2019	December 31, 2018
Construction and development loans	100%	77%	78%
Total CRE loans (excluding owner occupied)	300%	246%	249%

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At March 31, 2019, the Company’s short-term investments were $712.2 million, compared with $507.5 million at December 31, 2018. At March 31, 2019, the Company had $40.0 million in federal funds sold and $672.2 million was in interest-bearing deposit balances at correspondent banks and the Federal Reserve Bank of Atlanta.

Derivative Instruments and Hedging Activities

The Company has a cash flow hedge that matures September 15, 2020 with a notional amount of $37.1 million at March 31, 2019 and December 31, 2018 for the purpose of converting the variable rate on certain junior subordinated debentures to a fixed rate of 4.11%. The fair value of this instrument was a liability of $31,000 at March 31, 2019 and an asset of $102,000 at December 31, 2018.

The Company also has forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of $5.1 million and $2.5 million at March 31, 2019 and December 31, 2018, respectively, and a liability of $1.3 million at both March 31, 2019 and December 31, 2018.

No material hedge ineffectiveness from cash flow was recognized in the statement of operations. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

Capital

Common Stock Repurchase Program

On October 25, 2018, the Company announced that its Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock. Repurchases of shares, which are authorized to occur within the succeeding twelve months, must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of March 31, 2019, 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

For additional information regarding the Atlantic acquisition, see Note 3.

USPF Acquisition

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 $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.

Capital Management

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia Department of Banking and Finance (the "GDBF"), and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.

requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure.

In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the "Basel III Capital Rules"). The Basel III Capital Rules defined a new capital measure called "Common Equity Tier 1" ("CET1"), established that Tier 1 capital consist of Common Equity Tier 1 and "Additional Tier 1 Capital" instruments meeting specified requirements, defined Common Equity Tier 1, established a capital conservation buffer and expanded the scope of the adjustments as compared with existing regulations. The capital conservation buffer is being increased by 0.625% per year until reaching 2.50% by 2019. The capital conservation buffer was being phased in from 0.0% for 2015 to, 0.625% for 2016, 1.25% for 2017, 1.875% for 2018, and 2.50% for 2019. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.

The regulatory capital standards are defined by the following key measurements:

b) The “CET1 Ratio” is defined as Common equity tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a CET1 ratio greater than or equal to 4.50% (7.00% including the 2.50% capital conservation buffer for 2019; 6.375% including the 1.875% capital conservation buffer for 2018). For a bank to be considered “well capitalized,” it must maintain a CET1 ratio greater than or equal to 6.50%.

c) The “Tier 1 Capital Ratio” is defined as Tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a Tier 1 capital ratio greater than or equal to 6.00% (8.50% including the 2.50% capital conservation buffer for 2019; 7.875% including the 1.875% capital conservation buffer for 2018). For a bank to be considered “well capitalized,” it must maintain a Tier 1 capital ratio greater than or equal to 8.00%.

d) The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00% (10.50% including the 2.50% capital conservation buffer for 2019; 9.875% including the 1.875% capital conservation buffer for 2018). For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.

As of March 31, 2019, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of for the Company and the Bank at March 31, 2019 and December 31, 2018.



	March 31, 2019	December 31, 2018
Tier 1 Leverage Ratio (tier 1 capital to average assets)
Consolidated	9.43%	9.17%
Ameris Bank	10.69%	10.46%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
Consolidated	10.57%	10.07%
Ameris Bank	13.12%	12.66%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
Consolidated	11.58%	11.07%
Ameris Bank	13.12%	12.66%
Total Capital Ratio (total capital to risk weighted assets)
Consolidated	12.74%	12.23%
Ameris Bank	13.45%	12.98%

Interest Rate Sensitivity and Liquidity

The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.

The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysisin the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term assets at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 30% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At March 31, 2019 and December 31, 2018, the net carrying value of the Company’s other borrowings was $151.5 million and $151.8 million, respectively.

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:



	March 31, 2019	December 31, 2018	September 30, 2018	June 30, 2018	March 31, 2018
Investment securities available for sale to total deposits	12.60%	12.36%	12.66%	13.17%	13.16%
Loans (net of unearned income) to total deposits	86.55%	88.21%	92.90%	96.91%	96.03%
Interest-earning assets to total assets	90.63%	90.43%	90.48%	90.35%	92.15%
Interest-bearing deposits to total deposits	71.91%	73.88%	74.58%	73.11%	71.02%

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at March 31, 2019 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and ~~fair value hedges and~~ are part of the Company’s program to manage interest rate sensitivity.

At ~~September 30, 2017,~~March 31, 2019, the Company had one cash flow hedge with a notional amount of $37.1 million for the purpose of converting the variable rate on certain junior subordinated debentures to a fixed rate. The LIBOR rate swap exchanges fixed rate payments of 4.11% for floating rate payments based on the three-month LIBOR rate and matures September 2020. The fair value of this instrument was a liability of ~~approximately $723,000~~$31,000 at March 31, 2019 and ~~$978,000 at September 30, 2017 and December 31, 2016, respectively.~~

At September 30, 2017, the Company had fair value hedges with a combined notional amount of $22.7 million for the purpose of hedging the change in fair value of certain fixed rate loans. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $204,000 and a liability of approximately $96,000 at September 30, 2017. At December 31, 2016, the Company had fair value hedges with a combined notional amount of $20.2 million. These instruments have maturity dates that range from January 2023 to October 2031 and are indexed to the one-month LIBOR rate. The fair value of these instruments amounted to an asset of approximately $229,000 and a liability of approximately $96,000$102,000 at December 31, ~~2016.~~2018.

The Company also had forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of approximately ~~$3.8~~$5.1 million and ~~$4.3~~$2.5 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively, and a liability of ~~$237,000 and $0~~$1.3 million at ~~September 30, 2017~~both March 31, 2019 and December 31, ~~2016, respectively.~~2018.

The Company has no exposure to foreign currency exchange rate risk, commodity price risk and 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 the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “gap management.”

The Company uses 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 allows 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 12-month and 24-month period is subjected to gradual and parallel shocks of 100, 200, 300 and 400 basis point increases and decreases in market rates and is monitored on a quarterly ~~basis~~basis.

Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.

Item 4. 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 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 report, the Company’s disclosure controls and procedures are effective.

During the quarter ended ~~September 30, 2017,~~March 31, 2019, 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.

PART II - OTHER INFORMATION

Item 1. 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 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~c) Issuer Purchases of Equity Securities.

The table below sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three-month period ended March 31, 2019.



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs⁽²⁾
January 1, 2019 through January 31, 2019	6,130	$	31.67	—	$	100,000,000
February 1, 2019 through February 28, 2019	20,004	$	40.20	—	$	100,000,000
March 1, 2019 through March 31, 2019	—	$	—	—	$	100,000,000
Total	26,134	$	38.20	—	$	100,000,000


(1)	The shares purchased from January 1, 2019 through March 31, 2019 consist of shares of common stock surrendered to the Company in payment of the income tax withholding obligations relating to the vesting of shares of restricted stock.

(2)

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~On May 7, 2019, the Company and the Bank entered into a Severance Protection and Restrictive Covenants Agreement (each, a “Severance Agreement”) with each of the executive officers of the Company identified in the Company’s definitive proxy statement in connection with its 2019 annual meeting of shareholders, as filed with the Securities and Exchange Commission on April 1, 2019, including, among others, Dennis J. Zember Jr., President and Chief Executive Officer, Nicole S. Stokes, Executive Vice President and Chief Financial Officer, Lawton E. Bassett, III, Executive Vice President and Banking Group President, Jon S. Edwards, Executive Vice President and Chief Credit Officer, and James A. LaHaise, Executive Vice President and Chief Strategy Officer. In the case of each executive officer other than Ms. Stokes, the Severance Agreement replaces and supersedes his or her

prior employment or severance agreement, which automatically terminated with the execution of the Severance Agreement. The Severance Agreements were entered into following a review of executive compensation matters conducted by the Compensation Committee of the Board of Directors of the Company during which the Compensation Committee determined to provide similar terms to all executive officers for the payment of severance and other benefits upon any termination of their employment.

Each Severance Agreement provides that, in the event of termination of the executive’s employment by the Company without “cause” or by the executive for “good reason,” the Company will pay to the executive, in addition to certain accrued but unpaid amounts, (i) equal semi-monthly installments for two years in accordance with the Company’s normal payroll practices, totaling two times the sum of (A) the executive’s base salary and (B) the executive’s target cash bonus opportunity for the year in which the termination of employment occurred; (ii) a pro-rata portion of the cash bonus, if any, that the executive would have earned for the year during which the termination of employment occurred, based on the achievement of applicable performance goals; and (iii) reimbursement for any monthly COBRA premium paid for a period of as many as eighteen months. If a termination without “cause” or for “good reason” occurs at the time of, or within one year after, a “change of control” of the Company, then the amounts described in clause (i) will be paid in a lump sum instead of installments.

In the event of termination of the executive’s employment on account of the executive’s death or disability, the executive (or his or her estate or beneficiaries, as the case may be) will be entitled to receive, in addition to certain accrued but unpaid amounts, a pro-rata portion of the cash bonus, if any, that the executive would have otherwise earned for the year during which the termination of employment occurred, based on the achievement of applicable performance goals.

Each Severance Agreement also includes certain restrictive covenants that limit the executive’s ability to compete with the Company and the Bank and to solicit, or attempt to solicit, certain customers and employees for a period of two years after termination or to divulge certain confidential information concerning the Company or the Bank for any purpose other than as necessary in the executive’s performance of his or her duties.

Item 6. Exhibits.



Exhibit Number		Description

3.1		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).

3.2		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).

3.3		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).

3.4		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).

3.5		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).

3.6		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).

3.7		Bylaws of Ameris Bancorp, as amended and restated effective ~~July 18, 2017~~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 ~~July 21, 2017)~~January 19, 2018).

10.1*		Form of 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).

~~10.2~~		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).

~~10.3~~		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). . for executive officers.

31.1		Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer.

32.1		Section 1350 Certification by the Company’s Chief Executive Officer.

32.2		Section 1350 Certification by the Company’s Chief Financial Officer.

101		The following financial statements from Ameris Bancorp’s Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2019, formatted as interactive data files in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income and Comprehensive Income; (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

*Management contract or a compensatory plan or arrangement.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Dated: ~~November 9, 2017~~May 10, 2019	AMERIS BANCORP

	/s/ ~~Dennis J. Zember Jr.~~Nicole S. Stokes
	~~Dennis J. Zember Jr.,~~Nicole S. Stokes
	Executive Vice President ~~Chief Financial Officer~~ and Chief ~~Operating~~Financial Officer (duly authorized signatory and principal accounting and financial officer)

6771



(dollars in thousands, except per share amount)
Ameris common shares issued	128,572
Price per share of the Company's common stock	$	45.45
Fair value of consideration transferred	$	5,844



(dollars in thousands)	Covered Loans		Less: Fair Value Adjustments		Total Covered Loans		OREO		Less: Fair Value Adjustments		Total Covered OREO		Total Covered Assets		FDIC Loss- Share Receivable (Payable)
September 30, 2017
AUB	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
USB	2,763		12		2,751		—		—		—		2,751		(1,752		)
SCB	2,541		27		2,514		—		—		—		2,514		(169		)
FBJ	3,647		394		3,253		—		—		—		3,253		(312		)
DBT	9,663		356		9,307		81		—		81		9,388		(4,442		)
TBC	1,667		—		1,667		—		—		—		1,667		(8		)
HTB	1,856		28		1,828		—		—		—		1,828		27
OGB	930		31		899		—		—		—		899		(1,032		)
CBG	10,329		678		9,651		161		—		161		9,812		(502		)
Total	$	33,396	$	1,526	$	31,870	$	242	$	—	$	242	$	32,112	$	(8,190	)

December 31, 2016
AUB	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(27	)
USB	3,199		13		3,186		51		—		51		3,237		(1,642		)
SCB	4,019		51		3,968		—		—		—		3,968		(32		)
FBJ	3,767		452		3,315		—		—		—		3,315		(234		)
DBT	12,166		565		11,601		—		—		—		11,601		(4,591		)
TBC	1,679		—		1,679		—		—		—		1,679		(33		)
HTB	1,913		33		1,880		—		—		—		1,880		734
OGB	1,077		32		1,045		—		—		—		1,045		(993		)
CBG	33,449		1,963		31,486		1,161		4		1,157		32,643		505
Total	$	61,269	$	3,109	$	58,160	$	1,212	$	4	$	1,208	$	59,368	$	(6,313	)



											Nine Months Ended
(in thousands, except share and per share data)	Third Quarter 2017		Second Quarter 2017		First Quarter 2017		Fourth Quarter 2016		Third Quarter 2016		September 30, 2017		September 30, 2016
Results of Operations:
Net interest income	$	66,855	$	63,157	$	60,590	$	57,279	$	57,067	$	190,602	$	162,092
Net interest income (tax equivalent)	68,668		64,773		62,108		58,897		58,024		195,549		164,726
Provision for loan losses	1,787		2,205		1,836		1,710		811		5,828		2,381
Non-interest income	26,999		28,189		25,706		24,272		28,864		80,894		81,529
Non-interest expense	63,767		55,739		53,093		54,677		53,199		172,599		161,158
Income tax expense	8,142		10,315		10,214		6,987		10,364		28,671		26,159
Net income available to common shareholders	20,158		23,087		21,153		18,177		21,557		64,398		53,923
Selected Average Balances:
Investment securities	$	864,456	$	866,960	$	862,616	$	856,671	$	857,433	$	864,684	$	840,688
Loans held for sale	126,798		110,933		77,617		102,926		105,859		105,296		96,340
Loans	4,379,082		3,994,213		3,678,149		3,145,714		2,897,771		4,018,597		2,642,498
Purchased loans	937,595		973,521		1,034,983		1,101,907		1,199,175		982,033		1,147,821
Purchased loan pools	475,742		516,949		547,057		590,617		629,666		513,750		629,118
Earning assets	6,892,939		6,584,386		6,347,807		5,925,634		5,780,455		6,610,374		5,490,525
Assets	7,461,367		7,152,024		6,915,965		6,573,344		6,330,350		7,180,330		6,030,181
Deposits	5,837,154		5,671,394		5,491,324		5,490,657		5,221,219		5,667,891		5,102,729
Shareholders’ equity	796,856		774,664		695,830		653,991		640,382		756,153		599,817
Period-End Balances:
Investment securities	$	867,570	$	861,188	$	866,715	$	852,199	$	862,702	$	867,570	$	862,702
Loans held for sale	137,392		146,766		105,637		105,924		126,263		137,392		126,263
Loans	4,574,678		4,230,228		3,785,480		3,626,821		3,091,039		4,574,678		3,091,039
Purchased loans	917,126		950,499		1,006,935		1,069,191		1,129,381		917,126		1,129,381
Purchased loan pools	465,218		490,114		529,099		568,314		624,886		465,218		624,886
Earning assets	7,074,828		6,816,606		6,525,911		6,293,670		5,925,072		7,074,828		5,925,072
Total assets	7,649,820		7,397,858		7,094,856		6,892,031		6,493,495		7,649,820		6,493,495
Deposits	5,895,504		5,793,397		5,642,369		5,575,163		5,306,098		5,895,504		5,306,098
Shareholders’ equity	801,921		782,682		758,216		646,437		642,583		801,921		642,583
Per Common Share Data:
Earnings per share - basic	$	0.54	0.62		0.59		0.52		0.62		1.76		1.58
Earnings per share - diluted	$	0.54	0.62		0.59		0.52		0.61		1.74		1.56
Book value per common share	$	21.54	$	21.03	$	20.42	$	18.51	$	18.42	$	21.54	$	18.42
Tangible book value per common share	$	17.78	$	17.24	$	16.60	$	14.42	$	14.38	$	17.78	$	14.38
End of period shares outstanding	37,231,049		37,222,904		37,128,714		34,921,474		34,891,304		37,231,049		34,891,304



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share data)	2017			2016			2017			2016
Net income available to common shareholders	$	20,158		$	21,557		$	64,398		$	53,923
Adjustment items:
Merger and conversion charges	92			—			494			6,359
Certain compliance resolution expenses	4,729			—			4,729			—
Financial impact of Hurricane Irma	410			—			410			—
Losses on the sale of premises	91			238			956			562
Tax effect of management adjusted charges	(1,863		)	(83		)	(2,306		)	(2,422		)
After tax management-adjusted charges	3,459			155			4,283			4,499
Adjusted operating net income	$	23,617		$	21,712		$	68,681		$	58,422

Weighted average common shares outstanding - diluted	37,552,667			35,194,739			37,017,486			34,470,101
Earnings per diluted share	$	0.54		$	0.61		$	1.74		$	1.56
Adjusted operating net income per diluted share	$	0.63		$	0.62		$	1.86		$	1.69



	Quarter Ended September 30,
	2017					2016
(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid
Assets
Interest-earning assets:
Federal funds sold and interest-bearing deposits in banks	$	109,266	$	406	1.47%	$	90,551	$	155	0.68%
Investment securities	864,456		5,665		2.60%	857,433		4,872		2.26%
Loans held for sale	126,798		1,131		3.54%	105,859		826		3.10%
Loans	4,379,082		53,394		4.84%	2,897,771		33,672		4.62%
Purchased loans	937,595		14,048		5.94%	1,199,175		19,296		6.40%
Purchased loan pools	475,742		3,491		2.91%	629,666		4,346		2.75%
Total interest-earning assets	6,892,939		78,135		4.50%	5,780,455		63,167		4.35%
Noninterest-earning assets	568,428					549,895
Total assets	$	7,461,367				$	6,330,350

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits	$	3,162,448	$	2,963	0.37%	$	2,787,323	$	1,719	0.25%
Time deposits	1,020,239		2,173		0.85%	887,685		1,355		0.61%
Federal funds purchased and securities sold under agreements to repurchase	19,414		11		0.22%	37,305		18		0.19%
FHLB advances	608,413		1,849		1.21%	265,202		393		0.59%
Other borrowings	75,590		1,183		6.21%	49,345		479		3.86%
Subordinated deferrable interest debentures	85,040		1,288		6.01%	83,719		1,179		5.60%
Total interest-bearing liabilities	4,971,144		9,467		0.76%	4,110,579		5,143		0.50%
Demand deposits	1,654,467					1,546,211
Other liabilities	38,900					33,178
Shareholders’ equity	796,856					640,382
Total liabilities and shareholders’ equity	$	7,461,367				$	6,330,350
Interest rate spread					3.74%					3.85%
Net interest income			$	68,668				$	58,024
Net interest margin					3.95%					3.99%



	September 30, 2017	June 30, 2017	March 31, 2017	December 31, 2016	September 30, 2016
Investment securities available for sale to total deposits	13.90%	14.13%	14.72%	14.76%	15.80%
Loans (net of unearned income) to total deposits	101.04%	97.88%	94.31%	94.42%	91.32%
Interest-earning assets to total assets	92.48%	92.14%	91.98%	91.32%	91.25%
Interest-bearing deposits to total deposits	70.86%	71.12%	70.67%	71.78%	70.54%