UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
 ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 20182019
 
OR
 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-13901  

 
bancorplogoa03.jpg
AMERIS BANCORP
(Exact name of registrant as specified in its charter)

GEORGIA58-1456434
(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 filerýAccelerated 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1 per shareABCBNasdaq Global Select Market

There were 38,327,08147,585,309 shares of Common Stock outstanding as of May 1, 2018.2019.


AMERIS BANCORP
TABLE OF CONTENTS

  Page
   
PART I – FINANCIAL INFORMATION 
   
Item 1.
Financial Statements.
 
   
 
Consolidated Balance Sheets as of March 31, 20182019 and December 31, 20172018
1
   
 
Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 20182019 and 20172018
2
   
 
Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 20182019 and 20172018
3
   
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20182019 and 20172018
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.
6167
   
Item 4.
Controls and Procedures.
6267
   
PART II – OTHER INFORMATION
 
   
Item 1.
Legal Proceedings.
6268
   
Item 1A.
Risk Factors.
6268
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
6268
   
Item 3.
Defaults Upon Senior Securities.
6268
   
Item 4.
Mine Safety Disclosures.
6268
   
Item 5.
Other Information.
6268
   
Item 6.
Exhibits.
6370
   
Signatures
6471
 
 




Item 1. Financial Statements.
 
AMERIS BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
(dollars in thousands, except per share data)
March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Assets 
  
 
  
Cash and due from banks$123,945
 $139,313
$144,801
 $172,036
Federal funds sold and interest-bearing deposits in banks210,930
 191,345
712,199
 507,491
Cash and cash equivalents334,875
 330,658
857,000
 679,527
      
Time deposits in other banks7,371
 10,812
Investment securities available for sale, at fair value848,585
 810,873
1,234,435
 1,192,423
Other investments32,227
 42,270
15,157
 14,455
Loans held for sale, at fair value111,135
 197,442
112,070
 111,298
      
Loans5,051,986
 4,856,514
5,756,358
 5,660,457
Purchased loans818,587
 861,595
2,472,271
 2,588,832
Purchased loan pools319,598
 328,246
253,710
 262,625
Loans, net of unearned income6,190,171
 6,046,355
8,482,339
 8,511,914
Allowance for loan losses(26,200) (25,791)(28,659) (28,819)
Loans, net6,163,971
 6,020,564
8,453,680
 8,483,095
      
Other real estate owned, net9,171
 8,464
6,014
 7,218
Purchased other real estate owned, net6,723
 9,011
10,857
 9,535
Total other real estate owned, net15,894
 17,475
16,871
 16,753
      
Premises and equipment, net116,381
 117,738
141,698
 145,410
Goodwill208,513
 125,532
501,308
 503,434
Other intangible assets, net12,562
 13,496
55,557
 58,689
Cash value of bank owned life insurance80,007
 79,641
104,597
 104,096
Deferred income taxes, net28,677
 28,320
33,295
 35,126
Other assets70,001
 72,194
123,236
 88,397
Total assets$8,022,828
 $7,856,203
$11,656,275
 $11,443,515
      
Liabilities 
  
 
  
Deposits: 
  
 
  
Noninterest-bearing$1,867,900
 $1,777,141
$2,753,173
 $2,520,016
Interest-bearing4,578,265
 4,848,704
7,047,702
 7,129,297
Total deposits6,446,165
 6,625,845
9,800,875
 9,649,313
Securities sold under agreements to repurchase23,270
 30,638
4,259
 20,384
Other borrowings555,535
 250,554
151,454
 151,774
Subordinated deferrable interest debentures85,881
 85,550
89,529
 89,187
FDIC loss-share payable, net18,834
 19,487
Other liabilities43,033
 59,137
95,740
 57,023
Total liabilities7,153,884
 7,051,724
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 March 31, 2018 and December 31, 2017)—
 —
Common stock, par value $1 (100,000,000 shares authorized; 39,819,918 and 38,734,873 shares issued at March 31, 2018 and December 31, 2017, respectively)39,820
 38,735
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 surplus559,040
 508,404
1,053,190
 1,051,584
Retained earnings296,366
 273,119
412,005
 377,135
Accumulated other comprehensive income (loss), net of tax(10,823) (1,280)
Treasury stock, at cost (1,492,837 shares and 1,474,861 shares at March 31, 2018 and December 31, 2017, respectively)(15,459) (14,499)
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’ equity868,944
 804,479
1,495,584
 1,456,347
Total liabilities and shareholders’ equity$8,022,828
 $7,856,203
$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
March 31,		Three Months Ended
March 31,
2018 20172019 2018
Interest income 
  
 
  
Interest and fees on loans$73,267
 $61,521
$112,401
 $73,267
Interest on taxable securities5,207
 4,800
9,043
 5,207
Interest on nontaxable securities322
 416
156
 322
Interest on deposits in other banks and federal funds sold716
 313
3,329
 716
Total interest income79,512
 67,050
124,929
 79,512
      
Interest expense 
  
 
  
Interest on deposits6,772
 3,763
21,684
 6,772
Interest on other borrowings3,939
 2,697
3,850
 3,939
Total interest expense10,711
 6,460
25,534
 10,711
      
Net interest income68,801
 60,590
99,395
 68,801
Provision for loan losses1,801
 1,836
3,408
 1,801
Net interest income after provision for loan losses67,000
 58,754
95,987
 67,000
      
Noninterest income 
  
 
  
Service charges on deposit accounts10,228
 10,563
11,646
 10,228
Mortgage banking activity11,900
 11,215
13,828
 11,900
Other service charges, commissions and fees719
 709
768
 719
Gain on sale of securities37
 —
Gain on securities66
 37
Other noninterest income3,580
 3,219
4,463
 3,580
Total noninterest income26,464
 25,706
30,771
 26,464
      
Noninterest expense 
  
 
  
Salaries and employee benefits32,089
 27,794
38,370
 32,089
Occupancy and equipment expense6,198
 5,877
8,204
 6,198
Data processing and communications costs7,135
 6,572
8,391
 7,135
Credit resolution-related expenses549
 933
911
 549
Advertising and marketing expense1,229
 1,106
1,741
 1,229
Amortization of intangible assets934
 1,036
3,132
 934
Merger and conversion charges835
 402
2,057
 835
Other noninterest expenses10,129
 9,373
12,619
 10,129
Total noninterest expense59,098
 53,093
75,425
 59,098
      
Income before income tax expense34,366
 31,367
51,333
 34,366
Income tax expense7,706
 10,214
11,428
 7,706
Net income26,660
 21,153
39,905
 26,660
      
Other comprehensive income 
  
Net unrealized holding losses arising during period on investment securities available for sale, net of tax benefit of $2,500 and $105(9,403) (194)
Reclassification adjustment for gains on investment securities included in earnings, net of tax of ($8) and $0(29) —
Unrealized gains on cash flow hedges arising during period, net of tax expense of $75 and $23281
 43
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)(9,151) (151)3,648
 (9,151)
Total comprehensive income$17,509
 $21,002
$43,553
 $17,509
      
Basic earnings per common share$0.70
 $0.59
$0.84
 $0.70
Diluted earnings per common share$0.70
 $0.59
$0.84
 $0.70
Dividends declared per common share$0.10
 $0.10
$0.10
 $0.10
Weighted average common shares outstanding (in thousands)
 
  
 
  
Basic37,967
 35,664
47,366
 37,967
Diluted38,250
 36,040
47,456
 38,250

See notes to unaudited consolidated financial statements.


AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity (unaudited)
(dollars in thousands)
 Three Months Ended
March 31, 2018		 Three Months Ended
March 31, 2017		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 38,734,873
 $38,735
 36,377,807
 $36,378
49,014,925
 $49,015
 $1,051,584
 $377,135
 $(4,826) 1,514,984
 $(16,561) $1,456,347
Issuance of common stock 944,586
 944
 2,141,072
 2,141
Issuance of restricted shares 77,755
 78
 67,721
 68
103,794
 103
 812
 —
 —
 —
 —
 915
Proceeds from exercise of stock options 62,704
 63
 16,349
 16
7,708
 8
 46
 —
 —
 —
 —
 54
Issued at end of period 39,819,918
 $39,820
 38,602,949
 $38,603
        
Capital Surplus  
  
  
  
Balance at beginning of period  
 $508,404
  
 $410,276
Share-based compensation  
 897
  
 673
—
 —
 748
 —
 —
 —
 —
 748
Issuance of common shares, net of issuance costs of $0 and $4,925  
 49,067
  
 92,359
Issuance of restricted shares  
 (78)  
 (68)
Proceeds from exercise of stock options  
 750
  
 303
Balance at end of period  
 $559,040
  
 $503,543
        
Retained Earnings  
  
  
  
Balance at beginning of period  
 $273,119
  
 $214,454
Cumulative effect of change in accounting for derivatives   28
   —
Reclassification of stranded income tax effects from accumulated other comprehensive income   392
   —
Adjusted balance at beginning of period   273,539
   214,454
Purchase of treasury shares—
 —
 —
 —
 —
 26,134
 (998) (998)
Net income  
 26,660
  
 21,153
—
 —
 —
 39,905
 —
 —
 —
 39,905
Dividends on common shares  
 (3,833)  
 (3,713)—
 —
 —
 (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  
 $296,366
  
 $231,894
49,126,427
 $49,126
 $1,053,190
 $412,005
 $(1,178) 1,541,118
 $(17,559) $1,495,584
        
Accumulated Other Comprehensive Income (Loss), Net of Tax  
  
  
  
Unrealized gains (losses) on securities and derivatives:  
  
  
  
Balance at beginning of period  
 $(1,280)  
 $(1,058)
Reclassification of stranded income tax effects to retained earnings   (392)   —
Adjusted balance at beginning of period   (1,672)   (1,058)
Other comprehensive income during the period  
 (9,151)  
 (151)
Balance at end of period  
 $(10,823)  
 $(1,209)
        
Treasury Stock  
  
  
  
Balance at beginning of period 1,474,861
 $(14,499) 1,456,333
 $(13,613)
Purchase of treasury shares 17,976
 (960) 17,902
 (1,002)
Balance at end of period 1,492,837
 $(15,459) 1,474,235
 $(14,615)
        
Total Shareholders’ Equity  
 $868,944
  
 $758,216
 Three Months Ended March 31, 2018
            
 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 period38,734,873
 $38,735
 $508,404
 $273,119
 $(1,280) 1,474,861
 $(14,499) $804,479
Issuance of common stock for acquisition944,586
 944
 49,067
 —
 —
 —
 —
 50,011
Issuance of restricted shares77,755
 78
 (78) —
 —
 —
 —
 —
Proceeds from exercise of stock options62,704
 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 period39,819,918
 $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)
 Three Months Ended
March 31,		 Three Months Ended
March 31,
 2018 2017 2019 2018
Operating Activities  
  
  
  
Net income $26,660
 $21,153
 $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 2,274
 2,341
 2,623
 2,274
Net losses on sale or disposal of premises and equipment including write-downs 583
 295
 348
 583
Net write-downs on other assets 571
 —
Provision for loan losses 1,801
 1,836
 3,408
 1,801
Net losses (gains) on sale of other real estate owned including write-downs 33
 (127)
Net losses on sale of other real estate owned including write-downs 9
 33
Share-based compensation expense 1,441
 673
 1,152
 1,441
Amortization of intangible assets 934
 1,036
 3,132
 934
Amortization of operating lease right-of-use assets 1,547
 —
Provision for deferred taxes 2,432
 (580) 2,963
 2,432
Net amortization of investment securities available for sale 1,595
 1,697
 819
 1,595
Net gains on securities available for sale (37) —
Net gain on securities (66) (37)
Accretion of discount on purchased loans (1,571) (3,097) (2,980) (1,571)
Amortization of premium on purchased loan pools 511
 1,148
 348
 511
Net accretion (amortization) on other borrowings 33
 (57)
Amortization of subordinated deferrable interest debentures 331
 331
Accretion on other borrowings 18
 33
Accretion on subordinated deferrable interest debentures 342
 331
Originations of mortgage loans held for sale (358,038) (311,813) (296,197) (358,038)
Payments received on mortgage loans held for sale 367
 430
 194
 367
Proceeds from sales of mortgage loans held for sale 377,748
 294,045
 305,473
 377,748
Net gains on sale of mortgage loans held for sale (6,759) (9,200) (11,484) (6,759)
Originations of SBA loans (7,168) (19,003) (9,515) (7,168)
Proceeds from sales of SBA loans 10,497
 4,600
 11,870
 10,497
Net gains on sale of SBA loans (918) (1,407) (1,113) (918)
Increase in cash surrender value of bank owned life insurance (366) (389) (501) (366)
Changes in FDIC loss-share payable, net of cash payments received 785
 735
Changes in FDIC loss-share payable, net of cash payments 1,141
 785
Change attributable to other operating activities (4,671) 28,606
 5,670
 (4,671)
Net cash provided by operating activities 48,497
 13,253
Net cash provided by (used in) operating activities 59,677
 48,497
        
Investing Activities  
  
Investing Activities, net of effects of business combinations  
  
Proceeds from maturities of time deposits in other banks 3,441
 —
Purchases of securities available for sale (121,865) (40,145) (146,874) (121,865)
Proceeds from prepayments and maturities of securities available for sale 33,970
 30,119
 43,942
 33,970
Proceeds from sales of securities available for sale 36,685
 —
 64,995
 36,685
Net increase in other investments (13,809) (642) (694) (13,809)
Net increase in loans, excluding purchased loans (134,063) (117,681) (101,360) (134,063)
Payments received on purchased loans 43,971
 63,061
 116,834
 43,971
Payments received on purchased loan pools 16,158
 38,067
 8,567
 16,158
Purchases of premises and equipment (1,133) (1,219) (1,550) (1,133)
Proceeds from sales of premises and equipment 427
 —
 275
 427
Proceeds from sales of other real estate owned 3,106
 4,568
 2,610
 3,106
Payments paid to FDIC under loss-share agreements (333) (559) (1,794) (333)
Net cash proceeds paid in acquisitions (21,421) —
Net cash and cash equivalents paid in acquisitions —
 (21,421)
Net cash used in investing activities (158,307) (24,431) (11,608) (158,307)
        
  
 (Continued)
  
 (Continued)


AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
 Three Months Ended
March 31,		 Three Months Ended
March 31,
 2018 2017 2019 2018
Financing Activities, net of effects of business combinations  
  
  
  
Net increase (decrease) in deposits $(179,680) $67,206
 $151,562
 $(179,680)
Net decrease in securities sold under agreements to repurchase (7,368) (13,090) (16,125) (7,368)
Proceeds from other borrowings 455,000
 518,755
 —
 455,000
Repayment of other borrowings (150,052) (485,350) (338) (150,052)
Issuance of common stock —
 88,656
Proceeds from exercise of stock options 813
 319
 54
 813
Dividends paid - common stock (3,726) (3,492) (4,751) (3,726)
Purchase of treasury shares (960) (1,002) (998) (960)
Net cash provided by financing activities 114,027
 172,002
 129,404
 114,027
        
Net increase in cash and cash equivalents 4,217
 160,824
 177,473
 4,217
Cash and cash equivalents at beginning of period 330,658
 198,385
 679,527
 330,658
Cash and cash equivalents at end of period $334,875
 $359,209
 $857,000
 $334,875
        
Supplemental Disclosures of Cash Flow Information  
  
  
  
Cash paid during the period for:  
  
  
  
Interest $11,602
 $6,348
 $25,741
 $11,602
Income taxes 2
 18
 49
 2
Loans (excluding purchased loans) transferred to other real estate owned 1,176
 1,657
 264
 1,176
Purchased loans transferred to other real estate owned 457
 1,489
 2,523
 457
Loans transferred from loans held for sale to loans held for investment 73,374
 45,828
 —
 73,374
Loans transferred from loans held for investment to loans held for sale 2,796
 —
 —
 2,796
Loans provided for the sales of other real estate owned —
 264
 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 82,981
 —
 1,335
 82,981
Liabilities assumed in business acquisitions 5,705
 —
 (792) 5,705
Issuance of common stock in acquisitions 50,011
 —
 —
 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 (9,432) (194) 3,821
 (9,432)
Change in unrealized gain (loss) on cash flow hedge, net of tax 281
 43
 (173) 281
        
  
 (Concluded)
  
 (Concluded)
 
See notes to unaudited consolidated financial statements.
 



AMERIS BANCORP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
March 31, 20182019
 
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 March 31, 2018,2019, 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, (consistingconsisting 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 March 31, 20182019 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, 2017.2018.
 
Cash and Cash Equivalents
 
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold. The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Atlanta. The reserve requirement as of March 31, 20182019 and December 31, 20172018 was $46.0$52.7 million and $44.1$61.2 million, respectively, and was met by cash on hand which is reported on the Company's consolidated balance sheetsheets 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 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. These agent relationship, trade name and non-compete agreement intangible assets were initially recognized based on a valuation performed as of the consummation date and are 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 20182019

ASU 2018-02 -2016-02 – Income Statement-Reporting Comprehensive IncomeLeases (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 842)(" (“ASU 2018-02"2016-02”). Issued in February 2018, ASU 2018-02 seeks to help entities reclassify certain stranded income tax effects in accumulated other comprehensive income resulting from2016-02 amends the Tax Cuts and Jobs Actexisting standards for lease accounting effectively requiring that most leases be carried on the balance sheets of 2017 (the "Tax Reform Act"), enacted on December 22, 2017.  ASU 2018-02 was issued in response to concerns regarding current accounting guidance that requires deferred tax assets and deferred tax liabilities to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date, even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income, rather than net income,lessees by requiring them to recognize a right-of-use asset and as a result the stranded tax effects would not reflect the appropriate tax rate.  The amendments ofcorresponding lease liability. ASU 2018-02 allow an entity2016-02 includes qualitative and quantitative disclosure requirements intended to make a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects, which is the difference between the historical corporate income tax rate of 35.0% and the newly enacted corporate income tax rate of 21.0%.  ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2018; however, public business entities are allowed to early adopt the amendments of ASU 2018-02 in any interim period for which the financial statements have not yet been issued.  The amendments of ASU 2018-02 may be applied either at the beginning of the period (annual or interim) of adoption or retrospectivelyprovide


to eachgreater insight into the nature of the period(s) in which the effect of the change in the U.S. federal corporate tax rate in the Tax Reform Act is recognized.  As a result of the remeasurement of the Company's deferred tax assets and deferred tax liabilities following the enactment of the Tax Reform Act, accumulated other comprehensive loss included $392,000 of stranded tax effects at December 31, 2017.  The Company early adopted ASU 2018-02 during the first quarter of 2018 and made an election to reclassify the stranded tax effects from accumulated other comprehensive loss to retaining earnings at the beginning of the period of adoption.  The reclassification of the stranded tax effects resulted in an increase of $392,000 in accumulated other comprehensive loss and a corresponding increase of $392,000 in retained earnings.

ASU 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). The purposes of ASU 2017-12 are to (1) improve the transparency and understandability of information conveyed in financial statements about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with the economic objectives of those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018 with early adoption in an interim period permitted. ASU 2017-12 requiresleasing activities. The standard may be adopted using a modified retrospective transition method in which the Company will recognize thewith a cumulative effect of the change on the opening balance of each affected component ofadjustment to equity in the statement of financial position as of the beginning of the fiscal yearperiod in which it is adopted. Alternatively, the standard may be adopted using an optional transition method where initial application of adoption. During the first quarter of 2018, the Company early adopted the provisions of ASU 2017-12, and the adoption did not have a material impact on the Company's consolidated financial statements.
ASU 2017-09 – Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms of a share-based award must be accounted for as a modification. Companies must apply the modification accounting guidance if any of the following change: the share-based award’s fair value, vesting provisions or classification as an equity instrument or a liability instrument. The new guidance should reduce diversity in practice and result in fewer changes to the terms of share-based awards being accounted for as modifications,2016-02 are applied as the guidance will allow companiesdate of adoption, resulting in no adjustment to make certain non-substantive changes to share-based awards without accounting for them as modifications.amounts reported in prior periods. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. During the first quarter of 2018, the Company adopted the provisions of ASU 2017-09, and the adoption did not have a material impact on the Company's consolidated financial statements.

ASU 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. The standard provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. During the first quarter of 2018, the Company adopted the provisions of ASU 2017-01, and the adoption did not have a material impact on the Company's consolidated financial statements.

ASU 2016-01 – Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01").  ASU 2016-01 (1) requires equity investments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with changes recognized through net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by allowing a qualitative assessment similar to those performed on long-lived assets, goodwill or intangibles to be utilized at each reporting period; (3) eliminates the use of the entry price method requiring all preparers to utilize the exit price notion consistent with Topic 820, Fair Value Measurement in disclosing the fair value of financial instruments measured at amortized cost; (4) requires separate disclosure within other comprehensive income of changes in the fair value of liabilities due to instrument-specific credit risk when the fair value option has been elected; and (5) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. ASU 2016-012016-02 is effective for annual reporting periods beginning after December 15, 2017,2018, and interim periods within those annual periods. DuringThe Company adopted ASU 2016-02 during the first quarter of 2018,2019 and elected the optional transition method. The Company also elected the package of practical expedients provided in the guidance which permits the Company adopted ASU 2016-01. Other than changing fromto not reassess under the entry price methodnew standard the prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the hindsight practical expedient to an exit price notiondetermine lease term and in disclosing fair value of financial instruments at amortized cost, the adoption did not have a material impact on the Company's consolidated financial statements.
ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). On January 1, 2018, the Company adopted ASU 2014-09 and all subsequent amendments to the ASU (collectively "ASC 606") which (1) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (2) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as other real estate owned ("OREO"). The majorityassessing impairment of the Company's revenues come from interest incomeright-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 other sources, including loans, leases, investment securitiesa cumulative effect decrease to retained earnings of $276,000. The right-of-use asset and derivative financial instruments, that are outside the scope of ASC 606. With the exception of gains/losses on the sale of OREO, the Company's services that fall within the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Company satisfies its obligations to the customer. Services within the scope of ASC 606 reported in noninterest income include service charges on deposit accounts, debit card interchange fees, and ATM fees. The net of gains and losses on the sale of OREOlease liability are recorded in credit resolution


related expensesthe consolidated balance sheets in the Company's consolidated statement of incomeother assets and comprehensive income. The adoption of ASC 606 did not change the timing or amount of revenue recognized for in-scope revenue streams. Accordingly, no cumulative effect adjustment was recorded under the modified retrospective transition method. See Note 15 for further discussion on the Company's accounting policies for revenue sources with the scope of ASC 606.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 reasonably certain to exercise the option. Costs incurred in the preliminary project and post-implementation stages are expensed as incurred. Training costs and certain data conversion costs also cannot be capitalized for a CCA that is a service contract. Amortization expense of capitalized implementation costs will be presented in the same income statement caption as the CCA fees. Similarly, capitalized implementation costs will be presented in the same balance sheet caption as any prepaid CCA fees, and cash flows from capitalized implementation costs will be classified in the statement of cash flows in the same manner as payments made for the CCA fees. The requirements of ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. ASU 2018-15 is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated balance sheet, consolidated statement of income and comprehensive income, consolidated statement of shareholders’ equity and consolidated statement of cash flows, but it is not expected to have a material impact.

ASU 2018-13– Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13). ASU 2018-13 changes fair value measurement disclosure requirements by removing certain requirements, modifying certain requirements and adding certain new requirements. Disclosure requirements removed include the following: transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for determining when transfers between any of the three levels have occurred; the valuation processes for Level 3 measurements; and the changes in unrealized gains or losses presented in earnings for Level 3 instruments held at end of the reporting period. Disclosure requirements that have been modified include the following: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and clarification that the Level 3 measurement uncertainty disclosure should communicate information about the uncertainty at the balance sheet date. New disclosure requirements include the following: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 instruments held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used for Level 3 measurements or disclosure of other quantitative information in place of the weighted average to the extent that it would be a more reasonable and rational method to reflect the distribution of unobservable inputs. ASU 2018-13 is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on the Company’s fair value measurement disclosures, but it is not expected to have a material impact.
ASU 2017-04 – Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitativequantitative 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 standardASU 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 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 standardASU 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 identifiedcontracted with the software vendor of choice for implementation, established an implementation timelinetime-line, conducts regular meetings to monitor the project's status, and continues to stay current on implementation issues and concerns.
ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends During the existing standards for leasethird 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 effectively requiring most leases be carried onprofessional services firm to assist management with the balance sheetstechnical accounting, internal control, and project management aspects of the related lessees byCompany'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 themattention, and developing timelines to recognize a right-of-use asset and a corresponding lease liability.address those areas. Identification of financial assets in scope for ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative effect adjustment to equity as of the beginning of the period in which it2016-13 is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company has several leased facilities, which are currently treated as operating leases, and are not currently shown on the Company’s consolidated balance sheet. After ASU 2016-02 is implemented, the Company expects to begin reporting these lease agreements on the balance sheet as a right-of-use asset 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 it is not expected to have a material impact.
substantially complete.


NOTE 2 – PENDING ACQUISITION

NOTE 2. PENDING ACQUISITIONS

Hamilton State Bancshares, Inc.

On January 25,December 17, 2018, the Company and Hamilton State Bancshares, Inc.,Fidelity Southern Corporation, a Georgia corporation (“Hamilton”("Fidelity"), entered into an Agreement and Plan of Merger (the "Hamilton"Fidelity Merger Agreement") pursuant to which HamiltonFidelity will merge into Ameris, with Ameris as the surviving entity and immediately thereafter, Hamilton StateFidelity Bank, a Georgia bank wholly owned by Hamilton,Fidelity, will be merged into Ameris Bank, with Ameris Bank as the surviving entity. Hamilton StateAt March 31, 2019, Fidelity Bank operates 28operated 70 full-service banking locations, 2451 of which arewere 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, MSA, two of which are located in the Gainesville, Georgia MSA, and two of which are located just outside the Atlanta, Georgia MSA.Jacksonville, Orlando, Tallahassee, and Sarasota-Bradenton, Florida. Under the terms of the HamiltonFidelity Merger Agreement, Hamilton'sFidelity's shareholders will receive $0.93 in cash and 0.160.80 shares of Ameris common stock for each share of HamiltonFidelity 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 $405.7$750.7 million in the aggregate based upon the $53.45$34.02 per share closing price of the Company’sCompany's common stock as of January 25, 2018.December 14, 2018, the last trading date before announcement. The merger is subject to customary closing conditions, including the receipt of regulatory approvals and the approval of Hamilton's shareholders.approvals. The transaction is expected to close during the thirdsecond quarter of 2018.2019. As of December 31, 2017, Hamilton2018, Fidelity reported assets of $1.79$4.73 billion, gross loans of $1.30$3.92 billion and deposits of $1.55$3.98 billion. The purchase price will be allocated among the net assets of HamiltonFidelity acquired as appropriate, with the remaining balance being reported as goodwill.

Atlantic Coast Financial Corporation

On November 16, 2017, the Company and Atlantic Coast Financial Corporation, a Maryland corporation (“Atlantic”), entered into an Agreement and Plan of Merger (the "Atlantic Merger Agreement") pursuant to which Atlantic will merge into Ameris, with Ameris as the surviving entity and immediately thereafter, Atlantic Coast Bank, a Florida bank wholly owned by Atlantic, will be merged into Ameris Bank, with Ameris Bank as the surviving entity. Atlantic Coast Bank operates 12 full-service banking locations, eight of which are located in the Jacksonville, Florida MSA, three of which are located in the Waycross, Georgia MSA, and one of which is located in the Douglas, Georgia MSA. Under the terms of the Atlantic Merger Agreement, Atlantic's stockholders will receive $1.39 in cash and 0.17 shares of Ameris common stock for each share of Atlantic common stock they hold. The estimated purchase price is $145.0 million in the aggregate based upon the $47.30 per share closing price of the Company’s common stock as of November 16, 2017. All regulatory and stockholder approvals required for the merger have been received, and the transaction is expected to close in May 2018. As of December 31, 2017, Atlantic reported assets of $983.3 million, gross loans of $851.4 million and deposits of $675.8 million. The purchase price will be allocated among the net assets of Atlantic acquired as appropriate, with the remaining balance being reported as goodwill.


NOTE 3 – BUSINESS COMBINATIONCOMBINATIONS

US Premium Finance Holding Company

On January 31, 2018,In accounting for business combinations, the Company closed on the purchase of the final 70% of the outstanding shares of common stock of US Premium Finance Holding Company, a Florida corporation ("USPF"), completing its acquisition of USPF and making USPF a wholly owned subsidiary of the Company. 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. The present value of the contingent earn-out consideration expected to be paid is $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.

The acquisition of USPF will be accounted for usinguses the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, assets acquired, liabilities assumed and consideration exchanged are recorded at their respective acquisition date fair values. Any identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented or exchanged separately from the entity). If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. In addition, management


will assess and record the deferred tax assets and deferred tax liabilities resulting from differences in the carrying value of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes, including acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code of 1986, as amended.

Hamilton State Bancshares, Inc.

On June 29, 2018, the Company completed its acquisition of Hamilton State Bancshares, Inc. ("Hamilton"), a bank holding company headquartered in Hoschton, Georgia. Upon consummation of the acquisition, Hamilton was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Hamilton's wholly owned banking subsidiary, Hamilton State Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as Hamilton State Bank had a total of 28 full-service branches located in Atlanta, Georgia and the surrounding area, as well as in Gainesville, Georgia. Under the terms of the merger agreement, Hamilton's shareholders received 0.16 shares of Ameris common stock and $0.93 in cash for each share of Hamilton voting common stock or nonvoting common stock they previously held. As a result, the Company issued 6,548,385 common shares at a fair value of $349.4 million and paid $47.8 million in cash to the former shareholders of Hamilton as merger consideration.



The 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 closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company continues its evaluation of the facts and circumstances available as of June 29, 2018, to assign fair values to assets acquired and liabilities assumed which could result in further adjustments to the fair values presented below. Because final external valuations were not complete as of 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 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 banks102,156
 —
  —
  102,156
Time deposits in other banks11,558
 —
  —
  11,558
Investment securities288,206
 (2,376)(a) —
  285,830
Other investments2,094
 —
  —
  2,094
Loans1,314,264
 (15,528)(b) (696)(k) 1,298,040
Less allowance for loan losses(11,183) 11,183
(c) —
  —
     Loans, net1,303,081
 (4,345)  (696)  1,298,040
Other real estate owned847
 —
  —
  847
Premises and equipment27,483
 —
  (723)(l) 26,760
Other intangible assets, net18,755
 (2,755)(d) 7,610
(m) 23,610
Cash value of bank owned life insurance4,454
 —
  —
  4,454
Deferred income taxes, net12,445
 (6,308)(e) 343
(n) 6,480
Other assets13,053
 —
  (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-bearing1,201,324
 (1,896)(f) 4,783
(p) 1,204,211
          Total deposits1,582,363
 (1,896)  4,783
  1,585,250
Other borrowings10,687
 (66)(g) 286
(q) 10,907
Subordinated deferrable interest debentures3,093
 (658)(h) (143)(r) 2,292
Other liabilities10,460
 2,391
(i) —
  12,851
     Total liabilities1,606,603
 (229)  4,926
  1,611,300
Net identifiable assets acquired over (under) liabilities assumed191,934
 (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 issued6,548,385
        
     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 excess of the purchase price over the fair value of net assets acquired, was recorded in the Hamilton acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $1.30 billion of loans at fair value, net of $16.2 million, or 1.23%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $18.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(dollars in thousands) 
Contractually required principal and interest$21,223
Non-accretable difference(2,090)
Cash flows expected to be collected19,133
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 Jacksonville, Florida. Upon consummation of the acquisition, Atlantic was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Atlantic's wholly owned banking subsidiary, Atlantic Coast Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as Atlantic Coast Bank had a total of 12 full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida, Waycross, Georgia and Douglas, Georgia. Under the terms of the merger agreement, Atlantic's shareholders received 0.17 shares of Ameris common stock and $1.39 in cash for each share of Atlantic common stock they previously held. As a result, the Company issued 2,631,520 common shares at a fair value of $147.8 million and paid $21.5 million in cash to the former shareholders of Atlantic as merger consideration.




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 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 Company continues its evaluation of the facts and circumstances available as of May 25, 2018, to assign fair values to assets acquired and liabilities assumed which could result in further adjustments to the fair values presented below. Because final external valuations were not complete as of March 31, 2019, management continues to 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 banks22,149
 —
  —
  22,149
Investment securities35,186
 (60)(a) —
  35,126
Other investments9,576
 —
  —
  9,576
Loans held for sale358
 —
  —
  358
Loans777,605
 (19,423)(b) (2,478)(k) 755,704
Less allowance for loan losses(8,573) 8,573
(c) —
  —
     Loans, net769,032
 (10,850)  (2,478)  755,704
Other real estate owned1,837
 (796)(d) —
  1,041
Premises and equipment12,591
 (1,695)(e) —
  10,896
Other intangible assets, net—
 5,937
(f) 1,551
(l) 7,488
Cash value of bank owned life insurance18,182
 —
  —
  18,182
Deferred income taxes, net5,782
 709
(g) 1,595
(m) 8,086
Other assets3,604
 (634)(h) 82
(n) 3,052
     Total assets$882,287
 $(7,389)  $750
  $875,648
Liabilities         
Deposits:         
     Noninterest-bearing$69,761
 $—
  $—
  $69,761
     Interest-bearing514,935
 (554)(i) 1,025
(o) 515,406
          Total deposits584,696
 (554)  1,025
  585,167
Other borrowings204,475
 —
  —
  204,475
Other liabilities8,367
 (13)(j) —
  8,354
     Total liabilities797,538
 (567)  1,025
  797,996
Net identifiable assets acquired over (under) liabilities assumed84,749
 (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 issued2,631,520
        
     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 excess of the purchase price over the fair value of net assets acquired, was recorded in the Atlantic acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $755.7 million of loans at fair value, net of $21.9 million, or 2.82%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $10.8 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

(dollars in thousands) 
Contractually required principal and interest$16,077
Non-accretable difference(4,115)
Cash flows expected to be collected11,962
Accretable yield(1,199)
Total purchased credit-impaired loans acquired$10,763

The following table presents the acquired loan data for the Atlantic acquisition.
(dollars in thousands)
Fair Value of
Acquired Loans at
Acquisition Date
 
Gross Contractual
Amounts Receivable
at Acquisition Date
 
Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
Acquired receivables subject to ASC 310-30$10,763
 $16,077
 $4,115
Acquired receivables not subject to ASC 310-30$744,941
 $1,041,768
 $—

US Premium Finance Holding Company

On January 31, 2018, the Company closed on the purchase of the final 70% of the outstanding shares of common stock of US Premium Finance Holding Company, 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 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 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.

Prior to January 31, 2018, USPF was a private entity and the information necessary to complete the initial accounting for the business combination is incomplete at this time. Management has not yet finalized its determination of the fair value ofThe following table presents the assets acquired and liabilities assumed in theof USPF acquisition. Accordingly, as of MarchJanuary 31, 2018 at their initial and subsequent fair value estimates, as recorded by the entire $83.0 million purchase price is reflected as goodwill inCompany.  The fair value estimates were subject to refinement for up to one year after the Company's consolidated balance sheet, pending finalizationclosing date of the fair value ofacquisition for new information obtained about facts and circumstances that existed at the assets acquired and liabilities assumed.acquisition date. The assets acquired are expected to include only identifiable intangible assets related to insurance agent relationships that referlead to referral of insurance premium finance loans to USPF, customer relationships that result in repeat premium finance loans for insurance policy renewals, the US"US Premium FinanceFinance" trade name and a non-compete agreement with a former USPF shareholder. The
(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 issued1,073,158
        
     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.
Goodwill of $64.5 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the USPF acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

During the second quarter of 2018, the Company recorded $2.0 million in other noninterest income in the consolidated statements of income 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 statements of income and comprehensive income. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitionsacquisition had occurred on January 1, 2017, unadjusted for potential cost savings.
Three Months Ended
March 31,		Three Months Ended
March 31,
(dollars in thousands, except per share data; shares in thousands)2018 2017 2018
Net interest income and noninterest income$95,265
 $86,296
 $95,265
Net income$26,876
 $22,174
 $26,876
Net income available to common shareholders$26,876
 $22,174
 $26,876
Income per common share available to common shareholders – basic$0.70
 $0.61
 $0.70
Income per common share available to common shareholders – diluted$0.70
 $0.60
 $0.70
Average number of shares outstanding, basic38,246
 36,633
 38,246
Average number of shares outstanding, diluted38,529
 37,009
 38,529

NOTE 4 – 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
March 31, 2018        
March 31, 2019        
State, county and municipal securities 105,821
 987
 (534) 106,274
 $106,468
 $1,312
 $(40) $107,740
Corporate debt securities 57,134
 598
 (635) 57,097
 56,901
 412
 (161) 57,152
Mortgage-backed securities 699,990
 456
 (15,232) 685,214
 1,072,783
 5,867
 (9,107) 1,069,543
Total debt securities $862,945
 $2,041
 $(16,401) $848,585
 $1,236,152
 $7,591
 $(9,308) $1,234,435
                
December 31, 2017        
December 31, 2018        
State, county and municipal securities 135,968
 1,989
 (163) 137,794
 $149,670
 $1,367
 $(304) $150,733
Corporate debt securities 46,659
 721
 (237) 47,143
 67,123
 718
 (527) 67,314
Mortgage-backed securities 630,666
 1,762
 (6,492) 625,936
 982,183
 4,172
 (11,979) 974,376
Total debt securities $813,293
 $4,472
 $(6,892) $810,873
 $1,198,976
 $6,257
 $(12,810) $1,192,423

The amortized cost and estimated fair value of available for sale securities at March 31, 20182019 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 $11,606
 $11,643
 $14,170
 $14,178
Due from one year to five years 46,869
 46,432
 60,032
 60,448
Due from five to ten years 64,190
 64,842
 67,648
 68,541
Due after ten years 40,290
 40,454
 21,519
 21,725
Mortgage-backed securities 699,990
 685,214
 1,072,783
 1,069,543
 $862,945
 $848,585
 $1,236,152
 $1,234,435
 
Securities with a carrying value of approximately $368.3$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 March 31, 2018,2019, compared with $403.3$510.0 million at December 31, 2017.2018.
 


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 March 31, 20182019 and December 31, 2017.2018.
 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
March 31, 2018  
  
  
  
  
  
March 31, 2019  
  
  
  
  
  
State, county and municipal securities 54,182
 (448) 4,662
 (86) 58,844
 (534) $5,641
 $(3) $13,157
 $(37) $18,798
 $(40)
Corporate debt securities 492
 (126) 18,501
 (509) 18,993
 (635) 9,168
 (60) 8,049
 (101) 17,217
 (161)
Mortgage-backed securities 422,035
 (8,322) 172,548
 (6,910) 594,583
 (15,232) 78,426
 (174) 478,497
 (8,933) 556,923
 (9,107)
Total debt securities $476,709
 $(8,896) $195,711
 $(7,505) $672,420
 $(16,401) $93,235
 $(237) $499,703
 $(9,071) $592,938
 $(9,308)
                        
December 31, 2017  
  
  
  
  
  
December 31, 2018  
  
  
  
  
  
State, county and municipal securities 33,976
 (115) 4,725
 (48) 38,701
 (163) $23,784
 $(52) $33,873
 $(252) $57,657
 $(304)
Corporate debt securities 3,465
 (35) 18,853
 (202) 22,318
 (237) 17,291
 (111) 17,952
 (416) 35,243
 (527)
Mortgage-backed securities 262,353
 (2,401) 190,368
 (4,091) 452,721
 (6,492) 119,745
 (580) 435,749
 (11,399) 555,494
 (11,979)
Total debt securities $299,794
 $(2,551) $213,946
 $(4,341) $513,740
 $(6,892) $160,820
 $(743) $487,574
 $(12,067) $648,394
 $(12,810)
 
As of March 31, 2018,2019, the Company’s securities portfolio consisted of 390488 securities, 277246 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 March 31, 2018,2019, the Company held 226225 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 March 31, 2018.2019.

At March 31, 2018,2019, the Company held 4113 state, county and municipal securities and 10eight 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 March 31, 2018.2019.
 
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 March 31, 20182019 or December 31, 2017.2018.
 
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 March 31, 2018,2019, 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, 2018,2019, these investments are not considered impaired on an other-than-temporary basis.
 
At March 31, 20182019 and December 31, 2017,2018, 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 three months ended March 31, 20182019 and 2017:2018:
(dollars in thousands) March 31,
2018		 March 31,
2017		 March 31,
2019		 March 31,
2018
Gross gains on sales of securities $332
 $—
 $522
 $332
Gross losses on sales of securities (295) —
 (464) (295)
Net realized gains on sales of securities available for sale $37
 $—
 $58
 $37
        
Sales proceeds $36,685
 $—
 $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 5 – 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 unrelated third parties consumer installment home improvement loans made to borrowers throughout the United States. As of March 31, 20182019 and December 31, 2017,2018, the net carrying value of these consumer installment home improvement loans was approximately $280.3$382.5 million and $273.7$399.9 million, respectively, and such loans are reported in the consumer installment loan category. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of March 31, 20182019 and December 31, 2017,2018, the net carrying value of commercial insurance premium loans was approximately $501.9$487.0 million and $482.5$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 and warehouse 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 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)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Commercial, financial and agricultural$1,387,437
 $1,362,508
$1,382,907
 $1,316,359
Real estate – construction and development631,504
 624,595
676,563
 671,198
Real estate – commercial and farmland1,636,654
 1,535,439
1,894,937
 1,814,529
Real estate – residential1,080,028
 1,009,461
1,365,482
 1,403,000
Consumer installment316,363
 324,511
436,469
 455,371
$5,051,986
 $4,856,514
$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 $818.6 million$2.47 billion and $861.6 million$2.59 billion at March 31, 20182019 and December 31, 2017,2018, 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)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Commercial, financial and agricultural$64,612
 $74,378
$327,972
 $372,686
Real estate – construction and development48,940
 65,513
239,413
 227,900
Real estate – commercial and farmland465,870
 468,246
1,280,515
 1,337,859
Real estate – residential236,453
 250,539
597,735
 623,199
Consumer installment2,712
 2,919
26,636
 27,188
$818,587
 $861,595
$2,472,271
 $2,588,832
 
A rollforward of purchased loans for the three months ended March 31, 20182019 and 20172018 is shown below:
(dollars in thousands)March 31,
2018		 March 31,
2017		March 31,
2019		 March 31,
2018
Balance, January 1$861,595
 $1,069,191
$2,588,832
 $861,595
Charge-offs, net of recoveries(151) (803)
Charge-offs(184) (151)
Accretion1,571
 3,097
2,980
 1,571
Transfers to purchased other real estate owned(457) (1,489)(2,523) (457)
Payments received(43,971) (63,061)
Payments received, net of principal advances(116,834) (43,971)
Ending balance$818,587
 $1,006,935
$2,472,271
 $818,587

The following is a summary of changes in the accretable discounts of purchased loans during the three months ended March 31, 20182019 and 2017:2018:
(dollars in thousands)March 31,
2018		 March 31,
2017		March 31,
2019		 March 31,
2018
Balance, January 1$20,192
 $30,624
$40,496
 $20,192
Accretion(1,571) (3,097)(2,980) (1,571)
Accretable discounts removed due to charge-offs—
 (13)
Transfers between non-accretable and accretable discounts, net146
 (659)(1,869) 146
Ending balance$18,767
 $26,855
$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 March 31, 2018,2019, purchased loan pools totaled $319.6$253.7 million and consisted of whole-loan residential mortgages on properties outside the Company’s markets, with principal balances totaling $316.2$252.0 million and $3.4$1.7 million of remaining purchase premium paid at acquisition. As of December 31, 2017,2018, purchased loan pools totaled $328.2$262.6 million with principal balances totaling $324.4$260.5 million and $3.8$2.1 million of remaining purchase premium paid at acquisition.

At March 31, 2018 and December 31, 2017, one loan in the2019, purchased loan pools with aincluded principal balancebalances of $902,000 and $904,000, respectively, was classified as a troubled debt restructuring and$400,000 risk-rated grade 7 (Substandard), while all other loans included in the purchased loan pools were performing current loans risk-rated grade 3. During the second quarter of 2017, this troubled debt restructuring defaulted on its restructured terms and was placed on nonaccrual status. During the fourth quarter of 2017, this troubled debt restructuring was returned to accrual status.3 (Good Credit). At March 31, 2019,


purchased loan pools included principal balances of $400,000 on nonaccrual status and had no loans accounted for as troubled debt 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 and had no loans classified as troubled debt restructurings.

At March 31, 2019 and December 31, 2017,2018, the Company had allocated $1.0 million$697,000 and $1.1 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)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Commercial, financial and agricultural$1,548
 $1,306
$1,349
 $1,412
Real estate – construction and development518
 554
1,244
 892
Real estate – commercial and farmland3,555
 2,665
3,496
 4,654
Real estate – residential8,311
 9,194
11,118
 10,465
Consumer installment488
 483
426
 529
$14,420
 $14,202
$17,633
 $17,952

The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:
(dollars in thousands)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Commercial, financial and agricultural$796
 $813
$3,857
 $1,199
Real estate – construction and development3,112
 3,139
5,933
 6,119
Real estate – commercial and farmland4,347
 5,685
5,061
 5,534
Real estate – residential7,648
 5,743
8,402
 10,769
Consumer installment37
 48
593
 486
$15,940
 $15,428
$23,846
 $24,107




The following table presents an analysis of past-due loans, excluding purchased past-due loans as of March 31, 20182019 and December 31, 2017:2018: 
(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
March 31, 2018 
  
  
  
  
  
  
March 31, 2019 
  
  
  
  
  
  
Commercial, financial and agricultural$10,081
 $5,750
 $3,430
 $19,261
 $1,368,176
 $1,387,437
 $2,383
$5,270
 $2,784
 $4,222
 $12,276
 $1,370,631
 $1,382,907
 $3,416
Real estate – construction and development1,202
 168
 166
 1,536
 629,968
 631,504
 —
957
 531
 692
 2,180
 674,383
 676,563
 —
Real estate – commercial and farmland4,189
 590
 1,288
 6,067
 1,630,587
 1,636,654
 —
2,784
 3,276
 2,652
 8,712
 1,886,225
 1,894,937
 —
Real estate – residential11,907
 3,058
 7,207
 22,172
 1,057,856
 1,080,028
 —
13,394
 1,287
 9,895
 24,576
 1,340,906
 1,365,482
 —
Consumer installment1,033
 639
 413
 2,085
 314,278
 316,363
 114
1,752
 929
 541
 3,222
 433,247
 436,469
 260
Total$28,412
 $10,205
 $12,504
 $51,121
 $5,000,865
 $5,051,986
 $2,497
$24,157
 $8,807
 $18,002
 $50,966
 $5,705,392
 $5,756,358
 $3,676
                          
December 31, 2017 
  
  
  
  
  
  
December 31, 2018 
  
  
  
  
  
  
Commercial, financial and agricultural$8,124
 $3,285
 $6,978
 $18,387
 $1,344,121
 $1,362,508
 $5,991
$6,479
 $5,295
 $4,763
 $16,537
 $1,299,822
 $1,316,359
 $3,808
Real estate – construction and development810
 23
 288
 1,121
 623,474
 624,595
 —
1,218
 481
 725
 2,424
 668,774
 671,198
 —
Real estate – commercial and farmland869
 787
 1,940
 3,596
 1,531,843
 1,535,439
 —
1,625
 530
 3,645
 5,800
 1,808,729
 1,814,529
 —
Real estate – residential8,772
 2,941
 7,041
 18,754
 990,707
 1,009,461
 —
11,423
 4,631
 8,923
 24,977
 1,378,023
 1,403,000
 —
Consumer installment1,556
 472
 329
 2,357
 322,154
 324,511
 —
2,344
 1,167
 735
 4,246
 451,125
 455,371
 414
Total$20,131
 $7,508
 $16,576
 $44,215
 $4,812,299
 $4,856,514
 $5,991
$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 March 31, 20182019 and December 31, 2017:2018: 
(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
March 31, 2018 
  
  
  
  
  
  
March 31, 2019 
  
  
  
  
  
  
Commercial, financial and agricultural$103
 $—
 $778
 $881
 $63,731
 $64,612
 $—
$3,551
 $45
 $1,209
 $4,805
 $323,167
 $327,972
 $—
Real estate – construction and development473
 31
 2,561
 3,065
 45,875
 48,940
 —
1,112
 —
 5,473
 6,585
 232,828
 239,413
 —
Real estate – commercial and farmland1,589
 1,022
 1,515
 4,126
 461,744
 465,870
 —
3,003
 170
 2,403
 5,576
 1,274,939
 1,280,515
 —
Real estate – residential4,228
 591
 5,594
 10,413
 226,040
 236,453
 —
7,488
 1,747
 5,317
 14,552
 583,183
 597,735
 —
Consumer installment20
 —
 33
 53
 2,659
 2,712
 —
732
 97
 269
 1,098
 25,538
 26,636
 —
Total$6,413
 $1,644
 $10,481
 $18,538
 $800,049
 $818,587
 $—
$15,886
 $2,059
 $14,671
 $32,616
 $2,439,655
 $2,472,271
 $—
                          
December 31, 2017 
  
  
  
  
  
  
December 31, 2018 
  
  
  
  
  
  
Commercial, financial and agricultural$—
 $33
 $760
 $793
 $73,585
 $74,378
 $—
$421
 $416
 $1,015
 $1,852
 $370,834
 $372,686
 $—
Real estate – construction and development87
 31
 2,517
 2,635
 62,878
 65,513
 —
627
 370
 5,273
 6,270
 221,630
 227,900
 —
Real estate – commercial and farmland1,190
 701
 2,724
 4,615
 463,631
 468,246
 —
1,935
 736
 1,698
 4,369
 1,333,490
 1,337,859
 —
Real estate – residential2,722
 1,585
 2,320
 6,627
 243,912
 250,539
 —
12,531
 2,407
 7,005
 21,943
 601,256
 623,199
 —
Consumer installment57
 4
 43
 104
 2,815
 2,919
 —
679
 237
 249
 1,165
 26,023
 27,188
 —
Total$4,056
 $2,354
 $8,364
 $14,774
 $846,821
 $861,595
 $—
$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 EndedAs of and for the Period Ended
(dollars in thousands)March 31,
2018		 December 31,
2017		 March 31,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Nonaccrual loans$14,420
 $14,202
 $18,281
$17,633
 $17,952
 $14,420
Troubled debt restructurings not included above11,375
 13,599
 13,659
11,463
 9,323
 11,375
Total impaired loans$25,795
 $27,801
 $31,940
$29,096
 $27,275
 $25,795
          
Interest income recognized on impaired loans$239
 $1,010
 $240
Foregone interest income on impaired loans$190
 $197
 $274
Quarter-to-date interest income recognized on impaired loans$182
 $202
 $239
Quarter-to-date foregone interest income on impaired loans$209
 $217
 $190
 
The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of March 31, 2018,2019, December 31, 20172018 and March 31, 2017:2018:
(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
Unpaid
Contractual
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related
Allowance
 
Three
 Month
Average
Recorded
Investment
March 31, 2018 
  
  
  
  
  
March 31, 2019 
  
  
  
  
  
Commercial, financial and agricultural$1,874
 $985
 $602
 $1,587
 $136
 $1,467
$1,761
 $871
 $593
 $1,464
 $180
 $1,566
Real estate – construction and development746
 567
 127
 694
 1
 833
1,727
 621
 764
 1,385
 209
 1,211
Real estate – commercial and farmland9,515
 522
 7,639
 8,161
 1,216
 7,753
7,066
 663
 5,788
 6,451
 578
 6,984
Real estate – residential14,908
 4,912
 9,946
 14,858
 980
 14,891
19,693
 6,893
 12,466
 19,359
 712
 17,934
Consumer installment526
 495
 —
 495
 —
 492
453
 437
 —
 437
 —
 491
Total$27,569
 $7,481
 $18,314
 $25,795
 $2,333
 $25,436
$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
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, 2017 
  
  
  
  
  
December 31, 2018 
  
  
  
  
  
Commercial, financial and agricultural$1,453
 $734
 $613
 $1,347
 $145
 $1,900
$1,902
 $1,155
 $513
 $1,668
 $4
 $1,736
Real estate – construction and development1,467
 471
 500
 971
 48
 1,065
1,378
 613
 424
 1,037
 3
 1,229
Real estate – commercial and farmland10,646
 729
 8,873
 9,602
 1,047
 8,910
8,950
 867
 6,649
 7,516
 1,591
 7,537
Real estate – residential17,416
 4,828
 10,565
 15,393
 1,005
 14,294
16,885
 5,144
 11,365
 16,509
 867
 14,719
Consumer installment523
 488
 —
 488
 —
 493
561
 545
 —
 545
 —
 584
Total$31,505
 $7,250
 $20,551
 $27,801
 $2,245
 $26,662
$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
Unpaid
Contractual
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related 
Allowance
 
Three
 Month
Average
Recorded
Investment
March 31, 2017 
  
  
  
  
  
March 31, 2018 
  
  
  
  
  
Commercial, financial and agricultural$3,891
 $202
 $2,503
 $2,705
 $637
 $2,283
$1,874
 $985
 $602
 $1,587
 $136
 $1,467
Real estate – construction and development1,875
 —
 1,048
 1,048
 356
 1,140
746
 567
 127
 694
 1
 833
Real estate – commercial and farmland12,450
 5,655
 5,795
 11,450
 1,572
 12,163
9,515
 522
 7,639
 8,161
 1,216
 7,753
Real estate – residential14,344
 2,422
 13,727
 16,149
 2,645
 16,866
14,908
 4,912
 9,946
 14,858
 980
 14,891
Consumer installment666
 —
 588
 588
 6
 601
526
 495
 —
 495
 —
 492
Total$33,226
 $8,279
 $23,661
 $31,940
 $5,216
 $33,053
$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 EndedAs of and for the Period Ended
(dollars in thousands)March 31,
2018		 December 31,
2017		 March 31,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Nonaccrual loans$15,940
 $15,428
 $23,606
$23,846
 $24,107
 $15,940
Troubled debt restructurings not included above20,649
 20,472
 20,448
19,443
 18,740
 20,649
Total impaired loans$36,589
 $35,900
 $44,054
$43,289
 $42,847
 $36,589
          
Interest income recognized on impaired loans$696
 $379
 $379
Foregone interest income on impaired loans$245
 $281
 $337
Quarter-to-date interest income recognized on impaired loans$672
 $918
 $696
Quarter-to-date foregone interest income on impaired loans$520
 $451
 $245

The following table presents an analysis of information pertaining to purchased impaired loans as of March 31, 2018,2019, December 31, 20172018 and March 31, 2017:2018:
(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
Unpaid
Contractual
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related 
Allowance
 
Three
 Month
Average
Recorded
Investment
March 31, 2018 
  
  
  
  
  
March 31, 2019 
  
  
  
  
  
Commercial, financial and agricultural$4,050
 $52
 $744
 $796
 $396
 $805
$11,125
 $2,795
 $1,094
 $3,889
 $—
 $2,560
Real estate – construction and development9,012
 426
 3,720
 4,146
 913
 4,152
13,295
 605
 6,339
 6,944
 497
 7,039
Real estate – commercial and farmland12,590
 861
 10,230
 11,091
 767
 11,744
13,448
 1,546
 9,618
 11,164
 670
 11,431
Real estate – residential22,820
 8,426
 12,093
 20,519
 745
 19,502
22,825
 8,823
 11,876
 20,699
 629
 21,500
Consumer installment46
 37
 —
 37
 —
 43
680
 593
 —
 593
 —
 540
Total$48,518
 $9,802
 $26,787
 $36,589
 $2,821
 $36,246
$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
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, 2017 
  
  
  
  
  
December 31, 2018 
  
  
  
  
  
Commercial, financial and agricultural$4,170
 $70
 $744
 $814
 $400
 $1,450
$5,717
 $473
 $757
 $1,230
 $—
 $1,101
Real estate – construction and development9,060
 282
 3,875
 4,157
 1,114
 4,218
13,714
 623
 6,511
 7,134
 476
 7,240
Real estate – commercial and farmland14,596
 1,224
 11,173
 12,397
 906
 12,840
14,766
 1,115
 10,581
 11,696
 684
 13,514
Real estate – residential20,867
 6,574
 11,910
 18,484
 821
 19,002
24,839
 8,185
 14,116
 22,301
 773
 23,146
Consumer installment57
 48
 —
 48
 —
 68
526
 486
 —
 486
 —
 487
Total$48,750
 $8,198
 $27,702
 $35,900
 $3,241
 $37,578
$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
Unpaid
Contractual
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related
Allowance
 
Three
Month
Average
Recorded
Investment
March 31, 2017 
  
  
  
  
  
March 31, 2018 
  
  
  
  
  
Commercial, financial and agricultural$2,806
 $151
 $225
 $376
 $—
 $534
$4,050
 $52
 $744
 $796
 $396
 $805
Real estate – construction and development25,748
 287
 3,203
 3,490
 250
 3,730
9,012
 426
 3,720
 4,146
 913
 4,152
Real estate – commercial and farmland30,419
 768
 17,532
 18,300
 855
 18,467
12,590
 861
 10,230
 11,091
 767
 11,744
Real estate – residential25,855
 7,155
 14,713
 21,868
 1,091
 22,529
22,820
 8,426
 12,093
 20,519
 745
 19,502
Consumer installment34
 20
 —
 20
 —
 22
46
 37
 —
 37
 —
 43
Total$84,862
 $8,381
 $35,673
 $44,054
 $2,196
 $45,282
$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 1 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.
 
Grade 2 – Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.
 
Grade 3 – Good Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 4 – Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.
 
Grade 5 – Fair Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 6 – Other Assets Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
 
Grade 7 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.
 
Grade 8 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
 
Grade 9 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.
 


The following table presents the loan portfolio, excluding purchased loans, by risk grade as of March 31, 20182019 and December 31, 20172018 (in thousands): 
Risk
Grade 		 Commercial,
Financial and
Agricultural		 Real Estate -
Construction and
Development		 Real Estate -
Commercial and
Farmland		 Real Estate -
Residential		 Consumer
Installment		 Total Commercial,
Financial and
Agricultural		 Real Estate -
Construction and
Development		 Real Estate -
Commercial and
Farmland		 Real Estate -
Residential		 Consumer
Installment		 Total
March 31, 2018
March 31, 2019March 31, 2019
1 $542,520
 $—
 $5,234
 $47
 $9,824
 $557,625
 $528,386
 $—
 $724
 $694
 $10,842
 $540,646
2 568,129
 969
 55,823
 48,554
 116
 673,591
 521,486
 516
 33,656
 31,944
 20
 587,622
3 133,302
 57,386
 917,751
 918,086
 24,192
 2,050,717
 152,722
 66,180
 923,222
 1,206,722
 23,269
 2,372,115
4 132,154
 561,624
 614,291
 86,689
 281,550
 1,676,308
 161,089
 593,309
 834,693
 98,050
 401,672
 2,088,813
5 333
 4,490
 6,494
 6,180
 2
 17,499
 13,131
 11,560
 56,333
 6,741
 20
 87,785
6 5,728
 4,435
 24,099
 5,385
 148
 39,795
 3,557
 1,415
 23,534
 4,372
 71
 32,949
7 5,264
 2,600
 12,962
 15,087
 531
 36,444
 2,536
 3,583
 22,775
 16,959
 575
 46,428
8 7
 —
 —
 —
 —
 7
 —
 —
 —
 —
 —
 —
9 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Total $1,387,437
 $631,504
 $1,636,654
 $1,080,028
 $316,363
 $5,051,986
 $1,382,907
 $676,563
 $1,894,937
 $1,365,482
 $436,469
 $5,756,358
                        
December 31, 2017
December 31, 2018December 31, 2018
1 $539,899
 $—
 $5,790
 $47
 $9,243
 $554,979
 $530,864
 $40
 $500
 $16
 $10,744
 $542,164
2 568,557
 1,005
 68,507
 49,742
 670
 688,481
 452,250
 681
 37,079
 33,043
 48
 523,101
3 125,740
 59,318
 966,391
 843,178
 39,352
 2,033,979
 174,811
 74,657
 888,433
 1,246,383
 23,844
 2,408,128
4 117,358
 552,918
 454,506
 88,537
 274,462
 1,487,781
 137,038
 582,456
 814,068
 94,143
 419,983
 2,047,688
5 330
 4,474
 6,408
 5,781
 3
 16,996
 13,714
 6,264
 30,364
 8,634
 78
 59,054
6 5,236
 4,207
 15,108
 5,339
 185
 30,075
 5,130
 4,091
 20,959
 4,881
 57
 35,118
7 5,381
 2,673
 18,729
 16,837
 596
 44,216
 2,552
 3,009
 23,126
 15,900
 617
 45,204
8 7
 —
 —
 —
 —
 7
 —
 —
 —
 —
 —
 —
9 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Total $1,362,508
 $624,595
 $1,535,439
 $1,009,461
 $324,511
 $4,856,514
 $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 March 31, 20182019 and December 31, 20172018 (in thousands):       
Risk
Grade
 
Commercial,
Financial and
Agricultural
 
Real Estate -
Construction and
Development
 
Real Estate -
Commercial and
Farmland
 
Real Estate -
Residential
 
Consumer
Installment
 Total 
Commercial,
Financial and
Agricultural
 
Real Estate -
Construction and
Development
 
Real Estate -
Commercial and
Farmland
 
Real Estate -
Residential
 
Consumer
Installment
 Total
March 31, 2018
March 31, 2019March 31, 2019
1 $3,191
 $—
 $—
 $—
 $617
 $3,808
 $80,138
 $—
 $—
 $—
 $544
 $80,682
2 4,301
 —
 4,855
 88,081
 211
 97,448
 5,313
 —
 9,446
 70,003
 142
 84,904
3 8,018
 5,579
 181,551
 47,508
 1,074
 243,730
 20,562
 12,759
 270,517
 371,501
 2,379
 677,718
4 38,530
 32,528
 232,240
 64,055
 644
 367,997
 168,472
 207,413
 913,144
 116,762
 22,562
 1,428,353
5 —
 1,941
 6,027
 12,044
 —
 20,012
 22,982
 4,765
 48,763
 13,847
 34
 90,391
6 9,439
 4,112
 14,481
 5,623
 50
 33,705
 10,614
 4,598
 15,816
 7,441
 130
 38,599
7 1,133
 4,780
 26,716
 19,142
 116
 51,887
 19,891
 9,878
 22,829
 18,181
 839
 71,618
8 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
9 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 6
 6
Total $64,612
 $48,940
 $465,870
 $236,453
 $2,712
 $818,587
 $327,972
 $239,413
 $1,280,515
 $597,735
 $26,636
 $2,472,271
                        
December 31, 2017
December 31, 2018December 31, 2018
1 $3,358
 $—
 $—
 $—
 $606
 $3,964
 $90,205
 $—
 $—
 $—
 $570
 $90,775
2 4,541
 —
 5,047
 91,270
 240
 101,098
 2,648
 —
 7,407
 74,398
 164
 84,617
3 8,517
 13,014
 186,187
 50,988
 1,166
 259,872
 20,489
 18,022
 230,089
 385,279
 2,410
 656,289
4 43,085
 39,877
 230,570
 70,837
 711
 385,080
 215,096
 195,079
 1,034,943
 118,082
 23,177
 1,586,377
5 —
 2,306
 6,081
 11,349
 —
 19,736
 14,445
 2,728
 29,468
 16,937
 35
 63,613
6 13,718
 4,076
 13,637
 5,637
 53
 37,121
 11,601
 1,459
 10,063
 7,231
 94
 30,448
7 1,159
 6,240
 26,724
 20,458
 143
 54,724
 18,202
 10,612
 25,889
 21,272
 738
 76,713
8 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
9 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Total $74,378
 $65,513
 $468,246
 $250,539
 $2,919
 $861,595
 $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 three months of 2019 and 2018 and 2017 totaling $28.6$26.9 million and $16.2$28.6 million, respectively, under such parameters.
 
As of March 31, 20182019 and December 31, 2017,2018, the Company had a balance of $14.7$12.9 million and $15.6$11.0 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded $1.1 million$893,000 and $2.8 million$890,000 in previous charge-offs on such loans at March 31, 20182019 and December 31, 2017,2018, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $1.5 million$728,000 and $1.4 million$820,000 at March 31, 20182019 and December 31, 2017,2018, respectively. At March 31, 2018,2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
 
During the three months ended March 31, 20182019 and 2017,2018, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of $1.2$2.2 million and $93,000,$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 three months ended March 31, 20182019 and 2017:2018: 
March 31, 2018 March 31, 2017March 31, 2019 March 31, 2018
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural2 $125
 — $—
1 $7
 2 $125
Real estate – construction and development1 4
 — —
— —
 1 4
Real estate – commercial and farmland1 303
 — —
1 33
 1 303
Real estate – residential2 710
 1 77
7 2,109
 2 710
Consumer installment2 13
 4 16
3 12
 2 13
Total8 $1,155
 5 $93
12 $2,161
 8 $1,155
 


Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $3.0 million$837,000 and $1.6$3.0 million defaulted during the three months ended March 31, 20182019 and 2017,2018, 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 three months ended March 31, 20182019 and 2017:2018: 
March 31, 2018 March 31, 2017March 31, 2019 March 31, 2018
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 3 $55
— $—
 — $—
Real estate – construction and development— —
 1 26
— —
 — —
Real estate – commercial and farmland2 1,971
 3 150
— —
 2 1,971
Real estate – residential17 1,047
 18 1,380
7 837
 17 1,047
Consumer installment— —
 8 21
— —
 — —
Total19 $3,018
 33 $1,632
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 March 31, 20182019 and December 31, 2017:2018: 
March 31, 2018Accruing Loans Non-Accruing Loans
March 31, 2019Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural4 $39
 13 $224
3 $116
 14 $138
Real estate – construction and development5 176
 2 8
4 142
 1 2
Real estate – commercial and farmland16 4,606
 6 2,127
13 2,954
 4 450
Real estate – residential72 6,547
 19 838
78 8,240
 19 832
Consumer installment3 7
 32 93
5 11
 22 63
Total100 $11,375
 72 $3,290
103 $11,463
 60 $1,485
December 31, 2017Accruing Loans Non-Accruing Loans
December 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural4 $41
 12 $120
5 $256
 14 $138
Real estate – construction and development6 417
 2 34
5 145
 1 2
Real estate – commercial and farmland17 6,937
 5 204
12 2,863
 3 426
Real estate – residential74 6,199
 18 1,508
71 6,043
 20 1,119
Consumer installment4 5
 33 98
6 16
 24 69
Total105 $13,599
 70 $1,964
99 $9,323
 62 $1,754
 
As of March 31, 20182019 and December 31, 2017,2018, the Company had a balance of $24.5$22.3 million and $24.9$22.2 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded $1.7$1.1 million and $1.2 million$940,000 in previous charge-offs on such loans at March 31, 20182019 and December 31, 2017,2018, respectively. At March 31, 2018,2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
 
During the three months ended March 31, 20182019 and 2017,2018, the Company modified purchased loans as troubled debt restructurings, with principal balances of $186,000$773,000 and $355,000,$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 three months ended March 31, 20182019 and 2017:2018: 
March 31, 2018 March 31, 2017March 31, 2019 March 31, 2018
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural1 $7
 — $—
— $—
 1 $7
Real estate – construction and development— —
 — —
— —
 — —
Real estate – commercial and farmland— —
 1 231
— —
 — —
Real estate – residential2 179
 1 124
10 740
 2 179
Consumer installment— —
 — —
3 33
 — —
Total3 $186
 2 $355
13 $773
 3 $186
 
Troubled debt restructurings included in purchased loans with an outstanding balance of $906,000$831,000 and $2.1 million$906,000 defaulted during the three months ended March 31, 20182019 and 2017,2018, 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 three months ended March 31, 20182019 and 2017:2018:
March 31, 2018 March 31, 2017March 31, 2019 March 31, 2018
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 — $—
1 $3
 — $—
Real estate – construction and development— —
 2 336
— —
 — —
Real estate – commercial and farmland1 351
 3 1,149
1 163
 1 351
Real estate – residential8 555
 8 565
8 637
 8 555
Consumer installment— —
 — —
2 28
 — —
Total9 $906
 13 $2,050
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 March 31, 20182019 and December 31, 2017.2018. 
March 31, 2018Accruing Loans Non-Accruing Loans
March 31, 2019Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 4 $23
1 $31
 3 $29
Real estate – construction and development4 1,034
 6 316
4 1,011
 4 268
Real estate – commercial and farmland14 6,745
 8 2,234
12 6,104
 7 1,577
Real estate – residential120 12,871
 21 1,281
119 12,297
 21 917
Consumer installment— —
 2 4
— —
 7 50
Total138 $20,650
 41 $3,858
136 $19,443
 42 $2,841
December 31, 2017Accruing Loans Non-Accruing Loans
December 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 3 $16
1 $31
 3 $32
Real estate – construction and development3 1,018
 6 340
4 1,015
 5 293
Real estate – commercial and farmland14 6,713
 10 2,582
12 6,162
 7 1,685
Real estate – residential117 12,741
 25 1,462
115 11,532
 24 1,424
Consumer installment— —
 2 5
— —
 4 17
Total134 $20,472
 46 $4,405
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. Commercial insurance premium finance loans, overdraft protection loans, and certain residential mortgage loans and consumer loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor 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 $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-offcharged off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-offcharged 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-offcharged 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-offcharged off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 9 (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-month period ended March 31, 2018,2019, the year ended December 31, 20172018 and the three-month period ended March 31, 2017.2018. 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
 
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
March 31, 2018		 
  
  
  
  
  
  
  
Balance, December 31, 2017$3,631
 $3,629
 $7,501
 $4,786
 $1,916
 $3,253
 $1,075
 $25,791
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 losses783
 (171) 689
 177
 1,151
 (747) (81) 1,801
1,180
 218
 841
 (240) 1,870
 (426) (35) 3,408
Loans charged off(1,449) —
 (142) (198) (962) (121) —
 (2,872)(2,004) (25) (1,253) (20) (1,893) (184) —
 (5,379)
Recoveries of loans previously charged off656
 114
 24
 182
 67
 437
 —
 1,480
1,065
 1
 4
 104
 164
 473
 —
 1,811
Balance, March 31, 2018$3,621
 $3,572
 $8,072
 $4,947
 $2,172
 $2,822
 $994
 $26,200
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)
$533
 $1
 $1,216
 $980
 $—
 $2,822
 $176
 $5,728
$680
 $209
 $578
 $712
 $—
 $1,796
 $1
 $3,976
Loans collectively evaluated for impairment3,088
 3,571
 6,856
 3,967
 2,172
 —
 818
 20,472
3,848
 3,719
 7,989
 4,495
 3,936
 —
 696
 24,683
Ending balance$3,621
 $3,572
 $8,072
 $4,947
 $2,172
 $2,822
 $994
 $26,200
$4,528
 $3,928
 $8,567
 $5,207
 $3,936
 $1,796
 $697
 $28,659
                              
Loans: 
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
Individually evaluated for impairment (1)
$2,147
 $126
 $7,639
 $9,946
 $—
 $28,167
 $902
 $48,927
$2,699
 $764
 $5,788
 $12,466
 $—
 $29,097
 $400
 $51,214
Collectively evaluated for impairment1,385,290
 631,378
 1,629,015
 1,070,082
 316,363
 683,784
 318,696
 6,034,608
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—
 —
 —
 —
 —
 106,636
 —
 106,636
—
 —
 —
 —
 —
 82,029
 —
 82,029
Ending balance$1,387,437
 $631,504
 $1,636,654
 $1,080,028
 $316,363
 $818,587
 $319,598
 $6,190,171
$1,382,907
 $676,563
 $1,894,937
 $1,365,482
 $436,469
 $2,472,271
 $253,710
 $8,482,339

(1) At 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		 Purchased 
Loans		 Purchased
Loan
Pools		 Total
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 losses10,690
 277
 1,636
 1,002
 5,569
 (2,164) (343) 16,667
Loans charged off(13,803) (292) (338) (771) (4,189) (1,738) —
 (21,131)
Recoveries of loans previously charged off3,769
 120
 176
 346
 499
 2,582
 —
 7,492
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)
$570
 $3
 $1,591
 $867
 $—
 $1,933
 $—
 $4,964
Loans collectively evaluated for impairment3,717
 3,731
 7,384
 4,496
 3,795
 —
 732
 23,855
Ending balance$4,287
 $3,734
 $8,975
 $5,363
 $3,795
 $1,933
 $732
 $28,819
                
Loans: 
  
  
  
  
  
  
  
Individually evaluated for impairment (1)
$3,211
 $424
 $6,649
 $11,364
 $—
 $32,244
 $—
 $53,892
Collectively evaluated for impairment1,313,148
 670,774
 1,807,880
 1,391,636
 455,371
 2,468,996
 262,625
 8,370,430
Acquired with deteriorated credit quality—
 —
 —
 —
 —
 87,592
 —
 87,592
Ending balance$1,316,359
 $671,198
 $1,814,529
 $1,403,000
 $455,371
 $2,588,832
 $262,625
 $8,511,914
(1) At December 31, 2018, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
(dollars in thousands)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
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 losses783
 (171) 689
 177
 1,151
 (747) (81) 1,801
Loans charged off(1,449) —
 (142) (198) (962) (121) —
 (2,872)
Recoveries of loans previously charged off656
 114
 24
 182
 67
 437
 —
 1,480
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)
$533
 $1
 $1,216
 $980
 $—
 $2,822
 $176
 $5,728
Loans collectively evaluated for impairment3,088
 3,571
 6,856
 3,967
 2,172
 —
 818
 20,472
Ending balance$3,621
 $3,572
 $8,072
 $4,947
 $2,172
 $2,822
 $994
 $26,200
                
Loans: 
  
  
  
  
  
  
  
Individually evaluated for impairment (1)
$2,147
 $126
 $7,639
 $9,946
 $—
 $28,167
 $902
 $48,927
Collectively evaluated for impairment1,385,290
 631,378
 1,629,015
 1,070,082
 316,363
 683,784
 318,696
 6,034,608
Acquired with deteriorated credit quality—
 —
 —
 —
 —
 106,636
 —
 106,636
Ending balance$1,387,437
 $631,504
 $1,636,654
 $1,080,028
 $316,363
 $818,587
 $319,598
 $6,190,171
(1) At 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.


(dollars in thousands)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, 2017		 
  
  
  
  
  
  
  
Balance, January 1, 2017$2,192
 $2,990
 $7,662
 $6,786
 $827
 $1,626
 $1,837
 $23,920
Provision for loan losses3,019
 488
 508
 (86) 2,591
 2,606
 (762) 8,364
Loans charged off(2,850) (95) (853) (2,151) (1,618) (2,900) —
 (10,467)
Recoveries of loans previously charged off1,270
 246
 184
 237
 116
 1,921
 —
 3,974
Balance, December 31, 2017$3,631
 $3,629
 $7,501
 $4,786
 $1,916
 $3,253
 $1,075
 $25,791
                
Period-end allocation: 
  
  
  
  
  
  
  
Loans individually evaluated for impairment (1)
$465
 $48
 $1,047
 $1,028
 $—
 $3,253
 $177
 $6,018
Loans collectively evaluated for impairment3,166
 3,581
 6,454
 3,758
 1,916
 —
 898
 19,773
Ending balance$3,631
 $3,629
 $7,501
 $4,786
 $1,916
 $3,253
 $1,075
 $25,791
                
Loans: 
  
  
  
  
  
  
  
Individually evaluated for impairment (1)
$2,971
 $500
 $8,873
 $10,818
 $—
 $28,165
 $904
 $52,231
Collectively evaluated for impairment1,359,537
 624,095
 1,526,566
 998,643
 324,511
 718,447
 327,342
 5,879,141
Acquired with deteriorated credit quality—
 —
 —
 —
 —
 114,983
 —
 114,983
Ending balance$1,362,508
 $624,595
 $1,535,439
 $1,009,461
 $324,511
 $861,595
 $328,246
 $6,046,355
(1) At December 31, 2017, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
(dollars in thousands)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
March 31, 2017		 
  
  
  
  
  
  
  
Balance, December 31, 2016$2,192
 $2,990
 $7,662
 $6,786
 $827
 $1,626
 $1,837
 $23,920
Provision for loan losses641
 640
 217
 (791) 174
 706
 249
 1,836
Loans charged off(104) (53) (9) (216) (164) (556) —
 (1,102)
Recoveries of loans previously charged off69
 20
 9
 61
 17
 420
 —
 596
Balance, March 31, 2017$2,798
 $3,597
 $7,879
 $5,840
 $854
 $2,196
 $2,086
 $25,250
                
Period-end allocation: 
  
  
  
  
  
  
  
Loans individually evaluated for impairment (1)
$626
 $354
 $1,574
 $2,538
 $—
 $2,196
 $376
 $7,664
Loans collectively evaluated for impairment2,172
 3,243
 6,305
 3,302
 854
 —
 1,710
 17,586
Ending balance$2,798
 $3,597
 $7,879
 $5,840
 $854
 $2,196
 $2,086
 $25,250
                
Loans: 
  
  
  
  
  
  
  
Individually evaluated for impairment (1)
$1,937
 $843
 $11,260
 $9,630
 $—
 $35,673
 $3,446
 $62,789
Collectively evaluated for impairment1,059,662
 414,186
 1,446,850
 717,165
 123,947
 836,146
 525,653
 5,123,609
Acquired with deteriorated credit quality—
 —
 —
 —
 —
 135,116
 —
 135,116
Ending balance$1,061,599
 $415,029
 $1,458,110
 $726,795
 $123,947
 $1,006,935
 $529,099
 $5,321,514
(1) At March 31, 2017, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.


NOTE 6 – OTHER REAL ESTATE OWNED
 
The following is a summary of the activity in OREO during the three months ended March 31, 20182019 and 2017:2018:
(dollars in thousands)March 31,
2018		 March 31,
2017		March 31,
2019		 March 31,
2018
Beginning balance, January 1$8,464
 $10,874
$7,218
 $8,464
Loans transferred to other real estate owned1,176
 1,657
264
 1,176
Net gains (losses) on sale and write-downs recorded in statement of income101
 (322)(100) 101
Sales proceeds(495) (1,743)(1,368) (495)
Other(75) —
—
 (75)
Ending balance$9,171
 $10,466
$6,014
 $9,171
 
The following is a summary of the activity in purchased OREO during the three months ended March 31, 20182019 and 2017:2018:
(dollars in thousands) March 31,
2018		 March 31,
2017		March 31,
2019		 March 31,
2018
Beginning balance, January 1$9,011
 $12,540
$9,535
 $9,011
Loans transferred to other real estate owned457
 1,489
2,523
 457
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-sharing agreements—
 15
(31) —
Net gains (losses) on sale and write-downs recorded in statement of income(134) 449
91
 (134)
Sales proceeds(2,611) (2,825)(1,242) (2,611)
Other(19) —
Ending balance$6,723
 $11,668
$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 March 31, 20182019 and December 31, 2017,2018, 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 fallfalls 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 March 31, 20182019 and December 31, 2017.2018.    
(dollars in thousands)March 31,
2018		 December 31, 2017March 31,
2019		 December 31, 2018
Securities sold under agreements to repurchase$23,270
 $30,638
$4,259
 $20,384
 
At March 31, 20182019 and December 31, 2017,2018, 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 March 31, 2018 and December 31, 2017, there were $555.5 million and $250.6 million, respectively, in outstanding other borrowings.

Other borrowings consist of the following:
(dollars in thousands)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
FHLB borrowings: 
  
 
  
Daily Rate Credit from FHLB with a variable interest rate (1.92% at March 31, 2018 and 1.59% at December 31, 2017)$80,000
 $25,000
Advance from FHLB due April 9, 2018; fixed interest rate of 1.70%100,000
 —
Advance from FHLB due April 20, 2018; fixed interest rate of 1.88%150,000
 —
Advance from FHLB due April 23, 2018; fixed interest rate of 1.85%150,000
 —
Advance from FHLB due January 8, 2018; fixed interest rate of 1.39%—
 150,000
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 $1,172 and $1,205, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%73,828
 73,795
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%42
 49
13
 20
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09%1,665
 1,710
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$555,535
 $250,554
$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 March 31, 2018, $665.0 million2019, $2.04 billion was available for borrowing on lines with the FHLB.
 
At March 31, 2018,2019, the Company had a revolving credit arrangement with a regional bank with a maximum line amount of $30.0$100.0 million.  This line of credit is secured by subsidiary bank stock, expires on September 26, 2020, and bears a variable interest rate of 90-day LIBOR plus 3.50%.  At March 31, 2018,2019, there was no principal amount outstanding on this line of credit, resulting in $30.0 million available for borrowing under the revolving credit arrangement.
 
As of March 31, 2018,2019, the Bank maintained credit arrangements with various financial institutions to purchase federal funds up to $82.0$117.0 million.
 
The Bank also participates in the Federal Reserve discount window borrowings program. At March 31, 2018,2019, the Company had $1.14$1.60 billion of loans pledged at the Federal Reserve discount window and had $732.7 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 completedannounced that its Board of Directors authorized the public offering and sale of $75.0Company 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 soldamount 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 publicshareholders of Hamilton. Such shares had a value of $53.35 per share at par pursuant tothe 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 rateincrease 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 subordinatedHamilton acquisition, see Note 3.


notes are structurally subordinatedAtlantic Acquisition

On May 25, 2018, the Company issued 2,631,520 shares of its common stock to all existing and future indebtedness and other liabilitiesthe shareholders of Atlantic. Such shares had a value of $56.15 per share at the time of issuance, resulting in an increase in shareholders’ equity of $147.8 million.

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

USPF Acquisition

On January 18, 2017, in exchange for 4.99% of the Company’s subsidiaries, meaning that creditorsoutstanding 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 Company’s subsidiaries (including,128,572 common shares, valued at $45.45 per share at the time of issuance, resulted in the casean increase in shareholders’ equity of $5.8 million.

On January 3, 2018, in exchange for 25.01% of the Bank,outstanding shares of common stock of USPF, the Company issued 114,285 unregistered shares of its depositors) generally will becommon stock and paid from those subsidiaries’ assets before holders$12.5 million in cash to a selling shareholder of USPF. The issuance of the subordinated notes have any claim114,285 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 those assets.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 regulatory capital adequacy purposes,additional information regarding the subordinated notes qualify as Tier 2 capital for the Company. If in the future the subordinated notes no longer qualify as Tier 2 capital, the subordinated notes may be redeemed by the Company at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, subject to prior approval by the Board of Governors of the Federal Reserve System.USPF acquisition, see Note 3.


NOTE 910 – COMMITMENTS AND CONTINGENCIESACCUMULATED 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 Companyreclassification of gains included in net income is a party to financial instruments with off-balance-sheet riskrecorded in gain on securities in the normal courseconsolidated statement of business to meet the financing needs of its customers. These financial instruments include commitments to extend creditincome 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 isaccumulated other comprehensive loss balances, net of tax, as follows:of March 31, 2019 and 2018:
(dollars in thousands)March 31,
2018		 December 31,
2017
Commitments to extend credit$1,102,240
 $1,109,806
Unused home equity lines of credit71,138
 69,788
Financial standby letters of credit11,960
 11,389
Mortgage interest rate lock commitments153,809
 86,149
Mortgage forward contracts with positive fair value97,032
 31,500
(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 March 31, 2018, 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.
NOTE 1011 – SHAREHOLDERS’ EQUITYWEIGHTED 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 outstanding47,366
 37,967
Common share equivalents: 
  
Stock options—
 18
Nonvested restricted share grants90
 265
Average common shares outstanding, assuming dilution47,456
 38,250
 
USPF AcquisitionFor 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

On January 18, 2017, in exchangeThe Company has entered into various operating leases for 4.99%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 outstanding sharesleases have one or more lease renewal options. The exercise of common stocklease renewal options is at our sole discretion. The Company does not consider exercise of USPF,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 sharesuses its incremental borrowing rate at the commencement date in determining the present value of its common stock to a selling shareholder of USPF. A registration statement was filed withlease payments. The incremental borrowing rate is based on the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuanceterm of the 128,572 common shares was valued at $45.45 per share, resulting inlease. Incremental borrowing rates on January 1, 2019 were used for operating leases that commenced prior to that date. Leases with an increase in shareholders’ equityinitial term of $5.8 million.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.

On January 3, 2018, in exchangeOperating lease cost was $1.8 million for 25.01%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 leases on the Company's consolidated balance sheet at March 31, 2019:
(dollars in thousands)Location March 31, 2019
Operating lease right-of-use assetsOther assets $25,739
Operating lease liabilitiesOther liabilities 28,080

Future maturities of the outstanding shares of common stock of USPF, the Company issued 114,285 unregistered shares of its common stock to a selling shareholder of USPF. The issuance of the 114,285 common shares was valued at $48.55 per share, resulting in an increase in shareholders’ equity of $5.5 million.Company's operating lease liabilities are summarized as follows:

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 to the selling shareholders of USPF. The issuance of the 830,301 common shares was valued at $53.55 per share, resulting in an increase in shareholders’ equity of $44.5 million.

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.
2017 Public Offering

On March 6, 2017, the Company completed an underwritten public offering of 2,012,500 shares of the Company’s common stock at a price to the public of $46.50 per share. The Company received net proceeds from the issuance of $88.7 million, after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceeds of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 discussed in Note 8.

(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



NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The following tables present a summary of the accumulated other comprehensive income (loss) balances, net of tax, as of March 31, 2018 and 2017:
(dollars in thousands) 
Unrealized
Gain (Loss)
on Derivatives
 
Unrealized
Gain (Loss)
on Securities
 
Accumulated
Other Comprehensive
Income (Loss)
Balance, January 1, 2018 $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)
Supplemental lease information 
(dollars in thousands)March 31, 2019
Weighted-average remaining lease term (years)6.4
Weighted-average discount rate2.93%
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)$1,571
Operating lease right-of-use assets obtained in exchange for leases entered into during the period$—

(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)
Current year changes, net of tax 43
 (194) (151)
Balance, March 31, 2017 $219
 $(1,428) $(1,209)

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
March 31,
(share data in thousands)2018 2017
Average common shares outstanding37,967
 35,664
Common share equivalents: 
  
Stock options18
 120
Nonvested restricted share grants265
 256
Average common shares outstanding, assuming dilution38,250
 36,040
For the three-month periods ended March 31, 2018 and 2017, 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’sCompany's loans held for sale are carried at fair value and are comprised of the following:
(dollars in thousands)March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Mortgage loans held for sale$106,549
 $190,445
$109,442
 $107,428
SBA loans held for sale4,586
 6,997
2,628
 3,870
Total loans held for sale$111,135
 $197,442
$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 gainslosses of $3.1 million$150,000 and $3.0$1.6 million resulting from fair value changes of these mortgage loans were recorded in income during the three months ended March 31, 2019 and 2018, and 2017, respectively. A net gainNet gains of $2.4$2.5 million and a net loss of $622,000$1.6 million resulting from changes in the fair value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage loans were recorded in income during the three months ended March 31, 20182019 and 2017,2018, 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 carriedmeasured at fair value as of March 31, 20182019 and December 31, 2017:2018:
(dollars in thousands)
March 31,
2018		 December 31,
2017		March 31,
2019		 December 31,
2018
Aggregate fair value of mortgage loans held for sale$106,549
 $190,445
$109,442
 $107,428
Aggregate unpaid principal balance103,485
 185,814
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 derivativesderivative 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 and Federal Reserve Bank stock are included in other investment securities. Prior to the Company's completion of its acquisition of USPF on January 31, 2018, the minority equity investment in USPF was also included in other investments. These investments do not have readily determinable fair values 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 fair value for loans held for investment is estimated using an exit price methodology.  An exit price methodology considers expected cash flows that take into account contractual loan terms, as applicable, prepayment expectations, probability of default, loss severity in the event of default, recovery lag and, in the case of variable rate loans, expectations for future interest rate movements. These cash flows are present valued at a risk adjusted discount rate, which considers the cost of funding, liquidity, servicing costs, and other factors.   Because observable quoted prices seldom exist for identical or similar assets carried in loans held for investment, Level 3 inputs are primarily used to determine fair value exit pricing. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.
 
Other Real Estate Owned: The fair value of OREO is determined using certified appraisals and internal evaluations that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that OREO should be classified as Level 3.
 
Intangible Assets: Intangible assets consist of 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 valuation performed as of the consummation date and is amortized over an estimated useful life of seven to ten years.


Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable 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 fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.
 
Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of securities sold under agreements to repurchase approximates fair value and is classified as Level 1. The carrying amount of variable rate other borrowings approximates fair value and is classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and is classified as Level 2.
 
Subordinated Deferrable Interest Debentures: The fair value of the Company’s trust preferred securities is based on discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.

FDIC Loss-Share Payable: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.

Pursuant to the clawback provisions of the loss-sharing agreements for the Company’s FDIC-assisted acquisitions, the Company may be required to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-sharing agreement. The amount of the clawback provision for each acquisition is measured and recorded at fair value. The clawback amount, which is payable to the FDIC upon termination of the applicable loss-sharing agreement, is discounted using an appropriate discount rate.

Liability for USPF Acquisition Contingent Consideration: As discussed in Note 3, the selling shareholders of USPF may receive additional future cash payments based on the achievement by the Company's premium finance division of certain income targets between January 1, 2018 and June 30, 2019. The carrying value is used as the Level 3 fair value estimate for this liability.
 
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 March 31, 20182019 and December 31, 2017,2018, 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 March 31, 20182019 and December 31, 2017:2018:
Recurring Basis
Fair Value Measurements
Recurring Basis
Fair Value Measurements
March 31, 2018March 31, 2019
(dollars in thousands)
Fair Value Level 1 Level 2 Level 3Fair Value Level 1 Level 2 Level 3
Financial assets: 
  
  
  
 
  
  
  
State, county and municipal securities$106,274
 $—
 $106,274
 $—
$107,740
 $—
 $107,740
 $—
Corporate debt securities57,097
 —
 55,597
 1,500
57,152
 —
 55,652
 1,500
Mortgage-backed securities685,214
 —
 685,214
 —
1,069,543
 —
 1,069,543
 —
Loans held for sale111,135
 —
 111,135
 —
112,070
 —
 112,070
 —
Derivative financial instruments61
 —
 61
 —
Mortgage banking derivative instruments4,905
 —
 4,905
 —
5,118
 —
 5,118
 —
Total recurring assets at fair value$964,686
 $—
 $963,186
 $1,500
$1,351,623
 $—
 $1,350,123
 $1,500
Financial liabilities: 
  
  
  
 
  
  
  
Derivative financial instruments$31
 $—
 $31
 $—
Mortgage banking derivative instruments$505
 $—
 $505
 $—
1,315
 —
 1,315
 —
Total recurring liabilities at fair value$505
 $—
 $505
 $—
$1,346
 $—
 $1,346
 $—
Recurring Basis
Fair Value Measurements		Recurring Basis
Fair Value Measurements
December 31, 2017December 31, 2018
(dollars in thousands)Fair Value Level 1 Level 2 Level 3Fair Value Level 1 Level 2 Level 3
Financial assets: 
  
  
  
 
  
  
  
State, county and municipal securities$137,794
 $—
 $137,794
 $—
$150,733
 $—
 $150,733
 $—
Corporate debt securities47,143
 —
 45,643
 1,500
67,314
 —
 65,814
 1,500
Mortgage-backed securities625,936
 —
 625,936
 —
974,376
 —
 974,376
 —
Loans held for sale197,442
 —
 197,442
 —
111,298
 —
 111,298
 —
Derivative financial instruments102
 —
 102
 —
Mortgage banking derivative instruments2,888
 —
 2,888
 —
2,537
 —
 2,537
 —
Total recurring assets at fair value$1,011,203
 $—
 $1,009,703
 $1,500
$1,306,360
 $—
 $1,304,860
 $1,500
Financial liabilities: 
  
  
  
 
  
  
  
Derivative financial instruments$381
 $—
 $381
 $—
Mortgage banking derivative instruments67
 —
 67
 —
$1,276
 $—
 $1,276
 $—
Total recurring liabilities at fair value$448
 $—
 $448
 $—
$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 March 31, 20182019 and December 31, 2017:2018:
Nonrecurring Basis
Fair Value Measurements
Nonrecurring Basis
Fair Value Measurements
(dollars in thousands)Fair Value Level 1 Level 2 Level 3Fair Value Level 1 Level 2 Level 3
March 31, 2018 
  
  
  
March 31, 2019 
  
  
  
Impaired loans carried at fair value$31,397
 $—
 $—
 $31,397
Purchased other real estate owned10,857
 —
 —
 10,857
Total nonrecurring assets at fair value$42,254
 $—
 $—
 $42,254
       
December 31, 2018 
  
  
  
Impaired loans carried at fair value$26,133
 $—
 $—
 $26,133
$28,653
 $—
 $—
 $28,653
Other real estate owned708
 —
 —
 708
408
 —
 —
 408
Purchased other real estate owned6,723
 —
 —
 6,723
9,535
 —
 —
 9,535
Total nonrecurring assets at fair value$33,564
 $—
 $—
 $33,564
$38,596
 $—
 $—
 $38,596
       
December 31, 2017 
  
  
  
Impaired loans carried at fair value$27,684
 $—
 $—
 $27,684
Other real estate owned323
 —
 —
 323
Purchased other real estate owned9,011
 —
 —
 9,011
Total nonrecurring assets at fair value$37,018
 $—
 $—
 $37,018
 
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 OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
 
For the three months ended March 31, 20182019 and the year ended December 31, 2017,2018, there was not a change in the methods and significant assumptions used to estimate fair value for assets and liabilities carried at 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
March 31, 2018  
        
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 $26,133
 Third-party appraisals and discounted cash flows Collateral discounts and
discount rates		 15% - 90% 27% $28,653
 Third-party appraisals and discounted cash flows Collateral discounts and
discount rates		 3% - 53% 30%
Other real estate owned $708
 Third-party appraisals and sales contracts Collateral discounts and estimated
costs to sell		 15% - 32% 17% $408
 Third-party appraisals and sales contracts Collateral discounts and estimated
costs to sell		 15% - 69% 31%
Purchased other real estate owned $6,723
 Third-party appraisals Collateral discounts and estimated
costs to sell		 10% - 74% 17% $9,535
 Third-party appraisals Collateral discounts and estimated
costs to sell		 6% - 74% 39%
   
December 31, 2017  
        
Recurring:  
        
Investment securities available for sale $1,500
 Discounted par values Credit quality of underlying issuer 0% 0%
Nonrecurring:  
        
Impaired loans $27,684
 Third-party appraisals and discounted cash flows Collateral discounts and
discount rates		 20% - 90% 24%
Other real estate owned $323
 Third-party appraisals and sales contracts Collateral discounts and estimated
costs to sell		 15% - 15% 15%
Purchased other real estate owned $9,011
 Third-party appraisals Collateral discounts and estimated
costs to sell		 10% - 74% 26%
 


The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows. The methods used to estimate the fair value of financial instruments at December 31, 2017 approximated an entry price. In accordance with the adoption of ASU 2016-01, the methods utilized to estimate the fair value of financial instruments at March 31, 2018 represent an approximation of exit price; however, an actual price derived in an active market may differ.
  Fair Value Measurements  Fair Value Measurements
  March 31, 2018  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$123,945
 $123,945
 $—
 $—
 $123,945
$144,801
 $144,801
 $—
 $—
 $144,801
Federal funds sold and interest-bearing accounts210,930
 210,930
 —
 —
 210,930
Federal funds sold and interest-bearing deposits in banks712,199
 712,199
 —
 —
 712,199
Time deposits in other banks7,371
 —
 7,371
 —
 7,371
Loans, net6,137,838
 —
 —
 6,127,411
 6,127,411
8,422,283
 —
 —
 8,357,110
 8,357,110
Accrued interest receivable24,818
 24,818
 —
 —
 24,818
37,411
 —
 5,366
 32,045
 37,411
Financial liabilities: 
  
  
  
  
 
  
  
  
  
Deposits$6,446,165
 $—
 $6,447,150
 $—
 $6,447,150
$9,800,875
 $—
 $9,797,905
 $—
 $9,797,905
Securities sold under agreements to repurchase23,270
 23,270
 —
 —
 23,270
4,259
 4,259
 —
 —
 4,259
Other borrowings555,535
 —
 556,707
 —
 556,707
151,454
 —
 152,655
 —
 152,655
Subordinated deferrable interest debentures85,881
 —
 80,266
 —
 80,266
89,529
 —
 88,900
 —
 88,900
FDIC loss-share payable9,255
 —
 —
 9,880
 9,880
18,834
 —
 —
 18,847
 18,847
Liability for USPF acquisition contingent consideration5,719
 —
 —
 5,719
 5,719
Accrued interest payable2,367
 2,367
 —
 —
 2,367
5,462
 —
 5,462
 —
 5,462
  
  Fair Value Measurements  Fair Value Measurements
  December 31, 2017  December 31, 2018
(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$139,313
 $139,313
 $—
 $—
 $139,313
$172,036
 $172,036
 $—
 $—
 $172,036
Federal funds sold and interest-bearing accounts191,345
 191,345
 —
 —
 191,345
Federal funds sold and interest-bearing deposits in banks507,491
 507,491
 —
 —
 507,491
Time deposits in other banks10,812
 —
 10,812
 —
 10,812
Loans, net5,992,880
 —
 —
 5,960,963
 5,960,963
8,454,442
 —
 —
 8,365,293
 8,365,293
Accrued interest receivable26,005
 26,005
 —
 —
 26,005
36,970
 —
 5,456
 31,514
 36,970
Financial liabilities: 
  
  
  
  
 
  
  
  
  
Deposits$6,625,845
 $—
 $6,627,773
 $—
 $6,627,773
$9,649,313
 $—
 $9,645,617
 $—
 $9,645,617
Securities sold under agreements to repurchase30,638
 30,638
 —
 —
 30,638
20,384
 20,384
 —
 —
 20,384
Other borrowings250,554
 —
 271,759
 —
 251,759
151,774
 —
 152,873
 —
 152,873
Subordinated deferrable interest debentures85,550
 —
 74,243
 —
 74,243
89,187
 —
 90,180
 —
 90,180
FDIC loss-share payable8,803
 —
 —
 9,548
 9,548
19,487
 —
 —
 19,576
 19,576
Accrued interest payable3,258
 3,258
 —
 —
 3,258
5,669
 —
 5,669
 —
 5,669
 
NOTE 14 – SEGMENT REPORTINGCOMMITMENTS 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 hasuses the following five reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Divisionsame credit policies in making commitments 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.conditional obligations as it does for on-balance-sheet instruments. 

The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units becauseA summary 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.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 credit105,780
 112,310
Financial standby letters of credit25,599
 24,596
Mortgage interest rate lock commitments158,141
 81,833
 



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 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

The following tables present selectedCertain conditions may exist as of the date the financial information with respectstatements 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 reportable business segments formanagement 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 three months ended March 31, 2018Company 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 2017: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.
 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 expense5,537
 1,825
 897
 507
 1,945
 10,711
Net interest income55,359
 4,997
 1,855
 924
 5,666
 68,801
Provision for loan losses888
 217
 —
 537
 159
 1,801
Noninterest income13,099
 11,585
 397
 1,370
 13
 26,464
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits22,068
 7,742
 138
 740
 1,401
 32,089
Equipment and occupancy expenses5,477
 593
 —
 58
 70
 6,198
Data processing and telecommunications expenses6,304
 389
 33
 9
 400
 7,135
Other expenses11,080
 1,731
 52
 236
 577
 13,676
Total noninterest expense44,929
 10,455
 223
 1,043
 2,448
 59,098
Income before income tax expense22,641
 5,910
 2,029
 714
 3,072
 34,366
Income tax expense5,242
 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
Goodwill125,532
 —
 —
 —
 82,981
 208,513
Other intangible assets, net12,562
 —
 —
 —
 —
 12,562
 Three Months Ended
March 31, 2017
(dollars in thousands)
Banking
Division
 
Retail
Mortgage
Division
 
Warehouse
Lending
Division
 
SBA
Division
 
Premium
 Finance
 Division
 Total
Interest income$54,212
 $4,054
 $1,333
 $1,213
 $6,238
 $67,050
Interest expense4,086
 1,078
 228
 306
 762
 6,460
Net interest income50,126
 2,976
 1,105
 907
 5,476
 60,590
Provision for loan losses1,982
 8
 (232) 48
 30
 1,836
Noninterest income13,013
 10,513
 319
 1,815
 46
 25,706
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits18,844
 7,216
 147
 591
 996
 27,794
Equipment and occupancy expenses5,257
 519
 1
 51
 49
 5,877
Data processing and telecommunications expenses6,043
 317
 27
 1
 184
 6,572
Other expenses9,241
 1,141
 32
 211
 2,225
 12,850
Total noninterest expense39,385
 9,193
 207
 854
 3,454
 53,093
Income before income tax expense21,772
 4,288
 1,449
 1,820
 2,038
 31,367
Income tax expense6,856
 1,501
 507
 637
 713
 10,214
Net income$14,916
 $2,787
 $942
 $1,183
 $1,325
 $21,153
            
Total assets$6,100,876
 $378,897
 $107,937
 $76,405
 $430,741
 $7,094,856
Goodwill125,532
 —
 —
 —
 —
 125,532
Other intangible assets, net16,391
 —
 —
 —
 —
 16,391
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
 
 



NOTE 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS

With the exception of gains/losses on the sale of OREO discussed below, revenue from contracts with customers ("ASC 606 Revenue") is recorded in the service charges on deposit accounts category and the other service charges, commissions and fees category in the Company's consolidated statement of income and comprehensive income as part of noninterest income. Substantially all ASC 606 Revenue is recorded in the Banking Division. The following provides information on these noninterest income categories that contain ASC 606 Revenue for the periods indicated.
 Three Months Ended
(dollars in thousands)March 31, 2018 March 31, 2017
Service charges on deposit accounts   
ASC 606 revenue items   
   Debit card interchange fees$4,210
 $4,046
   Overdraft fees4,108
 4,444
   Other service charges on deposit accounts1,910
 2,073
   Total ASC 606 revenue included in service charges on deposits accounts10,228
 10,563
Total service charges on deposit accounts$10,228
 $10,563
    
Other service charges, commissions and fees   
ASC 606 revenue items   
ATM fees$661
 $674
Total ASC 606 revenue included in other service charges, commission and fees661
 674
Other58
 35
Total other service charges, commission and fees$719
 $709

Debit Card Interchange Fees - The Company earns debit card interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from debit cardholders transactions represent a percentage of the underlying transaction amount and are recognized daily, concurrently with the transaction processing services provided to the debit cardholder.
Overdraft Fees - Overdraft fees are recognized at the point in time that the overdraft occurs.

Other Service Charges on Deposit Accounts - Other service charges on deposit accounts include both transaction-based fees and account maintenance fees. Transaction based fees, which include wire transfer fees, stop payment charges, statement rendering, and automated clearing house ("ACH") fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

ATM Fees - Transaction-based ATM usage fees are recognized at the time the transaction is executed as that is the point at which the Company satisfies the performance obligation.

Gains/Losses on the Sale of OREO - The net gains and losses on sales of OREO are recorded in credit resolution related expenses in the Company's consolidated statement of income and comprehensive income. The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. For the three months ended March 31, 2018, net losses of $9,000 were recognized on the sale of OREO. For the three months ended March 31, 2017, net gains of $424,000 were recognized on the sale of OREO.



NOTE 16 – SUBSEQUENT EVENTS

As discussed in Note 8, at March 31, 2018, the Company had a revolving credit arrangement with a regional bank with a maximum line amount of $30.0 million.  This line of credit is secured by subsidiary bank stock, expires on September 26, 2020, and bears a variable interest rate of 90-day LIBOR plus 3.50%.  At March 31, 2018, there was no principal amount outstanding on this line of credit, resulting in $30.0 million available for borrowing under the revolving credit arrangement. On April 25, 2018, the maximum line amount under the revolving credit arrangement was increased to $100.0 million with all other terms of the credit arrangement remaining unchanged.

On May 8, 2018, the Bank sold $15.1 million of performing loans that were not classified as available for sale as of March 31, 2018.  The loans were sold at par and no gain or loss was recorded on the sale.




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 March 31, 2018, as compared with December 31, 2017, and operating results for the three-month periods ended March 31, 2018 and 2017. 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 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.
          
(in thousands, except share and per share data)First
Quarter
2018		 Fourth
Quarter
2017		 Third
Quarter
2017		 Second
Quarter
2017		 First
Quarter
2017
Results of Operations:         
Net interest income$68,801
 $69,523
 $66,855
 $63,157
 $60,590
Net interest income (tax equivalent)69,787
 71,537
 68,668
 64,773
 62,108
Provision for loan losses1,801
 2,536
 1,787
 2,205
 1,836
Non-interest income26,464
 23,563
 26,999
 28,189
 25,706
Non-interest expense59,098
 59,337
 63,767
 55,739
 53,093
Income tax expense7,706
 22,063
 8,142
 10,315
 10,214
Net income available to common shareholders26,660
 9,150
 20,158
 23,087
 21,153
Selected Average Balances: 
  
  
  
  
Investment securities$860,419
 $850,817
 $864,456
 $866,960
 $862,616
Loans held for sale138,129
 138,468
 126,798
 110,933
 77,617
Loans4,902,082
 4,692,997
 4,379,082
 3,994,213
 3,678,149
Purchased loans842,509
 888,854
 937,595
 973,521
 1,034,983
Purchased loan pools325,113
 446,677
 475,742
 516,949
 547,057
Earning assets7,215,742
 7,202,103
 6,892,939
 6,584,386
 6,347,807
Assets7,823,451
 7,777,996
 7,461,367
 7,152,024
 6,915,965
Deposits6,383,513
 6,372,259
 5,837,154
 5,671,394
 5,491,324
Shareholders’ equity849,346
 812,264
 796,856
 774,664
 695,830
Period-End Balances: 
  
  
  
  
Investment securities$880,812
 $853,143
 $867,570
 $861,188
 $866,715
Loans held for sale111,135
 197,442
 137,392
 146,766
 105,637
Loans5,051,986
 4,856,514
 4,574,678
 4,230,228
 3,785,480
Purchased loans818,587
 861,595
 917,126
 950,499
 1,006,935
Purchased loan pools319,598
 328,246
 465,218
 490,114
 529,099
Earning assets7,393,048
 7,288,285
 7,074,828
 6,816,606
 6,525,911
Total assets8,022,828
 7,856,203
 7,649,820
 7,397,858
 7,094,856
Deposits6,446,165
 6,625,845
 5,895,504
 5,793,397
 5,642,369
Shareholders’ equity868,944
 804,479
 801,921
 782,682
 758,216
Per Common Share Data: 
  
  
  
  
Earnings per share - basic$0.70
 0.25
 0.54
 0.62
 0.59
Earnings per share - diluted$0.70
 0.24
 0.54
 0.62
 0.59
Book value per common share$22.67
 $21.59
 $21.54
 $21.03
 $20.42
Tangible book value per common share$16.90
 $17.86
 $17.78
 $17.24
 $16.60
End of period shares outstanding38,327,081
 37,260,012
 37,231,049
 37,222,904
 37,128,714


(in thousands, except share and per share data)First
Quarter
2018		 Fourth
Quarter
2017		 Third
Quarter
2017		 Second
Quarter
2017		 First
Quarter
2017
Weighted Average Shares Outstanding: 
  
  
  
  
Basic37,966,781
 37,238,564
 37,225,418
 37,162,810
 35,664,420
Diluted38,250,122
 37,556,335
 37,552,667
 37,489,348
 36,040,240
Market Price: 
  
  
  
  
High intraday price$59.05
 $51.30
 $51.28
 $49.80
 $49.50
Low intraday price$47.90
 $44.75
 $41.05
 $42.60
 $41.60
Closing price for quarter$52.90
 $48.20
 $48.00
 $48.20
 $46.10
Average daily trading volume235,964
 206,178
 168,911
 169,617
 242,982
Cash dividends declared per share$0.10
 $0.10
 $0.10
 $0.10
 $0.10
Closing price to book value2.33
 2.23
 2.23
 2.29
 2.26
Performance Ratios: 
  
  
  
  
Return on average assets1.38% 0.47% 1.07% 1.29% 1.24%
Return on average common equity12.73% 4.47% 10.04% 11.95% 12.33%
Average loans to average deposits97.25% 96.78% 101.41% 98.66% 97.20%
Average equity to average assets10.86% 10.44% 10.68% 10.83% 10.06%
Net interest margin (tax equivalent)3.92% 3.94% 3.95% 3.95% 3.97%
Efficiency ratio62.04% 63.74% 67.94% 61.02% 61.52%
          
Non-GAAP Measures Reconciliation - 
  
  
  
  
Tangible book value per common share: 
  
  
  
  
Total shareholders’ equity$868,944
 $804,479
 $801,921
 $782,682
 $758,216
Less: 
  
  
  
  
Goodwill208,513
 125,532
 125,532
 125,532
 125,532
Other intangible assets, net12,562
 13,496
 14,437
 15,378
 16,391
Tangible common equity$647,869
 $665,451
 $661,952
 $641,772
 $616,293
End of period shares outstanding38,327,081
 37,260,012
 37,231,049
 37,222,904
 37,128,714
Book value per common share$22.67
 $21.59
 $21.54
 $21.03
 $20.42
Tangible book value per common share16.90
 17.86
 17.78
 17.24
 16.60



Results of Operations for the Three Months Ended March 31, 2018 and 2017
Consolidated Earnings and Profitability
Ameris reported net income available to common shareholders of $26.7 million, or $0.70 per diluted share, for the quarter ended March 31, 2018, compared with $21.2 million, or $0.59 per diluted share, for the same period in 2017. The Company’s return on average assets and average shareholders’ equity were 1.38% and 12.73%, respectively, in the first quarter of 2018, compared with 1.24% and 12.33%, respectively, in the first quarter of 2017. 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. During the first quarter of 2017, the Company incurred pre-tax merger and conversion charges of $402,000 and pre-tax losses on the sale of premises of $295,000. Excluding these merger and conversion charges and losses on the sale of premises, the Company’s net income would have been $27.8 million, or $0.73 per diluted share, for the first quarter of 2018 and $21.6 million, or $0.60 per diluted share, for the first quarter of 2017.
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)2018 2017
Net income available to common shareholders$26,660
 $21,153
Adjustment items: 
  
Merger and conversion charges835
 402
Losses on the sale of premises583
 295
Tax effect of adjustment items(298) (244)
After tax adjustment items1,120
 453
Adjusted net income$27,780
 $21,606
    
Weighted average common shares outstanding - diluted38,250,122
 36,040,240
Net income per diluted share$0.70
 $0.59
Adjusted net income per diluted share$0.73
 $0.60


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 first quarter of 2018 and 2017, respectively:
 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 expense5,537
 1,825
 897
 507
 1,945
 10,711
Net interest income55,359
 4,997
 1,855
 924
 5,666
 68,801
Provision for loan losses888
 217
 —
 537
 159
 1,801
Noninterest income13,099
 11,585
 397
 1,370
 13
 26,464
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits22,068
 7,742
 138
 740
 1,401
 32,089
Equipment and occupancy expenses5,477
 593
 —
 58
 70
 6,198
Data processing and telecommunications expenses6,304
 389
 33
 9
 400
 7,135
Other expenses11,080
 1,731
 52
 236
 577
 13,676
Total noninterest expense44,929
 10,455
 223
 1,043
 2,448
 59,098
Income before income tax expense22,641
 5,910
 2,029
 714
 3,072
 34,366
Income tax expense5,242
 1,244
 426
 150
 644
 7,706
Net income$17,399
 $4,666
 $1,603
 $564
 $2,428
 $26,660
 Three Months Ended
March 31, 2017
(dollars in thousands)
Banking
Division
 
Retail
Mortgage
Division
 
Warehouse
Lending
Division
 
SBA
Division
 
Premium
Finance
Division
 Total
Interest income$54,212
 $4,054
 $1,333
 $1,213
 $6,238
 $67,050
Interest expense4,086
 1,078
 228
 306
 762
 6,460
Net interest income50,126
 2,976
 1,105
 907
 5,476
 60,590
Provision for loan losses1,982
 8
 (232) 48
 30
 1,836
Noninterest income13,013
 10,513
 319
 1,815
 46
 25,706
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits18,844
 7,216
 147
 591
 996
 27,794
Equipment and occupancy expenses5,257
 519
 1
 51
 49
 5,877
Data processing and telecommunications expenses6,043
 317
 27
 1
 184
 6,572
Other expenses9,241
 1,141
 32
 211
 2,225
 12,850
Total noninterest expense39,385
 9,193
 207
 854
 3,454
 53,093
Income before income tax expense21,772
 4,288
 1,449
 1,820
 2,038
 31,367
Income tax expense6,856
 1,501
 507
 637
 713
 10,214
Net income$14,916
 $2,787
 $942
 $1,183
 $1,325
 $21,153


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, 2018 and 2017. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate for 2018 and a 35% federal tax rate for 2017.
 Quarter Ended
March 31,
 2018 2017
(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$147,490
 $716
 1.97% $147,385
 $313
 0.86%
Investment securities860,419
 5,615
 2.65% 862,616
 5,440
 2.56%
Loans held for sale138,129
 1,210
 3.55% 77,617
 653
 3.41%
Loans4,902,082
 58,771
 4.86% 3,678,149
 43,157
 4.76%
Purchased loans842,509
 11,762
 5.66% 1,034,983
 15,173
 5.95%
Purchased loan pools325,113
 2,424
 3.02% 547,057
 3,832
 2.84%
Total interest-earning assets7,215,742
 80,498
 4.52% 6,347,807
 68,568
 4.38%
Noninterest-earning assets607,709
  
   568,158
  
  
Total assets$7,823,451
  
   $6,915,965
  
  
            
Liabilities and Shareholders’ Equity 
  
    
  
  
Interest-bearing liabilities: 
  
    
  
  
Savings and interest-bearing demand deposits$3,586,369
 $4,526
 0.51% $2,925,280
 $2,078
 0.29%
Time deposits1,016,406
 2,246
 0.90% 961,549
 1,685
 0.71%
Federal funds purchased and securities sold under agreements to repurchase20,909
 9
 0.17% 42,589
 20
 0.19%
FHLB advances371,556
 1,457
 1.59% 525,583
 907
 0.70%
Other borrowings75,553
 1,134
 6.09% 47,738
 559
 4.75%
Subordinated deferrable interest debentures85,701
 1,339
 6.34% 84,379
 1,211
 5.82%
Total interest-bearing liabilities5,156,494
 10,711
 0.84% 4,587,118
 6,460
 0.57%
Demand deposits1,780,738
  
   1,604,495
  
  
Other liabilities36,873
  
   28,522
  
  
Shareholders’ equity849,346
  
   695,830
  
  
Total liabilities and shareholders’ equity$7,823,451
  
   $6,915,965
  
  
Interest rate spread 
  
 3.68%  
  
 3.81%
Net interest income 
 $69,787
    
 $62,108
  
Net interest margin 
  
 3.92%  
  
 3.97%
On a tax-equivalent basis, net interest income for the first quarter of 2018 was $69.8 million, an increase of $7.7 million, or 12.3%, compared with $62.1 million reported in the same quarter in 2017. The higher net interest income is a result of growth in average interest earning assets which increased $867.9 million, or 13.7%, from $6.35 billion in the first quarter of 2017 to $7.22 billion for the first quarter of 2018. The Company’s net interest margin decreased during the first quarter of 2018 to 3.92%, compared with 3.97% reported in the first quarter of 2017 and 3.94% reported in the fourth quarter of 2017.
Total interest income, on a tax-equivalent basis, increased to $80.5 million during the first quarter of 2018, compared with $68.6 million in the same quarter of 2017. Yields on earning assets increased to 4.52% during the first quarter of 2018, compared with 4.38% reported in the first quarter of 2017. During the first quarter of 2018, loans comprised 86.0% of earning assets, compared with 84.1% in the same quarter of 2017. This increase is a result of growth in average legacy loans which increased $1.22 billion, or 33.3%, to $4.90 billion in the first quarter 2018 from $3.68 billion in the same period of 2017. Yields on legacy loans increased to 4.86% in the first quarter of 2018, compared with 4.76% in the same period of 2017. The yield on purchased loans decreased from 5.95% in the first quarter of 2017 to 5.66% during the first quarter of 2018. Accretion income for the first quarter of 2018 was $1.4 million, compared with $2.2 million in the fourth quarter of 2017 and $2.8 million in the first quarter of 2017. Excluding the effect of accretion on purchased loans, the yield on purchased loans was 4.84% for the first quarter of 2017, compared with 4.97% in the same period of 2018. Yields on purchased loan pools increased from 2.84% in the first quarter of 2017 to 3.02% in the same period in 2018. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.


The yield on total interest-bearing liabilities increased from 0.57% in the first quarter of 2017 to 0.84% in the first quarter of 2018. Total funding costs, inclusive of noninterest bearing demand deposits, increased to 0.63% in the first quarter of 2018, compared with 0.42% during the first quarter of 2017. Deposit costs increased from 0.28% in the first quarter of 2017 to 0.43% in the first quarter of 2018. Non-deposit funding costs increased from 1.56% in the first quarter of 2017 to 2.89% in the first quarter of 2018. The increase in non-deposit funding costs was driven primarily by higher market rates being paid on 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 84.1% of total deposits in the first quarter of 2018, compared with 82.5% during the first quarter of 2017. Average balances of interest bearing deposits and their respective costs for the first quarter of 2018 and 2017 are shown below:
 Three Months Ended
March 31, 2018		 Three Months Ended
March 31, 2017
(dollars in thousands)
Average
Balance
 
Average
Cost
 
Average
Balance
 
Average
Cost
NOW$1,337,718
 0.29% $1,169,567
 0.17%
MMDA1,970,571
 0.73% 1,486,972
 0.42%
Savings278,080
 0.07% 268,741
 0.06%
Retail CDs < $100,000422,771
 0.64% 444,195
 0.51%
Retail CDs > $100,000593,635
 1.08% 517,354
 0.88%
Brokered CDs—
 —% —
 —%
Interest-bearing deposits$4,602,775
 0.60% $3,886,829
 0.39%
Provision for Loan Losses
The Company’s provision for loan losses during the first quarter of 2018 amounted to $1.8 million, compared with $2.5 million in the fourth quarter of 2017 and $1.8 million in the first quarter of 2017. At March 31, 2018, classified loans still accruing declined to $45.8 million, compared with $57.8 million at December 31, 2017. Non-performing assets as a percentage of total assets decreased from 0.68% at December 31, 2017 to 0.61% at March 31, 2018. Net charge-offs on legacy loans during the first quarter of 2018 were approximately $1.7 million, or 0.14% of average legacy loans on an annualized basis, compared with approximately $370,000, or 0.04%, in the first quarter of 2017. The Company’s allowance for loan losses allocated to legacy loans at March 31, 2018 was $22.4 million, or 0.44% of legacy loans, compared with $21.5 million, or 0.44% of legacy loans, at December 31, 2017. The Company’s total allowance for loan losses at March 31, 2018 was $26.2 million, or 0.42% of total loans, increasing from $25.8 million, or 0.43% of total loans, at December 31, 2017.
Noninterest Income
Total non-interest income for the first quarter of 2018 was $26.5 million, an increase of $758,000, or 2.9%, from the $25.7 million reported in the first quarter of 2017.  Service charges on deposit accounts in the first quarter of 2018 decreased $335,000, or 3.2%, to $10.2 million, compared with $10.6 million in the first quarter of 2017. This decrease in service charge revenue was primarily attributable to lower overdraft fee income. Income from mortgage-related activities increased $685,000, or 6.1%, from $11.2 million in the first quarter of 2017 to $11.9 million in the first quarter of 2018. Total production in the first quarter of 2018 amounted to $356.1 million, compared with $311.8 million in the same quarter of 2017, while spread (gain on sale) decreased to 2.62% in the current quarter compared with 3.45% in the same quarter of 2017. The retail mortgage open pipeline finished the first quarter of 2018 at $153.3 million, compared with $119.6 million at the beginning of the first quarter of 2018 and $146.3 million at the end of the first quarter of 2017. Other service charges, commissions and fees decreased $10,000, or 1.4%, to $719,000 during the first quarter of 2018, compared with $709,000 during the first quarter of 2017. Other non-interest income increased $361,000, or 11.2%, to $3.6 million for the first quarter of 2018, compared with $3.2 million during the first quarter of 2017. The increase in other non-interest income was attributable to higher loan servicing income, merchant fee income and check order fee income, partially offset by lower gains from sale of SBA loans.
Noninterest Expense
Total non-interest expenses for the first quarter of 2018 increased $6.0 million, or 11.3%, to $59.1 million, compared with $53.1 million in the same quarter 2017. Salaries and employee benefits increased $4.3 million, or 15.5%, from $27.8 million in the first quarter of 2017 to $32.1 million in the first quarter of 2018 due to higher incentive pay, new positions added for the premium finance division and equipment finance line of business and an increased investment in the Company's Bank Secrecy Act ("BSA") function. Occupancy and equipment expenses increased $321,000, or 5.5%, to $6.2 million for the first quarter of 2018, compared with $5.9 million in the first quarter of 2017. Data processing and telecommunications expense increased $563,000, or 8.6%, to $7.1 million in the first quarter of 2018, compared with $6.6 million in the first quarter of 2017, 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. Credit resolution-related expenses decreased $384,000, or 41.2%, from $933,000 in the first quarter of 2017 to $549,000 in the first quarter of 2018. Merger and conversion charges increased $433,000 to $835,000 in the first quarter of 2018, compared with $402,000 in the same quarter of 2017, reflecting increased merger and acquisition activity. Other noninterest expenses increased $756,000, or 8.1%, from $9.4 million in the first quarter of 2017 to $10.1 million in the first quarter of 2018 due primarily to higher loan servicing fees associated with consumer installment home improvement loans serviced by unrelated third parties and higher FDIC deposit insurance accruals, partially offset by a decrease in the premium finance division's management and licensing fees as a result of termination of the management and licensing agreement for USPF with the completion of the USPF acquisition on January 31, 2018.

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 2018, the Company reported income tax expense of $7.7 million, compared with $10.2 million in the same period of 2017. The Company’s effective tax rate for the three months ending March 31, 2018 and 2017 was 22.4% and 32.6%, respectively. These decreases in both income tax expense and the effective tax rate are due to enactment of the Tax Reform Act.


Financial Condition as of March 31, 2018NOTE 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. 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.
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.

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, 2018, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at March 31, 2018, 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
March 31, 2018         
State, county and municipal securities105,821
 106,274
 3.85% 4.82 12,872
Corporate debt securities57,134
 57,097
 4.38% 5.64 2,000
Mortgage-backed securities699,990
 685,214
 2.57% 4.21 96,942
Total debt securities$862,945
 $848,585
 2.84% 4.38 $111,814
          
December 31, 2017 
  
      
State, county and municipal securities135,968
 137,794
 3.78% 4.61 11,370
Corporate debt securities46,659
 47,143
 4.12% 5.17 3,000
Mortgage-backed securities630,666
 625,936
 2.37% 3.91 100,603
Total debt securities$813,293
 $810,873
 2.71% 4.10 $114,973
Loans and Allowance for Loan Losses
At March 31, 2018, gross loans outstanding (including purchased loans, purchased loan pools, and loans held for sale) were $6.30 billion, an increase from $6.24 billion reported at December 31, 2017. Loans held for sale decreased from $197.4 million at December 31, 2017 to $111.1 million at March 31, 2018. Legacy loans (excluding purchased loans and purchased loan pools) increased $195.5 million, from $4.86 billion at December 31, 2017 to $5.05 billion at March 31, 2018, driven primarily by increased growth in the commercial real estate and residential real estate loan categories. Purchased loans decreased $43.0 million, from $861.6 million at December 31, 2017 to $818.6 million at March 31, 2018, due to paydowns of $44.0 million, transfers to OREO of $457,000 and charge-offs of $151,000, partially offset by accretion of $1.6 million. Purchased loan pools decreased $8.7 million, from $328.2 million at December 31, 2017 to $319.6 million at March 31, 2018 due to payments on the portfolio of $16.2 million and premium amortization of $511,000 during the first three months of 2018.
 
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 financialloans, consumer loans and agricultural; (2) constructiondeposit 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 portfolioBanking, 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 qualityseparate business units because of the loan portfoliodifferent products and the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worthservices 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 isallocates 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 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.
profit or loss from operations. There are no material intersegment sales or transfers.


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 first quarter of 2018, the allowance for loan losses allocated to legacy loans totaled $22.4 million, or 0.44% of legacy loans, compared with $21.5 million, or 0.44% of legacy loans, at December 31, 2017. The allowance for loan losses as a percentage of legacy loans remained unchanged from December 31, 2017 and March 31, 2018 due to consistency in the mix of loan and collateral types and the overall credit quality of the loan portfolio. Our legacy nonaccrual loans increased slightly from $14.2 million at December 31, 2017 to $14.4 million at March 31, 2018. For the first three months of 2018, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.14%, compared with 0.04% for the first three months of 2017. The total provision for loan losses for the first three months of 2018 was $1.8 million, remaining unchanged from $1.8 million recorded for the first three months of 2017. Our ratio of total nonperforming assets to total assets decreased from 0.68% at December 31, 2017 to 0.61% at March 31, 2018.
The balance of the allowance for loan losses allocated to loans collectively evaluated for impairment increased 3.5%, or $699,000, during the first three months of 2018, while the balance of loans collectively evaluated for impairment increased 2.6%, or $155.5 million, during the same period. As a percentage of all loans collectively evaluated for impairment, the allowance allocated to those loans remained constant at 0.34% for both December 31, 2017 and March 31, 2018. 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 2018 was noted in the legacy consumer installment loan category, which increased from 0.59% at December 31, 2017 to 0.69% at March 31, 2018 due to increased net charge-offs for the category. Additionally, larger dollar amount increases in the allowance for loan losses allocated to loans collectively evaluated for the first three months of 2018 were noted for both the legacy commercial and farmland real estate and the legacy residential real estate loan categories, which experienced most of the growth in loan balances collectively evaluated for impairment. 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 by 4.8%, or $290,000, during the first three months of 2018, while the balance of loans individually evaluated for impairment decreased 6.3%, or $3.3 million, during the same period. Loan balances individually evaluated for impairment declined across all legacy loan categories and were flat for both purchased loans and purchased loan pools. The largest changes in the allowance for loan losses allocated to loans individually evaluated for impairment from December 31, 2017 to March 31, 2018 were a $431,000 decrease for purchased loans and an increase of $169,000 for legacy commercial and farmland real estate loans.


The following tables present an analysis ofselected financial information with respect to the allowance for loan losses as of andCompany’s reportable business segments for the three months ended March 31, 20182019 and 2017:2018:
 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 expense12,835
 6,759
 2,114
 1,088
 2,738
 25,534
Net interest income85,039
 5,753
 2,690
 1,086
 4,827
 99,395
Provision for loan losses2,058
 136
 —
 231
 983
 3,408
Noninterest income14,370
 14,290
 379
 1,730
 2
 30,771
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits27,932
 8,207
 161
 765
 1,305
 38,370
Equipment and occupancy expenses7,281
 766
 1
 59
 97
 8,204
Data processing and telecommunications expenses7,592
 330
 30
 2
 437
 8,391
Other expenses16,956
 2,114
 68
 349
 973
 20,460
Total noninterest expense59,761
 11,417
 260
 1,175
 2,812
 75,425
Income before income tax expense37,590
 8,490
 2,809
 1,410
 1,034
 51,333
Income tax expense8,775
 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
Goodwill436,810
 —
 —
 —
 64,498
 501,308
Other intangible assets, net35,455
 —
 —
 —
 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 expense5,537
 1,825
 897
 507
 1,945
 10,711
Net interest income55,359
 4,997
 1,855
 924
 5,666
 68,801
Provision for loan losses888
 217
 —
 537
 159
 1,801
Noninterest income13,099
 11,585
 397
 1,370
 13
 26,464
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits22,068
 7,742
 138
 740
 1,401
 32,089
Equipment and occupancy expenses5,477
 593
 —
 58
 70
 6,198
Data processing and telecommunications expenses6,304
 389
 33
 9
 400
 7,135
Other expenses11,080
 1,731
 52
 236
 577
 13,676
Total noninterest expense44,929
 10,455
 223
 1,043
 2,448
 59,098
Income before income tax expense22,641
 5,910
 2,029
 714
 3,072
 34,366
Income tax expense5,242
 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
Goodwill125,532
 —
 —
 —
 82,981
 208,513
Other intangible assets, net12,562
 —
 —
 —
 —
 12,562
 Three Months Ended
March 31,
(dollars in thousands)2018 2017
Balance of allowance for loan losses at beginning of period$25,791
 $23,920
Provision charged to operating expense1,801
 1,836
Charge-offs: 
  
Commercial, financial and agricultural1,449
 104
Real estate – construction and development—
 53
Real estate – commercial and farmland142
 9
Real estate – residential198
 216
Consumer installment962
 164
Purchased loans121
 556
Purchased loan pools—
 —
Total charge-offs2,872
 1,102
Recoveries: 
  
Commercial, financial and agricultural656
 69
Real estate – construction and development114
 20
Real estate – commercial and farmland24
 9
Real estate – residential182
 61
Consumer installment67
 17
Purchased loans437
 420
Purchased loan pools—
 —
Total recoveries1,480
 596
Net charge-offs1,392
 506
Balance of allowance for loan losses at end of period$26,200
 $25,250
 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 period1,708
 (316) —
 1,392
Loan balances: 
  
  
  
End of period5,051,986
 818,587
 319,598
 6,190,171
Average for the period4,902,082
 842,509
 325,113
 6,069,704
Net charge-offs as a percentage of average loans0.14% (0.15)% 0.00% 0.09%
Allowance for loan losses as a percentage of end of period loans0.44% 0.34 % 0.31% 0.42%

 As of and for the
Three Months Ended
March 31, 2017
(dollars in thousands)
Legacy
Loans
 
Purchased
Loans
 
Purchased
Loan
Pools 
 Total
Allowance for loan losses at end of period$20,968
 $2,196
 $2,086
 $25,250
Net charge-offs (recoveries) for the period370
 136
 —
 506
Loan balances: 
  
  
  
End of period3,785,480
 1,006,935
 529,099
 5,321,514
Average for the period3,678,149
 1,034,983
 547,057
 5,260,189
Net charge-offs as a percentage of average loans0.04% 0.05% 0.00% 0.04%
Allowance for loan losses as a percentage of end of period loans0.55% 0.22% 0.39% 0.47%



Loans Excluding Purchased Loans

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)March 31,
2018		 December 31,
2017
Commercial, financial and agricultural$1,387,437
 $1,362,508
Real estate – construction and development631,504
 624,595
Real estate – commercial and farmland1,636,654
 1,535,439
Real estate – residential1,080,028
 1,009,461
Consumer installment316,363
 324,511
 $5,051,986
 $4,856,514

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,
2018		 December 31,
2017
Municipal loans$526,609
 $522,880
Premium finance loans501,841
 482,536
Other commercial, financial and agricultural loans358,987
 357,092
 $1,387,437
 $1,362,508

Purchased Assets
Loans that were acquired in transactions, including those that are covered by the loss-sharing agreements with the FDIC (“purchased loans”), totaled $818.6 million and $861.6 million at March 31, 2018 and December 31, 2017, respectively. OREO that was acquired in transactions, including OREO that is covered by the loss-sharing agreements with the FDIC, totaled $6.7 million and $9.0 million, at March 31, 2018 and December 31, 2017, respectively.
The Bank initially recorded 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,
2018		 December 31, 2017
Commercial, financial and agricultural$64,612
 $74,378
Real estate – construction and development48,940
 65,513
Real estate – commercial and farmland465,870
 468,246
Real estate – residential236,453
 250,539
Consumer installment2,712
 2,919
 $818,587
 $861,595
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, 2018, purchased loan pools totaled $319.6 million and consisted of whole-loan residential mortgages on properties outside the Company’s markets, with principal balances totaling $316.2 million and $3.4 million of remaining purchase premium paid at acquisition. As of December 31, 2017, purchased loan pools totaled $328.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $324.4 million and $3.8 million of remaining purchase premium paid at acquisition. The Company has allocated approximately $1.0 million and $1.1 million of the allowance for loan losses to the purchased loan pools at March 31, 2018 and December 31, 2017, 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 $14.4 million at March 31, 2018, an increase of $218,000, or 1.5%, from $14.2 million reported at December 31, 2017. Nonaccrual purchased loans totaled $15.9 million at March 31, 2018, a increase of $512,000, or 3.3%, compared with $15.4 million at December 31, 2017. At March 31, 2018, OREO, excluding purchased OREO, totaled $9.2 million, an increase of $707,000 compared with $8.5 million at December 31, 2017. Purchased OREO totaled $6.7 million at March 31, 2018, a decrease of $2.3 million compared with $9.0 million at December 31, 2017. 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 2018, total non-performing assets decreased to 0.68% of total assets, compared with 0.61% at December 31, 2017.
Non-performing assets at March 31, 2018 and December 31, 2017 were as follows:
(dollars in thousands)March 31,
2018		 December 31, 2017
Nonaccrual loans, excluding purchased loans$14,420
 $14,202
Nonaccrual purchased loans15,940
 15,428
Nonaccrual purchased loan pools—
 —
Accruing loans delinquent 90 days or more, excluding purchased loans2,497
 5,991
Accruing purchased loans delinquent 90 days or more—
 —
Foreclosed assets, excluding purchased assets9,171
 8,464
Purchased other real estate owned6,723
 9,011
Total non-performing assets$48,751
 $53,096
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.
As of March 31, 2018 and December 31, 2017, the Company had a balance of $14.7 million and $15.6 million, respectively, in troubled debt restructurings, excluding purchased loans. The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at March 31, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural4 $39
 13 $224
Real estate – construction and development5 176
 2 8
Real estate – commercial and farmland16 4,606
 6 2,127
Real estate – residential72 6,547
 19 838
Consumer installment3 7
 32 93
Total100 $11,375
 72 $3,290
December 31, 2017Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural4 $41
 12 $120
Real estate – construction and development6 417
 2 34
Real estate – commercial and farmland17 6,937
 5 204
Real estate – residential74 6,199
 18 1,508
Consumer installment4 5
 33 98
Total105 $13,599
 70 $1,964


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 March 31, 2018 and December 31, 2017:
March 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 agricultural11 $176
 6 $88
Real estate – construction and development5 156
 2 27
Real estate – commercial and farmland17 4,629
 5 2,105
Real estate – residential63 5,669
 28 1,715
Consumer installment27 73
 8 27
Total123 $10,703
 49 $3,962
December 31, 2017Loans Currently Paying
Under Restructured Terms		 Loans that have Defaulted Under Restructured Terms
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural9 $55
 7 $106
Real estate – construction and development4 156
 4 295
Real estate – commercial and farmland18 6,722
 4 419
Real estate – residential78 6,753
 14 954
Consumer installment24 59
 13 44
Total133 $13,745
 42 $1,818
The following table presents the amount of troubled debt restructurings, excluding purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at March 31, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest12 $2,512
 4 $153
Forgiveness of principal3 1,220
 — —
Forbearance of principal6 813
 7 2,037
Rate reduction only11 1,289
 1 60
Rate reduction, forbearance of interest27 1,705
 19 523
Rate reduction, forbearance of principal7 1,180
 35 318
Rate reduction, forgiveness of interest34 2,656
 4 194
Rate reduction, forgiveness of principal— —
 2 5
Total100 $11,375
 72 $3,290
December 31, 2017Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest12 $2,567
 4 $163
Forgiveness of principal3 1,238
 — —
Forbearance of principal5 2,299
 6 657
Rate reduction only12 1,366
 1 29
Rate reduction, forbearance of interest32 2,224
 19 484
Rate reduction, forbearance of principal6 1,192
 33 216
Rate reduction, forgiveness of interest35 2,713
 4 408
Rate reduction, forgiveness of principal— —
 3 7
Total105 $13,599
 70 $1,964



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, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse3 $432
 4 $2,132
Raw land7 471
 2 8
Hotel and motel3 1,329
 — —
Office3 360
 — —
Retail, including strip centers6 2,431
 3 77
1-4 family residential72 6,340
 20 880
Automobile/equipment/CD5 11
 42 191
Unsecured1 1
 1 2
Total100 $11,375
 72 $3,290
December 31, 2017Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse4 $2,697
 1 $79
Raw land8 713
 2 34
Hotel and motel3 1,370
 — —
Office4 656
 — —
Retail, including strip centers5 2,159
 3 80
1-4 family residential74 5,992
 20 1,553
Automobile/equipment/CD6 11
 43 216
Unsecured1 1
 1 2
Total105 $13,599
 70 $1,964
As of March 31, 2018 and December 31, 2017, the Company had a balance of $24.5 million and $24.9 million, respectively, in troubled debt restructurings included in purchased loans. The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at March 31, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 4 $23
Real estate – construction and development4 1,034
 6 316
Real estate – commercial and farmland14 6,745
 8 2,234
Real estate – residential120 12,871
 21 1,281
Consumer installment— —
 2 4
Total138 $20,650
 41 $3,858
December 31, 2017Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural— $—
 3 $16
Real estate – construction and development3 1,018
 6 340
Real estate – commercial and farmland14 6,713
 10 2,582
Real estate – residential117 12,741
 25 1,462
Consumer installment— —
 2 5
Total134 $20,472
 46 $4,405


The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at March 31, 2018 and December 31, 2017: 
March 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 agricultural2 $18
 2 $5
Real estate – construction and development9 1,346
 1 5
Real estate – commercial and farmland20 8,413
 2 565
Real estate – residential120 12,769
 21 1,383
Consumer installment1 1
 1 3
Total152 $22,547
 27 $1,961
December 31, 2017Loans Currently Paying
Under Restructured Terms		 Loans that have Defaulted Under Restructured Terms
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural1 $11
 2 $5
Real estate – construction and development8 1,352
 1 6
Real estate – commercial and farmland22 9,014
 2 281
Real estate – residential124 13,151
 18 1,052
Consumer installment1 2
 1 3
Total156 $23,530
 24 $1,347
The following table presents the amount of troubled debt restructurings included in purchased loans, by types of concessions made, classified separately as accrual and nonaccrual at March 31, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest4 $176
 9 $1,640
Forbearance of principal6 2,482
 3 247
Forbearance of principal, extended amortization1 299
 1 282
Rate reduction only74 11,590
 12 1,222
Rate reduction, forbearance of interest23 2,282
 9 229
Rate reduction, forbearance of principal10 2,178
 5 182
Rate reduction, forgiveness of interest20 1,643
 2 56
Total138 $20,650
 41 $3,858
December 31, 2017Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest4 $182
 9 $1,740
Forgiveness of principal— —
 1 63
Forbearance of principal5 2,363
 4 406
Forbearance of principal, extended amortization2 371
 1 290
Rate reduction only70 11,450
 15 1,361
Rate reduction, forbearance of interest22 2,211
 9 257
Rate reduction, forbearance of principal10 2,195
 5 187
Rate reduction, forgiveness of interest21 1,700
 2 101
Total134 $20,472
 46 $4,405


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, 2018 and December 31, 2017: 
March 31, 2018Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse2 $365
 — $—
Raw land2 888
 7 768
Hotel and motel1 148
 1 456
Office2 450
 1 419
Retail, including strip centers8 4,530
 — —
1-4 family residential122 13,039
 24 1,930
Church1 1,230
 1 214
Automobile/equipment/CD— —
 7 71
Total138 $20,650
 41 $3,858
December 31, 2017Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse2 $368
 — $—
Raw land2 893
 7 829
Hotel and motel1 149
 1 476
Office2 460
 2 494
Retail, including strip centers7 4,407
 1 160
1-4 family residential119 12,958
 28 2,161
Church1 1,237
 1 218
Automobile/equipment/CD— —
 6 67
Total134 $20,472
 46 $4,405
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 March 31, 2018, 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, 2018 and December 31, 2017. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased loans: 
 March 31,
2018		 December 31,
2017
(dollars in thousands)Balance 
% of Total
Loans
 Balance 
% of Total
Loans
Construction and development loans$680,443
 11% $690,108
 11%
Multi-family loans158,133
 3% 148,663
 3%
Nonfarm non-residential loans (excluding owner occupied)1,083,783
 17% 979,205
 16%
Total CRE Loans  (excluding owner occupied)
1,922,359
 31% 1,817,976
 30%
All other loan types4,267,812
 69% 4,228,379
 70%
Total Loans$6,190,171
 100% $6,046,355
 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, 2018 and December 31, 2017: 
 
Internal
Limit
 Actual
  March 31,
2018		 December 31,
2017
Construction and development loans100% 81% 83%
Total CRE loans (excluding owner occupied)300% 230% 219%
Short-Term Investments
The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At March 31, 2018, the Company’s short-term investments were $210.9 million, compared with $191.3 million at December 31, 2017. At March 31, 2018, the Company had $9,000 in federal funds sold and $210.9 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, 2018 and December 31, 2017 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 an asset of $61,000 at March 31, 2018 and a liability of $381,000 at December 31, 2017.

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 $4.9 million and $2.9 million at March 31, 2018 and December 31, 2017, respectively, and a liability of $505,000 and $67,000 at March 31, 2018 and December 31, 2017, respectively.
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
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 was valued at $45.45 per share, resulting 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 to a selling shareholder of USPF. The issuance of the 114,285 common shares was valued at $48.55 per share, resulting 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 to the selling shareholders of USPF. The issuance of the 830,301 common shares was valued at $53.55 per share, resulting in an increase in shareholders’ equity of $44.5 million.

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.
2017 Public Offering

On March 6, 2017, the Company completed an underwritten public offering of 2,012,500 shares of the Company’s common stock at a price to the public of $46.50 per share. The Company received net proceeds from the issuance of $88.7 million, after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceeds of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027.

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.
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% (6.375% including the 1.875% capital conservation buffer for 2018; 5.75% including the 1.25% capital conservation buffer for 2017). 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% (7.875% including the 1.875% capital conservation buffer for 2018; 7.25% including the 1.25% capital conservation buffer for 2017). 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% (9.875% including the 1.875%


capital conservation buffer for 2018; 9.25% including the 1.25% capital conservation buffer for 2017). 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, 2018, 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, 2018 and December 31, 2017. 
 March 31,
2018		 December 31, 2017
Tier 1 Leverage Ratio (tier 1 capital to average assets)
   
Consolidated9.65% 9.71%
Ameris Bank10.57% 10.56%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
   
Consolidated9.96% 10.29%
Ameris Bank12.48% 12.64%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
   
Consolidated11.28% 11.58%
Ameris Bank12.48% 12.64%
Total Capital Ratio (total capital to risk weighted assets)
   
Consolidated12.82% 13.14%
Ameris Bank12.89% 13.05%
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 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 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.
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 March 31, 2018 and December 31, 2017, the net carrying value of the Company’s other borrowings was $555.5 million and $250.6 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 March 31, 2018 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:
 March 31, 2018 December 31, 2017 September 30, 2017 June 30,
2017		 March 31, 2017
Investment securities available for sale to total deposits13.16% 12.24% 13.90% 14.13% 14.72%
Loans (net of unearned income) to total deposits96.03% 91.25% 101.04% 97.88% 94.31%
Interest-earning assets to total assets92.15% 92.77% 92.48% 92.14% 91.98%
Interest-bearing deposits to total deposits71.02% 73.18% 70.86% 71.12% 70.67%
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, 2018 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
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: 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.
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 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 losses3,408
 3,661
 2,095
 9,110
 1,801
Noninterest income30,771
 30,470
 30,171
 31,307
 26,464
Noninterest expense75,425
 75,810
 72,353
 86,386
 59,098
Income tax expense11,428
 7,017
 13,317
 2,423
 7,706
Net income available to common shareholders39,905
 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 sale101,521
 129,664
 151,396
 141,875
 138,129
Loans5,867,037
 5,819,684
 5,703,921
 5,198,301
 4,902,082
Purchased loans2,359,280
 2,402,610
 2,499,393
 1,107,184
 842,509
Purchased loan pools257,661
 268,568
 287,859
 310,594
 325,113
Earning assets10,319,954
 10,220,747
 10,138,029
 7,818,525
 7,215,742
Assets11,423,677
 11,307,980
 11,204,504
 8,529,035
 7,823,451
Deposits9,577,574
 9,452,944
 8,962,170
 6,607,518
 6,383,513
Shareholders’ equity1,478,462
 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 sale112,070
 111,298
 130,179
 137,249
 111,135
Loans5,756,358
 5,660,457
 5,543,306
 5,380,515
 5,051,986
Purchased loans2,472,271
 2,588,832
 2,711,460
 2,812,510
 818,587
Purchased loan pools253,710
 262,625
 274,752
 297,509
 319,598
Earning assets10,563,571
 10,348,393
 10,340,558
 10,110,983
 7,393,048
Total assets11,656,275
 11,443,515
 11,428,994
 11,190,697
 8,022,828
Deposits9,800,875
 9,649,313
 9,181,363
 8,761,593
 6,446,165
Shareholders’ equity1,495,584
 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 outstanding47,585,309
 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: 
  
  
  
  
Basic47,366,296
 47,501,150
 47,514,653
 39,432,021
 37,966,781
Diluted47,456,314
 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 volume387,800
 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 value1.09
 1.03
 1.54
 1.85
 2.33
Performance Ratios: 
  
  
  
  
Return on average assets1.42% 1.53% 1.47% 0.44% 1.38%
Return on average common equity10.95% 12.09% 11.78% 3.86% 12.73%
Average loans to average deposits89.64% 91.19% 96.43% 102.28% 97.25%
Average equity to average assets12.94% 12.63% 12.45% 11.43% 10.86%
Net interest margin (tax equivalent)3.95% 3.91% 3.92% 3.95% 3.92%
Efficiency ratio57.95% 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: 
  
  
  
  
Goodwill501,308
 503,434
 505,604
 504,764
 208,513
Other intangible assets, net55,557
 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 outstanding47,585,309
 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 share19.73
 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 charges2,057
 835
Restructuring charge245
 —
Financial impact of hurricanes(89) —
Loss on the sale of premises919
 583
Tax effect of adjustment items (Note 1)
(450) (298)
After tax adjustment items2,682
 1,120
Adjusted net income$42,587
 $27,780
    
Weighted average common shares outstanding - diluted47,456,314
 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.


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 first quarter of 2019 and 2018, respectively:
 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 expense12,835
 6,759
 2,114
 1,088
 2,738
 25,534
Net interest income85,039
 5,753
 2,690
 1,086
 4,827
 99,395
Provision for loan losses2,058
 136
 —
 231
 983
 3,408
Noninterest income14,370
 14,290
 379
 1,730
 2
 30,771
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits27,932
 8,207
 161
 765
 1,305
 38,370
Equipment and occupancy expenses7,281
 766
 1
 59
 97
 8,204
Data processing and telecommunications expenses7,592
 330
 30
 2
 437
 8,391
Other expenses16,956
 2,114
 68
 349
 973
 20,460
Total noninterest expense59,761
 11,417
 260
 1,175
 2,812
 75,425
Income before income tax expense37,590
 8,490
 2,809
 1,410
 1,034
 51,333
Income tax expense8,775
 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 expense5,537
 1,825
 897
 507
 1,945
 10,711
Net interest income55,359
 4,997
 1,855
 924
 5,666
 68,801
Provision for loan losses888
 217
 —
 537
 159
 1,801
Noninterest income13,099
 11,585
 397
 1,370
 13
 26,464
Noninterest expense 
  
  
  
  
  
Salaries and employee benefits22,068
 7,742
 138
 740
 1,401
 32,089
Equipment and occupancy expenses5,477
 593
 —
 58
 70
 6,198
Data processing and telecommunications expenses6,304
 389
 33
 9
 400
 7,135
Other expenses11,080
 1,731
 52
 236
 577
 13,676
Total noninterest expense44,929
 10,455
 223
 1,043
 2,448
 59,098
Income before income tax expense22,641
 5,910
 2,029
 714
 3,072
 34,366
Income tax expense5,242
 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 securities1,225,564
 9,240
 3.06% 860,419
 5,615
 2.65%
Loans held for sale101,521
 1,152
 4.60% 138,129
 1,210
 3.55%
Loans5,867,037
 77,322
 5.34% 4,902,082
 58,771
 4.86%
Purchased loans2,359,280
 33,011
 5.67% 842,509
 11,762
 5.66%
Purchased loan pools257,661
 1,933
 3.04% 325,113
 2,424
 3.02%
Total interest-earning assets10,319,954
 125,987
 4.95% 7,215,742
 80,498
 4.52%
Noninterest-earning assets1,103,723
  
   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 deposits2,402,439
 10,451
 1.76% 1,016,406
 2,246
 0.90%
Federal funds purchased and securities sold under agreements to repurchase15,879
 11
 0.28% 20,909
 9
 0.17%
FHLB advances6,257
 44
 2.85% 371,556
 1,457
 1.59%
Other borrowings145,473
 2,227
 6.21% 75,553
 1,134
 6.09%
Subordinated deferrable interest debentures89,343
 1,568
 7.12% 85,701
 1,339
 6.34%
Total interest-bearing liabilities7,289,483
 25,534
 1.42% 5,156,494
 10,711
 0.84%
Demand deposits2,545,043
  
   1,780,738
  
  
Other liabilities110,689
  
   36,873
  
  
Shareholders’ equity1,478,462
  
   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%
MMDA2,677,015
 1.37% 1,970,571
 0.73%
Savings399,089
 0.08% 278,080
 0.07%
Retail CDs < $100,000767,405
 1.22% 422,771
 0.64%
Retail CDs > $100,0001,124,733
 1.81% 593,635
 1.08%
Brokered CDs510,301
 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.
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.

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.


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
March 31, 2019         
State, county and municipal securities$106,468
 $107,740
 3.90% 3.60 $18,639
Corporate debt securities56,901
 $57,152
 5.15% 5.34 500
Mortgage-backed securities1,072,783
 $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 securities67,123
 67,314
 4.75% 4.94 500
Mortgage-backed securities982,183
 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 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 on the following loan categories: (1) commercial, financial and agricultural; (2) construction and development related real estate; (3) 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 Georgia, North Florida, Southeast Alabama and South Carolina to take advantage of the growth in these areas.
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.


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 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 expense3,408
 1,801
Charge-offs: 
  
Commercial, financial and agricultural2,004
 1,449
Real estate – construction and development25
 —
Real estate – commercial and farmland1,253
 142
Real estate – residential20
 198
Consumer installment1,893
 962
Purchased loans184
 121
Total charge-offs5,379
 2,872
Recoveries: 
  
Commercial, financial and agricultural1,065
 656
Real estate – construction and development1
 114
Real estate – commercial and farmland4
 24
Real estate – residential104
 182
Consumer installment164
 67
Purchased loans473
 437
Total recoveries1,811
 1,480
Net charge-offs3,568
 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 period3,857
 (289) —
 3,568
Loan balances: 
  
  
  
End of period5,756,358
 2,472,271
 253,710
 8,482,339
Average for the period5,867,037
 2,359,280
 257,661
 8,483,978
Net charge-offs as a percentage of average loans0.27% (0.05)% 0.00% 0.17%
Allowance for loan losses as a percentage of end of period loans0.45% 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 period1,708
 (316) —
 1,392
Loan balances: 
  
  
  
End of period5,051,986
 818,587
 319,598
 6,190,171
Average for the period4,902,082
 842,509
 325,113
 6,069,704
Net charge-offs as a percentage of average loans0.14% (0.15)% 0.00% 0.09%
Allowance for loan losses as a percentage of end of period loans0.44% 0.34 % 0.31% 0.42%



Loans Excluding Purchased Loans

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)March 31,
2019		 December 31,
2018
Commercial, financial and agricultural$1,382,907
 $1,316,359
Real estate – construction and development676,563
 671,198
Real estate – commercial and farmland1,894,937
 1,814,529
Real estate – residential1,365,482
 1,403,000
Consumer installment436,469
 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 loans487,980
 410,381
Other commercial, financial and agricultural loans385,463
 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 development239,413
 227,900
Real estate – commercial and farmland1,280,515
 1,337,859
Real estate – residential597,735
 623,199
Consumer installment26,636
 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 loans23,846
 24,107
Nonaccrual purchased loan pools400
 —
Accruing loans delinquent 90 days or more, excluding purchased loans3,676
 4,222
Accruing purchased loans delinquent 90 days or more—
 —
Foreclosed assets, excluding purchased assets6,014
 7,218
Purchased other real estate owned10,857
 9,535
Total non-performing assets$62,426
 $63,034
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.
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, 2019Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural3 $116
 14 $138
Real estate – construction and development4 142
 1 2
Real estate – commercial and farmland13 2,954
 4 450
Real estate – residential78 8,240
 19 832
Consumer installment5 11
 22 63
Total103 $11,463
 60 $1,485


December 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural5 $256
 14 $138
Real estate – construction and development5 145
 1 2
Real estate – commercial and farmland12 2,863
 3 426
Real estate – residential71 6,043
 20 1,119
Consumer installment6 16
 24 69
Total99 $9,323
 62 $1,754

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 March 31, 2019 and December 31, 2018:
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 agricultural9 $145
 8 $109
Real estate – construction and development5 143
 — —
Real estate – commercial and farmland16 3,158
 1 246
Real estate – residential75 7,510
 22 1,562
Consumer installment18 42
 9 33
Total123 $10,998
 40 $1,950
December 31, 2018Loans Currently Paying
Under Restructured Terms		 Loans that have Defaulted Under Restructured Terms
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural10 $282
 9 $112
Real estate – construction and development5 147
 1 —
Real estate – commercial and farmland14 3,043
 1 246
Real estate – residential65 5,756
 26 1,406
Consumer installment18 36
 12 49
Total112 $9,264
 49 $1,813
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 March 31, 2019 and December 31, 2018: 
March 31, 2019Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forgiveness of interest— $—
 1 $55
Forbearance of interest9 1,339
 7 617
Forgiveness of principal1 681
 — —
Forbearance of principal11 2,339
 4 70
Rate reduction only12 1,180
 1 55
Rate reduction, forbearance of interest28 2,406
 11 318
Rate reduction, forbearance of principal13 1,357
 30 170
Rate reduction, forgiveness of interest29 2,161
 5 199
Rate reduction, forgiveness of principal— —
 1 1
Total103 $11,463
 60 $1,485


December 31, 2018Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forgiveness of interest— $—
 1 $55
Forbearance of interest9 1,361
 5 509
Forgiveness of principal1 686
 — —
Forbearance of principal6 360
 4 75
Rate reduction only11 1,155
 1 56
Rate reduction, forbearance of interest27 2,149
 13 618
Rate reduction, forbearance of principal15 1,384
 32 175
Rate reduction, forgiveness of interest30 2,228
 5 264
Rate reduction, forgiveness of principal— —
 1 2
Total99 $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, 2019Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse4 $535
 2 $165
Raw land6 431
 1 2
Hotel and motel1 252
 1 246
Office1 159
 — —
Retail, including strip centers6 1,956
 — —
1-4 family residential78 8,032
 20 871
Automobile/equipment/CD7 98
 34 186
Livestock— —
 1 14
Unsecured— —
 1 1
Total103 $11,463
 60 $1,485
December 31, 2018Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse5 $544
 1 $137
Raw land7 435
 1 2
Hotel and motel1 260
 1 246
Office1 161
 — —
Retail, including strip centers6 1,980
 — —
1-4 family residential71 5,835
 21 1,161
Automobile/equipment/CD8 108
 36 188
Livestock— —
 1 18
Unsecured— —
 1 2
Total99 $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, 2019Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural1 $31
 3 $29
Real estate – construction and development4 1,011
 4 268
Real estate – commercial and farmland12 6,104
 7 1,577
Real estate – residential119 12,297
 21 917
Consumer installment— —
 7 50
Total136 $19,443
 42 $2,841


December 31, 2018Accruing Loans Non-Accruing Loans
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural1 $31
 3 $32
Real estate – construction and development4 1,015
 5 293
Real estate – commercial and farmland12 6,162
 7 1,685
Real estate – residential115 11,532
 24 1,424
Consumer installment— —
 4 17
Total132 $18,740
 43 $3,451
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 March 31, 2019 and December 31, 2018: 
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 agricultural3 $58
 1 $3
Real estate – construction and development7 1,277
 1 2
Real estate – commercial and farmland16 7,252
 3 428
Real estate – residential113 10,723
 27 2,491
Consumer installment4 19
 3 31
Total143 $19,329
 35 $2,955
December 31, 2018Loans Currently Paying
Under Restructured Terms		 Loans that have Defaulted Under Restructured Terms
Loan Class# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Commercial, financial and agricultural4 $63
 — $—
Real estate – construction and development8 1,305
 1 3
Real estate – commercial and farmland17 7,576
 2 271
Real estate – residential106 10,040
 33 2,916
Consumer installment3 14
 1 3
Total138 $18,998
 37 $3,193
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 March 31, 2019 and December 31, 2018: 
March 31, 2019Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest5 $457
 9 $1,398
Forbearance of principal6 2,329
 4 233
Forbearance of principal, extended amortization— —
 1 250
Rate reduction only70 10,746
 6 236
Rate reduction, forbearance of interest24 2,293
 13 332
Rate reduction, forbearance of principal9 1,740
 7 263
Rate reduction, forgiveness of interest22 1,878
 2 129
Total136 $19,443
 42 $2,841
December 31, 2018Accruing Loans Non-Accruing Loans
Type of Concession# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Forbearance of interest5 $224
 10 $1,751
Forbearance of principal6 2,368
 3 226
Forbearance of principal, extended amortization— —
 1 258
Rate reduction only73 10,911
 6 285
Rate reduction, forbearance of interest24 2,304
 14 356
Rate reduction, forbearance of principal8 1,635
 6 368
Rate reduction, forgiveness of interest16 1,298
 3 207
Total132 $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, 2019Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse2 $354
 — $—
Raw land2 870
 5 653
Hotel and motel1 144
 — —
Office2 410
 2 445
Retail, including strip centers5 3,848
 — —
1-4 family residential122 12,600
 23 1,453
Church1 1,186
 1 196
Automobile/equipment/CD1 31
 11 94
Total136 $19,443
 42 $2,841
December 31, 2018Accruing Loans Non-Accruing Loans
Collateral Type# 
Balance
(in thousands)
 # 
Balance
(in thousands)
Warehouse2 $356
 — $—
Raw land2 873
 6 718
Hotel and motel1 145
 — —
Office2 419
 2 457
Retail, including strip centers5 3,882
 — —
1-4 family residential118 11,837
 26 2,009
Church1 1,197
 1 201
Automobile/equipment/CD1 31
 8 65
Total132 $18,740
 43 $3,450
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 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 loans288,583
 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 types5,557,227
 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
  March 31,
2019		 December 31,
2018
Construction and development loans100% 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

On May 25, 2018, the Company issued 2,631,520 shares of its common stock to the shareholders of Atlantic. Such shares had a value of $56.15 per share at the time of issuance, resulting in an increase in shareholders’ equity of $147.8 million.

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

USPF Acquisition

On January 18, 2017, in exchange for 4.99% of the outstanding shares of common stock of USPF, the Company issued 128,572 unregistered shares of its common stock to a selling shareholder of USPF. A registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the 128,572 common shares, valued at $45.45 per share at the time of issuance, resulted in an increase in shareholders’ equity of $5.8 million.

On January 3, 2018, in exchange for 25.01% of the outstanding shares of common stock of USPF, the Company issued 114,285 unregistered shares of its common stock and $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.
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 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:
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% (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)
   
Consolidated9.43% 9.17%
Ameris Bank10.69% 10.46%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
   
Consolidated10.57% 10.07%
Ameris Bank13.12% 12.66%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
   
Consolidated11.58% 11.07%
Ameris Bank13.12% 12.66%
Total Capital Ratio (total capital to risk weighted assets)
   
Consolidated12.74% 12.23%
Ameris Bank13.45% 12.98%


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 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.
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 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 deposits12.60% 12.36% 12.66% 13.17% 13.16%
Loans (net of unearned income) to total deposits86.55% 88.21% 92.90% 96.91% 96.03%
Interest-earning assets to total assets90.63% 90.43% 90.48% 90.35% 92.15%
Interest-bearing deposits to total deposits71.91% 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 are part of the Company’s program to manage interest rate sensitivity.
 
At March 31, 2018,2019, 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 $31,000 at March 31, 2019 and an asset of $61,000 at March 31, 2018 and a liability of $381,000$102,000 at December 31, 2017.2018.
  
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 $4.9$5.1 million and $2.9$2.5 million at March 31, 20182019 and December 31, 2017,2018, respectively, and a liability of $505,000 and $67,000$1.3 million at both March 31, 20182019 and December 31, 2017, 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.
 
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 March 31, 2018,2019, 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, 2017.2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
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, 2018.2019. 
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
January 1, 2018 through January 31, 2018 1,092
 $48.20
 —
 $—
February 1, 2018 through February 28, 2018 16,884
 $53.75
 —
 $—
March 1, 2018 through March 31, 2018 —
 $—
 —
 $—
Total 17,976
 $53.41
 —
 $—
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, 20182019 through March 31, 20182019 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)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.

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
2.1
Agreement and Plan of Merger dated as of January 25, 2018 by and between Ameris Bancorp and Hamilton State Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on January 26, 2018).
2.2
Voting and Support Agreement, dated January 25, 2018, by and among Ameris Bancorp, Hamilton State Bancshares, Inc. and the Hamilton State Bancshares, Inc. shareholders party thereto (incorporated by reference to Exhibit 2.2 to Ameris Bancorp’s Registration Statement on Form S-4 (File No. 333-224162) filed with the SEC on April 25, 2018).
2.3
Stock Purchase Agreement dated as of January 25, 2018 by and among Ameris Bancorp, Ameris Bank, William J. Villari and The Villari Family Gift Trust (incorporated by reference to Exhibit 2.2 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on January 26, 2018).
   
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 January 16, 2018 (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on January 19, 2018).
   
4.110.1*
 Registration RightsForm of Severance Protection and Restrictive Covenants Agreement dated as of January 3, 2018 by and between Ameris Bancorp and William J. Villari (incorporated by reference to Exhibit 4.9 to Ameris Bancorp’s Registration Statement on Form S-3 (File No. 333-223080) filed with the SEC on February 16, 2018).
4.2
Registration Rights Agreement dated as of January 31, 2018 by and among Ameris Bancorp, William J. Villari and The Villari Family Gift Trust (incorporated by reference to Exhibit 4.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on February 6, 2018).
10.1
Fourth Amendment to Loan Agreement dated April 25, 2018 by and between Ameris Bancorp and NexBank SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on April 25, 2018).
10.2
Fourth Amended and Restated Revolving Promissory Note dated April 25, 2018 issued by Ameris Bancorp to NexBank SSB (incorporated by reference to Exhibit 10.2 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on April 25, 2018).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.


Exhibit
Number		Description
   
101
 The following financial statements from Ameris Bancorp’s Form 10-Q for the quarter ended March 31, 2018,2019, 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 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: May 10, 20182019AMERIS BANCORP
  
 /s/ Nicole S. Stokes
 Nicole S. Stokes
 
Executive Vice President and Chief Financial Officer
(duly authorized signatory and principal accounting and financial officer)
 


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