Ameris Bancorp - 10-Q quarterly report FY2017 Q3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2017



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

Commission File Number: 001-13901

AMERIS BANCORP

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

There were 37,231,049 shares of Common Stock outstanding as of November 3, 2017.

AMERIS BANCORP

TABLE OF CONTENTS



		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	1

	Consolidated Statements of Income and Comprehensive Income for the Three and Nine-Month Periods Ended September 30, 2017 and 2016	2

	Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2017 and 2016	3

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	4

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	64

Item 4.	Controls and Procedures.	65

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	65

Item 1A.	Risk Factors.	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	65

Item 3.	Defaults Upon Senior Securities.	65

Item 4.	Mine Safety Disclosures.	65

Item 5.	Other Information.	65

Item 6.	Exhibits.	66

Signatures		67

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(dollars in thousands, except per share data)



	September 30, 2017			December 31, 2016
Assets
Cash and due from banks	$	131,071		$	127,164
Federal funds sold and interest-bearing deposits in banks	112,844			71,221
Investment securities available for sale, at fair value	819,593			822,735
Other investments	47,977			29,464
Loans held for sale, at fair value	137,392			105,924

Loans	4,574,678			3,626,821
Purchased loans	917,126			1,069,191
Purchased loan pools	465,218			568,314
Loans, net of unearned income	5,957,022			5,264,326
Allowance for loan losses	(25,966		)	(23,920		)
Loans, net	5,931,056			5,240,406

Other real estate owned, net	9,391			10,874
Purchased other real estate owned, net	9,946			12,540
Total other real estate owned, net	19,337			23,414

Premises and equipment, net	119,458			121,217
Goodwill	125,532			125,532
Other intangible assets, net	14,437			17,428
Deferred income taxes, net	39,365			40,776
Cash value of bank owned life insurance	79,241			78,053
Other assets	72,517			88,697
Total assets	$	7,649,820		$	6,892,031

Liabilities
Deposits:
Noninterest-bearing	$	1,718,022		$	1,573,389
Interest-bearing	4,177,482			4,001,774
Total deposits	5,895,504			5,575,163
Securities sold under agreements to repurchase	14,156			53,505
Other borrowings	808,572			492,321
Subordinated deferrable interest debentures	85,220			84,228
Other liabilities	44,447			40,377
Total liabilities	6,847,899			6,245,594

Commitments and Contingencies (Note 9)

Shareholders’ Equity
Preferred stock, stated value $1,000 (5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016)	—			—
Common stock, par value $1 (100,000,000 shares authorized; 38,705,910 and 36,377,807 shares issued at September 30, 2017 and December 31, 2016, respectively)	38,706			36,378
Capital surplus	506,779			410,276
Retained earnings	267,694			214,454
Accumulated other comprehensive income (loss), net of tax	3,241			(1,058		)
Treasury stock, at cost (1,474,861 shares and 1,456,333 shares at September 30, 2017 and December 31, 2016, respectively)	(14,499		)	(13,613		)
Total shareholders’ equity	801,921			646,437
Total liabilities and shareholders’ equity	$	7,649,820		$	6,892,031

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (unaudited)

(dollars in thousands, except per share data)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Interest income
Interest and fees on loans	$	70,462	$	57,322		$	197,447		$	160,677
Interest on taxable securities	5,062		4,336			15,057			13,476
Interest on nontaxable securities	392		397			1,209			1,297
Interest on deposits in other banks and federal funds sold	406		155			1,070			659
Total interest income	76,322		62,210			214,783			176,109

Interest expense
Interest on deposits	5,136		3,074			13,479			8,730
Interest on other borrowings	4,331		2,069			10,702			5,287
Total interest expense	9,467		5,143			24,181			14,017

Net interest income	66,855		57,067			190,602			162,092
Provision for loan losses	1,787		811			5,828			2,381
Net interest income after provision for loan losses	65,068		56,256			184,774			159,711

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

Noninterest expense
Salaries and employee benefits	32,583		27,982			89,509			81,700
Occupancy and equipment expense	6,036		5,989			18,059			18,060
Data processing and communications costs	7,050		6,185			20,650			18,347
Credit resolution-related expenses	1,347		1,526			2,879			5,089
Advertising and marketing expense	1,247		1,249			3,612			2,908
Amortization of intangible assets	941		993			2,990			3,332
Merger and conversion charges	92		—			494			6,359
Other noninterest expenses	14,471		9,275			34,406			25,363
Total noninterest expense	63,767		53,199			172,599			161,158

Income before income tax expense	28,300		31,921			93,069			80,082
Income tax expense	8,142		10,364			28,671			26,159
Net income	20,158		21,557			64,398			53,923

Other comprehensive income
Net unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax expense (benefit) of $966, ($1,481), $2,348 and $4,160	1,795		(2,752		)	4,361			7,724
Reclassification adjustment for gains on investment securities included in earnings, net of tax of $0, $0, $13 and $33	—		—			(24		)	(61		)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax expense (benefit) of $14, $130, ($21) and ($306)	25		241			(38		)	(567		)
Other comprehensive income	1,820		(2,511		)	4,299			7,096
Total comprehensive income	$	21,978	$	19,046		$	68,697		$	61,019

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

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (unaudited)

(dollars in thousands)



	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016
	Shares		Amount			Shares		Amount
Common Stock
Balance at beginning of period	36,377,807		$	36,378		33,625,162		$	33,625
Issuance of common stock	2,141,072		2,141			2,549,469		2,549
Issuance of restricted shares	84,147		84			125,581		126
Cancellation of restricted shares	(472	)	—			(7,085	)	(7		)
Proceeds from exercise of stock options	103,356		103			54,510		55
Issued at end of period	38,705,910		$	38,706		36,347,637		$	36,348

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

Retained Earnings
Balance at beginning of period			$	214,454				$	152,820
Net income			64,398					53,923
Dividends on common shares			(11,158		)			(6,974		)
Balance at end of period			$	267,694				$	199,769

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

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

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

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)



	Nine Months Ended September 30,
	2017			2016
Operating Activities
Net income	$	64,398		$	53,923
Adjustments reconciling net income to net cash provided by operating activities:
Depreciation	6,918			7,041
Net losses on sale or disposal of premises and equipment	956			112
Provision for loan losses	5,828			2,381
Net losses on sale of other real estate owned including write-downs	501			1,844
Share-based compensation expense	2,419			1,586
Amortization of intangible assets	2,990			3,332
Provision for deferred taxes	(962		)	(6,369		)
Net amortization of investment securities available for sale	4,815			5,086
Net gains on securities available for sale	(37		)	(94		)
Accretion of discount on purchased loans	(9,023		)	(12,926		)
Amortization of premium on purchased loan pools	2,943			4,149
Net accretion (amortization) on other borrowings	62			(57		)
Amortization of subordinated deferrable interest debentures	992			1,123
Originations of mortgage loans held for sale	(1,113,188		)	(1,051,812		)
Payments received on mortgage loans held for sale	799			1,167
Proceeds from sales of mortgage loans held for sale	961,831			982,898
Net gains on sale of mortgage loans held for sale	(36,451		)	(41,935		)
Originations of SBA loans	(25,720		)	(57,462		)
Proceeds from sales of SBA loans	23,952			21,656
Net gains on sale of SBA loans	(3,423		)	(3,054		)
Increase in cash surrender value of BOLI	(1,188		)	(1,318		)
Changes in FDIC loss-share receivable/payable, net of cash payments received	1,974			10,277
Change attributable to other operating activities	12,931			16,202
Net cash used in operating activities	(95,683		)	(62,250		)

Investing Activities, net of effects of business combinations
Purchase of securities available for sale	(83,090		)	(134,786		)
Proceeds from prepayments and maturities of securities available for sale	85,036			93,513
Proceeds from sales of securities available for sale	3,090			53,026
Net increase in other investments	(12,669		)	(13,050		)
Net increase in loans, excluding purchased loans	(786,548		)	(556,182		)
Payments received on purchased loans	155,033			186,319
Purchases of loan pools	—			(151,481		)
Payments received on purchased loan pools	95,533			115,409
Purchases of premises and equipment	(3,016		)	(8,250		)
Proceeds from sales of premises and equipment	16			207
Proceeds from sales of other real estate owned	11,989			18,329
Payments received from (payments to) FDIC under loss-share agreements	(97		)	4,770
Net cash proceeds paid in acquisitions	—			(7,205		)
Net cash used in investing activities	(534,723		)	(399,381		)

				(Continued)

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)



	Nine Months Ended September 30,
	2017			2016
Financing Activities, net of effects of business combinations
Net increase in deposits	$	320,341		$	25,448
Net decrease in securities sold under agreements to repurchase	(39,349		)	(20,938		)
Proceeds from other borrowings	1,687,692			339,500
Repayment of other borrowings	(1,371,503		)	(53,513		)
Issuance of common stock	88,656			—
Proceeds from exercise of stock options	1,912			963
Dividends paid - common stock	(10,927		)	(5,096		)
Purchase of treasury shares	(886		)	(1,225		)
Net cash provided by financing activities	675,936			285,139

Net increase (decrease) in cash and cash equivalents	45,530			(176,492		)
Cash and cash equivalents at beginning of period	198,385			390,563
Cash and cash equivalents at end of period	$	243,915		$	214,071

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	23,369		$	13,791
Income taxes	28,212			30,969
Loans (excluding purchased loans) transferred to other real estate owned	4,043			2,101
Purchased loans transferred to other real estate owned	4,294			6,262
Loans transferred from loans held for sale to loans held for investment	165,352			94,601
Loans provided for the sales of other real estate owned	1,334			1,471
Assets acquired in business acquisitions	—			561,440
Liabilities assumed in business acquisitions	—			465,048
Issuance of common stock in acquisitions	—			72,455
Issuance of common stock in exchange for equity investment in US Premium Finance Holding Company	5,844			—
Change in unrealized gain (loss) on securities available for sale, net of tax	4,337			7,724
Change in unrealized gain (loss) on cash flow hedge, net of tax	(38		)	(567		)

				(Concluded)

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

September 30, 2017

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Nature of Business

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At September 30, 2017, the Bank operated 97 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

Basis of Presentation

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

Accounting Policy Update

Other Investments – Other investments include Federal Home Loan Bank (“FHLB”) stock, Federal Reserve Bank stock and a minority equity investment in US Premium Finance Holding Company, a Florida corporation (“USPF”). These investments do not have readily determinable fair values and are carried at cost. They are periodically reviewed for impairment based on ultimate recovery of par value or cost basis. Both stock and cash dividends are reported as income. For additional information regarding the Company’s minority equity investment in USPF, see Note 2.

Reclassifications

Certain reclassifications of prior year amounts have been made to conform with the current year presentations.

Accounting Standards Adopted in 2017

ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies various aspects of how share-based payments are accounted for and presented in the financial statements. Under ASU 2016-09, companies will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. The standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. The excess tax benefits will be reported as an operating activity on the statement of cash flows, and the cash paid to a tax authority when shares are withheld to satisfy a company’s statutory income tax withholding obligation will be reported as a financing activity on its statement of cash. In addition, the standard increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. ASU 2016-09 permits companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. The Company has elected to recognize forfeitures as they occur. ASU 2016-09 became effective on January 1, 2017 and did not have a material impact on the consolidated financial statements.

Accounting Standards Pending Adoption

ASU 2017-12 – "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). The purposes of ASU 2017-12 are to (1) improve the transparency and understandability of information conveyed in financial statements about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with the economic objectives of those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018 with early adoption in an interim period permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the beginning of the fiscal year of adoption. The Company is currently evaluating the provisions of ASU 2017-12 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.

ASU 2017-09 – “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms of a share-based award must be accounted for as a modification. Companies must apply the modification accounting guidance if any of the following change: the shard-based award’s fair value, vesting provisions or classification as an equity instrument or a liability instrument. The new guidance should reduce diversity in practice and result in fewer changes to the terms of share-based awards being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to share-based awards without accounting for them as modifications. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. ASU 2017-09 is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2017-08 – “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). ASU 2017-08 shortens the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. Under the current guidance, entities generally amortize the premium on a callable debt security as an adjustment of yield over the contractual life (to maturity date) of the instrument. This ASU does not require any accounting change in the accounting for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, ASU 2017-08 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU 2017-08 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.

ASU 2017-04 – Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The standard must be adopted using a prospective basis and the nature and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.

ASU 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. The standard provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.

ASU 2016-13 - Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to

financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective. While the Company is currently evaluating the impact this standard will have on the results of operations, financial position and disclosures, the Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. The Company has established a steering committee which includes the appropriate members of management to evaluate the impact this ASU will have on Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments. This committee has identified the software vendor of choice for implementation, established an implementation timeline and continues to stay current on implementation issues and concerns.

ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it 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.

ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. Management has substantially completed its evaluation of the impact ASU 2014-09 will have on the Company’s consolidated financial statements. Based on this evaluation to date, management has determined that for the revenue streams of the Company within the scope of ASU 2014-09, the new accounting guidance will not change the timing or amount of revenue recognized. The adoption of ASU 2014-09 is not expected to have a material impact on the Company's consolidated financial statements.

NOTE 2 – INVESTMENT IN US PREMIUM FINANCE HOLDING COMPANY

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

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

The Company’s 4.99% investment in USPF was valued at $5.8 million, based upon the closing price of the Company’s common stock immediately prior to the parties’ execution of the Stock Purchase Agreement, as follows:



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

Because USPF does not have a readily determinable fair value and Ameris does not exercise significant influence over USPF, the investment is carried at cost and is included in other investments in the Company’s consolidated balance sheet. The net carrying value of the Company’s investment in USPF was $5.8 million as of September 30, 2017.

NOTE 3 – 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
September 30, 2017
U.S. government sponsored agencies	$	1,000	$	4	$	—		$	1,004
State, county and municipal securities	140,190		3,271		(74		)	143,387
Corporate debt securities	46,704		661		(116		)	47,249
Mortgage-backed securities	626,927		3,774		(2,748		)	627,953
Total debt securities	$	814,821	$	7,710	$	(2,938	)	$	819,593

December 31, 2016
U.S. government sponsored agencies	$	999	$	21	$	—		$	1,020
State, county and municipal securities	149,899		2,605		(469		)	152,035
Corporate debt securities	32,375		167		(370		)	32,172
Mortgage-backed securities	641,362		2,700		(6,554		)	637,508
Total debt securities	$	824,635	$	5,493	$	(7,393	)	$	822,735

The amortized cost and fair value of available-for-sale securities at September 30, 2017 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.



(dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	14,094	$	14,205
Due from one year to five years	57,385		58,204
Due from five to ten years	77,194		79,093
Due after ten years	39,221		40,138
Mortgage-backed securities	626,927		627,953
	$	814,821	$	819,593

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

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



	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
September 30, 2017
U.S. government sponsored agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities	11,333		(18		)	4,240		(56		)	15,573		(74		)
Corporate debt securities	8,131		(35		)	10,854		(81		)	18,985		(116		)
Mortgage-backed securities	225,258		(1,685		)	54,465		(1,063		)	279,723		(2,748		)
Total debt securities	$	244,722	$	(1,738	)	$	69,559	$	(1,200	)	$	314,281	$	(2,938	)

December 31, 2016
U.S. government sponsored agencies	$	—	$	—		$	—	$	—		$	—	$	—
State, county and municipal securities	47,647		(469		)	—		—			47,647		(469		)
Corporate debt securities	18,377		(363		)	493		(7		)	18,870		(370		)
Mortgage-backed securities	414,300		(6,177		)	11,791		(377		)	426,091		(6,554		)
Total debt securities	$	480,324	$	(7,009	)	$	12,284	$	(384	)	$	492,608	$	(7,393	)

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

At September 30, 2017, the Company held 101 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2017.

At September 30, 2017, the Company held nine state, county and municipal securities and nine corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2017.

The Company’s investments in corporate debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at September 30, 2017 or December 31, 2016.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at September 30, 2017, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at September 30, 2017, these investments are not considered impaired on an other-than-temporary basis.

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

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



(dollars in thousands)	September 30, 2017			September 30, 2016
Gross gains on sales of securities	$	38		$	312
Gross losses on sales of securities	(1		)	(218		)
Net realized gains on sales of securities available for sale	$	37		$	94

Sales proceeds	$	3,090		$	53,026

NOTE 4 – LOANS

The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank purchased residential mortgage loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began purchasing from an unrelated third party consumer installment home improvement loans made to borrowers throughout the United States. As of September 30, 2017 and December 31, 2016, the net carrying value of these consumer installment home improvement loans was approximately $148.0 million and $60.8 million, respectively. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of September 30, 2017 and December 31, 2016, the net carrying value of commercial insurance premium loans was approximately $487.9 million and $353.9 million, respectively, and such loans are reported in the commercial, financial and agricultural loan category.

The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance, and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.

Consumer installment loans and other loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans:



(dollars in thousands)	September 30, 2017		December 31, 2016
Commercial, financial and agricultural	$	1,307,209	$	967,138
Real estate – construction and development	550,189		363,045
Real estate – commercial and farmland	1,558,882		1,406,219
Real estate – residential	969,289		781,018
Consumer installment	183,314		96,915
Other	5,795		12,486
	$	4,574,678	$	3,626,821

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

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



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

A rollforward of purchased loans for the nine months ended September 30, 2017 and 2016 is shown below:



(dollars in thousands)	September 30, 2017			September 30, 2016
Balance, January 1	$	1,069,191		$	909,083
Charge-offs, net of recoveries	(1,761		)	(3,122		)
Additions due to acquisitions	—			402,942
Accretion	9,023			12,926
Transfers to purchased other real estate owned	(4,294		)	(6,262		)
Payments received	(155,033		)	(186,276		)
Other	—			90
Ending balance	$	917,126		$	1,129,381

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



(dollars in thousands)	September 30, 2017			September 30, 2016
Balance, January 1	$	30,624		$	33,848
Additions due to acquisitions	—			9,991
Accretion	(9,023		)	(12,926		)
Accretable discounts removed due to charge-offs	(15		)	(161		)
Transfers between non-accretable and accretable discounts, net	923			2,544
Ending balance	$	22,509		$	33,296

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2017, purchased loan pools totaled $465.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $459.1 million and $6.1 million of remaining purchase premium paid at acquisition. As of December 31, 2016, purchased loan pools totaled $568.3 million with principal balances totaling $559.4 million and $8.9 million of remaining purchase premium paid at acquisition. At September 30, 2017 and December 31, 2016, one loan in the purchased loan pools with a principal balance of $915,000 and $925,000, respectively, was classified as a troubled debt restructuring and risk-rated grade 40, while all other loans included in the purchased loan pools were performing current loans risk-rated grade 20. During the second quarter of 2017, this troubled debt restructuring defaulted on its restructured terms and was placed on nonaccrual status. At September 30, 2017 and December 31, 2016, the Company had allocated $1.5 million and $1.8 million, respectively, of allowance for loan losses for the purchased loan pools. As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file. Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.

Nonaccrual and Past-Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

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



(dollars in thousands)	September 30, 2017		December 31, 2016
Commercial, financial and agricultural	$	2,409	$	1,814
Real estate – construction and development	735		547
Real estate – commercial and farmland	5,705		8,757
Real estate – residential	5,984		6,401
Consumer installment	492		595
	$	15,325	$	18,114

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



(dollars in thousands)	September 30, 2017		December 31, 2016
Commercial, financial and agricultural	$	2,086	$	692
Real estate – construction and development	3,255		2,611
Real estate – commercial and farmland	6,974		10,174
Real estate – residential	6,646		9,476
Consumer installment	88		13
	$	19,049	$	22,966

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



(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
September 30, 2017
Commercial, financial and agricultural	$	5,388	$	2,488	$	5,025	$	12,901	$	1,294,308	$	1,307,209	$	2,941
Real estate – construction and development	341		52		517		910		549,279		550,189		—
Real estate – commercial and farmland	2,369		1,097		5,203		8,669		1,550,213		1,558,882		—
Real estate – residential	3,293		1,938		4,165		9,396		959,893		969,289		—
Consumer installment loans	1,034		408		338		1,780		181,534		183,314		—
Other	—		—		—		—		5,795		5,795		—
Total	$	12,425	$	5,983	$	15,248	$	33,656	$	4,541,022	$	4,574,678	$	2,941

December 31, 2016
Commercial, financial and agricultural	$	565	$	82	$	1,293	$	1,940	$	965,198	$	967,138	$	—
Real estate – construction and development	908		446		439		1,793		361,252		363,045		—
Real estate – commercial and farmland	6,329		1,711		6,945		14,985		1,391,234		1,406,219		—
Real estate – residential	6,354		1,282		5,302		12,938		768,080		781,018		—
Consumer installment loans	624		263		350		1,237		95,678		96,915		—
Other	—		—		—		—		12,486		12,486		—
Total	$	14,780	$	3,784	$	14,329	$	32,893	$	3,593,928	$	3,626,821	$	—

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



(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
September 30, 2017
Commercial, financial and agricultural	$	2,674	$	2	$	288	$	2,964	$	77,931	$	80,895	$	—
Real estate – construction and development	1,221		935		1,713		3,869		64,714		68,583		—
Real estate – commercial and farmland	2,842		1,318		1,823		5,983		494,186		500,169		—
Real estate – residential	3,308		440		3,435		7,183		257,129		264,312		—
Consumer installment loans	1		4		43		48		3,119		3,167		—
Total	$	10,046	$	2,699	$	7,302	$	20,047	$	897,079	$	917,126	$	—

December 31, 2016
Commercial, financial and agricultural	$	113	$	18	$	593	$	724	$	95,813	$	96,537	$	—
Real estate – construction and development	161		11		2,518		2,690		78,678		81,368		—
Real estate – commercial and farmland	2,034		326		7,152		9,512		566,843		576,355		—
Real estate – residential	4,566		698		6,835		12,099		298,178		310,277		—
Consumer installment loans	22		—		13		35		4,619		4,654		—
Total	$	6,896	$	1,053	$	17,111	$	25,060	$	1,044,131	$	1,069,191	$	—

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

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



	As of and for the Period Ended
(dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016
Nonaccrual loans	$	15,325	$	18,114	$	16,570
Troubled debt restructurings not included above	12,452		14,209		14,013
Total impaired loans	$	27,777	$	32,323	$	30,583

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

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



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
September 30, 2017
Commercial, financial and agricultural	$	2,924	$	1,121	$	1,331	$	2,452	$	379	$	2,478	$	2,380
Real estate – construction and development	1,655		532		627		1,159		81		1,179		1,160
Real estate – commercial and farmland	11,451		536		9,938		10,474		806		10,669		11,416
Real estate – residential	15,211		4,558		8,636		13,194		1,058		13,683		14,814
Consumer installment loans	538		498		—		498		—		507		554
Total	$	31,779	$	7,245	$	20,532	$	27,777	$	2,324	$	28,516	$	30,324



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
December 31, 2016
Commercial, financial and agricultural	$	3,068	$	204	$	1,656	$	1,860	$	134	$	1,613	$	1,684
Real estate – construction and development	2,047		—		1,233		1,233		273		1,590		2,018
Real estate – commercial and farmland	13,906		6,811		6,065		12,876		1,503		12,948		12,845
Real estate – residential	15,482		2,238		13,503		15,741		3,080		15,525		14,453
Consumer installment loans	671		—		613		613		5		576		506
Total	$	35,174	$	9,253	$	23,070	$	32,323	$	4,995	$	32,252	$	31,506



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
September 30, 2016
Commercial, financial and agricultural	$	2,568	$	252	$	1,114	$	1,366	$	118	$	1,736	$	1,640
Real estate – construction and development	2,972		—		1,946		1,946		537		2,001		2,214
Real estate – commercial and farmland	14,015		5,499		7,520		13,019		873		12,776		12,837
Real estate – residential	14,350		2,046		11,667		13,713		2,648		13,686		13,516
Consumer installment loans	586		—		539		539		6		492		479
Total	$	34,491	$	7,797	$	22,786	$	30,583	$	4,182	$	30,691	$	30,686

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



	As of and for the Period Ended
(dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016
Nonaccrual loans	$	19,049	$	22,966	$	23,827
Troubled debt restructurings not included above	20,205		23,543		21,117
Total impaired loans	$	39,254	$	46,509	$	44,944

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

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



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
September 30, 2017
Commercial, financial and agricultural	$	5,333	$	345	$	1,741	$	2,086	$	800	$	1,128	$	831
Real estate – construction and development	9,268		1,189		3,088		4,277		537		3,885		3,807
Real estate – commercial and farmland	16,492		1,516		11,766		13,282		1,140		13,658		16,063
Real estate – residential	22,462		7,224		12,297		19,521		762		20,088		21,308
Consumer installment loans	97		88		—		88		—		58		40
Total	$	53,652	$	10,362	$	28,892	$	39,254	$	3,239	$	38,817	$	42,049



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
December 31, 2016
Commercial, financial and agricultural	$	5,031	$	370	$	322	$	692	$	—	$	783	$	2,206
Real estate – construction and development	24,566		493		3,477		3,970		153		3,888		4,279
Real estate – commercial and farmland	36,174		3,598		15,036		18,634		385		17,806		19,872
Real estate – residential	27,022		7,883		15,306		23,189		1,088		23,201		23,163
Consumer installment loans	37		24		—		24		—		51		96
Total	$	92,830	$	12,368	$	34,141	$	46,509	$	1,626	$	45,729	$	49,616



(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
September 30, 2016
Commercial, financial and agricultural	$	5,097	$	648	$	225	$	873	$	—	$	838	$	2,251
Real estate – construction and development	24,253		296		3,509		3,805		184		3,946		4,075
Real estate – commercial and farmland	41,098		1,861		15,116		16,977		402		18,196		19,569
Real estate – residential	26,908		7,473		15,740		23,213		935		23,103		22,893
Consumer installment loans	98		76		—		76		—		80		105
Total	$	97,454	$	10,354	$	34,590	$	44,944	$	1,521	$	46,163	$	48,893

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

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory 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 30 – Other Asset 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 40 – 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 50 – 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 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

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



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

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

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



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

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

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment and approved by the Company’s Chief Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first nine months of 2017 and 2016 totaling $36.6 million and $58.2 million, respectively, under such parameters.

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

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



	September 30, 2017			September 30, 2016
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	4	5	$	59
Real estate – construction and development	—	—		2	251
Real estate – commercial and farmland	2	226		4	1,658
Real estate – residential	10	526		7	887
Consumer installment	6	27		9	44
Total	19	$	783	27	$	2,899

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



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

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



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



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

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

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



	September 30, 2017			September 30, 2016
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	—	$	—	1	$	76
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	—	—		3	708
Real estate – residential	8	1,005		8	1,130
Consumer installment	—	—		—	—
Total	8	$	1,005	12	$	1,914

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

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



	September 30, 2017			September 30, 2016
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	5	2	$	76
Real estate – construction and development	—	—		1	10
Real estate – commercial and farmland	5	1,945		1	207
Real estate – residential	7	333		11	440
Consumer installment	1	3		—	—
Total	14	$	2,286	15	$	733

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



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



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

Allowance for Loan Losses

The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past-due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio. Mortgage warehouse lines of credit, overdraft protection loans, commercial insurance premium finance loans, and certain consumer and mortgage loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of $500,000. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans may be identified as having deteriorating

credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

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



(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment Loans and Other			Purchased Loans			Purchased Loan Pools			Total
Three Months Ended September 30, 2017
Balance, June 30, 2017	$	3,302		$	3,756		$	7,869		$	5,605		$	1,155		$	1,791		$	1,623		$	25,101
Provision for loan losses	910			(587		)	68			127			670			745			(146		)	1,787
Loans charged off	(1,091		)	(1		)	(18		)	(852		)	(320		)	(161		)	—			(2,443		)
Recoveries of loans previously charged off	409			126			26			56			17			887			—			1,521
Balance, September 30, 2017	$	3,530		$	3,294		$	7,945		$	4,936		$	1,522		$	3,262		$	1,477		$	25,966

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

Period-end allocation:
Loans individually evaluated for impairment ⁽¹⁾	$	509		$	81		$	1,380		$	1,058		$	—		$	3,262		$	105		$	6,395
Loans collectively evaluated for impairment	3,021			3,213			6,565			3,878			1,522			—			1,372			19,571
Ending balance	$	3,530		$	3,294		$	7,945		$	4,936		$	1,522		$	3,262		$	1,477		$	25,966

Loans:
Individually evaluated for impairment⁽¹⁾	$	3,204		$	627		$	10,512		$	8,636		$	—		$	32,032		$	915		$	55,926
Collectively evaluated for impairment	1,304,005			549,562			1,548,370			960,653			189,109			763,271			464,303			5,779,273
Acquired with deteriorated credit quality	—			—			—			—			—			121,823			—			121,823
Ending balance	$	1,307,209		$	550,189		$	1,558,882		$	969,289		$	189,109		$	917,126		$	465,218		$	5,957,022

(1) At September 30, 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 Loans and Other			Purchased Loans			Purchased Loan Pools		Total
Twelve Months Ended December 31, 2016
Balance, January 1, 2016	$	1,144		$	5,009		$	7,994		$	4,760		$	1,574		$	—		$	581	$	21,062
Provision for loan losses	2,647			(1,921		)	107			2,757			(523		)	(232		)	1,256		4,091
Loans charged off	(1,999		)	(588		)	(708		)	(1,122		)	(351		)	(1,559		)	—		(6,327		)
Recoveries of loans previously charged off	400			490			269			391			127			3,417			—		5,094
Balance, December 31, 2016	$	2,192		$	2,990		$	7,662		$	6,786		$	827		$	1,626		$	1,837	$	23,920

Period-end allocation:
Loans individually evaluated for impairment⁽¹⁾	$	120		$	266		$	1,502		$	2,893		$	—		$	1,626		$	—	$	6,407
Loans collectively evaluated for impairment	2,072			2,724			6,160			3,893			827			—			1,837		17,513
Ending balance	$	2,192		$	2,990		$	7,662		$	6,786		$	827		$	1,626		$	1,837	$	23,920

Loans:
Individually evaluated for impairment ⁽¹⁾	$	501		$	659		$	12,423		$	12,697		$	—		$	34,141		$	—	$	60,421
Collectively evaluated for impairment	966,637			362,386			1,393,796			768,321			109,401			886,516			568,314		5,055,371
Acquired with deteriorated credit quality	—			—			—			—			—			148,534			—		148,534
Ending balance	$	967,138		$	363,045		$	1,406,219		$	781,018		$	109,401		$	1,069,191		$	568,314	$	5,264,326

(1) At December 31, 2016, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.



(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment Loans and Other			Purchased Loans			Purchased Loan Pools		Total
Three Months Ended September 30, 2016
Balance, June 30, 2016	$	1,667		$	3,599		$	7,459		$	4,263		$	2,160		$	1,387		$	1,199	$	21,734
Provision for loan losses	677			(521		)	(554		)	2,649			(1,595		)	(654		)	809		811
Loans charged off	(326		)	(60		)	—			(292		)	(74		)	(699		)	—		(1,451		)
Recoveries of loans previously charged off	119			131			13			40			78			1,488			—		1,869
Balance, September 30, 2016	$	2,137		$	3,149		$	6,918		$	6,660		$	569		$	1,522		$	2,008	$	22,963

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

Period-end allocation:
Loans individually evaluated for impairment⁽¹⁾	$	107		$	529		$	883		$	2,629		$	—		$	1,522		$	—	$	5,670
Loans collectively evaluated for impairment	2,030			2,620			6,035			4,031			569			—			2,008		17,293
Ending balance	$	2,137		$	3,149		$	6,918		$	6,660		$	569		$	1,522		$	2,008	$	22,963

Loans:
Individually evaluated for impairment ⁽¹⁾	$	424		$	1,154		$	11,699		$	11,571		$	—		$	34,991		$	—	$	59,839
Collectively evaluated for impairment	625,523			327,154			1,285,883			755,362			72,269			939,243			624,886		4,630,320
Acquired with deteriorated credit quality	—			—			—			—			—			155,147			—		155,147
Ending balance	$	625,947		$	328,308		$	1,297,582		$	766,933		$	72,269		$	1,129,381		$	624,886	$	4,845,306

(1) At September 30, 2016, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.

NOTE 5 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

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



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

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

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

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

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

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

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



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

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

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

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



(dollars in thousands)	September 30, 2017			September 30, 2016
Beginning balance, January 1	$	(6,313	)	$	6,301
Payments to (received from) FDIC	97			(4,770		)
Amortization	(747		)	(3,351		)
Changes in clawback liability	(326		)	(682		)
Increase in receivable due to:
Net recoveries on covered loans	(1,097		)	(4,118		)
Loss (gain) on covered other real estate owned	(76		)	203
Reimbursable expenses on covered assets	401			604
Other activity, net	(129		)	(1,962		)
Ending balance	$	(8,190	)	$	(7,775	)

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

NOTE 6 – OTHER REAL ESTATE OWNED

The following is a summary of the activity in other real estate owned during the nine months ended September 30, 2017 and 2016:



(dollars in thousands)	September 30, 2017			September 30, 2016
Beginning balance, January 1	$	10,874		$	16,147
Loans transferred to other real estate owned	4,043			2,101
Net gains (losses) on sale and write-downs recorded in statement of income	(766		)	(1,276		)
Sales proceeds	(4,760		)	(6,580		)
Ending balance	$	9,391		$	10,392

The following is a summary of the activity in purchased other real estate owned during the nine months ended September 30, 2017 and 2016:



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

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 securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At September 30, 2017 and December 31, 2016, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on a daily basis and is required to transfer additional securities if the market value of the securities fall below the repurchase agreement price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the market value of the securities sold under agreements to repurchase.

The following is a summary of the Company’s securities sold under agreements to repurchase at September 30, 2017 and December 31, 2016.



(dollars in thousands)	September 30, 2017		December 31, 2016
Securities sold under agreements to repurchase	$	14,156	$	53,505

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

NOTE 8 – OTHER BORROWINGS

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

Other borrowings consist of the following:



(dollars in thousands)	September 30, 2017		December 31, 2016
FHLB borrowings:
Daily Rate Credit from FHLB with a variable interest rate (1.32% at September 30, 2017 and 0.80% at December 31, 2016)	$	168,000	$	150,000
Advance from FHLB due October 6, 2017; fixed interest rate of 1.16%	565,000		—
Advance from FHLB due January 6, 2017; fixed interest rate of 0.56%	—		292,500
Advance from FHLB due January 9, 2017; fixed interest rate of 1.40%	—		4,002
Advance from FHLB due May 30, 2017; fixed interest rate of 1.23%	—		5,006
Subordinated notes payable:
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,238; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%	73,762		—
Other debt:
Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25%	56		77
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09%	1,754		1,886
Advances under revolving credit agreement with a regional bank due September 26, 2020; secured by subsidiary bank stock; variable interest rate at 90-day LIBOR plus 3.50% (4.43% at December 31, 2016)	—		38,000
Advances under revolving credit agreement with a regional bank due January 7, 2017; fixed interest rate of 8.00%	—		850
Total	$	808,572	$	492,321

The advances from the FHLB are collateralized by a blanket lien on all first mortgage loans and other specific loans in addition to FHLB stock. At September 30, 2017, $347.4 million was available for borrowing on lines with the FHLB.

At September 30, 2017, $30.0 million was available for borrowing under the revolving credit agreement with a regional bank, secured by subsidiary bank stock.

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

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

Subordinated Notes Payable

On March 13, 2017, the Company completed the public offering and sale of $75.0 million in aggregate principal amount of its 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 (the “subordinated notes”). The subordinated notes were sold to the public at par pursuant to an underwriting agreement and were issued pursuant to an indenture and a supplemental indenture. The subordinated notes will mature on March 15, 2027 and through March 14, 2022 will bear a fixed rate of interest of 5.75% per annum, payable semi-annually in arrears on September 15 and March 15 of each year. Beginning March 15, 2022, the interest rate on the subordinated notes resets quarterly to a floating rate per annum equal to the then-current three-month LIBOR plus 3.616%, payable quarterly in arrears on June 15, September 15, December 15, and March 15 of each year to the maturity date or earlier redemption.

On any scheduled interest payment date beginning March 15, 2022, the Company may, at its option, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest.

The subordinated notes are unsecured and rank equally with all other unsecured subordinated indebtedness of the Company, including any subordinated indebtedness issued in the future under the indenture governing the subordinated notes. The subordinated notes are subordinated in right of payment to all senior indebtedness of the Company. The subordinated notes are obligations of the Company only and are not guaranteed by any subsidiaries, including the Bank. Additionally, the subordinated notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries, meaning that creditors of the Company’s subsidiaries (including, in the case of the Bank, its depositors) generally will be paid from those subsidiaries’ assets before holders of the subordinated notes have any claim to those assets.

For regulatory capital adequacy purposes, the subordinated notes qualify as Tier 2 capital for the Company. If in the future the subordinated notes no longer qualify as Tier 2 capital, the subordinated notes may be redeemed by the Company at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, subject to prior approval by the Board of Governors of the Federal Reserve System.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

A summary of the Company’s commitments is as follows:



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

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary.

Other Commitments

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

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

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

A former borrower of the Company has filed a claim related to a loan previously made by the Company asserting lender liability. The case was tried without a jury and a judgment was issued by the court against the Company awarding the borrower approximately $2.9 million on August 8, 2013. The judgment was appealed to the South Carolina Court of Appeals. On May 24, 2017, the Court of Appeals filed its decision and unanimously found in favor of the Company and reversed the trial court judgment. The plaintiff has a filed a petition for rehearing with the Court of Appeals, which has been denied. The plaintiff has filed a writ of certiorari asking the Supreme Court of South Carolina to hear the case. The Company believes the likelihood the Supreme Court will hear the case is not probable, and, accordingly the Company does not expect to incur any loss as a result of this case. Accordingly, the Company has not established any reserves related to this legal matter. In the event that the Company's assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.

NOTE 10 – SHAREHOLDERS’ EQUITY

On January 18, 2017, the Company issued 128,572 unregistered shares of its common stock to William J. Villari in exchange for 4.99% of the outstanding shares of common stock of USPF. A registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the 128,572 common shares was valued at $45.45 per share, resulting in an increase in shareholders’ equity of $5.8 million. For additional information regarding the investment in USPF, see Note 2.

On March 6, 2017, the Company completed an underwritten public offering of 2,012,500 shares of the Company’s common stock at a price to the public of $46.50 per share. The Company received net proceeds from the issuance of approximately $88.7 million, after deducting $4.9 million in underwriting discounts and commissions and other issuance costs.

In March 2017, the Company made a capital contribution to the Bank in the amount of $110.0 million, using the net proceeds of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027 discussed in Note 8.

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

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



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



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

NOTE 12 – WEIGHTED AVERAGE SHARES OUTSTANDING

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



	Three Months Ended September 30,		Nine Months Ended September 30,
(share data in thousands)	2017	2016	2017	2016
Average common shares outstanding	37,225	34,870	36,690	34,156
Common share equivalents:
Stock options	70	108	70	100
Nonvested restricted share grants	258	217	257	214
Average common shares outstanding, assuming dilution	37,553	35,195	37,017	34,470

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

NOTE 13 – FAIR VALUE MEASURES

The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

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



(dollars in thousands)	September 30, 2017		December 31, 2016
Mortgage loans held for sale	$	132,201	$	105,924
SBA loans held for sale	5,191		—
Total loans held for sale	$	137,392	$	105,924

The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. Net gains of $5.7 million and $4.9 million resulting from fair value changes of these mortgage loans were recorded in income during the nine months ended September 30, 2017 and 2016, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.

The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of September 30, 2017 and December 31, 2016:



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

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, mortgage loans held for sale and derivatives 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, Due From Banks, Federal Funds Sold and Interest-Bearing Accounts: The carrying amount of cash, due from banks, federal funds sold and interest-bearing deposits in 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 include certain residual municipal securities and other less liquid securities.

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

Loans Held for Sale: The Company records loans held for sale at fair value. The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.

Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.

Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals and internal evaluations that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most

cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned 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.

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

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 variable rate borrowings and securities sold under repurchase agreements approximates fair value and are classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and are classified as Level 2.

Subordinated Deferrable Interest Debentures: The fair value of the Company’s trust preferred securities is based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.

Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.

Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of September 30, 2017 and December 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2017 and December 31, 2016:



	Recurring Basis Fair Value Measurements
	September 30, 2017
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. government sponsored agencies	$	1,004	$	—	$	1,004	$	—
State, county and municipal securities	143,387		—		143,387		—
Corporate debt securities	47,249		—		45,749		1,500
Mortgage-backed securities	627,953		—		627,953		—
Loans held for sale	137,392		—		137,392		—
Mortgage banking derivative instruments	3,836		—		3,836		—
Total recurring assets at fair value	$	960,821	$	—	$	959,321	$	1,500
Financial liabilities:
Derivative financial instruments	$	723	$	—	$	723	$	—
Mortgage banking derivative instruments	237		—		237		—
Total recurring liabilities at fair value	$	960	$	—	$	960	$	—



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

The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of September 30, 2017 and December 31, 2016:



	Nonrecurring Basis Fair Value Measurements
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
September 30, 2017
Impaired loans carried at fair value	$	28,790	$	—	$	—	$	28,790
Other real estate owned	435		—		—		435
Purchased other real estate owned	9,946		—		—		9,946
Total nonrecurring assets at fair value	$	39,171	$	—	$	—	$	39,171

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

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

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

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



(dollars in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts	Weighted Average Discount
September 30, 2017
Recurring:
Investment securities available for sale	$	1,500	Discounted par values	Credit quality of underlying issuer	0%	0%
Nonrecurring:
Impaired loans	$	28,790	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	10% - 100%	25%
Other real estate owned	$	435	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 20%	13%
Purchased other real estate owned	$	9,946	Third-party appraisals	Collateral discounts and estimated costs to sell	10% - 74%	16%

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

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



			Fair Value Measurements
			September 30, 2017
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	131,071	$	131,071	$	—	$	—	$	131,071
Federal funds sold and interest-bearing accounts	112,844		112,844		—		—		112,844
Loans, net	5,902,267		—		—		5,871,518		5,871,518
Accrued interest receivable	25,068		25,068		—		—		25,068
Financial liabilities:
Deposits	$	5,895,504	$	—	$	5,896,989	$	—	$	5,896,989
Securities sold under agreements to repurchase	14,156		14,156		—		—		14,156
Other borrowings	808,572		—		809,810		—		809,810
Subordinated deferrable interest debentures	85,220		—		70,984		—		70,984
FDIC loss-share payable	8,190		—		—		9,077		9,077
Accrued interest payable	2,313		2,313		—		—		2,313



			Fair Value Measurements
			December 31, 2016
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	127,164	$	127,164	$	—	$	—	$	127,164
Federal funds sold and interest-bearing accounts	71,221		71,221		—		—		71,221
Loans, net	5,212,153		—		—		5,236,034		5,236,034
Accrued interest receivable	22,278		22,278		—		—		22,278
Financial liabilities:
Deposits	$	5,575,163	$	—	$	5,575,288	$	—	$	5,575,288
Securities sold under agreements to repurchase	53,505		53,505		—		—		53,505
Other borrowings	492,321		—		492,321		—		492,321
Subordinated deferrable interest debentures	84,228		—		67,321		—		67,321
FDIC loss-share payable	6,313		—		—		8,243		8,243
Accrued interest payable	1,501		1,501		—		—		1,501

NOTE 14 – SEGMENT REPORTING

The Company has the following five reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying one-to-four family residential mortgage loans. The SBA Division derives its revenues from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination and servicing of commercial insurance premium finance loans.

The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers.

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



	Three Months Ended September 30, 2017
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division			Premium Finance Division		Total
Interest income	$	59,130	$	5,862	$	2,022	$	1,413		$	7,895	$	76,322
Interest expense	5,530		1,597		487		432			1,421		9,467
Net interest income	53,600		4,265		1,535		981			6,474		66,855
Provision for loan losses	1,037		262		215		(1		)	274		1,787
Noninterest income	13,007		12,257		583		1,130			22		26,999
Noninterest expense
Salaries and employee benefits	20,554		9,792		129		858			1,250		32,583
Equipment and occupancy expenses	5,384		555		1		54			42		6,036
Data processing and telecommunications expenses	6,357		425		28		9			231		7,050
Other expenses	14,905		1,001		51		63			2,078		18,098
Total noninterest expense	47,200		11,773		209		984			3,601		63,767
Income before income tax expense	18,370		4,487		1,694		1,128			2,621		28,300
Income tax expense	4,850		1,475		580		394			843		8,142
Net income	$	13,520	$	3,012	$	1,114	$	734		$	1,778	$	20,158

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



	Three Months Ended September 30, 2016
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	55,369	$	3,679	$	2,073	$	1,089	$	—	$	62,210
Interest expense	3,716		1,054		225		148		—		5,143
Net interest income	51,653		2,625		1,848		941		—		57,067
Provision for loan losses	57		447		94		213		—		811
Noninterest income	13,949		13,198		555		1,162		—		28,864
Noninterest expense
Salaries and employee benefits	18,323		8,940		103		616		—		27,982
Equipment and occupancy expenses	5,490		433		1		65		—		5,989
Data processing and telecommunications expenses	5,794		364		26		1		—		6,185
Other expenses	11,533		1,303		26		181		—		13,043
Total noninterest expense	41,140		11,040		156		863		—		53,199
Income before income tax expense	24,405		4,336		2,153		1,027		—		31,921
Income tax expense	7,733		1,518		754		359		—		10,364
Net income	$	16,672	$	2,818	$	1,399	$	668	$	—	$	21,557

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

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



	Nine Months Ended September 30, 2017
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	170,036	$	14,890	$	4,968	$	3,884	$	21,005	$	214,783
Interest expense	14,510		4,179		1,074		1,111		3,307		24,181
Net interest income	155,526		10,711		3,894		2,773		17,698		190,602
Provision for loan losses	4,510		617		159		98		444		5,828
Noninterest income	38,974		35,823		1,340		4,663		94		80,894
Noninterest expense
Salaries and employee benefits	58,757		24,771		403		2,339		3,239		89,509
Equipment and occupancy expenses	16,068		1,684		3		159		145		18,059
Data processing and telecommunications expenses	18,778		1,182		80		12		598		20,650
Other expenses	34,355		3,030		137		533		6,326		44,381
Total noninterest expense	127,958		30,667		623		3,043		10,308		172,599
Income before income tax expense	62,032		15,250		4,452		4,295		7,040		93,069
Income tax expense	17,801		5,337		1,559		1,503		2,471		28,671
Net income	$	44,231	$	9,913	$	2,893	$	2,792	$	4,569	$	64,398



	Nine Months Ended September 30, 2016
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	158,682	$	9,992	$	4,714	$	2,721	$	—	$	176,109
Interest expense	10,726		2,383		458		450		—		14,017
Net interest income	147,956		7,609		4,256		2,271		—		162,092
Provision for loan losses	1,471		540		94		276		—		2,381
Noninterest income	39,702		36,126		1,328		4,373		—		81,529
Noninterest expense
Salaries and employee benefits	55,740		23,591		399		1,970		—		81,700
Equipment and occupancy expenses	16,541		1,326		3		190		—		18,060
Data processing and telecommunications expenses	17,299		974		71		3		—		18,347
Other expenses	39,040		3,392		77		542		—		43,051
Total noninterest expense	128,620		29,283		550		2,705		—		161,158
Income before income tax expense	57,567		13,912		4,940		3,663		—		80,082
Income tax expense	18,278		4,870		1,729		1,282		—		26,159
Net income	$	39,289	$	9,042	$	3,211	$	2,381	$	—	$	53,923

NOTE 15 – REGULATORY MATTERS

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

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

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

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

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

Cautionary Note Regarding Forward-Looking Statements

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

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

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

Overview

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

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

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



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



																Nine Months Ended
(in thousands, except share and per share data)	Third Quarter 2017			Second Quarter 2017			First Quarter 2017			Fourth Quarter 2016			Third Quarter 2016			September 30, 2017			September 30, 2016
Weighted Average Shares Outstanding:
Basic	37,225,418			37,162,810			35,664,420			34,915,459			34,869,747			36,689,934			34,155,556
Diluted	37,552,667			37,489,348			36,040,240			35,293,035			35,194,739			37,017,486			34,470,101
Market Price:
High intraday price	$	51.28		$	49.80		$	49.50		$	47.70		$	36.20		$	51.28		$	36.20
Low intraday price	$	41.05		$	42.60		$	41.60		$	34.61		$	28.90		$	41.05		$	24.96
Closing price for quarter	$	48.00		$	48.20		$	46.10		$	43.60		$	34.95		$	48.00		$	34.95
Average daily trading volume	168,911			169,617			242,982			191,894			166,841			193,555			211,351
Cash dividends declared per share	$	0.10		$	0.10		$	0.10		$	0.10		$	0.10		$	0.30		$	0.20
Closing price to book value	2.23			2.29			2.26			2.36			1.90			2.23			1.90
Performance Ratios:
Return on average assets	1.07		%	1.29		%	1.24		%	1.10		%	1.35		%	1.20		%	1.19		%
Return on average common equity	10.04		%	11.95		%	12.33		%	11.06		%	13.39		%	11.39		%	12.01		%
Average loans to average deposits	101.41		%	98.66		%	97.20		%	89.99		%	92.55		%	99.15		%	88.50		%
Average equity to average assets	10.68		%	10.83		%	10.06		%	9.95		%	10.12		%	10.53		%	9.95		%
Net interest margin (tax equivalent)	3.95		%	3.95		%	3.97		%	3.95		%	3.99		%	3.96		%	4.01		%
Efficiency ratio	67.94		%	61.02		%	61.52		%	67.05		%	61.91		%	63.57		%	66.15		%

Non-GAAP Measures Reconciliation -
Tangible book value per common share:
Total shareholders’ equity	$	801,921		$	782,682		$	758,216		$	646,437		$	642,583		$	801,921		$	642,583
Less:
Goodwill	125,532			125,532			125,532			125,532			122,545			125,532			122,545
Other intangible assets, net	14,437			15,378			16,391			17,428			18,472			14,437			18,472
Tangible common equity	$	661,952		$	641,772		$	616,293		$	503,477		$	501,566		$	661,952		$	501,566
End of period shares outstanding	37,231,049			37,222,904			37,128,714			34,921,474			34,891,304			37,231,049			34,891,304
Book value per common share	$	21.54		$	21.03		$	20.42		$	18.51		$	18.42		$	21.54		$	18.42
Tangible book value per common share	17.78			17.24			16.60			14.42			14.38			17.78			14.38

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

Consolidated Earnings and Profitability

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

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



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

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

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



	Three Months Ended September 30, 2017
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division			Premium Finance Division		Total
Interest income	$	59,130	$	5,862	$	2,022	$	1,413		$	7,895	$	76,322
Interest expense	5,530		1,597		487		432			1,421		9,467
Net interest income	53,600		4,265		1,535		981			6,474		66,855
Provision for loan losses	1,037		262		215		(1		)	274		1,787
Noninterest income	13,007		12,257		583		1,130			22		26,999
Noninterest expense
Salaries and employee benefits	20,554		9,792		129		858			1,250		32,583
Equipment and occupancy expenses	5,384		555		1		54			42		6,036
Data processing and telecommunications expenses	6,357		425		28		9			231		7,050
Other expenses	14,905		1,001		51		63			2,078		18,098
Total noninterest expense	47,200		11,773		209		984			3,601		63,767
Income before income tax expense	18,370		4,487		1,694		1,128			2,621		28,300
Income tax expense	4,850		1,475		580		394			843		8,142
Net income	$	13,520	$	3,012	$	1,114	$	734		$	1,778	$	20,158



	Three Months Ended September 30, 2016
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	55,369	$	3,679	$	2,073	$	1,089	$	—	$	62,210
Interest expense	3,716		1,054		225		148		—		5,143
Net interest income	51,653		2,625		1,848		941		—		57,067
Provision for loan losses	57		447		94		213		—		811
Noninterest income	13,949		13,198		555		1,162		—		28,864
Noninterest expense
Salaries and employee benefits	18,323		8,940		103		616		—		27,982
Equipment and occupancy expenses	5,490		433		1		65		—		5,989
Data processing and telecommunications expenses	5,794		364		26		1		—		6,185
Other expenses	11,533		1,303		26		181		—		13,043
Total noninterest expense	41,140		11,040		156		863		—		53,199
Income before income tax expense	24,405		4,336		2,153		1,027		—		31,921
Income tax expense	7,733		1,518		754		359		—		10,364
Net income	$	16,672	$	2,818	$	1,399	$	668	$	—	$	21,557

Net Interest Income and Margins

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



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

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

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

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

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



	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016
(dollars in thousands)	Average Balance		Average Cost	Average Balance		Average Cost
NOW	$	1,201,151	0.20%	$	1,085,828	0.16%
MMDA	1,682,306		0.55%	1,435,151		0.34%
Savings	278,991		0.07%	266,344		0.07%
Retail CDs < $100,000	437,641		0.62%	431,570		0.45%
Retail CDs > $100,000	582,598		1.01%	451,115		0.75%
Brokered CDs	—		—%	5,000		0.64%
Interest-bearing deposits	$	4,182,687	0.49%	$	3,675,008	0.33%

Provision for Loan Losses

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

Noninterest Income

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

Noninterest Expense

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

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

Income Taxes

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

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

Consolidated Earnings and Profitability

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

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



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

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



	Nine Months Ended September 30, 2017
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	170,036	$	14,890	$	4,968	$	3,884	$	21,005	$	214,783
Interest expense	14,510		4,179		1,074		1,111		3,307		24,181
Net interest income	155,526		10,711		3,894		2,773		17,698		190,602
Provision for loan losses	4,510		617		159		98		444		5,828
Noninterest income	38,974		35,823		1,340		4,663		94		80,894
Noninterest expense
Salaries and employee benefits	58,757		24,771		403		2,339		3,239		89,509
Equipment and occupancy expenses	16,068		1,684		3		159		145		18,059
Data processing and telecommunications expenses	18,778		1,182		80		12		598		20,650
Other expenses	34,355		3,030		137		533		6,326		44,381
Total noninterest expense	127,958		30,667		623		3,043		10,308		172,599
Income before income tax expense	62,032		15,250		4,452		4,295		7,040		93,069
Income tax expense	17,801		5,337		1,559		1,503		2,471		28,671
Net income	$	44,231	$	9,913	$	2,893	$	2,792	$	4,569	$	64,398



	Nine Months Ended September 30, 2016
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	158,682	$	9,992	$	4,714	$	2,721	$	—	$	176,109
Interest expense	10,726		2,383		458		450		—		14,017
Net interest income	147,956		7,609		4,256		2,271		—		162,092
Provision for loan losses	1,471		540		94		276		—		2,381
Noninterest income	39,702		36,126		1,328		4,373		—		81,529
Noninterest expense
Salaries and employee benefits	55,740		23,591		399		1,970		—		81,700
Equipment and occupancy expenses	16,541		1,326		3		190		—		18,060
Data processing and telecommunications expenses	17,299		974		71		3		—		18,347
Other expenses	39,040		3,392		77		542		—		43,051
Total noninterest expense	128,620		29,283		550		2,705		—		161,158
Income before income tax expense	57,567		13,912		4,940		3,663		—		80,082
Income tax expense	18,278		4,870		1,729		1,282		—		26,159
Net income	$	39,289	$	9,042	$	3,211	$	2,381	$	—	$	53,923

Interest Income

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

Interest Expense

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

Net Interest Income

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



	Nine Months Ended September 30,
	2017					2016
(dollars in thousands)	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid	Average Balance		Interest Income/ Expense		Average Yield/ Rate Paid
Assets
Interest-earning assets:
Federal funds sold and interest-bearing deposits in banks	$	126,014	$	1,070	1.14%	$	134,060	$	659	0.66%
Investment securities	864,684		16,917		2.62%	840,688		15,227		2.42%
Loans held for sale	105,296		2,842		3.61%	96,340		2,402		3.33%
Loans	4,018,597		143,806		4.78%	2,642,498		93,887		4.75%
Purchased loans	982,033		43,986		5.99%	1,147,821		53,348		6.21%
Purchased loan pools	513,750		11,109		2.89%	629,118		13,220		2.81%
Total interest-earning assets	6,610,374		219,730		4.44%	5,490,525		178,743		4.35%
Noninterest-earning assets	569,956					539,656
Total assets	$	7,180,330				$	6,030,181

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits	$	3,048,284	$	7,614	0.33%	$	2,740,368	$	4,922	0.24%
Time deposits	994,770		5,865		0.79%	872,209		3,808		0.58%
Federal funds purchased and securities sold under agreements to repurchase	29,612		44		0.20%	44,433		77		0.23%
FHLB advances	539,496		3,994		0.99%	126,855		571		0.60%
Other borrowings	66,420		2,900		5.84%	47,809		1,333		3.72%
Subordinated deferrable interest debentures	84,712		3,764		5.94%	79,912		3,306		5.53%
Total interest-bearing liabilities	4,763,294		24,181		0.68%	3,911,586		14,017		0.48%
Demand deposits	1,624,837					1,490,152
Other liabilities	36,046					28,626
Shareholders’ equity	756,153					599,817
Total liabilities and shareholders’ equity	$	7,180,330				$	6,030,181
Interest rate spread					3.76%					3.87%
Net interest income			$	195,549				$	164,726
Net interest margin					3.96%					4.01%

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

Provision for Loan Losses

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

Noninterest Income

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

Noninterest Expense

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

Income Taxes

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

Financial Condition as of September 30, 2017

Securities

Debt securities with readily determinable fair values are classified as available for sale and recorded at fair value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Equity securities, including restricted equity securities, are classified as other investment securities and are recorded at the lower of cost or market value.

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. Declines in the fair value of securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.

In determining whether other-than-temporary impairment losses exist, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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 September 30, 2017, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at September 30, 2017, these investments are not considered impaired on an other-than temporary basis.

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



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

December 31, 2016
U.S. government sponsored agencies	$	999	$	1,020	3.20%	0.92	$	1,000
State, county and municipal securities	149,899		152,035		3.73%	5.34	7,884
Corporate debt securities	32,375		32,172		2.94%	4.87	2,000
Mortgage-backed securities	641,362		637,508		2.38%	4.33	94,081
Total debt securities	$	824,635	$	822,735	2.65%	4.53	$	104,965

Loans and Allowance for Loan Losses

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

The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loan losses in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses 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 South and Southeast Georgia, North Florida, Southeast Alabama and throughout 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 third quarter of 2017, the allowance for loan losses allocated to legacy loans totaled $21.2 million, or 0.46% of legacy loans, compared with $20.5 million, or 0.56% of legacy loans, at December 31, 2016. The decrease in the allowance for loan losses as a percentage of legacy loans reflects improvement in the credit risk of our portfolio, both from the mix of loan and collateral types and the credit quality of the loan portfolio. Our legacy nonaccrual loans decreased from $18.1 million at December 31, 2016 to $15.3 million at September 30, 2017. For the first nine months of 2017, our legacy net charge off ratio as a percentage of average legacy loans increased to 0.13%, compared with 0.10% for the first nine months of 2016. The total provision for loan losses for the first nine months of 2017 increased to $5.8 million, compared with $2.4 million for the first nine months of 2016. Our ratio of total nonperforming assets to total assets decreased from 0.94% at December 31, 2016 to 0.75% at September 30, 2017.

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

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

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



	Nine Months Ended September 30,
(dollars in thousands)	2017		2016
Balance of allowance for loan losses at beginning of period	$	23,920	$	21,062
Provision charged to operating expense	5,828		2,381
Charge-offs:
Commercial, financial and agricultural	1,896		1,273
Real estate – construction and development	95		324
Real estate – commercial and farmland	413		708
Real estate – residential	2,031		883
Consumer installment and Other	922		192
Purchased loans	1,472		1,261
Purchased loan pools	—		—
Total charge-offs	6,829		4,641
Recoveries:
Commercial, financial and agricultural	699		279
Real estate – construction and development	244		474
Real estate – commercial and farmland	156		191
Real estate – residential	190		368
Consumer installment and Other	78		119
Purchased loans	1,680		2,730
Purchased loan pools	—		—
Total recoveries	3,047		4,161
Net charge-offs	3,782		480
Balance of allowance for loan losses at end of period	$	25,966	$	22,963



	As of and for the Nine Months Ended September 30, 2017
(dollars in thousands)	Legacy Loans			Purchased Loans			Purchased Loan Pools			Total
Allowance for loan losses at end of period	$	21,227		$	3,262		$	1,477		$	25,966
Net charge-offs (recoveries) for the period	3,990			(208		)	—			3,782
Loan balances:
End of period	4,574,678			917,126			465,218			5,957,022
Average for the period	4,018,597			982,033			513,750			5,514,380
Net charge-offs as a percentage of average loans	0.13		%	(0.03		)%	0.00		%	0.09		%
Allowance for loan losses as a percentage of end of period loans	0.46		%	0.36		%	0.32		%	0.44		%



	As of and for the Nine Months Ended September 30, 2016
(dollars in thousands)	Legacy Loans			Purchased Loans			Purchased Loan Pools			Total
Allowance for loan losses at end of period	$	19,433		$	1,522		$	2,008		$	22,963
Net charge-offs (recoveries) for the period	1,949			(1,469		)	—			480
Loan balances:
End of period	3,091,039			1,129,381			624,886			4,845,306
Average for the period	2,642,498			1,147,821			629,118			4,419,437
Net charge-offs as a percentage of average loans	0.10		%	(0.17		)%	0.00		%	0.01		%
Allowance for loan losses as a percentage of end of period loans	0.63		%	0.13		%	0.32		%	0.47		%

Purchased Assets

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

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

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



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

Purchased Loan Pools

Non-Performing Assets

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

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

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



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

Troubled Debt Restructurings

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

As of September 30, 2017 and December 31, 2016, the Company had a balance of $14.2 million and $18.2 million, respectively, in troubled debt restructurings, excluding purchased loans. The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:



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



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

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2017 and December 31, 2016:



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



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

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



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



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

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



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



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

As of September 30, 2017 and December 31, 2016, the Company had a balance of $26.0 million and $28.1 million, respectively, in troubled debt restructurings included in purchased loans. The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at September 30, 2017 and December 31, 2016:



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



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

The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2017 and December 31, 2016:



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



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

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



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



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

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



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



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

Commercial Lending Practices

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

The CRE guidance is applicable when either:


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


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

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

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


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


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


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

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



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

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



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

Short-Term Investments

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

Derivative Instruments and Hedging Activities

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

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

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

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

Capital

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

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

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

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

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

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

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

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

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



	September 30, 2017	December 31, 2016
Tier 1 Leverage Ratio (tier 1 capital to average assets)
Consolidated	9.94%	8.68%
Ameris Bank	10.83%	9.27%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
Consolidated	10.35%	8.32%
Ameris Bank	12.69%	10.35%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
Consolidated	11.65%	9.69%
Ameris Bank	12.69%	10.35%
Total Capital Ratio (total capital to risk weighted assets)
Consolidated	13.25%	10.11%
Ameris Bank	13.10%	10.77%

Interest Rate Sensitivity and Liquidity

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

The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions 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 September 30, 2017 and December 31, 2016, the net carrying value of the Company’s other borrowings was $808.6 million and $492.3 million, respectively. On March 13, 2017, the Company completed the public offering and sale of $75.0 million

in aggregate principal amount of its 5.75% Fixed-To-Floating Rate Subordinated Notes due 2027. These subordinated notes are included in other borrowings at September 30, 2017 at a net carrying value of $73.8 million. See Note 8 for additional details on the subordinated notes.

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



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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

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

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

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

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 September 30, 2017, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, as a normal incident of the nature and kind of business in which the Company is engaged, various claims or charges are asserted against the Company or the Bank. In the ordinary course of business, the Company and the Bank are also subject to regulatory examinations, information gathering requests, inquiries and investigations. Other than ordinary routine litigation incidental to the Company’s business, management believes based on its current knowledge and after consultation with legal counsel that there are no pending or threatened legal proceedings that will, individually or in the aggregate, have a material adverse effect on the consolidated results of operations or financial condition of the Company.

Item 1A. Risk Factors.

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

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description

3.1		Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the SEC on August 14, 1987).

3.2		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 26, 1999).

3.3		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 31, 2003).

3.4		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on December 1, 2005).

3.5		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on November 21, 2008).

3.6		Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on June 1, 2011).

3.7		Bylaws of Ameris Bancorp, as amended and restated effective July 18, 2017 (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on July 21, 2017).

10.1*		Severance Protection and Restrictive Covenants Agreement by and among Ameris Bancorp, Ameris Bank and William D. McKendry dated as of October 3, 2017 (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 6, 2017).

10.2		Third Amendment to Loan Agreement dated October 20, 2017 by and between Ameris Bancorp and NexBank SSB (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 23, 2017).

10.3		Third Amended and Restated Revolving Promissory Note dated as of September 26, 2017 issued by Ameris Bancorp to NexBank SSB (incorporated by reference to Exhibit 10.2 to Ameris Bancorp's Current Report on Form 8-K filed with the SEC on October 23, 2017). .

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

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

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

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

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

* Management contract or a compensatory plan or arrangement.

SIGNATURE

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



Dated: November 9, 2017	AMERIS BANCORP

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

Ameris Bancorp - 10-Q quarterly report FY2017 Q3

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