BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2020

NOTE 2 – BUSINESS COMBINATIONS

In accounting for business combinations, the Company uses the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, assets acquired, liabilities assumed and consideration exchanged are recorded at their respective acquisition date fair values. Any identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented or exchanged separately from the entity). If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. In addition, management will assess and record the deferred tax assets and deferred tax liabilities resulting from differences in the carrying value of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes, including acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code of 1986, as amended.

Fidelity Southern Corporation

On July 1, 2019, the Company completed its acquisition of Fidelity Southern Corporation ("Fidelity"), a bank holding company headquartered in Atlanta, Georgia. Upon consummation of the acquisition, Fidelity was merged with and into the Company, with Ameris as the surviving entity in the merger, and Fidelity's wholly owned banking subsidiary, Fidelity Bank, was merged with and into the Bank, with the Bank surviving. The acquisition expanded the Company's existing market presence in Georgia and Florida, as Fidelity Bank had a total of 62 branches at the time of closing, 46 of which were located in Georgia and 16 of which were located in Florida. Under the terms of the merger agreement, Fidelity's shareholders received 0.80 shares of Ameris common stock for each share of Fidelity common stock they previously held. As a result, the Company issued 22,181,522 shares of its common stock at a fair value of $869.3 million to Fidelity's shareholders as merger consideration.

The following table presents the assets acquired and liabilities assumed of Fidelity as of July 1, 2019, and their fair value estimates. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company finalized its fair value adjustments during the second quarter of 2020.


(dollars in thousands)	As Recorded by Fidelity		Initial Fair Value Adjustments			Subsequent Adjustments			As Recorded by Ameris
Assets
Cash and due from banks	$	26,264	$	—		$	(2,417)	(o)	$	23,847
Federal funds sold and interest-bearing deposits in banks	217,936		—			—			217,936

Investment securities	299,341		(1,444)		(a)	—			297,897
Other investments	7,449		—			—			7,449
Loans held for sale	328,657		(1,290)		(b)	250		(p)	327,617
Loans	3,587,412		(79,002)		(c)	3,852		(q)	3,512,262
Less allowance for loan losses	(31,245)		31,245		(d)	—			—
Loans, net	3,556,167		(47,757)			3,852			3,512,262
Other real estate owned	7,605		(427)		(e)	—			7,178
Premises and equipment	93,662		11,407		(f)	(3,820)		(r)	101,249
Other intangible assets, net	10,670		39,940		(g)	—			50,610
Cash value of bank owned life insurance	72,328		—			—			72,328
Deferred income taxes, net	104		(104)		(h)	—			—
Other assets	157,863		998		(i)	(17,138)		(s)	141,723
Total assets	$	4,778,046	$	1,323		$	(19,273)		$	4,760,096
Liabilities
Deposits:
Noninterest-bearing	$	1,301,829	$	—		$	(2,114)	(t)	$	1,299,715
Interest-bearing	2,740,552		942		(j)	—			2,741,494
Total deposits	4,042,381		942			(2,114)			4,041,209
Securities sold under agreements to repurchase	22,345		—			—			22,345
Other borrowings	149,367		2,265		(k)	(300)		(u)	151,332
Subordinated deferrable interest debentures	46,393		(9,675)		(l)	—			36,718
Deferred tax liability, net	12,222		(11,401)		(m)	497		(v)	1,318
Other liabilities	65,027		538		(n)	(839)		(w)	64,726
Total liabilities	4,337,735		(17,331)			(2,756)			4,317,648
Net identifiable assets acquired over (under) liabilities assumed	440,311		18,654			(16,517)			442,448
Goodwill	—		410,348			16,517			426,865
Net assets acquired over liabilities assumed	$	440,311	$	429,002		$	—		$	869,313
Consideration:
Ameris Bancorp common shares issued	22,181,522
Price per share of the Company's common stock	39.19
Company common stock issued	$	869,294
Cash exchanged for shares	$	19
Fair value of total consideration transferred	$	869,313

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Explanation of fair value adjustments

(a)Adjustment reflects the fair value adjustments of the portfolio of investment securities as of the acquisition date.

(b)Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loans held for sale.

(c)Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loan portfolio, net of the reversal of Fidelity's unamortized accounting adjustments from Fidelity's prior acquisitions, loan premiums, loan discounts, deferred loan origination costs and deferred loan origination fees.

(d)Adjustment reflects the elimination of Fidelity's allowance for loan losses.

(e)Adjustment reflects the fair value adjustment based on the Company's evaluation of the acquired OREO portfolio.

(f)Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired premises and equipment.

(g)Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts, net of reversal of Fidelity's remaining intangible assets from its past acquisitions.

(h)Adjustment reflects the reclassification of Fidelity's deferred tax asset against the deferred tax liability.

(i)Adjustment reflects the fair value adjustment to other assets.

(j)Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired deposits.

(k)Adjustment reflects the fair value adjustment to the other borrowings at the acquisition date, net of reversal of Fidelity's unamortized deferred issuance costs.

(l)Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

(m)Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes and reclassification of Fidelity's deferred tax asset against the deferred tax liability.

(n)Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired other liabilities.

(o)Subsequent to acquisition, cash and due from banks were adjusted for Fidelity reconciling items.

(p)Adjustment reflects additional recording of fair value adjustments to loans held for sale.

(q)Adjustment reflects additional recording of fair value adjustments of the acquired loan portfolio.

(r)Adjustment reflects additional recording of fair value adjustments to premises and equipment.

(s)Adjustment reflects additional recording of fair value adjustments to other assets and includes a reclassification of deferred income taxes to current income taxes.

(t)Subsequent to acquisition, noninterest-bearing deposits were adjusted for Fidelity reconciling items.

(u)Adjustment reflects additional recording of fair value adjustments to other borrowings.

(v)Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes and includes a reclassification of deferred income taxes to current income taxes.

(w)Adjustment reflects additional recording of fair value adjustments to other liabilities.

Goodwill of $426.9 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the Fidelity acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $3.51 billion of loans at fair value, net of $75.2 million, or 2.09%, estimated discount to the acquired carrying value. Of the total loans acquired, management identified $121.3 million that were considered to be credit impaired and were accounted for under ASC Topic 310-30 prior to the adoption of ASC 326 on January 1, 2020. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.


(dollars in thousands)
Contractually required principal and interest	$	191,534
Non-accretable difference	(23,058)
Cash flows expected to be collected	168,476
Accretable yield	(47,173)
Total purchased credit-impaired loans acquired	$	121,303

The following table presents the acquired loan data for the Fidelity acquisition.


(dollars in thousands)	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
Acquired receivables subject to ASC 310-30	$	121,303	$	191,534	$	23,058
Acquired receivables not subject to ASC 310-30	$	3,390,959	$	4,217,890	$	33,076

Pro Forma Financial Information

The results of operations of Fidelity subsequent to its acquisition date are included in the Company’s consolidated statements of income and comprehensive income. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on January 1, 2019, unadjusted for potential cost savings. Merger and conversion charges are not included in the pro forma information below.


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands, except per share data; shares in thousands)	2020		2019		2020		2019
Net interest income and noninterest income	$	284,774	$	200,132	$	357,890	$	392,386
Net income	$	32,943	$	44,495	$	52,693	$	92,348
Net income available to common shareholders	$	32,943	$	44,495	$	52,693	$	92,348
Income per common share available to common shareholders – basic	$	0.48	$	0.64	$	0.76	$	1.33
Income per common share available to common shareholders – diluted	$	0.48	$	0.64	$	0.76	$	1.33
Average number of shares outstanding, basic	69,192		69,492		69,235		69,535
Average number of shares outstanding, diluted	69,293		69,519		69,413		69,576