BUSINESS COMBINATIONS

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 2 – BUSINESS COMBINATIONS

Jacksonville Bancorp, Inc.

On March 11, 2016, the Company completed its acquisition of Jacksonville Bancorp, Inc. (“JAXB”), a bank holding company headquartered in Jacksonville, Florida.  Upon consummation of the acquisition, JAXB was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, JAXB’s wholly owned banking subsidiary, The Jacksonville Bank (“Jacksonville Bank”), was also merged with and into the Bank. The acquisition expanded the Company’s existing market presence, as Jacksonville Bank had a total of eight full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida. Under the terms of the merger, JAXB’s common shareholders received 0.5861 shares of Ameris common stock or $16.50 in cash for each share of JAXB common stock or nonvoting common stock they previously held, subject to the total consideration being allocated 75% stock and 25% cash. As a result, the Company issued 2,549,469 common shares at a fair value of $72.5 million and paid $23.9 million in cash to former shareholders of JAXB.

The acquisition of JAXB was accounted for using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. 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 preliminary and 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 assessed and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code of 1986, as amended. Management continues to evaluate fair value adjustments related to loans, other real estate owned, premises, intangibles and deferred tax assets.

The following table presents the assets acquired and liabilities of JAXB assumed as of March 11, 2016 and their initial fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

	As Recorded by		Fair Value			As Recorded
(Dollars in Thousands)	JAXB		Adjustments			by Ameris
Assets
Cash and cash equivalents	$	9,704	$	-		$	9,704
Federal funds sold and interest-bearing balances		7,027		-			7,027
Investment securities		60,836		(942)	(a)		59,894
Other investments		2,458		-			2,458
Loans		416,831		(15,746)	(b)		401,085
Less allowance for loan losses		(12,613)		12,613	(c)		-
Loans, net		404,218		(3,133)			401,085
Other real estate owned		2,873		(1,035)	(d)		1,838
Premises and equipment		4,798		-			4,798
Intangible assets		288		5,566	(e)		5,854
Other assets		14,141		23,266	(f)		37,407
Total assets	$	506,343	$	23,722		$	530,065
Liabilities
Deposits:
Noninterest-bearing	$	123,399	$	-		$	123,399
Interest-bearing		277,539		421	(g)		277,960
Total deposits		400,938		421			401,359
Other borrowings		48,350		84	(h)		48,434
Other liabilities		2,354		-			2,354
Subordinated deferrable interest debentures		16,294		(3,393)	(i)		12,901
Total liabilities		467,936		(2,888)			465,048
Net identifiable assets acquired over (under) liabilities assumed		38,407		26,610			65,017
Goodwill		-		31,375			31,375
Net assets acquired over (under) liabilities assumed	$	38,407	$	57,985		$	96,392
Consideration:
Ameris Bancorp common shares issued		2,549,469
Purchase price per share of the Company's common stock	$	28.42
Company common stock issued		72,456
Cash exchanged for shares		23,936
Fair value of total consideration transferred	$	96,392

Explanation of fair value adjustments

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

(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio, net of the reversal of JAXB remaining fair value adjustments from their prior acquisitions.

(c) Adjustment reflects the elimination of JAXB’s allowance for loan losses.

(d) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio, which is based largely on contracted sale prices.

(e) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

(f) Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes and the reversal of JAXB valuation allowance established on their deferred tax assets.

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

(h) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the liability for other borrowings.

(i) Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date, net of the reversal of JAXB remaining fair value adjustments from their prior acquisitions.

Goodwill of $31.4 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the JAXB acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $401.1 million of loans at fair value, net of $15.7 million, or 3.78%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $28.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

Contractually required principal and interest	$	42,314
Non-accretable difference		(7,877)
Cash flows expected to be collected		34,437
Accretable yield		(6,182)
Total purchased credit-impaired loans acquired	$	28,255

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

					Best Estimate
			Gross		at Acquisition
			Contractual		Date of
			Amounts		Contractual
	Fair Value of		Receivable at		Cash Flows
	Acquired Loans at		Acquisition		Not Expected
	Acquisition Date		Date		to be Collected
	(Dollars in Thousands)
Acquired receivables subject to ASC 310-30	$	28,255	$	42,314	$	7,877
Acquired receivables not subject to ASC 310-30	$	372,830	$	488,346	$	-

Branch Acquisition

On June 12, 2015, the Company completed its acquisition of 18 branches from Bank of America, National Association located in Calhoun, Columbia, Dixie, Hamilton, Suwanee and Walton Counties, Florida and Ben Hill, Colquitt, Dougherty, Laurens, Liberty, Thomas, Tift and Ware Counties, Georgia. Under the terms of the Purchase and Assumption Agreement dated January 28, 2015, the Company paid a deposit premium of $20.0 million, equal to 3.00% of the average daily deposits for the 15 calendar-day period immediately prior to the acquisition date. In addition, the Company acquired approximately $4.0 million in loans and $10.7 million in premises and equipment.

The acquisition of the 18 branches was accounted for using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. 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 preliminary and 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. During the third and fourth quarters of 2015, management revised its initial estimates regarding the valuation of loans, premises and intangible assets acquired.  Management continues to evaluate fair value adjustments related to premises acquired.

The following table presents the assets acquired and liabilities assumed as of June 12, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

			Initial Fair			Subsequent
	As Recorded by		Value			Fair Value			As Recorded
(Dollars in Thousands)	Bank of America		Adjustments			Adjustments			by Ameris
Assets
Cash and cash equivalents	$	630,220	$	-		$	-		$	630,220
Loans		4,363		-			(364	)(d)		3,999
Premises and equipment		10,348		1,060	(a)		(755	)(e)		10,653
Intangible assets		-		7,651	(b)		985	(f)		8,636
Other assets		126					-			126
Total assets	$	645,057	$	8,711		$	(134)		$	653,634
Liabilities
Deposits:
Noninterest-bearing	$	149,854	$	-		$	-		$	149,854
Interest-bearing		495,110		(215	)(c)		-			494,895
Total deposits		644,964		(215)			-			644,749
Other liabilities		93		-			-			93
Total liabilities		645,057		(215)			-			644,842
Net identifiable assets acquired over (under) liabilities assumed		-		8,926			(134)			8,792
Goodwill		-		11,076			134			11,210
Net assets acquired over (under) liabilities assumed	$	-	$	20,002		$	-		$	20,002
Consideration:
Cash paid as deposit premium	$	20,002
Fair value of total consideration transferred	$	20,002

Explanation of fair value adjustments

(a) Adjustment reflects the fair value adjustments of the premises and equipment as of the acquisition date.

(b) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

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

(d) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

(e) Adjustment reflects additional recording of fair value adjustment of the premises and equipment.

(f) Adjustment reflects additional recording of core deposit intangible on the acquired core deposit accounts.

Goodwill of $11.2 million, which is the excess of the purchase consideration over the fair value of net assets acquired, was recorded in the branch acquisition and is the result of expected operational synergies and other factors.

In the acquisition, the Company purchased $4.0 million of loans at fair value. Management identified $364,000 of overdrafts that were considered to be credit impaired and were subsequently charged off as uncollectible under ASC Topic 310-30.

Merchants & Southern Banks of Florida, Incorporated

On May 22, 2015, the Company completed its acquisition of all shares of the outstanding common stock of Merchants & Southern Banks of Florida, Incorporated (“Merchants”), a bank holding company headquartered in Gainesville, Florida, for a total purchase price of $50,000,000.  Upon consummation of the stock purchase, Merchants was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Merchants’ wholly owned banking subsidiary, Merchants and Southern Bank, was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Merchants and Southern Bank had a total of 13 banking locations in Alachua, Marion and Clay Counties, Florida.

 

The acquisition of Merchants was accounted for using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. 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 preliminary and 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. During the third and fourth quarters of 2015, management revised its initial estimates regarding the valuation of investment securities, core deposit intangible and other assets acquired. In addition, management continued its assessment and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code of 1986, as amended. Management continues to evaluate fair value adjustments related to loans and premises acquired. 

The following table presents the assets acquired and liabilities of Merchants assumed as of May 22, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

			Initial Fair			Subsequent
	As Recorded by		Value			Fair Value			As Recorded
(Dollars in Thousands)	Merchants		Adjustments			Adjustments			by Ameris
Assets
Cash and cash equivalents	$	7,527	$	-		$	-		$	7,527
Federal funds sold and interest-bearing balances		106,188		-			-			106,188
Investment securities		164,421		(553	)(a)		(639	)(j)		163,229
Other investments		872		-			(253	)(k)		619
Loans		199,955		(8,500	)(b)		-			191,455
Less allowance for loan losses		(3,354)		3,354	(c)		-			-
Loans, net		196,601		(5,146)			-			191,455
Other real estate owned		4,082		(1,115	)(d)		-			2,967
Premises and equipment		14,614		(3,680	)(e)		-			10,934
Intangible assets		-		4,577	(f)		(634	)(l)		3,943
Other assets		2,333		2,335	(g)		(1,109	)(m)		3,559
Total assets	$	496,638	$	(3,582)		$	(2,635)		$	490,421
Liabilities
Deposits:
Noninterest-bearing	$	121,708	$	-		$	-		$	121,708
Interest-bearing		286,112		-			41,588	(n)		327,700
Total deposits		407,820		-			-			449,408
Federal funds purchased and securities sold under agreements to repurchase		41,588		-			(41,588	)(n)		-
Other liabilities		2,151		81	(h)		-			2,232
Subordinated deferrable interest debentures		6,186		(2,680	)(i)		-			3,506
Total liabilities		457,745		(2,599)			-			455,146
Net identifiable assets acquired over (under) liabilities assumed		38,893		(983)			(2,635)			35,275
Goodwill		-		12,090			2,635			14,725
Net assets acquired over (under) liabilities assumed	$	38,893	$	11,107		$	-		$	50,000
Consideration:
Cash exchanged for shares	$	50,000
Fair value of total consideration transferred	$	50,000

 

Explanation of fair value adjustments

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

(b) Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

(c) Adjustment reflects the elimination of Merchants’ allowance for loan losses.

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

(e) Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired premises.

(f) Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

(g) Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

(h) Adjustment reflects the fair value adjustments based on the Company’s evaluation of interest rate swap liabilities.

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

(j) Adjustment reflects the additional fair value adjustments of the portfolio of securities available for sale as of the acquisition date.

(k) Adjustment reflects the fair value adjustments of other investments as of the acquisition date.

(l) Adjustment reflects adjustment to the core deposit intangible on the acquired core deposit accounts.

(m) Adjustment reflects the additional deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

(n) Subsequent to acquisition, the acquired securities sold under agreements to repurchase were converted to deposit accounts and are no longer reported as securities sold under agreements to repurchase on the Consolidated Balance Sheet as of December 31, 2015.

Goodwill of $14.7 million, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the Merchants 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 $191.5 million of loans at fair value, net of $8.5 million, or 4.25%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $11.2 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

Contractually required principal and interest	$	17,201
Non-accretable difference		(2,712)
Cash flows expected to be collected		14,489
Accretable yield		(3,254)
Total purchased credit-impaired loans acquired	$	11,235

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

					Best Estimate
			Gross		at Acquisition
			Contractual		Date of
			Amounts		Contractual
	Fair Value of		Receivable at		Cash Flows
	Acquired Loans at		Acquisition		Not Expected
	Acquisition Date		Date		to be Collected
	(Dollars in Thousands)
Acquired receivables subject to ASC 310-30	$	11,235	$	14,086	$	2,712
Acquired receivables not subject to ASC 310-30	$	180,220	$	184,906	$	-

The results of operations of JAXB and Merchants subsequent to the respective acquisition dates are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on January 1, 2015, unadjusted for potential cost savings (in thousands).

	Three Months Ended
	March 31,
	2016		2015
Net interest income and noninterest income	$	78,798	$	64,931
Net income	$	13,052	$	12,195
Income per common share available to common stockholders – basic	$	0.38	$	0.37
Income per common share available to common stockholders – diluted	$	0.37	$	0.37
Average number of shares outstanding, basic		34,741		32,992
Average number of shares outstanding, diluted		35,043		33,345

A rollforward of purchased non-covered loans for the three months ended March 31, 2016, the year ended December 31, 2015 and the three months ended March 31, 2015 is shown below:

	March 31,		December 31,		March 31,
(Dollars in Thousands)	2016		2015		2015
Balance, January 1	$	771,554	$	674,239	$	674,239
Charge-offs, net of recoveries		(317)		(991)		(244)
Additions due to acquisitions		401,085		195,818		-
Accretion		2,647		10,590		3,111
Transfers to purchased non-covered other real estate owned		(1,243)		(4,473)		(1,094)
Transfer from covered loans due to loss-share expiration		-		50,568		-
Payments received		(43,807)		(154,666)		(32,920)
Other		-		469		-
Ending balance	$	1,129,919	$	771,554	$	643,092

The following is a summary of changes in the accretable discounts of purchased non-covered loans during the three months ended March 31, 2016, the year ended December 31, 2015 and the three months ended March 31, 2015:

	March 31,		December 31,		March 31,
(Dollars in Thousands)	2016		2015		2015
Balance, January 1	$	24,785	$	25,716	$	25,716
Additions due to acquisitions		9,991		5,788		-
Accretion		(2,647)		(10,590)		(3,111)
Transfer from covered loans due to loss-share expiration		-		1,665		-
Accretable discounts removed due to charge-offs		(11)		(1,768)		(1,380)
Transfers between non-accretable and accretable discounts, net		353		3,974		(996)
Ending balance	$	32,471	$	24,785	$	20,229