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 statement of operations.

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 and the HTB and OGB NSF agreements passed their five-year anniversaries during the third quarter of 2016. Losses will no longer be reimbursed on these agreements. The remaining NSF assets for these eight agreements have been reclassified to purchased non-covered loans and purchased non-covered other real estate owned.

At September 30, 2016, the Company’s FDIC loss-sharing payable totaled $7.8 million, which is comprised of an accrued clawback liability of $8.9 million and $1.3 million in current activity incurred but not yet remitted to the FDIC (net recoveries offset by reimbursable expenses), less remaining indemnification of $2.4 million (for reimbursements associated with anticipated losses in future quarters).

The following table summarizes components of all covered assets at September 30, 2016, December 31, 2015 and September 30, 2015 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)
As of September 30, 2016:

AUB	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	12

USB		3,309		13		3,296		30		-		30		3,326		(1,682)

SCB		4,475		61		4,414		-		-		-		4,414		89

FBJ		3,811		488		3,323		-		-		-		3,323		(164)

DBT		12,964		690		12,274		-		-		-		12,274		(4,898)

TBC		1,867		7		1,860		-		-		-		1,860		(2,727)

HTB		1,926		35		1,891		-		-		-		1,891		1,538

OGB		1,086		32		1,054		-		-		-		1,054		(776)

CBG		36,468		2,289		34,179		974		4		970		35,149		833

Total	$	65,906	$	3,615	$	62,291	$	1,004	$	4	$	1,000	$	63,291	$	(7,775)

	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)
As of December 31, 2015:

AUB	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	111

USB		3,639		16		3,623		165		-		165		3,788		(1,424)

SCB		5,228		124		5,104		-		-		-		5,104		149

FBJ		4,782		562		4,220		41		-		41		4,261		252

DBT		15,934		1,131		14,803		-		-		-		14,803		(1,084)

TBC		2,159		11		2,148		-		-		-		2,148		1,446

HTB		44,405		3,881		40,524		2,433		643		1,790		42,314		3,875

OGB		27,561		1,900		25,661		160		-		160		25,821		913

CBG		44,865		3,419		41,446		3,139		284		2,855		44,301		2,063

Total	$	148,573	$	11,044	$	137,529	$	5,938	$	927	$	5,011	$	142,540	$	6,301

	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)
As of September 30, 2015:

AUB	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	115

USB		3,686		17		3,669		165		-		165		3,834		(1,453)

SCB		5,269		174		5,095		-		-		-		5,095		280

FBJ		13,826		991		12,835		984		171		813		13,648		679

DBT		44,112		3,107		41,005		5,044		624		4,420		45,425		(1,737)

TBC		16,813		481		16,332		1,480		116		1,364		17,696		(2,225)

HTB		45,345		3,999		41,346		2,985		955		2,030		43,376		4,108

OGB		28,309		1,971		26,338		320		39		281		26,619		1,517

CBG		48,397		3,996		44,401		3,474		344		3,130		47,531		3,222

Total	$	205,757	$	14,736	$	191,021	$	14,452	$	2,249	$	12,203	$	203,224	$	4,506

A rollforward of acquired covered loans for the nine months ended September 30, 2016, the year ended December 31, 2015 and the nine months ended September 30, 2015 is shown below:

(Dollars in Thousands)	September 30, 2016		December 31, 2015		September 30, 2015
Balance, January 1	$	137,529	$	271,279	$	271,279
Charge-offs, net of recoveries		(2,218)		(5,558)		(5,062)
Accretion		2,855		9,658		8,105
Transfer to covered other real estate owned		(2,391)		(7,910)		(6,909)
Transfer to purchased, non-covered loans due to loss-share expiration		(45,908)		(50,568)		(15,462)
Payments received		(27,576)		(79,372)		(60,930)
Ending balance	$	62,291	$	137,529	$	191,021

The following is a summary of changes in the accretable discounts of acquired loans during the nine months ended September 30, 2016, the year ended December 31, 2015 and the nine months ended September 30, 2015:

(Dollars in Thousands)	September 30, 2016		December 31, 2015		September 30, 2015
Balance, January 1	$	9,063	$	15,578	$	15,578
Accretion		(2,855)		(9,658)		(8,105)
Transfer to purchased, non-covered loans due to loss-share expiration		(3,457)		(1,665)		(84)
Transfers between non-accretable and accretable discounts, net		281		4,808		3,312
Ending balance	$	3,032	$	9,063	$	10,701

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, 2016, December 31, 2015 and September 30, 2015, the Company has recorded a clawback liability of $8.9 million, $8.2 million and $7.7 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 receivable (payable) for the nine months ended September 30, 2016, for the year ended December 31, 2015 and for the nine months ended September 30, 2015 are as follows:

(Dollars in Thousands)	September 30, 2016		December 31, 2015		September 30, 2015
Beginning balance, January 1	$	6,301	$	31,351	$	31,351
Payments received from FDIC		(4,770)		(19,273)		(19,089)
Accretion, net		(3,351)		(8,878)		(7,914)
Changes in clawback liability		(682)		(2,008)		(1,483)
Increase in receivable due to:
Net charge-offs on covered loans		(4,118)		416		1,180
Write downs of covered other real estate owned		203		4,752		2,349
Reimbursable expenses on covered assets		604		2,582		2,312
Other activity, net		(1,962)		(2,641)		(4,200)
Ending balance	$	(7,775)	$	6,301	$	4,506