BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

BUSINESS COMBINATIONS

NOTE 3– BUSINESS COMBINATIONS

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:

(Dollars in Thousands)	As Recorded by Bank of America		Initial Fair Value Adjustments			Subsequent Fair Value Adjustments			As Recorded 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 premise 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 premise 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 Sections 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:

(Dollars in Thousands)	As Recorded by Merchants		Initial Fair Value Adjustments			Subsequent Fair Value Adjustments			As Recorded 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		-			-			872
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)	(k)		3,943
Other assets		2,333		2,335	(g)		(1,307)	(l)		3,361
Total assets	$	496,638	$	(3,582)		$	(2,580)		$	490,476
Liabilities
Deposits:
Noninterest-bearing	$	121,708	$	-		$	-		$	121,708
Interest-bearing		286,112		-			41,588	(m)		327,700
Total deposits		407,820		-			-			449,408
Federal funds purchased and securities sold under agreements to repurchase		41,588		-			(41,588)	(m)		-
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)			(2,580)			35,330
Goodwill		-		12,090			2,580			14,670
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 available for sale portfolio 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 available for sale portfolio as of the acquisition date.

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

(l) 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.

(m) 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.

	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected 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	$	-

Coastal Bankshares, Inc.

On June 30, 2014, the Company completed its acquisition of The Coastal Bankshares, Inc. (“Coastal”), a bank holding company headquartered in Savannah, Georgia.  Upon consummation of the acquisition, Coastal was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Coastal’s wholly owned banking subsidiary, The Coastal Bank (“Coastal Bank”), was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Coastal Bank had a total of six banking locations in Chatham, Liberty and Effingham Counties, Georgia. Coastal’s common shareholders received 0.4671 of a share of the Company's common stock in exchange for each share of Coastal’s common stock. As a result, the Company issued 1,598,998 common shares at a fair value of $34.5 million and paid $2.8 million cash in exchange for outstanding warrants.

The acquisition of Coastal was accounted for using the purchase 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. As of June 30, 2015, the Company finalized its valuation of all assets and liabilities acquired.

The following table presents the assets acquired and liabilities of Coastal assumed as of June 30, 2014 and their fair value estimates:

(Dollars in Thousands)	As Recorded by Coastal		Fair Value Adjustments			As Recorded by Ameris
Assets
Cash and cash equivalents	$	3,895	$	-		$	3,895
Federal funds sold and interest-bearing balances		15,923		-			15,923
Investment securities		67,266		(500)	(a)		66,766
Other investments		975		-			975
Mortgage loans held for sale		7,288		-			7,288
Loans		296,141		(16,700)	(b)		279,441
Less allowance for loan losses		(3,218)		3,218	(c)		-
Loans, net		292,923		(13,482)			279,441
Other real estate owned		14,992		(6,935)	(d)		8,057
Premises and equipment		11,882		-			11,882
Intangible assets		507		4,035	(e)		4,542
Cash value of bank owned life insurance		7,812		-			7,812
Other assets		14,898		(601)	(f)		14,297
Total assets	$	438,361	$	(17,483)		$	420,878
Liabilities
Deposits:
Noninterest-bearing	$	80,012	$	-		$	80,012
Interest-bearing		289,012		-			289,012
Total deposits		369,024		-			369,024
Federal funds purchased and securities sold under agreements to repurchase		5,428		-			5,428
Other borrowings		22,005		-			22,005
Other liabilities		6,192		-			6,192
Subordinated deferrable interest debentures		15,465		(6,413)	(g)		9,052
Total liabilities		418,114		(6,413)			411,701
Net identifiable assets acquired over (under) liabilities assumed		20,247		(11,070)			9,177
Goodwill		-		28,093			28,093
Net assets acquired over (under) liabilities assumed	$	20,247	$	17,023		$	37,270
Consideration:
Ameris Bancorp common shares issued		1,598,998
Purchase price per share of the Company's common stock	$	21.56
Company common stock issued		34,474
Cash exchanged for shares		2,796
Fair value of total consideration transferred	$	37,270

Explanation of fair value adjustments

(a) Adjustment reflects the fair value adjustments of the available for sale portfolio 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 Coastal’s allowance for loan losses.

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

(e) Adjustment reflects the 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.

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

Goodwill of $28.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Coastal 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 $279.4 million of loans at fair value, net of $16.7 million, or 5.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $29.3 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	$	38,194
Non-accretable difference		(5,632)
Cash flows expected to be collected		32,562
Accretable yield		(3,282)
Total purchased credit-impaired loans acquired	$	29,280

The results of operations of Merchants and Coastal 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 acquisition had occurred on January 1, 2014, unadjusted for potential cost savings (in thousands).

	Year Ended December 31,
	2015		2014
Net interest income and noninterest income	$	266,710	$	238,055
Net income	$	40,514	$	41,806
Net income available to common stockholders	$	40,514	$	41,520
Income per common share available to common stockholders – basic	$	1.28	$	1.51
Income per common share available to common stockholders – diluted	$	1.26	$	1.49
Average number of shares outstanding, basic		31,762		27,573
Average number of shares outstanding, diluted		32,127		27,858

A rollforward of purchased non-covered loans for the years ended December 31, 2015 and 2014 is shown below:

(Dollars in Thousands)	2015		2014
Balance, January 1	$	674,239	$	448,753
Charge-offs, net of recoveries		(991)		(84)
Additions due to acquisitions		195,818		279,441
Accretion		10,590		9,745
Transfers to purchased non-covered other real estate owned		(4,473)		(4,160)
Transfer from covered loans due to loss share expiration		50,568		15,475
Payments received		(154,666)		(74,931)
Other		469		-
Ending balance	$	771,554	$	674,239

The following is a summary of changes in the accretable discounts of purchased non-covered loans during years ended December 31, 2015 and 2014:

(Dollars in Thousands)	2015		2014
Balance, January 1	$	25,716	$	26,189
Additions due to acquisitions		5,788		7,799
Accretion		(10,590)		(9,745)
Transfer from covered loans due to loss share expiration		1,665		-
Accretable discounts removed due to charge-offs		(1,768)		-
Transfers between non-accretable and accretable discounts, net		3,974		1,473
Ending balance	$	24,785	$	25,716