ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

6 Months Ended

Jun. 30, 2016

Banking and Thrift [Abstract]

ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

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”), 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 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 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 and the FBJ, TBC and DBT NSF agreements passed their five-year anniversaries during the fourth quarter of 2015. Losses will no longer be reimbursed on these agreements. The remaining NSF assets for these six agreements have been reclassified to purchased non-covered loans and purchased non-covered other real estate owned.

At June 30, 2016, the Company’s FDIC loss-sharing payable totaled $1.9 million, which is comprised of $3.2 million in indemnification asset (for reimbursements associated with anticipated losses in future quarters) and $3.5 million in current charge-offs and expenses already incurred but not yet submitted for reimbursement, less the accrued clawback liability of $8.6 million.

The following table summarizes components of all covered assets at June 30, 2016, December 31, 2015 and June 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 June 30, 2016:
AUB	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	5
USB		3,423		14		3,409		-		-		-		3,409		(1,791)
SCB		4,774		70		4,704		440		-		440		5,144		55
FBJ		4,127		507		3,620		31		-		31		3,651		(80)
DBT		13,705		835		12,870		14		-		14		12,884		(3,823)
TBC		1,956		8		1,948		-		-		-		1,948		132
HTB		42,092		3,550		38,542		586		180		406		38,948		1,789
OGB		18,663		667		17,996		136		-		136		18,132		306
CBG		40,909		2,580		38,329		1,741		26		1,715		40,044		1,510
Total	$	129,649	$	8,231	$	121,418	$	2,948	$	206	$	2,742	$	124,160	$	(1,897)

	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 June 30, 2015:
AUB	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	187
USB		3,883		18		3,865		165		-		165		4,030		(1,232)
SCB		5,318		209		5,109		95		-		95		5,204		1,300
FBJ		17,708		1,286		16,422		815		121		694		17,116		1,227
DBT		46,269		3,667		42,602		5,216		700		4,516		47,118		2,126
TBC		19,609		515		19,094		1,480		116		1,364		20,458		521
HTB		47,176		4,127		43,049		3,085		955		2,130		45,179		4,806
OGB		34,218		2,192		32,026		442		-		442		32,468		1,856
CBG		52,259		4,828		47,431		3,559		339		3,220		50,651		4,166
Total	$	226,440	$	16,842	$	209,598	$	14,857	$	2,231	$	12,626	$	222,224	$	14,957

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

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Balance, January 1	$	137,529	$	271,279	$	271,279
Charge-offs		(720)		(5,558)		(7,065)
Accretion		2,247		9,658		6,251
Transfer to covered other real estate owned		(757)		(7,910)		(6,534)
Transfer to purchased, non-covered loans due to loss-share expiration		-		(50,568)		(15,462)
Payments received		(16,881)		(79,372)		(38,871)
Ending balance	$	121,418	$	137,529	$	209,598

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

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Balance, January 1	$	9,063	$	15,578	$	15,578
Accretion		(2,247)		(9,658)		(6,251)
Transfer to purchased, non-covered loans due to loss-share expiration		-		(1,665)		(84)
Transfers between non-accretable and accretable discounts, net		(453)		4,808		2,817
Ending balance	$	6,363	$	9,063	$	12,060

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 June 30, 2016, December 31, 2015 and June 30, 2015, the Company has recorded a clawback liability of $8.6 million, $8.2 million and $7.3 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 receivable (payable) for the six months ended June 30, 2016, for the year ended December 31, 2015 and for the six months ended June 30, 2015 are as follows:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Beginning balance, January 1	$	6,301	$	31,351	$	31,351
Payments received from FDIC		(4,165)		(19,273)		(12,539)
Accretion, net		(2,737)		(8,878)		(5,393)
Changes in clawback liability		(345)		(2,008)		(1,057)
Increase in receivable due to:
Net charge-offs on covered loans		(929)		416		1,955
Write downs of covered other real estate		774		4,752		2,206
Reimbursable expenses on covered assets		429		2,582		1,866
Other activity, net		(1,225)		(2,641)		(3,432)
Ending balance	$	(1,897)	$	6,301	$	14,957