XML 22 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
BUSINESS COMBINATIONS
3 Months Ended
Mar. 31, 2017
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. During the third and fourth quarters of 2016, management revised its initial estimates regarding the valuation of loans, other real estate owned, premises and equipment, core deposit intangible and other assets acquired. 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.
 
The following table presents the assets acquired and liabilities assumed of JAXB as of March 11, 2016 and their fair value estimates.
 
(dollars in thousands)
 
As Recorded
by
JAXB
 
Initial Fair
Value
Adjustments
 
Subsequent Fair
Value
Adjustments
 
As Recorded
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)
 
553
(j)
 
401,638
 
Allowance for loan losses
 
 
(12,613)
 
 
12,613
(c)
 
-
 
 
-
 
Loans, net
 
 
404,218
 
 
(3,133)
 
 
553
 
 
401,638
 
Other real estate owned
 
 
2,873
 
 
(1,035)
(d)
 
88
(k)
 
1,926
 
Premises and equipment
 
 
4,798
 
 
-
 
 
(119)
(l)
 
4,679
 
Intangible assets
 
 
288
 
 
5,566
(e)
 
(1,108)
(m)
 
4,746
 
Other assets
 
 
14,141
 
 
23,266
(f)
 
(3,524)
(n)
 
33,883
 
Total assets
 
$
506,343
 
$
23,722
 
$
(4,110)
 
$
525,955
 
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
 
Subordinated deferrable interest debentures
 
 
16,294
 
 
(3,393)
(i)
 
-
 
 
12,901
 
Other liabilities
 
 
2,354
 
 
-
 
 
-
 
 
2,354
 
Total liabilities
 
 
467,936
 
 
(2,888)
 
 
-
 
 
465,048
 
Net identifiable assets acquired over (under) liabilities assumed
 
 
38,407
 
 
26,610
 
 
(4,110)
 
 
60,907
 
Goodwill
 
 
-
 
 
31,375
 
 
4,110
 
 
35,485
 
Net assets acquired over (under) liabilities assumed
 
$
38,407
 
$
57,985
 
$
-
 
$
96,392
 
Consideration:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ameris common shares issued
 
 
2,549,469
 
 
 
 
 
 
 
 
 
 
Price per share of the Company’s common stock
 
$
28.42
 
 
 
 
 
 
 
 
 
 
Company common stock issued
 
$
72,455
 
 
 
 
 
 
 
 
 
 
Cash exchanged for shares
 
$
23,937
 
 
 
 
 
 
 
 
 
 
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.
 
(j)
Adjustment reflects additional recording of fair value adjustment of the acquired loan portfolio.
 
(k)
Adjustment reflects additional recording of fair value adjustment of other real estate owned.
 
(l)
Adjustment reflects recording of fair value adjustment of the premises and equipment.
 
(m)
Adjustment reflects adjustment to the core deposit intangible on the acquired core deposit accounts.
 
(n)
Adjustment reflects additional recording of 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.
 
Goodwill of $35.5 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 $401.6 million of loans at fair value, net of $15.2 million, or 3.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $27.0 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 payments, 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 payments have been adjusted for estimated prepayments.
 
(dollars in thousands)
 
 
 
 
Contractually required principal and interest
 
$
42,314
 
Non-accretable difference
 
 
(9,181)
 
Cash flows expected to be collected
 
 
33,133
 
Accretable yield
 
 
(6,182)
 
Total purchased credit-impaired loans acquired
 
$
26,951
 
 
The following table presents the acquired loan data for the JAXB acquisition.
 
(dollars in thousands)
 
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
 
Acquired receivables subject to ASC 310-30
 
$
26,951
 
$
42,314
 
$
9,181
 
Acquired receivables not subject to ASC 310-30
 
$
374,687
 
$
488,346
 
$
-
 
 
The results of operations of JAXB 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 acquisition had occurred on January 1, 2016, unadjusted for potential cost savings. Since the JAXB acquisition was completed March 11, 2016, the 2017 information was not impacted by any pro forma adjustments.
 
 
 
Three Months Ended
March 31,
 
(dollars in thousands, except per share data)
 
2017
 
2016
 
Net interest income and noninterest income
 
$
86,296
 
$
78,798
 
Net income
 
$
21,153
 
$
13,052
 
Net income available to common shareholders
 
$
21,153
 
$
13,052
 
Income per common share available to common shareholders – basic
 
$
0.59
 
$
0.38
 
Income per common share available to common shareholders – diluted
 
$
0.59
 
$
0.37
 
Average number of shares outstanding, basic
 
 
35,664
 
 
34,741
 
Average number of shares outstanding, diluted
 
 
36,040
 
 
35,043
 
 
A rollforward of all purchased loans, including loans purchased as part of the JAXB acquisition, for the three months ended March 31, 2017 and 2016 is shown below:
 
(dollars in thousands)
 
March 31,
2017
 
March 31,
2016
 
Balance, January 1
 
$
1,069,191
 
$
909,083
 
Charge-offs, net of recoveries
 
 
(803)
 
 
(678)
 
Additions due to acquisitions
 
 
-
 
 
401,085
 
Accretion
 
 
3,097
 
 
4,134
 
Transfers to purchased other real estate owned
 
 
(1,489)
 
 
(1,401)
 
Payments received
 
 
(63,061)
 
 
(52,025)
 
Ending balance
 
$
1,006,935
 
$
1,260,198
 
 
The following is a summary of changes in the accretable discounts of all purchased loans, including loans purchased as part of the JAXB acquisition, during the three months ended March 31, 2017 and 2016:
 
(dollars in thousands)
 
March 31,
2017
 
March 31,
2016
 
Balance, January 1
 
$
30,624
 
$
33,848
 
Additions due to acquisitions
 
 
-
 
 
9,991
 
Accretion
 
 
(3,097)
 
 
(4,134)
 
Accretable discounts removed due to charge-offs
 
 
(13)
 
 
355
 
Transfers between non-accretable and accretable discounts, net
 
 
(659)
 
 
353
 
Ending balance
 
$
26,855
 
$
40,413