Edgar Filing: Ameris Bancorp

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13901

AMERIS BANCORP

(Exact name of registrant as specified in its charter)

GEORGIA	58-1456434
(State of incorporation)	(IRS Employer ID No.)

310 FIRST STREET, S.E., MOULTRIE, GA 31768

(Address of principal executive offices)

(229) 890-1111

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ¨ No x

There were 34,873,100 shares of Common Stock outstanding as of August 1, 2016.

AMERIS BANCORP

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets at June 30, 2016, December 31, 2015 and June 30, 2015	1

	Consolidated Statements of Earnings and Comprehensive Income/(Loss) for the Three and Six-month periods Ended June 30, 2016 and 2015	2

	Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2016 and 2015	3

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	58

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	87

Item 4.	Controls and Procedures.	87

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	88

Item 1A.	Risk Factors.	88

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	88

Item 3.	Defaults Upon Senior Securities.	88

Item 4.	Mine Safety Disclosures.	88

Item 5.	Other Information.	88

Item 6.	Exhibits.	89

Signatures		89

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

	June 30, 2016			December 31, 2015			June 30, 2015
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	116,255		$	118,518		$	115,413
Federal funds sold and interest-bearing accounts		68,273			272,045			239,804
Investment securities available for sale, at fair value		843,646			783,185			862,154
Other investments		19,125			9,323			9,322
Mortgage loans held for sale, at fair value		102,757			111,182			108,829

Loans, net of unearned income		2,819,071			2,406,877			2,171,600
Purchased loans not covered by FDIC loss-share agreements (“purchased non-covered loans”)		1,072,217			771,554			808,313
Purchased loan pools not covered by FDIC loss-share agreements (“purchased loan pools”)		610,425			592,963			268,984
Purchased loans covered by FDIC loss-share agreements (“covered loans”)		121,418			137,529			209,598
Less: allowance for loan losses		(21,734	)		(21,062	)		(21,658	)
Loans, net		4,601,397			3,887,861			3,436,837

Other real estate owned, net		13,765			16,147			22,567
Purchased, non-covered other real estate owned, net		13,928			14,333			13,112
Covered other real estate owned, net		2,742			5,011			12,626
Total other real estate owned, net		30,435			35,491			48,305
Premises and equipment, net		123,978			121,639			124,916
FDIC loss-share receivable, net		-			6,301			14,957
Other intangible assets, net		20,574			17,058			19,189
Goodwill		121,422			90,082			87,367
Cash value of bank owned life insurance		77,095			64,251			59,552
Other assets		96,337			72,004			79,089
Total assets	$	6,221,294		$	5,588,940		$	5,205,734

Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	1,553,972		$	1,329,857		$	1,280,174
Interest-bearing		3,625,560			3,549,433			3,231,373

Total deposits		5,179,532			4,879,290			4,511,547
Securities sold under agreements to repurchase		37,139			63,585			75,066
FDIC loss-share payable, net		1,897			-			-
Other borrowings		260,191			39,000			39,000
Other liabilities		33,050			22,432			24,026
Subordinated deferrable interest debentures		83,570			69,874			69,325
Total liabilities		5,595,379			5,074,181			4,718,964

Stockholders’ Equity
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0 shares issued and outstanding		-			-			-
Common stock, par value $1; 100,000,000 shares authorized; 36,303,163; 33,625,162 and 33,608,866 issued		36,303			33,625			33,609
Capital surplus		408,549			337,349			336,212
Retained earnings		181,701			152,820			126,265
Accumulated other comprehensive income		12,960			3,353			3,072
Treasury stock, at cost, 1,455,852; 1,413,777 and 1,413,777 shares		(13,598	)		(12,388	)		(12,388	)
Total stockholders’ equity		625,915			514,759			486,770
Total liabilities and stockholders’ equity	$	6,221,294		$	5,588,940		$	5,205,734

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME/(LOSS)

(dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Interest income
Interest and fees on loans	$	54,164		$	39,838		$	103,355		$	78,456
Interest on taxable securities		4,554			3,747			9,140			6,900
Interest on nontaxable securities		454			462			900			931
Interest on deposits in other banks and federal funds sold		168			182			504			310
Total interest income		59,340			44,229			113,899			86,597
Interest expense
Interest on deposits		2,915			2,264			5,656			4,544
Interest on other borrowings		1,836			1,277			3,218			2,533
Total interest expense		4,751			3,541			8,874			7,077
Net interest income		54,589			40,688			105,025			79,520
Provision for loan losses		889			2,656			1,570			3,725
Net interest income after provision for loan losses		53,700			38,032			103,455			75,795
Noninterest income
Service charges on deposit accounts		10,436			7,151			20,351			13,580
Mortgage banking activity		14,142			9,727			24,353			17,810
Other service charges, commissions and fees		967			829			2,078			1,497
Gain on sale of securities		-			10			94			22
Other noninterest income		2,834			2,909			5,789			5,292
Total noninterest income		28,379			20,626			52,665			38,201
Noninterest expense
Salaries and employee benefits		27,531			22,465			53,718			43,097
Occupancy and equipment expense		6,371			4,809			12,071			9,363
Advertising and marketing expense		854			833			1,659			1,474
Amortization of intangible assets		1,319			630			2,339			1,260
Data processing and communications costs		6,049			4,214			12,162			8,474
Credit resolution-related expenses		1,764			11,240			3,563			14,401
Merger and conversion charges		-			5,712			6,359			5,727
Other noninterest expenses		8,471			6,961			16,088			13,895
Total noninterest expense		52,359			56,864			107,959			97,691
Income before income tax expense		29,720			1,794			48,161			16,305
Income tax expense		9,671			486			15,795			5,233
Net income		20,049			1,308			32,366			11,072
Other comprehensive income (loss)
Unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax of $3,630, $1,901, $5,641 and $1,561		6,742			(3,531	)		10,476			(2,881	)
Reclassification adjustment for gains included in earnings, net of tax of $0, $3, $33 and $8		-			(6	)		(61	)		(14	)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax of $104, $138, $435 and $70		(193	)		256			(808	)		(131	)
Other comprehensive income (loss)		6,549			(3,281	)		9,607			(3,026	)
Total comprehensive income (loss)	$	26,598		$	(1,973	)	$	41,973		$	8,046
Basic earnings per common share	$	0.58		$	0.04		$	0.96		$	0.35
Diluted earnings per common share	$	0.57		$	0.04		$	0.95		$	0.35
Dividends declared per common share	$	0.05		$	0.05		$	0.10		$	0.10
Weighted average common shares outstanding
Basic		34,833			32,184			33,792			31,318
Diluted		35,153			32,520			34,107			31,653

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

	Six Months Ended						Six Months Ended
	June 30, 2016						June 30, 2015
	Shares			Amount			Shares		Amount

COMMON STOCK
Balance at beginning of period		33,625,162		$	33,625			28,159,027	$	28,159
Issuance of common stock		2,549,469			2,549			5,320,000		5,320
Issuance of restricted shares		110,653			111			71,000		71
Cancellation of restricted shares		(3,085	)		(3	)		-		-
Proceeds from exercise of stock options		20,964			21			58,839		59

Issued at end of period		36,303,163		$	36,303			33,608,866	$	33,609

CAPITAL SURPLUS
Balance at beginning of period				$	337,349				$	225,015
Stock-based compensation					1,009					760
Issuance of common shares, net of issuance costs of $0 and $4,811					69,906					109,569
Issuance of restricted shares					(111	)				(71	)
Cancellation of restricted shares					3					-
Proceeds from exercise of stock options					393					939

Balance at end of period				$	408,549				$	336,212

RETAINED EARNINGS
Balance at beginning of period				$	152,820				$	118,412
Net income					32,366					11,072
Dividends on common shares					(3,485	)				(3,219	)

Balance at end of period				$	181,701				$	126,265

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities and derivatives:
Balance at beginning of period				$	3,353				$	6,098
Other comprehensive income (loss) during the period					9,607					(3,026	)

Balance at end of period				$	12,960				$	3,072

TREASURY STOCK
Balance at beginning of period		1,413,777		$	(12,388	)		1,385,164	$	(11,656	)
Purchase of treasury shares		42,075			(1,210	)		28,613		(732	)

Balance at end of period		1,455,852		$	(13,598	)		1,413,777	$	(12,388	)

TOTAL STOCKHOLDERS’ EQUITY				$	625,915				$	486,770

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income	$	32,366		$	11,072
Adjustments reconciling net income to net cash provided by operating activities:
Depreciation		4,631			3,950
Amortization of intangible assets		2,339			1,260
Net amortization of investment securities available for sale		3,113			2,669
Net gains on securities available for sale		(94	)		(22	)
Stock based compensation expense		1,009			760
Net losses on sale or disposal of premises and equipment		574			98
Net write-downs and losses on sale of other real estate owned		1,995			9,779
Provision for loan losses		1,570			3,725
Accretion of discount on covered loans		(2,247	)		(6,251	)
Accretion of discount on purchased non-covered loans		(6,597	)		(5,388	)
Changes in FDIC loss-share receivable/payable, net of cash payments received		4,033			3,855
Increase in cash surrender value of BOLI		(776	)		(685	)
Originations of mortgage loans held for sale		(641,667	)		(472,660	)
Payments received on mortgage loans held for sale		644			-
Proceeds from sales of mortgage loans held for sale		613,430			449,570
Net gains on sale of mortgage loans held for sale		(25,942	)		(18,244	)
Originations of SBA loans		(33,079	)		(26,684	)
Proceeds from sales of SBA loans		18,067			20,539
Net gains on sale of SBA loans		(1,745	)		(2,290	)
Change attributable to other operating activities		12,335			7,683
Net cash provided by (used in) operating activities		(16,041	)		(17,264	)

Cash flows from investing activities:
Purchase of securities available for sale		(90,556	)		(230,226	)
Proceeds from maturities of securities available for sale		56,262			36,544
Proceeds from sales of securities available for sale		46,731			30,113
Decrease (increase) in other investments, net		(7,597	)		1,825
Net increase in loans, excluding purchased non-covered and covered loans		(336,554	)		(257,665	)
Purchases of loan pools		(94,707	)		(268,984	)
Payments received on purchased non-covered loans		103,985			80,668
Payments received on purchased pool loans		74,652			-
Payments received on covered loans		16,881			42,103
Purchases of premises and equipment		(6,878	)		(6,595	)
Proceeds from sales of premises and equipment		161			217
Proceeds from sales of other real estate owned		9,818			27,691
Payments received from FDIC under loss-share agreements		4,165			12,539
Net cash proceeds received (paid) from acquisitions		(7,205	)		673,840
Net cash provided by (used in) investing activities		(230,842	)		142,070

Cash flows from financing activities:
Net increase (decrease) in deposits		(101,118	)		27,829
Net decrease in securities sold under agreements to repurchase		(26,446	)		(39,832	)
Proceeds from other borrowings		172,700			-
Repayment of other borrowings		(7	)		(39,881	)
Dividends paid - common stock		(3,484	)		(3,220	)
Purchase of treasury shares		(1,211	)		(731	)
Issuance of common stock		-			114,889
Proceeds from exercise of stock options		414			998
Net cash provided by (used in) financing activities		40,848			60,052

Net increase (decrease) in cash and cash equivalents		(206,035	)		184,858
Cash and cash equivalents at beginning of period		390,563			170,359
Cash and cash equivalents at end of period	$	184,528		$	355,217

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	8,801		$	7,220
Income taxes	$	17,395		$	2,659
Loans (excluding purchased non-covered and covered loans) transferred to other real estate owned	$	1,499		$	8,636
Purchased non-covered loans transferred to other real estate owned	$	2,663		$	2,039
Covered loans transferred to other real estate owned	$	757		$	6,534
Loans provided for the sales of other real estate owned	$	905		$	1,948
Change in unrealized gain on securities available for sale, net of tax	$	10,415		$	(2,895	)
Change in unrealized loss on cash flow hedge (interest rate swap), net of tax	$	(808	)	$	(131	)
Issuance of common stock in acquisitions	$	72,455		$	-

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At June 30, 2016, the Bank operated 102 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Newly Issued Accounting Pronouncements

ASU 2016-13 - Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies various aspects of how share-based payments are accounted for and presented in the financial statements. Under ASU 2016-09, companies will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. The standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. The excess tax benefits will be reported as an operating activity on the statement of cash flows, and the cash paid to a tax authority when shares are withheld to satisfy a company’s statutory income tax withholding obligation will be reported as a financing activity on its statement of cash. In addition, the standard increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. ASU 2016-09 permits companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2015-16 – Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The standard also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company has early adopted the provisions of this amendment, and the adoption did not have a material impact on the Company's consolidated financial statements.

ASU 2015-03 – Interest – Imputation of Interest (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. It should be applied on a retrospective basis. The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2015-02 “Consolidation (Topic 810) - Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 includes amendments that are intended to improve targeted areas of consolidation for legal entities including reducing the number of consolidation models from four to two and simplifying the FASB Accounting Standards Codification. ASU 2015-02 is effective for annual and interim periods within those annual periods, beginning after December 15, 2015. The amendments may be applied retrospectively in previously issued financial statements for one or more years with a cumulative effect adjustment to retained earnings as of the beginning of the first year restated. Early adoption is permitted, including adoption in an interim period. The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2015-01- Income Statement – Extraordinary and Unusual Items (“ASU 2015-01”). ASU 2015-01 eliminates the concept of extraordinary items by no longer allowing companies to segregate an extraordinary item from the results of operations, separately present an extraordinary item on the income statement, or disclose income taxes or earnings-per-share data applicable to an extraordinary item. ASU 2015-01 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2016. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

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:

(Dollars in Thousands)	As Recorded by JAXB			Initial 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)		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		72,455
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.

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 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		(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.

	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	$	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.

The following table presents the assets acquired and liabilities assumed as of June 12, 2015 and their fair value estimates.

(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 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. During the second quarter of 2016, management revised its initial estimates regarding the valuation of loans.

The following table presents the assets acquired and liabilities of Merchants assumed as of May 22, 2015 and their fair value estimates.

(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			-			(253	)(k)		619
Loans		199,955			(8,500	)(b)		91	(o)		191,546
Less allowance for loan losses		(3,354	)		3,354	(c)		-			-
Loans, net		196,601			(5,146	)		91			191,546
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	)	$	(2,544	)	$	490,512

Liabilities
Deposits:
Noninterest-bearing	$	121,708		$	-		$	-		$	121,708
Interest-bearing		286,112			-			41,588	(n)		327,700
Total deposits		407,820			-			41,588			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	)		(2,544	)		35,366
Goodwill		-			12,090			2,544			14,634
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)

(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.

(o)

Adjustment reflects additional recording of fair value adjustment of the acquired loan portfolio.

Goodwill of $14.6 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 $8.4 million, or 4.21%, 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 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	$	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	$	180,311	$	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 June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Net interest income and noninterest income	$	82,968	$	66,635	$	161,766	$	127,924
Net income	$	20,049	$	5,086	$	33,101	$	16,178
Net income available to common stockholders	$	20,049	$	5,086	$	33,101	$	16,178
Income per common share available to common stockholders – basic	$	0.58	$	0.15	$	0.95	$	0.48
Income per common share available to common stockholders – diluted	$	0.57	$	0.15	$	0.94	$	0.47
Average number of shares outstanding, basic		34,833		34,734		34,786		33,867
Average number of shares outstanding, diluted		35,153		35,069		35,101		34,202

A rollforward of purchased non-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	$	771,554		$	674,239		$	674,239
Charge-offs, net of recoveries		(461	)		(991	)		(470	)
Additions due to acquisitions		401,085			195,818			195,818
Accretion		6,597			10,590			5,388
Transfers to purchased non-covered other real estate owned		(2,663	)		(4,473	)		(2,039	)
Transfer from covered loans due to loss-share expiration		-			50,568			15,462
Payments received		(103,985	)		(154,666	)		(80,085	)
Other		90			469			-
Ending balance	$	1,072,217		$	771,554		$	808,313

The following is a summary of changes in the accretable discounts of purchased non-covered 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	$	24,785		$	25,716		$	25,716
Additions due to acquisitions		9,991			5,788			4,686
Accretion		(6,597	)		(10,590	)		(5,388	)
Transfer from covered loans due to loss-share expiration		-			1,665			-
Accretable discounts removed due to charge-offs		(11	)		(1,768	)		(1,685	)
Transfers between non-accretable and accretable discounts, net		1,914			3,974			(1,007	)
Ending balance	$	30,082		$	24,785		$	22,322

NOTE 3 – INVESTMENT SECURITIES

The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government-sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

The amortized cost and estimated fair value of investment securities available for sale at June 30, 2016, December 31, 2015 and June 30, 2015 are presented below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)

June 30, 2016:
U.S. government agencies	$	5,999	$	38	$	-		$	6,037
State, county and municipal securities		151,504		6,936		(54	)		158,386
Corporate debt securities		20,151		174		(22	)		20,303
Mortgage-backed securities		645,045		14,053		(178	)		658,920
Total debt securities	$	822,699	$	21,201	$	(254	)	$	843,646

December 31, 2015:
U.S. government agencies	$	14,959	$	-	$	(69	)	$	14,890
State, county and municipal securities		157,681		4,046		(411	)		161,316
Corporate debt securities		5,900		145		(28	)		6,017
Mortgage-backed securities		599,721		3,945		(2,704	)		600,962
Total debt securities	$	778,261	$	8,136	$	(3,212	)	$	783,185

June 30, 2015:
U.S. government agencies	$	14,956	$	-	$	(210	)	$	14,746
State, county and municipal securities		165,070		3,305		(1,003	)		167,372
Corporate debt securities		12,710		184		(58	)		12,836
Mortgage-backed securities		665,274		4,948		(3,022	)		667,200
Total debt securities	$	858,010	$	8,437	$	(4,293	)	$	862,154

The amortized cost and fair value of available-for-sale securities at June 30, 2016 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.

	Amortized Cost		Fair Value
	(Dollars in Thousands)
Due in one year or less	$	4,829	$	4,875
Due from one year to five years		60,389		62,119
Due from five to ten years		52,279		55,280
Due after ten years		60,157		62,452
Mortgage-backed securities		645,045		658,920
	$	822,699	$	843,646

Securities with a carrying value of approximately $473.6 million serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law at June 30, 2016, compared with $551.0 million and $323.9 million at December 31, 2015 and June 30, 2015, respectively.

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at June 30, 2016, December 31, 2015 and June 30, 2015.

	Less Than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
June 30, 2016:
U.S. government agencies	$	-	$	-		$	-	$	-		$	-	$	-
State, county and municipal securities		-		-			3,862		(54	)		3,862		(54	)
Corporate debt securities		5,683		(22	)		-		-			5,683		(22	)
Mortgage-backed securities		30,187		(128	)		9,411		(50	)		39,598		(178	)
Total debt securities	$	35,870	$	(150	)	$	13,273	$	(104	)	$	49,143	$	(254	)

December 31, 2015:
U.S. government agencies	$	9,932	$	(27	)	$	4,958	$	(42	)	$	14,890	$	(69	)
State, county and municipal securities		19,293		(199	)		11,557		(212	)		30,850		(411	)
Corporate debt securities		1,383		(28	)		-		-			1,383		(28	)
Mortgage-backed securities		263,281		(1,950	)		29,950		(754	)		293,231		(2,704	)
Total debt securities	$	293,889	$	(2,204	)	$	46,465	$	(1,008	)	$	340,354	$	(3,212	)

June 30, 2015:
U.S. government agencies	$	9,818	$	(138	)	$	4,928	$	(72	)	$	14,746	$	(210	)
State, county and municipal securities		50,294		(680	)		10,404		(323	)		60,698		(1,003	)
Corporate debt securities		7,149		(58	)		-		-			7,149		(58	)
Mortgage-backed securities		238,174		(2,046	)		30,672		(976	)		268,846		(3,022	)
Total debt securities	$	305,435	$	(2,922	)	$	46,004	$	(1,371	)	$	351,439	$	(4,293	)

As of June 30, 2016, the Company’s securities portfolio consisted of 408 securities, 19 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed and state, county and municipal securities, as discussed below.

At June 30, 2016, the Company held 14 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2016.

At June 30, 2016, the Company held two state, county and municipal securities and three corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2016.

During the first six months of 2016 and 2015, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities, except for one security that began deferring interest during the fourth quarter of 2010. The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at June 30, 2016, December 31, 2015 or June 30, 2015.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at June 30, 2016, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at June 30, 2016, these investments are not considered impaired on an other-than-temporary basis.

At June 30, 2016, December 31, 2015 and June 30, 2015, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the six months ended June 30, 2016, year ended December 31, 2015 and six months ended June 30, 2015:

	June 30, 2016			December 31, 2015			June 30, 2015
	(Dollars in Thousands)
Gross gains on sales of securities	$	313		$	396		$	41
Gross losses on sales of securities		(219	)		(259	)		(19	)
Net realized gains on sales of securities available for sale	$	94		$	137		$	22
Sales proceeds	$	46,731		$	72,528		$	30,113

NOTE 4 – LOANS

The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank also purchased loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes, including SBA guaranteed loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. Residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased non-covered and covered loans:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	564,343	$	449,623	$	373,202
Real estate – construction and development		274,717		244,693		205,019
Real estate – commercial and farmland		1,248,580		1,104,991		1,010,195
Real estate – residential		680,233		570,430		537,201
Consumer installment		33,245		31,125		30,080
Other		17,953		6,015		15,903
	$	2,819,071	$	2,406,877	$	2,171,600

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased non-covered loans totaling $1.1 billion, $771.6 million and $808.3 million at June 30, 2016, December 31, 2015 and June 30, 2015, respectively, are not included in the above schedule.

Purchased non-covered loans are shown below according to major loan type as of the end of the periods shown:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	101,803	$	45,462	$	45,337
Real estate – construction and development		89,096		72,080		75,302
Real estate – commercial and farmland		574,830		390,755		404,588
Real estate – residential		300,898		258,153		276,798
Consumer installment		5,590		5,104		6,288
	$	1,072,217	$	771,554	$	808,313

Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of June 30, 2016, purchased loan pools totaled $610.4 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $599.9 million and $10.5 million of remaining purchase premium paid at acquisition. As of December 31, 2015, purchased loan pools totaled $593.0 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $580.7 million and $12.3 million of purchase premium paid at acquisition. As of June 30, 2015, purchased loan pools totaled $269.0 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $263.8 million and $5.2 million of purchase premium paid at acquisition. At June 30, 2016, one loan in the purchased loan pools totaling $864,000 was past due and risk-rated grade 40, while all other loans included in the purchased loan pools were performing current loans, risk-rated grade 20. At December 31, 2015 and June 30, 2015, all loans included in the purchased loan pools were performing current loans, all risk-rated grade 20. At June 30, 2016 and December 31, 2015, the Company had allocated $1.2 million and $581,000, respectively, of allowance for loan losses for the purchased loan pools. As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file. Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $121.4 million, $137.5 million and $209.6 million at June 30, 2016, December 31, 2015 and June 30, 2015, respectively, are not included in the above schedules.

Covered loans are shown below according to loan type as of the end of the periods shown:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	1,604	$	5,546	$	17,666
Real estate – construction and development		7,168		7,612		15,002
Real estate – commercial and farmland		65,091		71,226		111,772
Real estate – residential		47,455		53,038		64,982
Consumer installment		100		107		176
	$	121,418	$	137,529	$	209,598

Nonaccrual and Past-Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased non-covered and covered loans:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	1,829	$	1,302	$	4,067
Real estate – construction and development		1,588		1,812		1,594
Real estate – commercial and farmland		6,732		7,019		8,938
Real estate – residential		5,434		6,278		5,650
Consumer installment		420		449		491
	$	16,003	$	16,860	$	20,740

The following table presents an analysis of purchased non-covered loans accounted for on a nonaccrual basis:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	673	$	1,064	$	309
Real estate – construction and development		1,160		1,106		1,483
Real estate – commercial and farmland		7,065		4,920		9,634
Real estate – residential		6,830		6,168		5,930
Consumer installment		39		72		88
	$	15,767	$	13,330	$	17,444

The following table presents an analysis of covered loans accounted for on a nonaccrual basis:

(Dollars in Thousands)	June 30, 2016		December 31, 2015		June 30, 2015
Commercial, financial and agricultural	$	127	$	2,803	$	7,948
Real estate – construction and development		1,600		1,701		3,120
Real estate – commercial and farmland		5,110		5,034		13,997
Real estate – residential		4,100		3,663		3,712
Consumer installment		32		37		94
	$	10,969	$	13,238	$	28,871

The following table presents an analysis of past-due loans, excluding purchased non-covered and covered past-due loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	845	$	297	$	1,700	$	2,842	$	561,501	$	564,343	$	-
Real estate – construction & development		355		153		1,527		2,035		272,682		274,717		-
Real estate – commercial & farmland		2,675		724		5,257		8,656		1,239,924		1,248,580		-
Real estate – residential		3,430		1,776		4,243		9,449		670,784		680,233		-
Consumer installment loans		325		123		246		694		32,551		33,245		-
Other		-		-		-		-		17,953		17,953		-
Total	$	7,630	$	3,073	$	12,973	$	23,676	$	2,795,395	$	2,819,071	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2015:
Commercial, financial & agricultural	$	568	$	271	$	835	$	1,674	$	447,949	$	449,623	$	-
Real estate – construction & development		1,413		261		1,739		3,413		241,280		244,693		-
Real estate – commercial & farmland		1,781		641		6,912		9,334		1,095,657		1,104,991		-
Real estate – residential		3,806		2,120		5,121		11,047		559,383		570,430		-
Consumer installment loans		374		188		238		800		30,325		31,125		-
Other		-		-		-		-		6,015		6,015		-
Total	$	7,942	$	3,481	$	14,845	$	26,268	$	2,380,609	$	2,406,877	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	840	$	888	$	3,891	$	5,619	$	367,583	$	373,202	$	-
Real estate – construction & development		1,201		374		1,536		3,111		201,908		205,019		-
Real estate – commercial & farmland		1,958		2,823		7,014		11,795		998,400		1,010,195		-
Real estate – residential		5,135		1,949		4,727		11,811		525,390		537,201		-
Consumer installment loans		293		77		315		685		29,395		30,080		-
Other		-		-		-		-		15,903		15,903		-
Total	$	9,427	$	6,111	$	17,483	$	33,021	$	2,138,579	$	2,171,600	$	-

The following table presents an analysis of purchased non-covered past-due loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	106	$	134	$	501	$	741	$	101,062	$	101,803	$	-
Real estate – construction & development		764		41		789		1,594		87,502		89,096		-
Real estate – commercial & farmland		2,177		1,799		6,929		10,905		563,925		574,830		-
Real estate – residential		4,307		1,487		5,433		11,227		289,671		300,898		-
Consumer installment loans		9		-		38		47		5,543		5,590		-
Total	$	7,363	$	3,461	$	13,690	$	24,514	$	1,047,703	$	1,072,217	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2015:
Commercial, financial & agricultural	$	248	$	13	$	846	$	1,107	$	44,355	$	45,462	$	-
Real estate – construction & development		416		687		420		1,523		70,557		72,080		-
Real estate – commercial & farmland		2,479		1,629		3,347		7,455		383,300		390,755		-
Real estate – residential		4,965		2,176		4,928		12,069		246,084		258,153		-
Consumer installment loans		31		9		70		110		4,994		5,104		-
Total	$	8,139	$	4,514	$	9,611	$	22,264	$	749,290	$	771,554	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	-	$	1,101	$	202	$	1,303	$	44,034	$	45,337	$	-
Real estate – construction & development		245		-		1,026		1,271		74,031		75,302		-
Real estate – commercial & farmland		2,115		724		9,062		11,901		392,687		404,588		-
Real estate – residential		3,848		1,400		5,369		10,617		266,181		276,798		-
Consumer installment loans		6		-		84		90		6,198		6,288		-
Total	$	6,214	$	3,225	$	15,743	$	25,182	$	783,131	$	808,313	$	-

The following table presents an analysis of covered past-due loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	1	$	76	$	51	$	128	$	1,476	$	1,604	$	-
Real estate – construction & development		108		3		1,537		1,648		5,520		7,168		-
Real estate – commercial & farmland		157		-		2,066		2,223		62,868		65,091		-
Real estate – residential		1,773		836		2,672		5,281		42,174		47,455		-
Consumer installment loans		-		-		32		32		68		100		-
Total	$	2,039	$	915	$	6,358	$	9,312	$	112,106	$	121,418	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of December 30, 2015:
Commercial, financial & agricultural	$	-	$	-	$	2,802	$	2,802	$	2,744	$	5,546	$	-
Real estate – construction & development		96		-		1,633		1,729		5,883		7,612		-
Real estate – commercial & farmland		170		205		3,064		3,439		67,787		71,226		-
Real estate – residential		2,155		1,001		2,658		5,814		47,224		53,038		-
Consumer installment loans		-		-		37		37		70		107		-
Total	$	2,421	$	1,206	$	10,194	$	13,821	$	123,708	$	137,529	$	-

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	237	$	240	$	1,670	$	2,147	$	15,519	$	17,666	$	-
Real estate – construction & development		292		31		3,045		3,368		11,634		15,002		143
Real estate – commercial & farmland		699		81		9,396		10,176		101,596		111,772		-
Real estate – residential		2,690		927		2,122		5,739		59,243		64,982		-
Consumer installment loans		-		-		50		50		126		176		-
Total	$	3,918	$	1,279	$	16,283	$	21,480	$	188,118	$	209,598	$	143

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to impaired loans, excluding purchased non-covered and covered loans:

	As of and For the Period Ended
	June 30, 2016		December 31, 2015		June 30, 2015
	(Dollars in Thousands)
Nonaccrual loans	$	16,003	$	16,860	$	20,740
Troubled debt restructurings not included above		14,795		14,418		12,467
Total impaired loans	$	30,798	$	31,278	$	33,207

Quarter-to-date interest income recognized on impaired loans	$	238	$	274	$	192
Year-to-date interest income recognized on impaired loans	$	556	$	909	$	344
Quarter-to-date foregone interest income on impaired loans	$	230	$	265	$	311
Year-to-date foregone interest income on impaired loans	$	471	$	1,204	$	629

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	3,786	$	652	$	1,453	$	2,105	$	150	$	1,825	$	1,731
Real estate – construction & development		3,141		230		1,826		2,056		697		2,154		2,304
Real estate – commercial & farmland		13,592		5,312		7,221		12,533		1,000		12,772		12,777
Real estate – residential		14,460		1,329		12,331		13,660		2,369		13,249		13,450
Consumer installment loans		531		-		444		444		8		441		458
Total	$	35,510	$	7,523	$	23,275	$	30,798	$	4,224	$	30,441	$	30,720

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2015:
Commercial, financial & agricultural	$	3,062	$	158	$	1,385	$	1,543	$	135	$	1,887	$	2,275
Real estate – construction & development		3,581		230		2,374		2,604		774		2,598		3,228
Real estate – commercial & farmland		14,385		6,702		6,083		12,785		1,067		15,074		15,105
Real estate – residential		15,809		1,621		12,230		13,851		2,224		11,935		11,977
Consumer installment loans		592		-		495		495		9		461		488
Total	$	37,429	$	8,711	$	22,567	$	31,278	$	4,209	$	31,955	$	33,073

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	6,004	$	442	$	3,903	$	4,345	$	458	$	2,819	$	2,533
Real estate – construction & development		3,765		-		2,416		2,416		445		3,245		3,648
Real estate – commercial & farmland		18,117		5,960		9,595		15,555		1,243		15,378		15,125
Real estate – residential		11,743		1,153		9,199		10,352		1,825		11,555		12,006
Consumer installment loans		633		-		539		539		8		494		507
Total	$	40,262	$	7,555	$	25,652	$	33,207	$	3,979	$	33,491	$	33,819

The following is a summary of information pertaining to purchased non-covered impaired loans:

	As of and For the Period Ended
	June 30, 2016		December 31, 2015		June 30, 2015
	(Dollars in Thousands)
Nonaccrual loans	$	15,767	$	13,330	$	17,444
Troubled debt restructurings not included above		9,053		9,373		6,792
Total impaired loans	$	24,820	$	22,703	$	24,236
Quarter-to-date interest income recognized on impaired loans	$	189	$	442	$	143
Year-to-date interest income recognized on impaired loans	$	546	$	785	$	161
Quarter-to-date foregone interest income on impaired loans	$	264	$	245	$	451
Year-to-date foregone interest income on impaired loans	$	620	$	1,365	$	923

The following table presents an analysis of information pertaining to purchased non-covered impaired loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	2,662	$	675	$	-	$	675	$	-	$	669	$	801
Real estate – construction & development		3,241		340		1,340		1,680		142		1,905		1,759
Real estate – commercial & farmland		16,678		2,075		10,908		12,983		492		15,078		13,764
Real estate – residential		11,891		7,269		2,170		9,439		223		8,880		8,906
Consumer installment loans		56		43		-		43		-		68		71
Total	$	34,528	$	10,402	$	14,418	$	24,820	$	857	$	26,600	$	25,301

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2015:
Commercial, financial & agricultural	$	3,103	$	1,066	$	-	$	1,066	$	-	$	640	$	392
Real estate – construction & development		8,987		1,469		-		1,469		-		1,369		1,429
Real estate – commercial & farmland		14,999		11,134		-		11,134		-		9,966		10,806
Real estate – residential		14,946		8,957		-		8,957		-		8,591		8,067
Consumer installment loans		94		77		-		77		-		67		65
Total	$	42,129	$	22,703	$	-	$	22,703	$	-	$	20,633	$	20,759

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	1,476	$	309	$	-	$	309	$	-	$	254	$	227
Real estate – construction & development		9,656		1,857		-		1,857		-		1,485		1,469
Real estate – commercial & farmland		17,043		13,691		-		13,691		-		11,753		11,366
Real estate – residential		12,992		8,285		-		8,285		-		7,982		7,718
Consumer installment loans		111		94		-		94		-		61		64
Total	$	41,278	$	24,236	$	-	$	24,236	$	-	$	21,535	$	20,844

The following is a summary of information pertaining to covered impaired loans:

	As of and For the Period Ended
	June 30, 2016		December 31, 2015		June 30, 2015
	(Dollars in Thousands)
Nonaccrual loans	$	10,969	$	13,238	$	28,871
Troubled debt restructurings not included above		11,589		13,283		17,500
Total impaired loans	$	22,558	$	26,521	$	46,371

Quarter-to-date interest income recognized on impaired loans	$	154	$	154	$	219
Year-to-date interest income recognized on impaired loans	$	339	$	886	$	431
Quarter-to-date foregone interest income on impaired loans	$	148	$	181	$	409
Year-to-date foregone interest income on impaired loans	$	318	$	1,596	$	947

The following table presents an analysis of information pertaining to covered impaired loans as of June 30, 2016, December 31, 2015 and June 30, 2015:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2016:
Commercial, financial & agricultural	$	314	$	127	$	-	$	127	$	-	$	1,463	$	1,909
Real estate – construction & development		6,841		1,198		1,210		2,408		81		2,368		2,405
Real estate – commercial & farmland		10,556		2,127		4,303		6,430		198		6,503		6,669
Real estate – residential		14,890		4,830		8,724		13,554		251		13,724		13,880
Consumer installment loans		47		39		-		39		-		41		43
Total	$	32,648	$	8,321	$	14,237	$	22,558	$	530	$	24,099	$	24,906

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2015:
Commercial, financial & agricultural	$	5,188	$	2,802	$	-	$	2,802	$	-	$	5,360	$	7,408
Real estate – construction & development		15,119		2,480		-		2,480		-		4,130		6,906
Real estate – commercial & farmland		20,508		7,001		-		7,001		-		14,133		18,504
Real estate – residential		15,830		14,192		-		14,192		-		14,399		16,010
Consumer installment loans		60		46		-		46		-		69		86
Total	$	56,705	$	26,521	$	-	$	26,521	$	-	$	38,091	$	48,914

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Six Month Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2015:
Commercial, financial & agricultural	$	14,260	$	7,951	$	-	$	7,951	$	-	$	8,869	$	8,773
Real estate – construction & development		29,895		5,953		-		5,953		-		7,819		8,757
Real estate – commercial & farmland		37,426		17,970		-		17,970		-		21,795		21,418
Real estate – residential		18,226		14,402		-		14,402		-		16,600		17,084
Consumer installment loans		125		95		-		95		-		99		97
Total	$	99,932	$	46,371	$	-	$	46,371	$	-	$	55,179	$	56,129

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2016:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	339,903	$	-	$	2,313	$	99	$	7,410	$	-	$	349,725
15		22,049		3,741		106,801		58,283		700		-		191,574
20		100,406		46,224		804,685		501,795		22,498		17,953		1,493,561
23		484		7,245		9,084		6,664		188		-		23,665
25		94,022		211,322		290,528		90,191		1,754		-		687,817
30		2,545		3,297		20,775		5,689		162		-		32,468
40		4,934		2,888		14,394		17,512		533		-		40,261
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	564,343	$	274,717	$	1,248,580	$	680,233	$	33,245	$	17,953	$	2,819,071

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	241,721	$	294	$	116	$	1,606	$	6,872	$	-	$	250,609
15		28,420		2,074		117,880		78,165		1,191		-		227,730
20		97,142		46,221		685,538		369,624		19,780		6,015		1,224,320
23		559		7,827		13,073		6,112		36		-		27,607
25		77,829		183,512		254,012		91,465		2,595		-		609,413
30		1,492		1,620		13,821		7,347		143		-		24,423
40		2,460		3,145		20,551		16,111		506		-		42,773
50		-		-		-		-		-		-		-
60		-		-		-		-		2		-		2
Total	$	449,623	$	244,693	$	1,104,991	$	570,430	$	31,125	$	6,015	$	2,406,877

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	173,795	$	268	$	150	$	1,606	$	6,114	$	-	$	181,933
15		25,447		3,402		127,090		85,812		1,319		-		243,070
20		96,169		47,207		592,636		334,999		17,833		15,903		1,104,747
23		635		8,071		11,984		6,655		55		-		27,400
25		69,304		140,119		248,227		83,207		3,807		-		544,664
30		2,566		2,510		11,088		8,612		244		-		25,020
40		5,286		3,442		19,020		16,310		708		-		44,766
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	373,202	$	205,019	$	1,010,195	$	537,201	$	30,080	$	15,903	$	2,171,600

The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2016:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	5,818	$	-	$	-	$	-	$	1,081	$	-	$	6,899
15		1,085		-		8,637		34,848		675		-		45,245
20		16,503		10,427		202,853		113,691		2,006		-		345,480
23		-		4,072		10,627		12,688		-		-		27,387
25		71,603		64,200		305,654		114,097		1,667		-		557,221
30		4,779		7,910		28,761		11,054		32		-		52,536
40		1,983		2,487		18,298		14,520		129		-		37,417
50		30		-		-		-		-		-		30
60		2		-		-		-		-		-		2
Total	$	101,803	$	89,096	$	574,830	$	300,898	$	5,590	$	-	$	1,072,217

The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	8,592	$	-	$	-	$	-	$	1,010	$	-	$	9,602
15		1,186		1,143		10,490		37,808		541		-		51,168
20		10,057		13,678		183,219		128,005		2,031		-		336,990
23		-		438		5,177		6,414		-		-		12,029
25		17,565		47,517		162,253		66,166		1,328		-		294,829
30		6,657		4,185		14,297		5,503		51		-		30,693
40		1,373		5,119		15,319		14,257		143		-		36,211
50		30		-		-		-		-		-		30
60		2		-		-		-		-		-		2
Total	$	45,462	$	72,080	$	390,755	$	258,153	$	5,104	$	-	$	771,554

The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	9,091	$	-	$	80	$	-	$	952	$	-	$	10,123
15		1,377		866		8,710		41,641		626		-		53,220
20		12,545		16,979		190,219		139,792		2,769		-		362,304
23		-		240		3,792		6,505		-		-		10,537
25		18,556		49,070		165,267		65,818		1,700		-		300,411
30		2,462		3,409		19,042		9,803		63		-		34,779
40		1,276		4,738		17,478		13,217		178		-		36,887
50		30		-		-		22		-		-		52
60		-		-		-		-		-		-		-
Total	$	45,337	$	75,302	$	404,588	$	276,798	$	6,288	$	-	$	808,313

The following table presents the covered loan portfolio by risk grade as of June 30, 2016:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	-	$	-	$	-	$	-	$	-	$	-	$	-
15		-		-		-		-		-		-		-
20		32		738		10,278		8,096		-		-		19,144
23		24		-		1,769		4,637		-		-		6,430
25		1,417		4,436		35,031		22,371		13		-		63,268
30		3		418		4,659		3,564		47		-		8,691
40		128		1,576		13,354		8,787		40		-		23,885
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	1,604	$	7,168	$	65,091	$	47,455	$	100	$	-	$	121,418

The following table presents the covered loan portfolio by risk grade as of December 31, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	-	$	-	$	-	$	-	$	-	$	-	$	-
15		-		-		-		-		-		-		-
20		93		800		11,698		10,040		-		-		22,631
23		52		-		2,957		5,723		-		-		8,732
25		2,594		3,907		38,741		24,345		11		-		69,598
30		5		828		2,857		4,552		-		-		8,242
40		2,802		2,077		14,973		8,378		96		-		28,326
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	5,546	$	7,612	$	71,226	$	53,038	$	107	$	-	$	137,529

The following table presents the covered loan portfolio by risk grade as of June 30, 2015:

Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	-	$	-	$	-	$	-	$	-	$	-	$	-
15		-		-		488		125		-		-		613
20		580		1,218		17,382		12,571		43		-		31,794
23		68		-		5,255		6,083		-		-		11,406
25		4,089		8,142		60,682		30,870		37		-		103,820
30		4,923		2,409		4,165		5,730		-		-		17,227
40		8,006		3,233		23,800		9,603		96		-		44,738
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	17,666	$	15,002	$	111,772	$	64,982	$	176	$	-	$	209,598

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first six months of 2016 and 2015 totaling $9.7 million and $54.8 million, respectively, under such parameters.

As of June 30, 2016, December 31, 2015 and June 30, 2015, the Company had a balance of $17.8 million, $16.4 million and $14.0 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $1.4 million, $1.3 million and $1.6 million in previous charge-offs on such loans at June 30, 2016, December 31, 2015 and June 30, 2015, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $2.8 million, $2.7 million and $210,000 at June 30, 2016, December 31, 2015 and June 30, 2015, respectively. At June 30, 2016, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2016 and 2015, the Company modified loans as troubled debt restructurings, excluding purchased non-covered and covered loans, with principal balances of $2.5 million and $782,000, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased non-covered and covered loans, which occurred during the six months ending June 30, 2016 and 2015:

	June 30, 2016				June 30, 2015
Loan class:	#		Balance *(in thousands*)		#		Balance *(in thousands)*
Commercial, financial & agricultural		2	$	28		3	$	18
Real estate – construction & development		1		6		2		16
Real estate – commercial & farmland		4		1,666		-		-
Real estate – residential		6		739		15		729
Consumer installment		6		26		5		19
Total		19	$	2,465		25	$	782

Troubled debt restructurings, excluding purchased non-covered and covered loans, with an outstanding balance of $494,000 and $2.2 million defaulted during the six months ended June 30, 2016 and 2015, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the six months ending June 30, 2016 and 2015:

	June 30, 2016				June 30, 2015
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		2	$	7		2	$	35
Real estate – construction & development		-		-		-		-
Real estate – commercial & farmland		2		191		5		1,274
Real estate – residential		6		292		10		884
Consumer installment		1		4		6		32
Total		11	$	494		23	$	2,225

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and nonaccrual at June 30, 2016, December 31, 2015 and June 30, 2015:

As of June 30, 2016	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		5	$	275		11	$	86
Real estate – construction & development		9		468		3		36
Real estate – commercial & farmland		19		5,802		3		1,832
Real estate – residential		54		8,226		20		899
Consumer installment		7		24		27		113
Total		94	$	14,795		64	$	2,966

As of December 31, 2015	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		4	$	240		10	$	110
Real estate – construction & development		11		792		3		63
Real estate – commercial & farmland		16		5,766		3		596
Real estate – residential		51		7,574		20		1,123
Consumer installment		12		46		23		94
Total		94	$	14,418		59	$	1,986

As of June 30, 2015	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		6	$	278		5	$	29
Real estate – construction & development		11		821		3		57
Real estate – commercial & farmland		17		6,617		3		598
Real estate – residential		49		4,702		15		783
Consumer installment		11		49		17		82
Total		94	$	12,467		43	$	1,549

As of June 30, 2016, December 31, 2015 and June 30, 2015, the Company had a balance of $10.0 million, $10.0 million and $7.0 million, respectively, in troubled debt restructurings included in purchased non-covered loans. The Company has recorded $347,000, $377,000 and $632,000 in previous charge-offs on such loans at June 30, 2016, December 31, 2015 and June 30, 2015, respectively. At June 30, 2016, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2016 and 2015, the Company modified purchased non-covered loans as troubled debt restructurings, with principal balances of $668,000 and $1.0 million, and these modifications did not have a material impact on the Company’s allowance for loan loss. The Company transferred troubled debt restructurings with principal balances of $4.8 million from the covered loan category to the purchased non-covered loan category during the six months ended June 30, 2015, due to the expiration of the loss-sharing portion of the agreements. The following table presents the purchased non-covered loans by class modified as troubled debt restructurings, which occurred during the six months ending June 30, 2016 and 2015:

	June 30, 2016				June 30, 2015
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		-	$	-		-	$	-
Real estate – construction & development		-		-		-		-
Real estate – commercial & farmland		1		28		-		-
Real estate – residential		2		640		5		1,017
Consumer installment		-		-		1		5
Total		3	$	668		6	$	1,022

Troubled debt restructurings included in purchased non-covered loans with an outstanding balance of $402,000 and $65,000 defaulted during the six months ended June 30, 2016 and 2015, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the six months ending June 30, 2016 and 2015:

	June 30, 2016				June 30, 2015
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		-	$	-		-	$	-
Real estate – construction & development		2		402		-		-
Real estate – commercial & farmland		-		-		-		-
Real estate – residential		-		-		1		65
Consumer installment		-		-		-		-
Total		2	$	402		1	$	65

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and nonaccrual at June 30, 2016, December 31, 2015 and June 30, 2015:

As of June 30, 2016	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands*)
Commercial, financial & agricultural		1	$	1		1	$	17
Real estate – construction & development		2		521		3		36
Real estate – commercial & farmland		12		5,918		3		398
Real estate – residential		14		2,609		4		448
Consumer installment		1		4		2		2
Total		30	$	9,053		13	$	901

As of December 31, 2015	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		1	$	2		2	$	21
Real estate – construction & development		1		363		3		42
Real estate – commercial & farmland		14		6,214		3		412
Real estate – residential		13		2,789		4		180
Consumer installment		2