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 September 30, 2015

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	¨	Accelerated filer	x

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 32,196,117 shares of Common Stock outstanding as of October 30, 2015.

AMERIS BANCORP

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets at September 30, 2015, December 31, 2014 and September 30, 2014	1

	Consolidated Statements of Earnings and Comprehensive Income/(Loss) for the Three and Nine Month Periods Ended September 30, 2015 and 2014	2

	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2015 and 2014	3

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	55

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	83

Item 4.	Controls and Procedures.	83

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	84

Item 1A.	Risk Factors.	84

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	84

Item 3.	Defaults Upon Senior Securities.	84

Item 4.	Mine Safety Disclosures.	84

Item 5.	Other Information.	84

Item 6.	Exhibits.	84

Signatures		84

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

	September 30, 2015			December 31, 2014			September 30, 2014
	(Unaudited)			(Audited)			(Unaudited)
Assets
Cash and due from banks	$	114,396		$	78,036		$	69,421
Federal funds sold and interest-bearing accounts		120,925			92,323			40,165
Investment securities available for sale, at fair value		811,385			541,805			529,509
Other investments		9,322			10,275			12,687
Mortgage loans held for sale, at fair value		111,807			94,759			110,059

Loans, net of unearned income		2,290,649			1,889,881			1,848,759
Purchased loans not covered by FDIC loss share agreements (“purchased non-covered loans”)		767,494			674,239			673,724
Purchased loan pools not covered by FDIC loss share agreements (“purchased loan pools”)		410,072			-			-
Purchased loans covered by FDIC loss share agreements (“covered loans”)		191,021			271,279			313,589
Less: allowance for loan losses		(22,471	)		(21,157	)		(22,212	)
Loans, net		3,636,765			2,814,242			2,813,860

Other real estate owned, net		20,730			33,160			35,320
Purchased, non-covered other real estate owned, net		11,538			15,585			13,660
Covered other real estate owned, net		12,203			19,907			28,883
Total other real estate owned, net		44,471			68,652			77,863
Premises and equipment, net		124,756			97,251			98,752
FDIC loss-share receivable, net		4,506			31,351			38,233
Other intangible assets, net		18,218			8,221			9,114
Goodwill		87,701			63,547			58,879
Cash value of bank owned life insurance		59,894			58,867			58,217
Other assets		72,154			77,748			82,649
Total assets	$	5,216,300		$	4,037,077		$	3,999,408

Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	1,275,800		$	839,377		$	816,517
Interest-bearing		3,254,723			2,591,772			2,556,602

Total deposits		4,530,523			3,431,149			3,373,119
Securities sold under agreements to repurchase		51,506			73,310			32,351
Other borrowings		39,000			78,881			147,409
Other liabilities		23,371			22,384			27,615
Subordinated deferrable interest debentures		69,600			65,325			65,084
Total liabilities		4,714,000			3,671,049			3,645,578

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; 33,609,894; 28,159,027 and 28,157,898 issued		33,610			28,159			28,158
Capital surplus		336,599			225,015			224,142
Retained earnings		140,282			118,412			109,170
Accumulated other comprehensive income		4,197			6,098			3,974
Treasury stock, at cost, 1,413,777; 1,385,164 and 1,383,496 shares		(12,388	)		(11,656	)		(11,614	)
Total stockholders’ equity		502,300			366,028			353,830
Total liabilities and stockholders’ equity	$	5,216,300		$	4,037,077		$	3,999,408

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Interest income
Interest and fees on loans	$	45,775		$	39,610		$	124,231		$	109,376
Interest on taxable securities		4,694			3,034			11,594			8,972
Interest on nontaxable securities		480			496			1,411			1,143
Interest on deposits in other banks and federal funds sold		246			46			556			175
Total interest income		51,195			43,186			137,792			119,666
Interest expense
Interest on deposits		2,521			2,540			7,065			6,928
Interest on other borrowings		1,275			1,514			3,808			3,858
Total interest expense		3,796			4,054			10,873			10,786
Net interest income		47,399			39,132			126,919			108,880
Provision for loan losses		986			1,669			4,711			4,760
Net interest income after provision for loan losses		46,413			37,463			122,208			104,120
Noninterest income
Service charges on deposit accounts		10,766			6,659			24,346			18,092
Mortgage banking activity		10,404			7,498			28,214			19,510
Other service charges, commissions and fees		1,145			690			2,642			2,004
Gain on sale of securities		115			132			137			138
Other noninterest income		2,548			2,922			7,840			6,730
Total noninterest income		24,978			17,901			63,179			46,474
Noninterest expense
Salaries and employee benefits		24,934			20,226			68,031			54,562
Occupancy and equipment		5,915			4,669			15,278			12,804
Advertising and marketing expenses		667			594			2,141			2,022
Amortization of intangible assets		1,321			698			2,581			1,668
Data processing and communications costs		5,329			3,928			13,803			11,322
Credit resolution-related expenses		1,083			3,186			15,484			8,216
Merger and conversion charges		446			551			6,173			3,873
Other noninterest expenses		8,701			4,727			22,596			14,669
Total noninterest expense		48,396			38,579			146,087			109,136
Income before income tax expense		22,995			16,785			39,300			41,458
Income tax expense		7,368			5,122			12,601			13,315
Net income		15,627			11,663			26,699			28,143
Less preferred stock dividends and discount accretion		-			-			-			286
Net income available to common shareholders	$	15,627		$	11,663		$	26,699		$	27,857
Other comprehensive income (loss)
Unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax of ($936), $114, $615 and ($2,610)		1,739			(211	)		(1,143	)		4,847
Reclassification adjustment for gains included in earnings, net of tax of $40, $46, $48 and $48		(75	)		(86	)		(89	)		(90	)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax of $290, ($80), $360 and $264		(539	)		149			(669	)		(489	)
Other comprehensive income (loss)		1,125			(148	)		(1,901	)		4,268
Total comprehensive income (loss)	$	16,752		$	11,515		$	24,798		$	32,411
Basic earnings per common share	$	0.49		$	0.44		$	0.84		$	1.08
Diluted earnings per common share	$	0.48		$	0.43		$	0.84		$	1.07
Dividends declared per common share	$	0.05		$	0.05		$	0.15		$	0.10
Weighted average common shares outstanding
Basic		32,195			26,773			31,614			25,705
Diluted		32,553			27,161			31,962			26,099

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)

	Nine Months Ended						Nine Months Ended
	September 30, 2015						September 30, 2014
	Shares			Amount			Shares			Amount
PREFERRED STOCK
Balance at beginning of period		-		$	-			28,000		$	28,000
Repurchase of preferred stock		-			-			(28,000	)		(28,000	)

Issued at end of period		-		$	-			-		$	-

COMMON STOCK
Balance at beginning of period		28,159,027		$	28,159			26,461,769		$	26,462
Issuance of common stock		5,320,000			5,320			1,598,998			1,599
Proceeds from exercise of stock options		59,867			60			29,084			29
Issuance of restricted shares		71,000			71			68,047			68

Issued at end of period		33,609,894		$	33,610			28,157,898		$	28,158

CAPITAL SURPLUS
Balance at beginning of period				$	225,015					$	189,722
Stock-based compensation					1,140						1,230
Issuance of common shares, net of issuance costs of $4,811 and $0					109,569						32,875
Proceeds from exercise of stock options					946						383
Issuance of restricted shares					(71	)					(68	)

Balance at end of period				$	336,599					$	224,142

RETAINED EARNINGS
Balance at beginning of period				$	118,412					$	83,991
Net income					26,699						28,143
Dividends on preferred shares					-						(286	)
Dividends on common shares					(4,829	)					(2,678	)

Balance at end of period				$	140,282					$	109,170
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gains on securities and derivatives:
Balance at beginning of period				$	6,098					$	(294	)
Other comprehensive income (loss) during the period					(1,901	)					4,268

Balance at end of period				$	4,197					$	3,974

TREASURY STOCK
Balance at beginning of period		(1,385,164	)	$	(11,656	)		(1,363,342	)	$	(11,182	)
Purchase of treasury shares		(28,613	)		(732	)		(20,154	)		(432	)

Balance at end of period		(1,413,777	)	$	(12,388	)		(1,383,496	)	$	(11,614	)
TOTAL STOCKHOLDERS’ EQUITY				$	502,300					$	353,830

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net income	$	26,699		$	28,143
Adjustments reconciling net income to net cash used in operating activities:
Depreciation		6,504			5,850
Amortization of intangible assets		2,581			1,668
Net amortization of investment securities available for sale		4,397			2,609
Net gains on securities available for sale		(137	)		(138	)
Stock based compensation expense		1,140			1,230
Net (gains) losses on sale or disposal of premises and equipment		83			(615	)
Net write-downs and losses on sale of other real estate owned		12,193			2,344
Provision for loan losses		4,711			4,760
Accretion of discount on covered loans		(8,105	)		(20,822	)
Accretion of discount on purchased non-covered loans		(8,055	)		(5,840	)
Changes in FDIC loss-share receivable, net of cash payments received		7,756			8,699
Increase in cash surrender value of BOLI		(1,027	)		(973	)
Originations of mortgage loans held for sale		(784,548	)		(504,164	)
Proceeds from sales of mortgage loans held for sale		748,509			468,671
Net gains on sale of mortgage loans held for sale		(30,427	)		(19,501	)
Originations of SBA loans		(41,116	)		(43,771	)
Proceeds from sales of SBA loans		29,381			23,366
Net gains on sale of SBA loans		(3,158	)		(2,351	)
Change attributable to other operating activities		14,630			3,685
Net cash used in operating activities		(17,989	)		(47,150	)

Cash flows from investing activities, net of effect of business combinations:
Net decrease in federal funds sold and interest-bearing deposits		77,586			180,742
Purchase of securities available for sale		(246,090	)		(102,340	)
Proceeds from maturities of securities available for sale		64,390			37,706
Proceeds from sales of securities available for sale		69,208			92,975
Decrease in restricted equity securities, net		1,825			5,116
Net increase in loans, excluding purchased non-covered and covered loans		(349,541	)		(201,552	)
Purchases of loan pools		(422,956	)		-
Payments received on purchased non-covered loans		123,311			58,350
Payments received on purchased loan pools		12,884			-
Payments received on covered loans		60,930			85,946
Purchases of premises and equipment		(11,057	)		(3,779	)
Proceeds from sales of premises and equipment		282			1,213
Proceeds from sales of other real estate owned		33,460			31,913
Payments received from FDIC under loss-share agreements		19,089			18,509
Net cash proceeds received from acquisitions		567,652			1,099
Net cash provided by investing activities		973			205,898

Cash flows from financing activities, net of effect of business combinations:
Net increase in deposits		46,315			4,864
Net decrease in securities sold under agreements to repurchase		(63,392	)		(56,593	)
Proceeds from other borrowings		-			117,463
Repayment of other borrowings		(39,881	)		(187,032	)
Redemption of preferred stock		-			(28,000	)
Dividends paid - preferred stock		-			(286	)
Dividends paid - common stock		(4,829	)		(2,678	)
Purchase of treasury shares		(732	)		(432	)
Issuance of common stock		114,889			-
Proceeds from exercise of stock options		1,006			412
Net cash provided by (used in) financing activities		53,376			(152,282	)
Net increase in cash and due from banks		36,360			6,466
Cash and due from banks at beginning of period		78,036			62,955
Cash and due from banks at end of period	$	114,396		$	69,421
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid/(received) during the period for:
Interest	$	11,106		$	10,773
Income taxes	$	2,739		$	15,008
Loans (excluding purchased non-covered and covered loans) transferred to other real estate owned	$	9,838		$	9,268
Purchased non-covered loans transferred to other real estate owned	$	2,565		$	1,955
Covered loans transferred to other real estate owned	$	6,909		$	10,840
Loans provided for the sales of other real estate owned	$	4,996		$	987
Change in unrealized gain on securities available for sale, net of tax	$	(1,143	)	$	4,847
Change in unrealized loss on cash flow hedge (interest rate swap), net of tax	$	(669	)	$	(489	)
Issuance of common stock in acquisitions	$	-		$	34,474

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

(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 September 30, 2015 the Bank operated 103 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 September 30, 2015 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, 2014.

Newly Issued Accounting Pronouncements

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 require 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 is currently evaluating the provisions of this amendment to determine the potential impact the new standard will have 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 Company is currently evaluating the impact this standard will have on the Company’s 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 Company is currently evaluating the impact this standard will have 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 is not expected to have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2014-11 – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”). ASU 2014-11 impacted FASB ASC 860 Transfers and Servicing by changing the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require new disclosures. An entity is required to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. An entity must also provide additional information about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The amendments in this update became effective for interim and annual periods beginning after December 15, 2014 and did not have a material impact on the consolidated financial statements although the required disclosures have been included in Note 8.

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, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

NOTE 2 – PENDING MERGER

On September 30, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Jacksonville Bancorp, Inc., a Florida corporation (“Jacksonville Bancorp”). The Jacksonville Bank is a wholly owned banking subsidiary of Jacksonville Bancorp that has eight full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida, as well as one virtual branch. Under the terms of the Merger Agreement, Jacksonville Bancorp shareholders will receive either 0.5861 shares of Ameris common stock or $16.50 in cash for each share of Jacksonville Bancorp common stock or nonvoting common stock they hold, subject to the total consideration being allocated 75% stock and 25% cash. As of June 30, 2015, Jacksonville Bancorp reported assets of $501.9 million, gross loans of $385.7 million and deposits of $426.2 million. The purchase price will be allocated among the net assets of Jacksonville Bancorp acquired as appropriate, with the remaining balance being reported as goodwill. The Merger Agreement has been unanimously approved by the board of directors of each company. The transaction is expected to close in the first quarter of 2016 and is subject to customary closing conditions, regulatory approvals and the approval of Jacksonville Bancorp’s shareholders.

NOTE 3– BUSINESS COMBINATIONS

Branch Acquisition

On June 12, 2015, the Company completed its acquisition of 18 branches from Bank of America, National Association located in Calhoun, Columbia, Dixie, Hamilton, Suwanee and Walton Counties, Florida and Ben Hill, Colquitt, Dougherty, Laurens, Liberty, Thomas, Tift and Ware Counties, Georgia. Under the terms of the Purchase and Assumption Agreement dated January 28, 2015, the Company paid a deposit premium of $20.0 million, equal to 3.00% of the average daily deposits for the 15 calendar day period immediately prior to the acquisition date. In addition, the Company acquired approximately $4.4 million in loans and $11.4 million in premises and equipment.

The acquisition of the 18 branches was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. 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. Management continues to evaluate fair value adjustments related to premises and core deposit intangible assets acquired.

The following table presents the assets acquired and liabilities assumed as of June 12, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

(Dollars in Thousands)	As Recorded by Bank of America		Initial Fair Value Adjustments			Subsequent Fair Value Adjustments			As Recorded by Ameris
Assets
Cash and cash equivalents	$	630,220	$	-		$	-		$	630,220
Loans		4,363		-			-			4,363
Premises and equipment		10,348		1,060	(a)		(755	)(d)		10,917
Intangible assets		-		7,651	(b)		985	(e)		8,636
Other assets		126					264	(f)		126
Total assets	$	645,057	$	8,711		$	494		$	654,262
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			494			9,420
Goodwill		-		11,076			(494	)		10,582
Net assets acquired over (under) liabilities assumed	$	-	$	20,002		$	-		$	20,002
Consideration:
Cash paid as deposit premium	$	20,002
Fair value of total consideration transferred	$	20,002

Explanation of fair value adjustments

(a)

Adjustment reflects the fair value adjustments of the premise and equipment as of the acquisition date.

(b)

Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

(c)

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired deposits.

(d)

Adjustment reflects additional recording of fair value adjustment of the premise and equipment.

(e)

Adjustment reflects additional recording of core deposit intangible on the acquired core deposit accounts.

(f)

Adjustment reflects recording of deferred tax asset.

Goodwill of $10.6 million, which is the excess of the merger 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 $4.4 million of loans at fair value. Management did not identify any loans that were considered to be credit impaired and are accounted for 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, Merchant’s 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 purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. 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. Management continues to evaluate fair value adjustments related to loans, premises, deferred taxes and core deposit intangible assets acquired.

The following table presents the assets acquired and liabilities of Merchants assumed as of May 22, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

(Dollars in Thousands)	As Recorded by Merchants			Initial Fair Value Adjustments			Subsequent Fair Value Adjustments			As Recorded by Ameris
Assets
Cash and cash equivalents	$	7,527		$	-		$	-		$	7,527
Federal funds sold and interest-bearing balances		106,188			-			-			106,188
Investment securities		164,421			(553	)(a)		(639	)(j)		163,229
Other investments		872			-			-			872
Loans		199,955			(8,500	)(b)		-			191,455
Less allowance for loan losses		(3,354	)		3,354	(c)		-			-
Loans, net		196,601			(5,146	)		-			191,455
Other real estate owned		4,082			(1,115	)(d)		-			2,967
Premises and equipment		14,614			(3,680	)(e)		-			10,934
Intangible assets		-			4,577	(f)		(634	)(k)		3,943
Other assets		2,333			2,335	(g)		446	(l)		5,114
Total assets	$	496,638		$	(3,582	)	$	(827	)	$	492,229

Liabilities
Deposits:
Noninterest-bearing	$	121,708		$	-		$	-		$	121,708
Interest-bearing		286,112			-			-			286,112
Total deposits		407,820			-			-			407,820
Federal funds purchased and securities sold under agreements to repurchase		41,588			-			-	(m)		41,588
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	)		(827	)		37,083
Goodwill		-			12,090			827			12,917
Net assets acquired over (under) liabilities assumed	$	38,893		$	11,107		$	-		$	50,000
Consideration:
Cash exchanged for shares	$	50,000
Fair value of total consideration transferred	$	50,000

Explanation of fair value adjustments

(a)

Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

(b)

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

(c)

Adjustment reflects the elimination of Merchant’s allowance for loan losses.

(d)

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

(e)

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired premises.

(f)

Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

(g)

Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

(h)

Adjustment reflects the fair value adjustments based on the Company’s evaluation of interest rate swap liabilities.

(i)

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

(j)

Adjustment reflects the additional fair value adjustments of the available for sale portfolio as of the acquisition date.

(k)

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

(l)

Adjustment reflects the additional deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

(m)

Subsequent to acquisition, the acquired securities sold under agreements to repurchase were converted to deposit accounts and are no longer reported as securities sold under agreements to repurchase on the Consolidated Balance Sheet as of September 30, 2015.

Goodwill of $12.9 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Merchants acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $191.5 million of loans at fair value, net of $8.5 million, or 4.25%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $17.4 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

Contractually required principal and interest	$	24,446
Non-accretable difference		(3,814	)
Cash flows expected to be collected		20,632
Accretable yield		(3,254	)
Total purchased credit-impaired loans acquired	$	17,378

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	$	17,378	$	24,446	$	3,814
Acquired receivables not subject to ASC 310-30	$	174,077	$	178,763	$	-

Coastal Bankshares, Inc.

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

The acquisition of Coastal was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. 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 quarter of 2014 and the second quarter of 2015, management revised its initial estimates regarding the valuation of other real estate owned. In addition, during the third and fourth quarters of 2014 and second quarter of 2015, management continued its assessment and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Sections 382 of the Internal Revenue Code of 1986, as amended.

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

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

Explanation of fair value adjustments

(a)

Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

(b)

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

(c)

Adjustment reflects the elimination of Coastal’s allowance for loan losses.

(d)

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

(e)

Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

(f)

(g)

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

Goodwill of $28.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Coastal acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

In the acquisition, the Company purchased $279.4 million of loans at fair value, net of $16.7 million, or 5.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $29.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

Contractually required principal and interest	$	38,194
Non-accretable difference		(5,632	)
Cash flows expected to be collected		32,562
Accretable yield		(3,282	)
Total purchased credit-impaired loans acquired	$	29,280

The results of operations of Merchants and Coastal subsequent to the respective acquisition dates are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on January 1, 2014, unadjusted for potential cost savings (in thousands).

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014

Net interest income and noninterest income	$	72,377	$	60,613	$	195,685	$	177,067
Net income (loss)	$	15,627	$	12,798	$	26,366	$	29,961
Net income (loss) available to common stockholders	$	15,627	$	12,798	$	26,366	$	29,675
Income (loss) per common share available to common stockholders – basic	$	0.49	$	0.48	$	0.83	$	1.09
Income (loss) per common share available to common stockholders – diluted	$	0.48	$	0.47	$	0.82	$	1.07
Average number of shares outstanding, basic		32,195		26,773		31,614		27,304
Average number of shares outstanding, diluted		32,553		27,161		31,962		27,698

A rollforward of purchased non-covered loans for the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014 is shown below:

(Dollars in Thousands)	September 30, 2015			December 31, 2014			September 30, 2014
Balance, January 1	$	674,239		$	448,753		$	448,753
Charge-offs, net of recoveries		(814	)		(84	)		-
Additions due to acquisitions		195,818			279,441			279,441
Accretion		8,055			9,745			6,171
Transfers to purchased non-covered other real estate owned		(2,565	)		(4,160	)		(1,425	)
Transfer from covered loans due to loss-share expiration		15,462			15,475			-
Payments received		(123,311	)		(74,931	)		(59,216	)
Other		610			-			-
Ending balance	$	767,494		$	674,239		$	673,724

The following is a summary of changes in the accretable discounts of purchased non-covered loans during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

(Dollars in Thousands)	September 30, 2015			December 31, 2014			September 30, 2014
Balance, January 1	$	25,716		$	26,189		$	26,189
Additions due to acquisitions		4,686			7,799			7,799
Accretion		(8,055	)		(9,745	)		(5,840	)
Accretable discounts removed due to charge-offs		(1,686	)		-			-
Transfers between non-accretable and accretable discounts, net		(106	)		1,473			916
Ending balance	$	20,555		$	25,716		$	29,064

NOTE 4 – 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 September 30, 2015, December 31, 2014 and September 30, 2014 are presented below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
September 30, 2015:
U. S. government agencies	$	14,957	$	26	$	(15	)	$	14,968
State, county and municipal securities		161,509		3,875		(519	)		164,865
Corporate debt securities		5,901		150		(19	)		6,032
Mortgage-backed securities		622,313		5,208		(2,001	)		625,520
Total securities	$	804,680	$	9,259	$	(2,554	)	$	811,385

December 31, 2014:
U. S. government agencies	$	14,953	$	-	$	(275	)	$	14,678
State, county and municipal securities		137,873		3,935		(433	)		141,375
Corporate debt securities		10,812		228		-			11,040
Mortgage-backed securities		369,581		6,534		(1,403	)		374,712
Total securities	$	533,219	$	10,697	$	(2,111	)	$	541,805

September 30, 2014:
U. S. government agencies	$	14,951	$	-	$	(491	)	$	14,460
State, county and municipal securities		134,641		3,708		(714	)		137,635
Corporate debt securities		10,801		237		(73	)		10,965
Mortgage-backed securities		364,399		4,493		(2,443	)		366,449
Total securities	$	524,792	$	8,438	$	(3,721	)	$	529,509

The amortized cost and fair value of available-for-sale securities at September 30, 2015 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	$	4,574	$	4,604
Due from one year to five years		48,907		50,206
Due from five to ten years		63,934		65,751
Due after ten years		64,952		65,304
Mortgage-backed securities		622,313		625,520
	$	804,680	$	811,385

Securities with a carrying value of approximately $381.9 million serve as collateral to secure public deposits and for other purposes required or permitted by law at September 30, 2015, compared with $286.6 million and $265.9 million at December 31, 2014 and September 30, 2014, 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 September 30, 2015, December 31, 2014 and September 30, 2014.

	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)
September 30, 2015:
U. S. government agencies	$	-	$	-		$	4,985	$	(15	)	$	4,985	$	(15	)
State, county and municipal securities		28,339		(297	)		10,451		(222	)		38,790		(519	)
Corporate debt securities		894		(19	)		-		-			894		(19	)
Mortgage-backed securities		213,439		(1,184	)		30,708		(817	)		244,147		(2,001	)

Total temporarily impaired securities	$	242,672	$	(1,500	)	$	46,144	$	(1,054	)	$	288,816	$	(2,554	)

December 31, 2014:
U. S. government agencies	$	-	$	-		$	14,678	$	(275	)	$	14,678	$	(275	)
State, county and municipal securities		15,038		(70	)		19,665		(363	)		34,703		(433	)
Corporate debt securities		-		-			-		-			-		-
Mortgage-backed securities		36,760		(221	)		46,812		(1,182	)		83,572		(1,403	)

Total temporarily impaired securities	$	51,798	$	(291	)	$	81,155	$	(1,820	)	$	132,953	$	(2,111	)

September 30, 2014:
U. S. government agencies	$	-	$	-		$	14,460	$	(491	)	$	14,460	$	(491	)
State, county and municipal securities		10,296		(98	)		22,696		(616	)		32,992		(714	)
Corporate debt securities		-		-			4,997		(73	)		4,997		(73	)
Mortgage-backed securities		71,050		(416	)		51,314		(2,027	)		122,364		(2,443	)

Total temporarily impaired securities	$	81,346	$	(514	)	$	93,467	$	(3,207	)	$	174,813	$	(3,721	)

As of September 30, 2015, the Company’s security portfolio consisted of 369 securities, 111 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 September 30, 2015, the Company held 84 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 September 30, 2015.

At September 30, 2015, the Company held 24 state, county and municipal securities, one U.S. government-sponsored agency security, and two corporate 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 September 30, 2015.

During the first nine months of 2015 and 2014, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities. During the third quarter of 2015, the Company received all interest payments due on a security that had previously deferred interest since 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 September 30, 2015, December 31, 2014 or September 30, 2014.

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 September 30, 2015, 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 September 30, 2015, these investments are not considered impaired on an other-than-temporary basis.

The following table is a summary of sales activities in the Company’s investment securities available for sale for the nine months ended September 30, 2015, year ended December 31, 2014 and nine months ended September 30, 2014:

	September 30, 2015			December 31, 2014			September 30, 2014
	(Dollars in Thousands)
Gross gains on sales of securities	$	396		$	141		$	141
Gross losses on sales of securities		(259	)		(3	)		(3	)
Net realized gains on sales of securities available for sale	$	137		$	138		$	138
Sales proceeds	$	69,208		$	94,051		$	92,975

NOTE 5 – LOANS

The Company 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. Ameris concentrates the majority of its lending activities in real estate loans. While the 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.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company 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 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. The Company's residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas.

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)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	427,747	$	319,654	$	334,783
Real estate – construction and development		220,798		161,507		154,315
Real estate – commercial and farmland		1,067,828		907,524		882,160
Real estate – residential		532,285		456,106		436,515
Consumer installment		31,299		30,782		31,403
Other		10,692		14,308		9,583
	$	2,290,649	$	1,889,881	$	1,848,759

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 FDIC, including purchased loans where the loss-sharing agreement with the FDIC has expired. Purchased non-covered loans totaling $767.5 million, $674.2 million and $673.7 million at September 30, 2015, December 31, 2014 and September 30, 2014, 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)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	42,350	$	38,041	$	38,077
Real estate – construction and development		71,109		58,362		60,262
Real estate – commercial and farmland		385,032		306,706		296,790
Real estate – residential		263,312		266,342		273,347
Consumer installment		5,691		4,788		5,248
	$	767,494	$	674,239	$	673,724

Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2015, purchased loan pools totaled $410.1 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $402.1 million and $8.0 million of purchase premium paid at acquisition. At September 30, 2015, all loans included in the purchased loan pools were performing current loans, all risk-rated grade 20. The Company did not have any purchased loan pools at December 31, 2014 or September 30, 2014.

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 $191.0 million, $271.3 million and $313.6 million at September 30, 2015, December 31, 2014 and September 30, 2014, 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)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	13,349	$	21,467	$	22,545
Real estate – construction and development		14,266		23,447		27,756
Real estate – commercial and farmland		103,399		147,627		180,566
Real estate – residential		59,835		78,520		82,445
Consumer installment		172		218		277
	$	191,021	$	271,279	$	313,589

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 payments on nonaccrual 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. 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 90 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)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	1,995	$	1,672	$	2,695
Real estate – construction and development		1,753		3,774		3,037
Real estate – commercial and farmland		11,645		8,141		8,983
Real estate – residential		4,810		7,663		7,608
Consumer installment		355		478		487
	$	20,558	$	21,728	$	22,810

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

(Dollars in Thousands)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	214	$	175	$	54
Real estate – construction and development		916		1,119		1,969
Real estate – commercial and farmland		4,728		10,242		8,776
Real estate – residential		5,464		6,644		6,132
Consumer installment		52		69		76
	$	11,374	$	18,249	$	17,007

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

(Dollars in Thousands)	September 30, 2015		December 31, 2014		September 30, 2014
Commercial, financial and agricultural	$	7,916	$	8,541	$	8,441
Real estate – construction and development		2,934		7,601		8,896
Real estate – commercial and farmland		18,164		12,584		14,617
Real estate – residential		3,979		6,595		7,227
Consumer installment		91		91		102
	$	33,084	$	35,412	$	39,283

The following table presents an aging analysis of loans, excluding purchased non-covered and covered past due loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	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 September 30, 2015:
Commercial, financial & agricultural	$	781	$	714	$	1,799	$	3,294	$	424,453	$	427,747	$	-
Real estate – construction & development		1,184		417		1,753		3,354		217,444		220,798		-
Real estate – commercial & farmland		4,275		399		8,082		12,756		1,055,072		1,067,828		-
Real estate – residential		6,424		1,558		4,247		12,229		520,056		532,285		-
Consumer installment loans		326		82		227		635		30,664		31,299		-
Other		-		-		-		-		10,692		10,692		-
Total	$	12,990	$	3,170	$	16,108	$	32,268	$	2,258,381	$	2,290,649	$	-

	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 31, 2014:
Commercial, financial & agricultural	$	900	$	233	$	1,577	$	2,710	$	316,944	$	319,654	$	-
Real estate – construction & development		1,382		286		3,367		5,035		156,472		161,507		-
Real estate – commercial & farmland		2,859		635		7,668		11,162		896,362		907,524		-
Real estate – residential		3,953		2,334		6,755		13,042		443,064		456,106		-
Consumer installment loans		634		158		366		1,158		29,624		30,782		1
Other		-		-		-		-		14,308		14,308		-
Total	$	9,728	$	3,646	$	19,733	$	33,107	$	1,856,774	$	1,889,881	$	1

	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 September 30, 2014:
Commercial, financial & agricultural	$	271	$	400	$	2,483	$	3,154	$	331,629	$	334,783	$	-
Real estate – construction & development		1,232		285		2,899		4,416		149,899		154,315		-
Real estate – commercial & farmland		3,025		484		8,918		12,427		869,733		882,160		-
Real estate – residential		4,416		2,085		7,303		13,804		422,711		436,515		-
Consumer installment loans		333		113		396		842		30,561		31,403		-
Other		-		-		-		-		9,583		9,583		-
Total	$	9,277	$	3,367	$	21,999	$	34,643	$	1,814,116	$	1,848,759	$	-

The following table presents an analysis of purchased non-covered past due loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	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 September 30, 2015:
Commercial, financial & agricultural	$	140	$	11	$	112	$	263	$	42,087	$	42,350	$	-
Real estate – construction & development		322		-		459		781		70,328		71,109		-
Real estate – commercial & farmland		2,681		613		3,391		6,685		378,347		385,032		-
Real estate – residential		3,822		1,672		4,901		10,395		252,917		263,312		-
Consumer installment loans		5		-		49		54		5,637		5,691		-
Total	$	6,970	$	2,296	$	8,912	$	18,178	$	749,316	$	767,494	$	-

	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, 2014:
Commercial, financial & agricultural	$	461	$	90	$	175	$	726	$	37,315	$	38,041	$	-
Real estate – construction & development		790		1,735		1,117		3,642		54,720		58,362		-
Real estate – commercial & farmland		2,107		1,194		9,529		12,830		293,876		306,706		-
Real estate – residential		6,907		1,401		6,369		14,677		251,665		266,342		-
Consumer installment loans		82		-		65		147		4,641		4,788		-
Total	$	10,347	$	4,420	$	17,255	$	32,022	$	642,217	$	674,239	$	-

	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 September 30, 2014:
Commercial, financial & agricultural	$	33	$	46	$	55	$	134	$	37,943	$	38,077	$	-
Real estate – construction & development		520		135		3,069		3,724		56,538		60,262		1,100
Real estate – commercial & farmland		3,497		1,227		8,266		12,990		283,800		296,790		258
Real estate – residential		3,915		1,440		5,929		11,284		262,063		273,347		-
Consumer installment loans		36		5		76		117		5,131		5,248		-
Total	$	8,001	$	2,853	$	17,395	$	28,249	$	645,475	$	673,724	$	1,358

The following table presents an aging analysis of covered loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	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 September 30, 2015:
Commercial, financial & agricultural	$	40	$	48	$	7,886	$	7,974	$	5,375	$	13,349	$	-
Real estate – construction & development		1,548		68		2,408		4,024		10,242		14,266		-
Real estate – commercial & farmland		1,003		550		6,573		8,126		95,273		103,399		-
Real estate – residential		2,612		783		2,140		5,535		54,300		59,835		-
Consumer installment loans		-		-		49		49		123		172		-
Total	$	5,203	$	1,449	$	19,056	$	25,708	$	165,313	$	191,021	$	-

	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 31, 2014:
Commercial, financial & agricultural	$	451	$	136	$	1,878	$	2,465	$	19,002	$	21,467	$	-
Real estate – construction & development		238		226		6,703		7,167		16,280		23,447		-
Real estate – commercial & farmland		4,371		1,486		7,711		13,568		134,059		147,627		714
Real estate – residential		3,464		962		5,656		10,082		68,438		78,520		-
Consumer installment loans		10		-		91		101		117		218		-
Total	$	8,534	$	2,810	$	22,039	$	33,383	$	237,896	$	271,279	$	714

	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 September 30, 2014:
Commercial, financial & agricultural	$	568	$	188	$	1,978	$	2,734	$	19,811	$	22,545	$	-
Real estate – construction & development		632		72		8,659		9,363		18,393		27,756		-
Real estate – commercial & farmland		7,100		322		8,930		16,352		164,214		180,566		305
Real estate – residential		2,694		1,473		5,563		9,730		72,715		82,445		65
Consumer installment loans		2		7		101		110		167		277		-
Total	$	10,996	$	2,062	$	25,231	$	38,289	$	275,300	$	313,589	$	370

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. 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. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. 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
	September 30, 2015		December 31, 2014		September 30, 2014
	(Dollars in Thousands)
Nonaccrual loans	$	20,558	$	21,728	$	22,810
Troubled debt restructurings not included above		12,075		12,759		17,261
Total impaired loans	$	32,633	$	34,487	$	40,071

Quarter-to-date interest income recognized on impaired loans	$	241	$	237	$	332
Year-to-date interest income recognized on impaired loans	$	635	$	1,991	$	1,754
Quarter-to-date foregone interest income on impaired loans	$	309	$	323	$	353
Year-to-date foregone interest income on impaired loans	$	939	$	1,491	$	1,168

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2015:
Commercial, financial & agricultural	$	3,761	$	471	$	1,762	$	2,233	$	528	$	3,289	$	2,458
Real estate – construction & development		3,757		230		2,361		2,591		731		2,503		3,384
Real estate – commercial & farmland		18,652		5,870		11,494		17,364		1,635		16,459		15,684
Real estate – residential		11,549		1,752		8,266		10,018		1,872		10,185		11,509
Consumer installment loans		524		-		426		426		7		483		487
Total	$	38,243	$	8,323	$	24,309	$	32,632	$	4,773	$	32,919	$	33,522

	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, 2014:
Commercial, financial & agricultural	$	3,387	$	6	$	1,956	$	1,962	$	395	$	2,457	$	3,021
Real estate – construction & development		8,325		448		4,005		4,453		771		4,703		5,368
Real estate – commercial & farmland		17,514		4,967		9,651		14,618		1,859		15,341		15,972
Real estate – residential		15,571		3,514		9,407		12,921		974		14,244		16,317
Consumer installment loans		618		-		533		533		9		527		519
Total	$	45,415	$	8,935	$	25,552	$	34,487	$	4,008	$	37,272	$	41,197

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2014:
Commercial, financial & agricultural	$	4,445	$	8	$	2,943	$	2,951	$	631	$	2,402	$	3,285
Real estate – construction & development		8,824		211		4,743		4,954		612		5,243		5,596
Real estate – commercial & farmland		18,955		7,311		8,753		16,064		1,698		16,242		16,312
Real estate – residential		18,251		5,635		9,946		15,581		1,286		15,356		17,169
Consumer installment loans		606		-		521		521		10		517		516

Total	$	51,081	$	13,165	$	26,906	$	40,071	$	4,237	$	39,760	$	42,878

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

	As of and For the Period Ended
	September 30, 2015		December 31, 2014		September 30, 2014
	(Dollars in Thousands)
Nonaccrual loans	$	11,374	$	18,249	$	17,007
Troubled debt restructurings not included above		7,188		1,212		583
Total impaired loans	$	18,562	$	19,461	$	17,590

Quarter-to-date interest income recognized on impaired loans	$	158	$	64	$	27
Year-to-date interest income recognized on impaired loans	$	342	$	132	$	68
Quarter-to-date foregone interest income on impaired loans	$	198	$	521	$	587
Year-to-date foregone interest income on impaired loans	$	1,121	$	1,759	$	1,239

The following table presents an analysis of information pertaining to purchased non-covered impaired loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2015:
Commercial, financial & agricultural	$	1,137	$	214	$	-	$	214	$	-	$	262	$	224
Real estate – construction & development		9,211		1,268		-		1,268		-		1,563		1,419
Real estate – commercial & farmland		13,399		8,799		-		8,799		-		11,245		10,724
Real estate – residential		12,443		8,224		-		8,224		-		8,255		7,845
Consumer installment loans		74		57		-		57		-		76		63
Total	$	36,264	$	18,562	$	-	$	18,562	$	-	$	21,402	$	20,275

	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, 2014:
Commercial, financial & agricultural	$	1,366	$	175	$	-	$	175	$	-	$	277	$	165
Real estate – construction & development		5,161		1,436		-		1,436		-		2,242		1,643
Real estate – commercial & farmland		15,007		10,588		-		10,588		-		11,148		7,484
Real estate – residential		12,283		7,191		-		7,191		-		8,447		7,084
Consumer installment loans		172		71		-		71		-		124		68
Total	$	33,989	$	19,461	$	-	$	19,461	$	-	$	22,238	$	16,444


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2014:
Commercial, financial & agricultural	$	438	$	54	$	-	$	54	$	-	$	98	$	81
Real estate – construction & development		3,794		2,274		-		2,274		-		2,273		1,501
Real estate – commercial & farmland		12,354		8,776		-		8,776		-		7,712		5,976
Real estate – residential		9,610		6,407		-		6,407		-		6,533		6,233
Consumer installment loans		184		79		-		79		-		64		43
Total	$	26,380	$	17,590	$	-	$	17,590	$	-	$	16,680	$	13,834

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

	As of and For the Period Ended
	September 30, 2015		December 31, 2014		September 30, 2014
	(Dollars in Thousands)
Nonaccrual loans	$	33,084	$	35,412	$	39,283
Troubled debt restructurings not included above		16,576		22,619		22,757
Total impaired loans	$	49,660	$	58,031	$	62,040

Quarter-to-date interest income recognized on impaired loans	$	268	$	443	$	420
Year-to-date interest income recognized on impaired loans	$	732	$	2,057	$	1,614
Quarter-to-date foregone interest income on impaired loans	$	468	$	571	$	660
Year-to-date foregone interest income on impaired loans	$	1,416	$	3,123	$	2,552

The following table presents an analysis of information pertaining to covered impaired loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2015:
Commercial, financial & agricultural	$	11,794	$	7,918	$	-	$	7,918	$	-	$	8,625	$	8,560
Real estate – construction & development		29,596		5,780		-		5,780		-		6,166		8,013
Real estate – commercial & farmland		41,724		21,265		-		21,265		-		20,697		21,380
Real estate – residential		18,097		14,605		-		14,605		-		14,881		16,465
Consumer installment loans		126		92		-		92		-		101		96
Total	$	101,337	$	49,660	$	-	$	49,660	$	-	$	50,470	$	54,514

	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, 2014:
Commercial, financial & agricultural	$	14,385	$	8,582	$	-	$	8,582	$	-	$	8,525	$	9,325
Real estate – construction & development		27,289		10,638		-		10,638		-		11,279		13,935
Real estate – commercial & farmland		31,309		20,663		-		20,663		-		21,890		28,057
Real estate – residential		22,860		18,054		-		18,054		-		18,242		20,776
Consumer installment loans		124		94		-		94		-		100		160
Total	$	95,967	$	58,031	$	-	$	58,031	$	-	$	60,036	$	72,253

	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine Month Average Recorded Investment
	(Dollars in Thousands)
As of September 30, 2014:
Commercial, financial & agricultural	$	11,356	$	8,467	$	-	$	8,467	$	-	$	10,367	$	9,511
Real estate – construction & development		13,268		11,920		-		11,920		-		11,484		14,760
Real estate – commercial & farmland		26,624		23,118		-		23,118		-		23,562		29,904
Real estate – residential		20,331		18,430		-		18,430		-		19,112		21,456
Consumer installment loans		134		105		-		105		-		116		177
Total	$	71,713	$	62,040	$	-	$	62,040	$	-	$	64,641	$	75,808

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of certain mortgage loans serviced at a third party, mortgage warehouse lines and overdraft protection loans, which are treated as pools for risk-rating purposes. Relationships greater than $1.0 million and a sample of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department. 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 exhibit 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 quality 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 loss 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 September 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	$	222,693	$	294	$	116	$	1,490	$	6,688	$	-	$	231,281
15		23,807		2,150		123,515		83,361		1,352		-		234,185
20		99,414		45,091		645,949		327,576		19,302		10,692		1,148,024
23		645		7,754		11,792		6,240		46		-		26,477
25		75,635		159,944		250,575		90,320		3,168		-		579,642
30		2,378		2,035		9,762		7,811		204		-		22,190
40		3,175		3,530		26,119		15,487		537		-		48,848
50		-		-		-		-		2		-		2
60		-		-		-		-		-		-		-
Total	$	427,747	$	220,798	$	1,067,828	$	532,285	$	31,299	$	10,692	$	2,290,649

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2014:

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	$	121,355	$	268	$	155	$	226	$	6,573	$	-	$	128,577
15		25,318		4,010		128,170		59,301		1,005		-		217,804
20		100,599		47,541		511,198		256,758		17,544		14,308		947,948
23		56		8,933		10,507		9,672		37		-		29,205
25		62,519		93,514		224,464		102,998		4,692		-		488,187
30		3,758		1,474		13,035		7,459		257		-		25,983
40		6,049		5,767		19,995		19,692		673		-		52,176
50		-		-		-		-		1		-		1
60		-		-		-		-		-		-		-
Total	$	319,654	$	161,507	$	907,524	$	456,106	$	30,782	$	14,308	$	1,889,881

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of September 30, 2014:

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	$	114,298	$	171	$	251	$	479	$	6,287	$	-	$	121,486
15		29,665		4,114		136,303		51,508		1,124		-		222,714
20		110,337		50,427		478,551		241,457		17,700		9,583		908,055
23		186		9,292		9,574		9,469		305		-		28,826
25		73,251		83,245		217,226		105,635		4,842		-		484,199
30		3,438		1,781		16,217		10,060		254		-		31,750
40		3,608		5,285		23,950		17,907		890		-		51,640
50		-		-		88		-		-		-		88
60		-		-		-		-		1		-		1
Total	$	334,783	$	154,315	$	882,160	$	436,515	$	31,403	$	9,583	$	1,848,759

The following table presents the purchased non-covered loan portfolio by risk grade as of September 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	$	8,741	$	-	$	-	$	-	$	1,060	$	-	$	9,801
15		1,229		1,805		8,440		38,643		789		-		50,906
20		10,982		13,518		187,329		133,914		2,291		-		348,034
23		-		230		4,079		6,303		-		-		10,612
25		17,873		48,137		159,816		63,049		1,397		-		290,272
30		2,379		3,418		12,997		7,609		55		-		26,458
40		1,116		4,001		12,371		13,794		99		-		31,381
50		30		-		-		-		-		-		30
60		-		-		-		-		-		-		-
Total	$	42,350	$	71,109	$	385,032	$	263,312	$	5,691	$	-	$	767,494

The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2014:

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	$	6,624	$	-	$	-	$	290	$	480	$	-	$	7,394
15		1,376		552		13,277		14,051		501		-		29,727
20		13,657		12,991		116,308		64,083		1,647		-		208,686
23		73		-		3,207		3,298		-		-		6,578
25		13,753		36,230		144,293		164,959		1,920		-		361,155
30		1,618		4,365		12,279		7,444		41		-		25,747
40		910		4,254		17,342		12,184		199		-		34,889
50		30		-		-		33		-		-		63
60		-		-		-		-		-		-		-
Total	$	38,041	$	58,362	$	306,706	$	266,342	$	4,788	$	-	$	674,239

The following table presents the purchased non-covered loan portfolio by risk grade as of September 30, 2014:

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	$	3,187	$	-	$	-	$	292	$	486	$	-	$	3,965
15		5,023		447		14,136		15,336		519		-		35,461
20		11,230		12,345		90,915		64,178		2,034		-		180,702
23		8		-		-		1,208		-		-		1,216
25		16,467		38,426		167,458		175,313		2,065		-		399,729
30		1,494		2,164		9,300		7,071		19		-		20,048
40		668		6,880		14,981		9,915		121		-		32,565
50		-		-		-		34		4		-		38
60		-		-		-		-		-		-		-
Total	$	38,077	$	60,262	$	296,790	$	273,347	$	5,248	$	-	$	673,724

The following table presents the covered loan portfolio by risk grade as of September 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		-		-		478		115		-		-		593
20		327		1,147		16,211		12,304		42		-		30,031
23		53		-		4,783		6,396		-		-		11,232
25		4,476		8,241		53,126		27,795		37		-		93,675
30		4,060		1,965		5,539		5,481		-		-		17,045
40		4,431		2,913		23,262		7,744		93		-		38,443
50		-		-		-		-		-		-		-
60		2		-		-		-		-		-		2
Total	$	13,349	$	14,266	$	103,399	$	59,835	$	172	$	-	$	191,021

The following table presents the covered loan portfolio by risk grade as of December 31, 2014:

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		-		1		761		525		-		-		1,287
20		917		3,184		23,167		14,089		77		-		41,434
23		164		537		11,404		6,642		-		-		18,747
25		5,181		9,406		80,334		33,124		37		-		128,082
30		4,808		2,753		5,302		8,050		-		-		20,913
40		10,397		7,566		26,659		16,090		104		-		60,816
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	21,467	$	23,447	$	147,627	$	78,520	$	218	$	-	$	271,279

The following table presents the covered loan portfolio by risk grade as of September 30, 2014:

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		-		2		795		531		-		-		1,328
20		1,302		3,380		33,200		15,957		71		-		53,910
23		145		547		14,640		5,815		-		-		21,147
25		5,687		11,725		89,201		35,344		41		-		141,998
30		4,827		3,006		8,808		8,649		43		-		25,333
40		10,584		9,096		33,922		16,149		122		-		69,873
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	22,545	$	27,756	$	180,566	$	82,445	$	277	$	-	$	313,589

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 nine months of 2015 and 2014 totaling $77.4 million and $16.4 million, respectively, under such parameters.

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $13.9 million, $15.3 million and $20.5 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $1.3 million, $2.2 million and $4.4 million in previous charge-offs on such loans at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $183,000, $231,000 and $2.2 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. At September 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the nine months ending September 30, 2015 and 2014, the Company modified loans as troubled debt restructurings, excluding purchased non-covered and covered loans, with principal balances of $4.3 million and $2.4 million, 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 nine months ending September 30, 2015 and 2014:

September 30, 2015