Ameris Bancorp reported net income of $9.4 million, or $0.24 per diluted share, for the quarter ended June 30, 2018, compared with $23.1 million, or $0.62 per diluted share, for the quarter ended June 30, 2017.  For the year-to-date period ending June 30, 2018, the Company reported net income of $36.0 million, or $0.92 per diluted share, compared with $44.2 million, or $1.20 per diluted share, for the same period in 2017.

Commenting on the Company's quarterly results, Dennis J. Zember, Jr., the Company's President and Chief Executive Officer, said, "We had an active second quarter from the perspective of moving our operating results and recurring earnings higher.  Closing two acquisitions in the second quarter, and fully completing one of the integrations sets us up for a positive move in our earnings in the coming quarters.  Combined with our growth and our stable margins and deposit costs, we believe the catalysts are in place to improve on already strong efficiency ratios and return on assets.  Our operating results in the current quarter were adversely impacted by defaults on two purchased loan relationships in the premium finance division that reduced our earnings by approximately $3.7 million, after tax.  These two relationships were not the type of traditional premium finance loans that we have been relying on for growth, but instead were part of a group of C&I loans made to insurance agencies.  Since our acquisition of the premium finance division, we have grown traditional premium finance by $190.7 million and reduced non-core loans by $6.4 million to only $18.1 million at the end of the quarter.  Most importantly, we do not anticipate similar credit costs going forward and we remain confident in the credit quality from our premium finance operation."

The Company reported adjusted operating net income of $29.2 million, or $0.74 per diluted share, for the quarter ended June 30, 2018, compared with $23.5 million, or $0.63 per diluted share, for the second quarter of 2017.  The Company reported adjusted operating net income of $57.0 million, or $1.46 per diluted share, for the six months ended June 30, 2018, compared with $45.1 million, or $1.23 per diluted share, for the same period of 2017.  Adjusted net income for the periods excludes after-tax merger and conversion charges, loss on the sale of bank premises and expenses related to the retirement of Edwin W. Hortman, Jr., the Company's Executive Chairman.

Following is a summary of the adjustments between reported net income and adjusted net income:

Highlights of the Company's performance and results for the second quarter of 2018 include the following:

• Completion of the acquisition of Atlantic Coast Financial Corporation ("Atlantic"), adding $966.3 million in total assets

• Completion of the acquisition of Hamilton State Bancshares, Inc. ("Hamilton"), adding $2.0 billion in total assets

• Growth in adjusted net earnings of 24.6% compared with the second quarter of 2017

• Organic loan growth of $268.0 million for the quarter, reflecting an annualized growth rate of 18.4%

• Year-over-year organic growth in noninterest bearing deposits of $232.7 million, or 13.9% 

• Adjusted return on average assets of 1.38%, compared with 1.32% in the second quarter of 2017

• Adjusted return on average tangible common equity of 17.26%, compared with 14.86% in the second quarter of 2017

• Improvement in the adjusted efficiency ratio to 57.53% in the second quarter of 2018, compared with 59.95% in the first quarter of 2018 and 59.37% in the second quarter of 2017

• 17.5% increase in total revenue, to $107.3 million, in the second quarter of 2018, compared with total revenue of $91.3 million in the second quarter of 2017

• Annualized net charge-offs of 0.23% of average total loans and 0.26% of average non-purchased loans

Acquisition of Atlantic
The Company completed the acquisition of Atlantic on May 25, 2018.  Highlights of the merger include the following:

• Added $966.3 million in total assets, $758.2 million in loans and $584.1 million in total deposits

• Identified and realized cost saves in excess of amounts in initial announcement

• Retained production teams in Orlando and Tampa that have strong pipelines and similar lending styles to that of Ameris Bank

The conversion of Atlantic's systems to the Company's systems was complete by the end of the second quarter of 2018.  In addition, due to the proximity between Atlantic's retail branches and those of the Company, the Company closed 11 retail branches at the time of the systems conversion in June 2018, and as a result, management expects to realize immediate operating efficiencies from the acquisition going forward.

Acquisition of Hamilton
The Company completed the acquisition of Hamilton on June 29, 2018.  Highlights of the merger include the following:

• Added $2.0 billion in total assets, $1.3 billion in loans and $1.6 billion in total deposits

• Added 28 retail offices, 24 of which are located within the Atlanta MSA, two of which are in the Gainesville, Georgia MSA and the remaining two of which are located near the Atlanta MSA

• Identified cost savings slightly in excess of our announced level of 35%

The conversion of Hamilton's systems to the Company's is scheduled to be completed during the fourth quarter of 2018, after which time management expects to realize operating efficiencies from the acquisition.

Credit Quality
During the second quarter of 2018, the Company recorded provision for loan loss expense of $9.1 million, compared with $1.8 million in the first quarter of 2018.  Approximately $6.7 million was related to two acquired loan relationships in the premium finance division that became impaired during the second quarter of 2018.  Those impaired loans were non-core general operating lines to insurance agencies and were not the traditional premium finance offerings that the Company primarily focuses on.  At the end of the quarter, 97% of the division's loans were secured by insurance policies and the related cash and 3% were operating lines.  Management notes that both agencies suffered unusual circumstances that precipitated their defaults, leading the Company to believe that the remaining portfolio is not a material risk item and that future credit costs should be similar to past expectations.

Nonperforming assets as a percent of total assets increased six basis point to 0.67% during the quarter, a result of four basis points from the premium finance division and two basis points because of the Atlantic and Hamilton acquisitions completed during the quarter.  The net charge-off ratio for non-purchased loans increased twelve basis points, all of which was due to the elevated charge offs in the premium finance division.

Net Interest Income and Net Interest Margin
Net interest income on a tax-equivalent basis increased to $76.9 million in the current quarter of 2018, an increase of $12.2 million, or 18.79%, from the same quarter in 2017.  The Company's net interest margin, excluding the effects of accretion income, decreased during the quarter to 3.81%, compared with 3.84% in the first quarter of 2018.  Compared with the same quarter in 2017, net interest margin, excluding the effects of accretion income, has improved by four basis points, while average earning assets grew $1.23 billion during this period.  The Company closed on Atlantic on May 25, 2018, which had the effect of reducing the quarter's margin by approximately two basis points.

Interest income on a tax-equivalent basis increased to $90.9 million in the current quarter of 2018, an increase of $17.9 million, or 24.5%, from the same quarter in 2017.  Yields on total earning assets moved higher during the quarter to 4.66%, compared with 4.52% for the first quarter in 2018 and 4.45% in the second quarter of 2017.  Yields on all loans excluding the effect of accretion increased to 4.81% in the current quarter of 2018, compared with 4.75% in the first quarter of 2018 and 4.59% in the second quarter of 2017.  Accretion income in the current quarter increased to $2.7 million, compared with $1.4 million in the first quarter of 2018 and $2.9 million in the second quarter of 2017.  Loan production in the banking division during the second quarter of 2018 totaled $439.3 million, with a weighted average yield of 5.46%, compared with $365.0 million and 5.19%, respectively, in the first quarter of 2018 and $527.8 million and 4.57%, respectively, in the second quarter of 2017.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $2.1 billion during the second quarter of 2018.  Management believes production yields going forward will be accretive to overall yields and will continue to provide stability in the overall margin despite likely increases in funding costs.

Interest expense during the second quarter of 2018 moved higher to $13.9 million, compared with $10.7 million in the first quarter of 2018 and $8.3 million in the second quarter of 2017.  The Company's total cost of funds moved twelve basis points higher to 0.75% in the second quarter of 2018 as compared with the first quarter of 2018.  Deposit costs increased only four basis points during the second quarter of 2018 to 0.47%, compared with 0.43% in the first quarter of 2018.  Costs of interest bearing deposits increased during the quarter from 0.59% in the first quarter of 2018 to 0.67% in the second quarter, with approximately one basis points of this increase relating to the newly acquired deposits at Atlantic.  Management notes that the deposit beta on interest bearing deposits in the second quarter at core Ameris Bank amounted to 28% which is in line with previous quarters and previous rate movements.

Interest expense on non-deposit borrowings increased during the quarter to $6.2 million, compared with $3.9 million in the first quarter of 2018 and $3.7 million in the same quarter in 2017.  Overall costs on these funding sources decreased twelve basis points during the quarter, but the Company's use of these sources increased from 8.0% of total funding in the first quarter of 2018 to 11.9% in the second quarter of 2018, causing the increase in total cost of funds.

Non-interest Income
Non-interest income in the second quarter of 2018 was $31.3 million, an increase of $3.1 million, or 11.1%, compared with the same quarter in 2017.  The Company continued to experience mostly stable levels of service charge revenue in the second quarter of 2018 as compared with prior quarters.

Revenue in the retail mortgage group totaled $18.9 million in the second quarter of 2018, an increase of 14.6% compared with $16.5 million in the second quarter of 2017.  Total production in the second quarter of 2018 for the retail mortgage group amounted to $522.1 million (90% purchase and 10% refinance), compared with $400.2 million in the same quarter of 2017 (89% purchase and 11% refinance).  Gain on sale spreads recovered somewhat in the second quarter, moving to 2.94% from 2.62% in the first quarter.  The Company's open pipeline increased in the second quarter of 2018 to $228.7 million, compared with $153.3 million at March 31, 2018 and $174.3 million at the end of the second quarter of 2017.

The Company's warehouse lending group continued to increase its profitability, as revenues from the division increased by $1.4 million, or 80.9%, during the second quarter of 2018 compared with the same period in 2017.  Net income for the division increased 168.8% from $837,000 in the second quarter of 2017 to $2.3 million in the second quarter of 2018.  Loan production increased from $966.8 million in the second quarter of 2017 to approximately $1.23 billion in the current quarter.

Revenues from the Company's SBA division were $2.7 million during the second quarter of 2018, compared with $2.6 million during the second quarter of 2017, and net income for the division increased slightly from $875,000 for the second quarter of 2017 to $894,000 for the second quarter of 2018.  The open pipeline increased to $96.7 million at the end of the quarter, compared with $46.0 million at the same time last year.

Non-interest Expense
Non-interest expense increased $27.3 million to $86.4 million during the second quarter of 2018, compared with $59.1 million in the first quarter of 2018.  During the second quarter of 2018, the Company recorded $18.4 million of merger and conversion charges, $5.5 million of expense related to Mr. Hortman's retirement and $196,000 of loss on sale of bank premises, compared with $835,000 of merger and conversion charges and $583,000 of loss on sale bank premises recorded in the first quarter of 2018.  Excluding these charges, operating expenses increased approximately $4.7 million, or 8.1%, to $62.3 million in the second quarter of 2018, up from $57.7 million in the first quarter of 2018.

The Company continues to focus on improving its operating efficiency ratio. During the second quarter of 2018, the Company's adjusted efficiency ratio declined to 57.53%, compared with 59.95% in the first quarter of 2018.  Management expects to continue improving efficiency in future quarters as a result of  the recently completed acquisitions of Atlantic and Hamilton.  Atlantic has been fully integrated and cost savings are expected immediately in the third quarter of 2018, while Hamilton will not be fully integrated with full cost savings benefits until the fourth quarter of 2018.

Exclusive of the $5.5 million retirement expense, salaries and benefits increased $2.2 million during the second quarter of 2018 to $34.3 million, from $32.1 million in the first quarter of 2018.  The increase is attributable to the retail mortgage division, where compensation costs increased $3.1 million due to increased commissions and associated expenses resulting from continued growth of the sales force in the quarter.

Total credit costs (provision and non-provision credit resolution-related costs) totaled $10.2 million in the second quarter of 2018, compared with $2.8 million in the same quarter in 2017 and $2.4 million in the first quarter of 2018.  Excluding the $6.7 million charge discussed above related to the premium finance division, credit costs increased $651,000 as compared with the same quarter in 2017 and increased $1.1 million as compared with the first quarter of 2018.

Income Tax Expense
The Company's effective tax rate for the second quarter of 2018 was 20.5%, compared with 22.4% in the first quarter of 2018 and 30.9% during the second quarter of 2017.  The Company expects that its effective tax rates in the future will be consistent with that for the first quarter of 2018.  The decrease in effective tax rates in 2018, compared with 2017, is a result of the Tax Cuts and Jobs Act that was enacted in the fourth quarter of 2017.

Balance Sheet Trends
Total assets at June 30, 2018 were $11.2 billion, compared with $7.86 billion at December 31, 2017.   Loans, including loans held for sale, totaled $8.63 billion at June 30, 2018, compared with $6.24 billion at December 31, 2017 and $6.30 billion at March 31, 2018.  The Atlantic and Hamilton acquisitions accounted for $2.06 billion of this loan growth.  Exclusive of the acquisitions, growth in core loans (legacy and purchased non-covered loans) during the quarter amounted to $268.0 million, or 18.4% on an annualized basis.  This growth in legacy loans was diversified across product type, with residential real estate at 50% of incremental growth, commercial and industrial and agriculture at 18%, consumer and other loans at 18%, construction and development at 13% and commercial real estate at 1% of the total.  Loans held for sale, which includes both residential mortgage and SBA-guaranteed loans, increased $26.1 million during the second quarter of 2018.

Investment securities at the end of the second quarter of 2018 were $1.20 billion, or 11.9% of earning assets, compared with $853.1 million, or 11.7% of earning assets, at December 31, 2017.

At June 30, 2018, total deposits amounted to $8.76 billion, or 90.1% of total funding, compared with $6.63 billion and 94.8%, respectively, at December 31, 2017.  Compared with the same period in 2017, deposits have increased by $2.97 billion, or 51.2% with the Atlantic and Hamilton acquisitions accounting for $2.16 billion of this growth.  Excluding the acquisitions, deposits increased $803.6 million, or 13.9%.  Non-interest bearing deposits at the end of the current quarter were $2.36 billion, or 26.9% of total deposits, compared with $1.78 billion, or 26.8%, at December 31, 2017.  Non-rate sensitive deposits (including non-interest bearing, NOW and savings) totaled $4.39 billion at June 30, 2018, compared with $3.52 billion at the end of 2017.  These funds represented 50.1% of the Company's total deposits at June 30, 2018, compared with 53.1% at the end of 2017.

Shareholders' equity at June 30, 2018 totaled $1.37 billion, compared with $804.5 million at December 31, 2017.  The increase in shareholders' equity was the result of the issuance of shares of common stock in the Company's acquisitions of Atlantic, Hamilton and the remainder of US Premium Finance Holding Company, plus earnings of $36.0 million during the year.  Tangible book value per share at June 30, 2018 was $17.12, up compared with $16.90 per share at March 31, 2018.