Ameris Bancorp reported net income of $41.4 million, or $0.87 per diluted share, for the quarter ended September 30, 2018, compared with $20.2 million, or $0.54 per diluted share, for the quarter ended September 30, 2017.  The Company reported adjusted net income of $43.3 million, or $0.91 per diluted share, for the quarter ended September 30, 2018, compared with $23.6 million, or $0.63 per diluted share, for the third quarter of 2017.  Adjusted net income for the period excludes after-tax merger and conversion charges, executive retirement benefits, restructuring charges related to recently announced branch consolidations and loss on the sale of bank premises.

For the year-to-date period ending September 30, 2018, the Company reported net income of $77.5 million, or $1.85 per diluted share, compared with $64.4 million, or $1.74 per diluted share, for the same period in 2017.  The Company reported adjusted net income of $100.3 million, or $2.40 per diluted share, for the nine months ended September 30, 2018, compared with $68.7 million, or $1.86 per diluted share, for the same period of 2017.  Adjusted net income for the year-to-date period excludes the same items listed above for the Company's quarter-to-date results and as reflected in the table below.

Commenting on the Company's quarterly results, Dennis J. Zember, Jr., the Company's President and Chief Executive Officer, said, "We had an outstanding quarter of operating results where we saw a material move in our efficiency ratio, a stable margin, and solid deposit growth.  Realizing the remaining cost savings on Hamilton and our recently announced cost saving initiatives will move our efficiency closer to 50% and have a material impact on our earnings.  Our operating return on assets and return on tangible capital of 1.53% and 20.50% are already best in class before these additional drivers are fully realized and our operating strategies will deliver the earnings and book value growth that we have forecasted."

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

• Growth in adjusted net earnings of 83.3% compared with the third quarter of 2017

• Improvement in the adjusted efficiency ratio to 54.42% in the third quarter of 2018, compared with 57.53% in the second quarter of 2018 and 61.09% in the third quarter of 2017

• Adjusted return on average assets of 1.53%, compared with 1.26% in the third quarter of 2017

• Adjusted return on average tangible common equity of 20.50%, compared with 14.28% in the third quarter of 2017

• 37.7% increase in total revenue, to $129.2 million, in the third quarter of 2018, compared with total revenue of $93.9 million in the third quarter of 2017

• Organic loan growth of $68.5 million for the quarter, reflecting an annualized growth rate of 3.4%; year-to-date organic loan growth of $490.3 million, or an annualized growth rate of 11.5%

• Year-over-year organic growth in noninterest bearing deposits of $191.1 million, or 11.1%

• Improvement in nonperforming assets, decreasing to 0.60% of total assets

• Annualized net charge-offs of 0.26% of average total loans and 0.44% of average non-purchased loans for the third quarter of 2018

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

Credit Quality

During the third quarter of 2018, the Company recorded provision for loan loss expense of $2.1 million, compared with $9.1 million in the second quarter of 2018.  Credit quality in the premium finance division loan portfolio was stable and there was no unexpected additional provision expense in the third quarter, compared to the increased provision in the second quarter of 2018.  As expected, credit costs returned to normal compared with quarters prior to the second quarter of 2018.  Nonperforming assets as a percentage of total assets decreased seven basis points to 0.60% during the quarter.  The net charge-off ratio for non-purchased loans increased 18 basis points, all of which was due to the elevated charge offs in the premium finance division, which were provided for in the second quarter of 2018.

Net Interest Income and Net Interest Margin

Net interest income on a tax-equivalent basis increased to $100.1 million in the current quarter of 2018, an increase of $31.4 million, or 45.8%, from the same quarter in 2017.  The Company's net interest margin, excluding the effects of accretion income, decreased during the quarter to 3.77%, compared with 3.81% in the second quarter of 2018.  Compared with the same quarter in 2017, net interest margin, excluding the effects of accretion income, has decreased by three basis points, while average earning assets grew $3.25 billion during this period.

Interest income on a tax-equivalent basis increased to $122.2 million in the current quarter of 2018, an increase of $44.1 million, or 56.4%, from the same quarter in 2017.  Yields on total earning assets moved higher during the quarter to 4.78%, compared with 4.66% for the second quarter in 2018 and 4.50% in the third quarter of 2017.  Yields on all loans excluding the effect of accretion increased to 4.95% in the current quarter of 2018, compared with 4.81% in the second quarter of 2018 and 4.65% in the third quarter of 2017.  Accretion income in the current quarter increased to $3.7 million, compared with $2.7 million in the second quarter of 2018 and $2.7 million in the third quarter of 2017.  Loan production in the banking division during the third quarter of 2018 totaled $467.5 million, with a weighted average yield of 5.51%, compared with $439.3 million and 5.46%, respectively, in the second quarter of 2018 and $409.2 million and 4.74%, respectively, in the third quarter of 2017.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $2.0 billion during the third quarter of 2018.

Interest expense during the third quarter of 2018 moved higher to $22.1 million, compared with $13.9 million in the second quarter of 2018 and $9.5 million in the third quarter of 2017.  The Company's total cost of funds moved 15 basis points higher to 0.90% in the third quarter of 2018 as compared with the second quarter of 2018.  Deposit costs increased 22 basis points during the third quarter of 2018 to 0.69%, compared with 0.47% in the second quarter of 2018.  Costs of interest-bearing deposits increased during the quarter from 0.67% in the second quarter of 2018 to 0.93% in the third quarter, with approximately 12 basis points of this increase relating to the increase in brokered funds.

Non-interest Income

Non-interest income in the third quarter of 2018 was $30.2 million, an increase of $3.2 million, or 11.7%, compared with the same quarter in 2017.  Service charge revenue increased $2.2 million, or 20.5%, in the third quarter of 2018, as compared with the same period of 2017, due to the Company's recently completed acquisitions.

Revenue in the retail mortgage group totaled $17.6 million in the third quarter of 2018, an increase of 6.8% compared with $16.5 million in the third quarter of 2017.  Total production in the third quarter of 2018 for the retail mortgage group amounted to $479.1 million (87% purchase and 13% refinance), compared with $401.7 million in the same quarter of 2017 (89% purchase and 11% refinance).  Gain on sale spreads improved in the third quarter, moving to 3.00% from 2.94% in the second quarter.  The Company's open pipeline at the end of the third quarter of 2018 was $162.4 million, compared with $228.7 million at June 30, 2018 and $158.4 million at the end of the third quarter of 2017.

The Company's warehouse lending group continued to increase its profitability, as revenues from the division increased by $854,000, or 40.3%, during the third quarter of 2018, compared with the same period in 2017.  Net income for the division increased 94.0% from $1.1 million in the third quarter of 2017 to $2.2 million in the third quarter of 2018.  Loan production increased from $957.3 million in the third quarter of 2017 to approximately $1.22 billion in the current quarter.

Revenues from the Company's SBA division were $2.5 million during the third quarter of 2018, compared with $2.1 million during the third quarter of 2017, and net income for the division increased 62.8% from $734,000 for the third quarter of 2017 to $1.2 million for the third quarter of 2018.  The open pipeline increased to $99.5 million at the end of the quarter, compared with $56.0 million at the same time last year.

Non-interest Expense

Non-interest expense totaled $72.4 million in the third quarter of 2018, a decrease of $14.0 million compared with $86.4 million in the second quarter of 2018.  During the third quarter of 2018, the Company recorded $276,000 of merger and conversion charges, $962,000 of expense related to executive retirement, $229,000 of restructuring charges related to the Company's recently announced branch consolidation plan and $4,000 of loss on sale of bank premises, compared with $18.4 million of merger and conversion charges, $5.5 million of expense related to executive retirement and $196,000 of loss on sale of bank premises recorded in the second quarter of 2018.  Excluding these charges, operating expenses increased approximately $8.5 million, or 13.7%, to $70.9 million in the third quarter of 2018, up from $62.3 million in the second quarter of 2018.  Substantially all of the increase in operating expenses related to additional compensation and occupancy costs associated with the acquisitions of Atlantic Coast Financial Corporation ("Atlantic") and Hamilton State Bancshares, Inc. ("Hamilton") during the second quarter of 2018.

The Company continues to focus on improving its operating efficiency ratio. During the third quarter of 2018, the Company's adjusted efficiency ratio declined to 54.42%, compared with 57.53% in the second quarter of 2018.  Management expects to continue improving efficiency in future quarters as a result of the recently completed acquisitions of Atlantic and Hamilton, as well as from the recently announced cost savings strategies and branch consolidation plan.  Atlantic was fully integrated and cost savings were realized in the third quarter of 2018, while Hamilton was not fully integrated until early October 2018, with full cost savings benefits expected to be realized beginning in the fourth quarter of 2018.  The Company's additional branch consolidation and cost saving initiatives will take effect the first quarter of 2019.

Exclusive of the executive retirement expense in each quarter, salaries and benefits increased $3.2 million during the third quarter of 2018 to $37.5 million, from $34.3 million in the second quarter of 2018.  The increase is attributable to $4.8 million of additional salary expense from the acquisitions, offset by decreased expense in the retail mortgage division and reduced incentive and commission accruals based on production.  Management anticipates decreases in salary expense in the fourth quarter of 2018, when the full benefit of cost savings from the Hamilton acquisition and data conversion will become effective.

Occupancy costs increased 34.6% from $6.4 million in the second quarter of 2018 to $8.6 million in the third quarter of 2018, and data processing increased 32.3% from $6.4 million in the second quarter of 2018 to $8.5 million in the third quarter of 2018.  Both of these increases were directly attributable to the increased number of branches from the Hamilton acquisition, which was acquired the last business day of the second quarter of 2018.  Other operating costs increased by only $301,000, or 2.8%, to $11.1 million in the third quarter of 2018, primarily as a result of expenses from the increased branch network, offset by re-engineering efforts in the administrative and support cost centers.

Total credit costs (including provision and non-provision credit resolution-related costs) totaled $3.3 million in the third quarter of 2018, compared with $3.1 million in the same quarter in 2017 and $10.2 million in the second quarter of 2018.

Income Tax Expense

The Company's effective tax rate for the third quarter of 2018 was 24.3%, compared with 20.5% in the second quarter of 2018 and 28.8% during the third quarter of 2017.  The Company's effective tax rate for the nine months ended September 30, 2018 was 23.2% and management expects that its effective tax rates in the future will be consistent with the year-to-date blended rate of  22% to 24%.  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 September 30, 2018 were $11.43 billion, compared with $7.86 billion at December 31, 2017.   Loans, including loans held for sale, totaled $8.66 billion at September 30, 2018, compared with $6.24 billion at December 31, 2017 and $8.63 billion at June 30, 2018. Excluding the effects of recent acquisitions, growth in core loans (including legacy and purchased non-covered loans) during the quarter amounted to $68.5 million, or 3.4% on an annualized basis, and amounted to $490.3 million, or 11.5%, for the year-to-date period.  Net loan growth slowed in the third quarter due to the negative impact of early paydowns while production remained strong, increasing by over 14% as compared with the third quarter of 2017.  The growth in legacy loans was realized in commercial real estate, residential real estate and consumer installment loans, while the commercial and industrial and agriculture and real estate construction and development categories both declined during the quarter.  Loans held for sale, which includes both residential mortgage and SBA-guaranteed loans, decreased $7.1 million during the third quarter of 2018.  The Company's efforts to manage a diversified loan portfolio have resulted in concentration levels that are solidly below applicable regulatory guidance.

Investment securities at the end of the third quarter of 2018 were $1.20 billion, or 11.6% of earning assets, compared with $853.1 million, or 11.7% of earning assets, at December 31, 2017.

At September 30, 2018, total deposits amounted to $9.18 billion, or 92.4% 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 $3.29 billion, or 55.7%.  Excluding the recently completed acquisitions, deposits increased $191.1 million, or 11.1%.  Non-interest bearing deposits at the end of the current quarter were $2.33 billion, or 25.4% 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 $4.35 billion at September 30, 2018, compared with $3.52 billion at the end of 2017.  These funds represented 47.4% of the Company's total deposits at September 30, 2018, compared with 53.1% at the end of 2017.

Shareholders' equity at September 30, 2018 totaled $1.40 billion, compared with $804.5 million at December 31, 2017.  The increase in shareholders' equity resulted from the issuance of new shares of common stock in the Company's acquisitions of Atlantic, Hamilton and US Premium Finance Holding Company, plus earnings of $77.5 million during the year.  Tangible book value per share at September 30, 2018 was $17.78, compared with $17.12 per share at June 30, 2018.