Ameris Bancorp reported net income of $121.0 million, or $2.80 per diluted share, for the year ended December 31, 2018, compared with $73.5 million, or $1.98 per diluted share, for 2017.  For the quarter ending December 31, 2018, reported results include net income of $43.5 million, or $0.91 per diluted share, compared with $9.2 million, or $0.24 per diluted share, for the same period in 2017.

The Company reported adjusted net income of $146.2 million, or $3.38 per diluted share, for the year ended December 31, 2018, compared with $92.3 million, or $2.48 per diluted share, for 2017.  Adjusted net income for the fourth quarter of 2018 was $45.9 million, or $0.96 per diluted share, compared with $23.6 million, or $0.63 per diluted share, for the same quarter of 2017.  Adjusted net income for the 2018 fourth quarter and full year periods excludes after-tax merger and conversion charges, executive retirement benefits, restructuring charges related to recently announced branch consolidations, expenses related to Hurricane Michael, loss on the sale of bank premises and state tax credit related to the Company's 2017 income tax returns.  In addition, the 2017 financial results included expenses related to compliance resolution, accelerated premium amortization on sold loans and a charge of $13.4 million to income tax expense, related to the valuation of the Company's deferred tax asset, due to recent tax legislation that reduced the Company's future corporate income tax rate.

Commenting on the Company's earnings, Dennis J. Zember Jr., the Company's President and Chief Executive Officer, said, "I am delighted with how we finished 2018 and the momentum we have going into 2019.  We succeeded on the expense side, pushing our adjusted efficiency ratio down to 54% in the fourth quarter of 2018 and knowing we have more savings in the works. Despite the flat yield curve and enormous pressure on the margin, we reported the same margin, net of accretion, in 2018 that we did in 2017, notable especially given a 46% growth in total assets.  Lastly, we closed and fully integrated two bank acquisitions, in addition to finalizing the purchase of US Premium Finance, and closed out the year with an announcement regarding a merger with Fidelity Bank that, once closed, will make Ameris the largest non-super regional bank in the Atlanta MSA."

Highlights of the Company's results for the fourth quarter of 2018 include the following:

Increase of $1.05 in tangible book value per share to $18.83 at December 31, 2018, compared with $17.78 at September 30, 2018

Improvement in adjusted efficiency ratio to 54.10%, compared with 54.42% in the third quarter of 2018 and 60.88% in the fourth quarter of 2017

Adjusted return on average assets of 1.61%, compared with 1.53% in the third quarter of 2018 and 1.20% in the fourth quarter of 2017

Adjusted return on average tangible common equity of 20.95%, compared with 20.50% in the third quarter of 2018 and 13.91% in the fourth quarter of 2017

Highlights of the Company's results for 2018 include the following:

Growth in adjusted net earnings of $53.9 million, representing a 58.5% increase over 2017

Organic growth in loans of $482.6 million, or 8.5%, compared with $941.0 million, or 20.3%, in 2017

Adjusted return on average assets of 1.50%, compared with 1.26% in 2017

Adjusted return on average tangible common equity of 19.18%, compared with 14.66% in 2017

Stable net interest margin, excluding accretion, of 3.79% during 2018 and 2017

Loan-to-deposit ratio at the end of 2018 of 88.2%, compared with 91.3% at the end of 2017

Increase in total revenue of 26.7% to $461.8 million

Annualized net charge-offs of 0.18% of average total loans and 0.27% of average non-purchased loans

Year-over-year organic growth in non-interest bearing deposits of $183.5 million, or 10.3% 

Improvement in nonperforming assets, decreasing to 0.55% of total assets

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

Increase in Net Interest Income
Net interest income on a tax-equivalent basis increased 30.1% in 2018 to $347.5 million, up from $267.1 million for 2017.  Growth in earning assets from the Company's two acquisitions in 2018, as well as internal sources, contributed to the increase.  Average earning assets increased 31.1% in 2018 to $8.86 billion, compared with $6.76 billion for 2017.  Although the Company's net interest income increased, net interest margin for 2018, including accretion, declined only slightly to 3.92%, compared with 3.95% for 2017.  Yields on earning assets in 2018 were 4.71%, compared with 4.46% in 2017.

Accretion income for 2018 increased to $11.8 million, or 2.6% of total revenue, compared with $10.6 million, or 2.9%, respectively, for 2017.  Excluding the effect of accretion, the Company's margin was stable at 3.79% for both 2018 and 2017.  Management believes this is particularly notable given the material increase in average earning assets and intense pressure on deposit costs.  Yields on all loans, excluding the effect of accretion, increased to 4.89% in 2018, compared with 4.63% in 2017.

The Company's net interest margin was 3.91% for the fourth quarter of 2018, down slightly from 3.92% reported for the third quarter of 2018 and 3.94% reported for the fourth quarter of 2017.  Accretion income for the fourth quarter of 2018 increased to $4.1 million, compared with $3.7 million for the third quarter of 2018, and up from $2.2 million reported for the fourth quarter of 2017.  Excluding the effect of accretion, the Company's margin for the fourth quarter of 2018 was 3.75%, a slight decrease compared with 3.77% for the third quarter of 2018 and 3.82% for the fourth quarter of 2017.

Yields on all loans, excluding the effect of accretion, increased to 5.00% during the fourth quarter of 2018, compared with 4.95% in the third quarter of 2018 and 4.70% during the fourth quarter of 2017.  Loan production in the banking division during the fourth quarter of 2018 totaled $604.9 million, with weighted average yields of 5.74%, compared with $467.5 million and 5.51%, respectively, in the third quarter of 2018 and $419.8 million and 4.89%, respectively, in the fourth quarter of 2017.  Loan production in the lines of business (to include retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $1.8 billion during the fourth quarter of 2018, compared with $1.5 billion during the fourth quarter of 2017.

Total interest expense for 2018 was $69.9 million, compared with $34.2 million for 2017.  Deposit costs increased during 2018 to 0.62%, compared with 0.34% for 2017.  Noninterest-bearing deposits represented 27.5% of the total average deposits for 2018, compared with 28.6% for 2017.  The Company has been successful in aggressive sales efforts that led strong growth in deposits while managing a flat margin through each rate increase.  Management believes that current deposit pricing at the end of the year has reached a level that better supports management's growth goals and that slower increases in costs in 2019 will not reduce the impressive momentum in deposit growth rates that the Company is experiencing.

Interest expense during the fourth quarter of 2018 moved higher to $23.2 million, compared with $22.1 million in the third quarter of 2018 and $10.0 million in the fourth quarter of 2017.  The Company's total cost of funds moved 4 basis points higher to 0.94% in the fourth quarter of 2018 as compared with the third quarter of 2018.  Deposit costs increased 10 basis points during the fourth quarter of 2018 to 0.79%, compared with 0.69% in the third quarter of 2018.  Costs of interest-bearing deposits increased during the quarter from 0.93% in the third quarter of 2018 to 1.09% in the fourth quarter, with the material portion of the increase relating to NOW and MMDA accounts.

Non-interest Income
Non-interest income increased 13.4% in 2018 to $118.4 million, compared with $104.5 million for 2017, as a result of increased service charges and mortgage banking activity during 2018.  Service charge revenue increased $4.1 million, or 9.7%, during 2018 due to the Company's increased number of deposit accounts from organic growth and the acquisitions completed in 2018.

Revenue in the retail mortgage group totaled $71.7 million in 2018, an increase of 18.5%, compared with $60.5 million in 2017.  Total production in 2018 for the retail mortgage group amounted to $1.77 billion (87% purchase and 13% refinance), compared with $1.50 billion in 2017 (70% purchase and 30% refinance).  Gain on sale spreads continued to improve in the fourth quarter of 2018, moving to 3.06% from 3.00% in the third quarter.  Revenue and profitability, which traditionally slow in the fourth quarter each year, increased during the fourth quarter of 2018 due to recent recruiting efforts.  Net income for the Company's retail mortgage division was $4.0 million for the fourth quarter of 2018, compared with $3.7 million in the third quarter of 2018 and $2.2 million for the fourth quarter of 2017.

Profitability in the Company's warehouse lending group continued to increase, as revenues from the division increased 45.9% during the year, from $7.6 million for 2017 to $11.1 million in 2018.  Net income for the division increased 86.8% from $4.3 million in 2017 to $8.1 million in 2018.  Loan production increased from $3.44 billion in 2017 to $4.52 billion in the current year.   Net income for the Company's warehouse lending division was $2.0 million for the fourth quarter of 2018, compared with $2.2 million for the third quarter of 2018 and $1.4 million for the fourth quarter of 2017.  The Company experienced zero losses in this division during 2017 or 2018.

Non-interest Expense
Non-interest expense increased $61.7 million, or 26.6%, to $293.6 million for the year ended December 31, 2018, compared with $231.9 million for 2017.  During 2018, the Company recorded $31.8 million of charges to earnings, the majority of which were related to merger and conversion activity and executive retirement, compared to $7.8 million in 2017 that were mostly merger and compliance oriented.  Excluding these charges, adjusted expenses increased approximately $37.6 million, or 16.8%, to $261.8 million in 2018, up from $224.2 million in 2017.  Growth in operating expenses in 2018 amounted to 1.57% of growth in average assets, materially lower than the Company's gross overhead ratio for 2017 at 3.06%.  Intense efforts to leverage administrative expenses alongside 2018's merger activity provided the Company with the opportunity to notably improve its operating efficiency ratio.  The following table shows the detail of these charges and analysis:

The Company continues to focus on improving its operating efficiency ratio. The Company's adjusted efficiency ratio declined from 60.27% in 2017 to 56.19% in 2018.  During the fourth quarter of 2018, the Company's adjusted efficiency ratio declined to 54.10%, compared with 54.42% in the third quarter of 2018 and 60.88% in the fourth quarter of 2017.  Management expects to continue improving efficiency in future quarters as a result of the Company's acquisitions completed in 2018 and its announced cost savings strategies and branch consolidation plan.  Atlantic Coast Bank and Hamilton State Bank were fully integrated by the end of the fourth quarter of 2018, and full cost savings benefits have been realized.  The Company's additional branch consolidation and cost saving initiatives will take effect the first quarter of 2019.

Income Tax Expense
The Company's effective tax rate for the fourth quarter of 2018 was 13.9%, compared with 24.3% in the third quarter of 2018.  The reduced rate in the fourth quarter is a result of a large return to provision adjustment when the Company filed its 2017 income tax returns in the fourth quarter of 2018.  These factors, determined in the fourth quarter, impacted the overall expected tax rate for the year and the full impact was realized in the fourth quarter.  Excluding this benefit, which was removed in the adjusted net income amounts discussed above, the Company's tax rate for the fourth quarter of 21.4% was more in line with the year-to-date tax rate of 20.1%. This is significantly lower than the 2017 effective tax rate of 40.8% because of the Tax Cuts and Jobs Act that was enacted in the fourth quarter of 2017.

Balance Sheet Trends
Total assets increased $3.59 billion, or 45.7%, during 2018.  Total loans, including loans held for sale, purchased loans and purchased loan pools, were $8.62 billion at the end of 2018, compared with $6.24 billion at the end of 2017.  Excluding the effects of recent acquisitions, growth in core loans (including legacy and purchased non-covered loans) totaled $482.6 million, or 8.5%, during 2018, compared with $941.0 million, or 20.3%, in 2017.  As management expected, loan growth rates in the fourth quarter of 2018 slowed due to the negative impact of early paydowns.  Production remained strong in the fourth quarter of 2018, increasing by 29.4% from the third quarter of 2018 and by 44.1% from the fourth quarter of 2017.

At December 31, 2018, total deposits amounted to $9.65 billion, or 97.4% of total funding, compared with $6.63 billion and 94.8%, respectively, at December 31, 2017.  Excluding the Company's recently completed acquisitions and brokered funds, deposits increased $549.7 million, or 8.6%.  At December 31, 2018, noninterest-bearing deposit accounts were $2.52 billion, or 26.1% of total deposits, compared with $1.78 billion, or 26.8% of total deposits, at December 31, 2017.  Non-rate sensitive deposits (including non-interest bearing, NOW and savings) totaled $4.60 billion at December 31, 2018, compared with $3.52 billion at the end of 2017.  These funds represented 47.6% of the Company's total deposits at the end of 2018, compared with 53.1% at the end of 2017.

Stockholders' equity at December 31, 2018 totaled $1.46 billion, an increase of $651.9 million, or 81.0%, from December 31, 2017.  The increase in stockholders' equity was the result of the issuance of new shares of common stock in the Company's recent acquisitions, plus earnings of $121.0 million during 2018.  Tangible book value per share was $18.83 at the end of 2018, up from $17.78 at September 30, 2018 and $17.86 at the end of 2017.  Tangible common equity as a percentage of tangible assets was 8.22% at the end of 2018, compared with 7.77% at the end of the third quarter of 2017 and 8.62% at the end of 2017.

Credit Quality
During the fourth quarter of 2018, the Company recorded provision for loan loss expense of $3.7 million, compared with $2.1 million in the third quarter of 2018.  The increase in provision expense is mostly attributable to increased general reserves on consumer and premium finance loans based on loss history and agricultural loans affected by Hurricane Michael.  Nonperforming assets as a percentage of total assets decreased five basis points to 0.55% during the quarter.  As management expected, the net charge-off ratio for non-purchased loans decreased, by 23 basis points, as the elevated charge offs in the prior quarter resulting from the premium finance division, which were provided for and discussed in the second quarter of 2018.