Ameris Bancorp reported net income of $21.4 million, or $0.31 per diluted share, for the quarter ended September 30, 2019, compared with $41.4 million, or $0.87 per diluted share, for the quarter ended September 30, 2018.  The Company reported adjusted net income of $68.5 million, or $0.98 per diluted share, for the quarter ended September 30, 2019, compared with $43.3 million, or $0.91 per diluted share, for the same period in 2018.  Adjusted net income excludes after-tax merger and conversion charges, executive retirement benefits, servicing right valuation adjustments, restructuring charges related to previously announced branch consolidations, gain on bank owned life insurance ("BOLI") proceeds, loss on sale of bank premises and expenses related to hurricanes.

For the year-to-date period ending September 30, 2019, the Company reported net income of $100.2 million, or $1.83 per diluted share, compared with $77.5 million, or $1.85 per diluted share, for the same period in 2018.  The Company reported adjusted net income of $156.3 million, or $2.85 per diluted share, for the nine months ended September 30, 2019, compared with $100.3 million, or $2.40 per diluted share, for the same period in 2018.  Adjusted net income for the year-to-date period excludes the same items listed above for the Company's quarter-to-date period. 

Commenting on the Company's results, Palmer Proctor, the Company's Chief Executive Officer, said, "Our third quarter results were solid.  I am proud of our team's focus on integration efforts while also executing the financial strategies as planned.  Producing an adjusted ROA of 1.57% while working through the Fidelity integration is a direct reflection of our team's hard work and dedication.  These results give us confidence in our ability to make 2020 a success."

Highlights of the Company's results for the third quarter of 2019 include the following:

Adjusted return on average assets of 1.57%, compared with 1.56% in the second quarter of 2019 and 1.53% in the third quarter of 2018

Adjusted return on average tangible common equity of 18.95%, compared with 18.79% in the second quarter of 2019 and 20.50% in the third quarter of 2018

Adjusted efficiency ratio of 57.25%, compared with 53.77% in the second quarter of 2019 and 54.42% in the third quarter of 2018

Growth in adjusted net income of $25.2 million, representing a 58% increase over the third quarter of 2018

Organic growth in loans of $282.9 million, or 12.9% annualized

Improvement in deposit mix such that noninterest bearing deposits represent 29.85% of total deposits, up from 25.42% a year ago

Annualized net charge-offs of 0.07% of average total loans and 0.09% of average non-purchased loans

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

Acquisition of Fidelity
On July 1, 2019, the Company completed its acquisition of Fidelity Southern Corporation ("Fidelity"), the parent company of Fidelity Bank, Atlanta, Georgia.  Fidelity operated 62 full-service banking locations, 46 of which were located in Georgia and 16 of which were located in Florida.  The acquisition further expands the Company's existing Southeastern footprint in the attractive Atlanta market, where the Company is the largest community bank by deposit share after the acquisition.  The acquisition added $5.2 billion in total assets, $3.8 billion in total loans and $4.0 billion in total deposits.  Ameris Bank relocated its charter to Atlanta simultaneously with the closing of the transaction.  On October 1, the Company relocated its corporate headquarters to Atlanta to create consistency with the Bank's relocation.  The conversion of Fidelity's systems to the Company's is scheduled to be completed during the fourth quarter of 2019, after which management expects to fully realize operating efficiencies from the acquisition.  The Company believes all significant merger and conversion charges have been recorded in the third quarter and no material additional expenses are anticipated going forward related to the Fidelity acquisition.

Net Interest Income and Net Interest Margin
Net interest income on a tax-equivalent basis for the third quarter of 2019 totaled $149.9 million, compared with $102.7 million for the second quarter of 2019 and $100.1 million for third quarter of 2018.  The Company's net interest margin was 3.84% for the third quarter of 2019, down from 3.91% reported for the second quarter of 2019 and 3.92% reported for the third quarter of 2018.  Accretion income for the third quarter of 2019 increased to $4.2 million, compared with $3.1 million for the second quarter of 2019, and $3.7 million reported for the third quarter of 2018.  The linked quarter decrease in net interest margin was primarily attributable to the impact of the Fidelity acquisition and a decrease in the yield on total loans, partially offset by a decrease in deposit costs. 

Yields on all loans decreased to 5.16% during the third quarter of 2019, compared with 5.32% for the second quarter of 2019 and increased from 5.12% reported for the third quarter of 2018.  Loan production in the banking division during the third quarter of 2019 totaled $1.2 billion, with weighted average yields of 5.08%, compared with $854.7 million and 5.49%, respectively, in the second quarter of 2019 and $467.5 million and 5.51%, respectively, in the third quarter of 2018.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $4.2 billion during the third quarter of 2019, with weighted average yields of 4.51%, compared with $2.6 billion and 5.20%, respectively, during the second quarter of 2019 and $2.0 billion and 5.37%, respectively, during the third quarter of 2018.

Interest expense during the third quarter of 2019 increased to $39.6 million, compared with $27.4 million in the second quarter of 2019 and $22.1 million in the third quarter of 2018.  The Company's total cost of funds moved three basis points lower to 1.07% in the third quarter of 2019 as compared with the second quarter of 2019.  Deposit costs also decreased 11 basis points during the third quarter of 2019 to 0.86%, compared with 0.97% in the second quarter of 2019.  Costs of interest-bearing deposits decreased during the quarter from 1.34% in the second quarter of 2019 to 1.23% in the third quarter of 2019.

Noninterest Income
Noninterest income in the third quarter of 2019 was $77.0 million, compared with $35.2 million in the second quarter of 2019 and $30.2 million in the third quarter of 2018.  The increase for both the linked quarter and year over year is a result of increased service charges and mortgage banking activity.  In addition, other noninterest income increased during the quarter because the Company recorded a $4.3 million gain on BOLI proceeds during the quarter, due to the unfortunate death of a former officer of Fidelity.

Service charge revenue increased to $13.4 million in the third quarter of 2019, compared with $12.2 million in the second quarter of 2019 and $12.7 million in the third quarter of 2018 due to the Company's increased number of deposit accounts from organic growth and completion of the Fidelity acquisition.  The Fidelity acquisition added $3.6 million in service charge revenue, which was offset by approximately $2.7 million decline in revenue as a result of the Durbin Amendment.

Mortgage banking activity increased to $53.0 million in the third quarter of 2019, compared with $18.5 million for the second quarter of 2019 and $14.1 million for the third quarter of 2018.  This increase was a result of the Fidelity acquisition as well as additional growth from the low interest rate environment during the third quarter. Total production in the retail mortgage division increased to $1.8 billion for the third quarter of 2019, compared with $585.1 million for the second quarter of 2019 and $479.1 million for the third quarter of 2018.  Gain on sale spreads decreased in the third quarter of 2019 to 2.67% from 3.11% in the linked quarter and 3.00% for the third quarter of 2018. The gain on sale spread during the quarter was impacted by a shift in product mix and the transition of the pricing models through conversion. 

Noninterest income from the SBA division increased to $2.8 million in the third quarter of 2019, compared with $1.9 million in the second quarter of 2019 and $1.0 million in the third quarter of 2018.  Net income for the division increased over 60% from the second quarter of 2019 and over 83% from the third quarter of 2018 to $2.2 million in the third quarter of 2019.

Noninterest Expense
Noninterest expense increased $111.4 million, or 137.2%, to $192.7 million during the third quarter of 2019, compared with $81.3 million for the second quarter of 2019.  During the third quarter of 2019, the Company recorded $66.0 million of charges to earnings, the majority of which was related to merger and conversion activity and loss on sale of premises, compared with $6.3 million in charges in the second quarter of 2019 that were related principally to merger and conversion activity and loss on sale of premises.  Excluding these charges, adjusted expenses increased approximately $51.7 million, or 69.0%, to $126.7 million in the third quarter of 2019, from $74.9 million in the second quarter of 2019.  The majority of this increase is attributable to the acquisition of Fidelity and variable expenses related to increased mortgage production. The Company continues to focus on its operating efficiency ratio. The Company's adjusted efficiency ratio increased from 54.42% in the third quarter of 2018 and 53.77% in the second quarter of 2019 to 57.25% in the third quarter of 2019.

Income Tax Expense
The Company's effective tax rate for the third quarter of 2019 was 21.0%, compared with 23.7% in the second quarter of 2019 and 24.3% for the third quarter of 2018. The decreased rate for the third quarter of 2019 was attributable to a non-taxable gain on BOLI proceeds and a reduction in the Florida corporate income tax rate  partially offset by certain non-deductible merger expenses.

Balance Sheet Trends
Total assets at September 30, 2019 were $17.8 billion, compared with $11.4 billion at December 31, 2018.  Total loans, including loans held for sale, purchased loans and purchased loan pools, were $14.01 billion at September 30, 2019, compared with $8.62 billion at December 31, 2018.  Strong loan production in the second and third quarters of 2019 helped offset the impact of strategic runoff of certain acquired portfolios and early paydowns and payoffs experienced during the first quarter of 2019.  Loan production in the banking division during the third quarter of 2019 was 37% higher than the second quarter of 2019 and was 151% higher than the third quarter of 2018. 

At September 30, 2019, total deposits amounted to $13.66 billion, or 90.1% of total funding, compared with $9.65 billion and 97.4%, respectively, at December 31, 2018.  The increase in total deposits in the third quarter was materially impacted by the Company's acquisition of Fidelity.  Excluding the acquisition, deposits increased $33.9 million, or 1.4% annualized, in the third quarter.  At September 30, 2019, noninterest-bearing deposit accounts were $4.08 billion, or 29.9% of total deposits, compared with $2.52 billion, or 26.1% of total deposits, at December 31, 2018.  Non-rate sensitive deposits (including non-interest bearing, NOW and savings) totaled $6.84 billion at September 30, 2019, compared with $4.60 billion at December 31, 2018.  These funds represented 50.1% of the Company's total deposits at September 30, 2019, compared with 47.6% at the end of 2018.

Shareholders' equity at September 30, 2019 totaled $2.42 billion, an increase of $964.4 million, or 66.2%, from December 31, 2018.  The increase in shareholders' equity was primarily the result of the issuance of shares of common stock in the Company's acquisition of Fidelity plus earnings of $100.2 million during the first nine months of 2019, offset by dividends declared of $19.9 million and treasury stock purchases of $11.6 million.  Tangible book value per share was $20.29 at September 30, 2019, up from $18.83 at December 31, 2018.  Tangible common equity as a percentage of tangible assets was 8.43% at September 30, 2019, compared with 8.22% at the end of the 2018.

Credit Quality
Credit quality remains strong in the Company.  During the third quarter of 2019, the Company recorded provision for loan loss expense of $6.0 million, compared with $4.7 million in the second quarter of 2019.  Nonperforming assets as a percentage of total assets increased by 22 basis points to 0.73% during the quarter.  The increase in nonperforming assets is primarily as result of the Fidelity acquisition.  The net charge-off ratio for non-purchased loans was nine basis points for the third quarter of 2019, compared with 11 basis points in the second quarter of 2019 and 44 basis points in the third quarter of 2018.