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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, 2022
 
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-13901
abcb-20220930_g1.jpg
AMERIS BANCORP
(Exact name of registrant as specified in its charter)
Georgia58-1456434
(State of incorporation)(IRS Employer ID No.)
3490 Piedmont Rd N.E., Suite 1550
AtlantaGeorgia30305
(Address of principal executive offices)
(404)639-6500
(Registrant’s telephone number) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1 per shareABCBNasdaq Global Select Market

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  ý    No   ¨
 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No   ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer☐
    
Non-accelerated filer
☐ 
Smaller reporting company☐
    
 Emerging growth company☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ý

 There were 69,351,709 shares of Common Stock outstanding as of October 31, 2022.


AMERIS BANCORP
TABLE OF CONTENTS
  Page
   
PART I – FINANCIAL INFORMATION 
   
Item 1. 
   
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
 
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
   




Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands, except per share data)
 September 30, 2022 (unaudited)December 31, 2021
Assets  
Cash and due from banks$269,193 $307,813 
Federal funds sold and interest-bearing deposits in banks1,061,975 3,756,844 
Cash and cash equivalents1,331,168 4,064,657 
Debt securities available-for-sale, at fair value, net of allowance for credit losses of $79 and $—
1,255,149 592,621 
Debt securities held-to-maturity, at amortized cost, net of allowance for credit losses of $— and $— (fair value of $107,814 and $78,206)
130,214 79,850 
Other investments60,560 47,552 
Loans held for sale, at fair value 297,987 1,254,632 
Loans, net of unearned income18,806,856 15,874,258 
Allowance for credit losses(184,891)(167,582)
Loans, net18,621,965 15,706,676 
Other real estate owned, net843 3,810 
Premises and equipment, net222,694 225,400 
Goodwill1,023,071 1,012,620 
Other intangible assets, net110,903 125,938 
Cash value of bank owned life insurance386,533 331,146 
Other assets372,570 413,419 
Total assets$23,813,657 $23,858,321 
Liabilities  
Deposits:  
Noninterest-bearing$8,343,200 $7,774,823 
Interest-bearing11,123,719 11,890,730 
Total deposits19,466,919 19,665,553 
Securities sold under agreements to repurchase— 5,845 
Other borrowings725,664 739,879 
Subordinated deferrable interest debentures127,823 126,328 
Other liabilities374,181 354,265 
Total liabilities20,694,587 20,891,870 
Commitments and Contingencies (Note 8)
Shareholders’ Equity  
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0 shares issued and outstanding
— — 
Common stock, par value $1; 200,000,000 shares authorized; 72,247,386 and 72,017,126 shares issued
72,247 72,017 
Capital surplus1,932,906 1,924,813 
Retained earnings1,239,477 1,006,436 
Accumulated other comprehensive income, net of tax(50,734)15,590 
Treasury stock, at cost, 2,894,677 and 2,407,898 shares
(74,826)(52,405)
Total shareholders’ equity3,119,070 2,966,451 
Total liabilities and shareholders’ equity$23,813,657 $23,858,321 

 See notes to unaudited consolidated financial statements.
1

AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (unaudited)
(dollars and shares in thousands, except per share data)
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2022202120222021
Interest income    
Interest and fees on loans$216,400 $166,358 $584,706 $505,276 
Interest on taxable securities10,324 5,296 21,627 16,658 
Interest on nontaxable securities363 139 818 419 
Interest on deposits in other banks and federal funds sold7,215 1,253 13,093 2,394 
Total interest income234,302 173,046 620,244 524,747 
Interest expense    
Interest on deposits14,034 5,106 23,034 17,679 
Interest on other borrowings7,287 6,279 20,321 18,578 
Total interest expense21,321 11,385 43,355 36,257 
Net interest income212,981 161,661 576,889 488,490 
Provision for loan losses17,469 (3,984)27,962 (21,462)
Provision for unfunded commitments192 (5,516)10,980 (16,056)
Provision for other credit losses(9)(175)(135)(606)
Provision for credit losses17,652 (9,675)38,807 (38,124)
Net interest income after provision for credit losses195,329 171,336 538,082 526,614 
Noninterest income    
Service charges on deposit accounts11,168 11,486 33,374 33,322 
Mortgage banking activity40,350 56,460 162,049 225,177 
Other service charges, commissions and fees970 1,154 2,907 3,226 
Net gain (loss) on securities(21)530 200 519 
Other noninterest income12,857 6,932 37,546 21,531 
Total noninterest income65,324 76,562 236,076 283,775 
Noninterest expense    
Salaries and employee benefits78,697 79,671 244,523 261,161 
Occupancy and equipment12,983 11,979 38,456 34,572 
Data processing and communications expenses12,015 10,681 36,742 34,442 
Credit resolution-related expenses126 377 (343)1,546 
Advertising and marketing3,553 2,676 8,663 6,053 
Amortization of intangible assets4,710 3,387 15,035 11,578 
Merger and conversion charges— 183 977 183 
Loan servicing expense9,613 7,400 28,452 18,214 
Other noninterest expenses17,881 20,842 53,089 54,006 
Total noninterest expense139,578 137,196 425,594 421,755 
Income before income tax expense121,075 110,702 348,564 388,634 
Income tax expense28,520 29,022 84,245 93,665 
Net income92,555 81,680 264,319 294,969 
Other comprehensive loss    
Net unrealized holding losses arising during period on investment securities available-for-sale, net of tax benefit of $(10,128), $(834), $(17,631) and $(3,089)
(38,099)(3,139)(66,324)(11,620)
Total other comprehensive loss(38,099)(3,139)(66,324)(11,620)
Comprehensive income$54,456 $78,541 $197,995 $283,349 
Basic earnings per common share$1.34 $1.18 $3.82 $4.25 
Diluted earnings per common share$1.34 $1.17 $3.81 $4.23 
Weighted average common shares outstanding    
Basic69,125 69,440 69,213 69,445 
Diluted69,327 69,756 69,428 69,772 
See notes to unaudited consolidated financial statements.
2

AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity (unaudited)
(dollars in thousands)

Three Months Ended September 30, 2022
Common StockCapital SurplusRetained EarningsAccumulated Other Comprehensive Income (Loss), Net of TaxTreasury StockTotal Shareholders' Equity
SharesAmountSharesAmount
Balance, June 30, 202272,251,856 $72,251 $1,931,088 $1,157,359 $(12,635)2,891,395 $(74,687)$3,073,376 
Forfeitures of restricted shares(4,470)(4)(38)— — — — (42)
Share-based compensation— — 1,856 — — — — 1,856 
Purchase of treasury shares— — — — — 3,282 (139)(139)
Net income— — — 92,555 — — — 92,555 
Dividends on common shares ($0.15 per share)
— — — (10,437)— — — (10,437)
Other comprehensive loss during the period— — — — (38,099)— — (38,099)
Balance, September 30, 202272,247,386 $72,247 $1,932,906 $1,239,477 $(50,734)2,894,677 $(74,826)$3,119,070 
Nine Months Ended September 30, 2022
Common StockCapital SurplusRetained EarningsAccumulated Other Comprehensive Income (Loss), Net of TaxTreasury StockTotal Shareholders' Equity
SharesAmountSharesAmount
Balance, December 31, 202172,017,126 $72,017 $1,924,813 $1,006,436 $15,590 2,407,898 $(52,405)$2,966,451 
Issuance of restricted shares164,346 164 1,177 — — — — 1,341 
Forfeitures of restricted shares(13,889)(14)(119)— — — — (133)
Proceeds from exercise of stock options79,803 80 2,244 — — — — 2,324 
Share-based compensation— — 4,791 — — — — 4,791 
Purchase of treasury shares— — — — — 486,779 (22,421)(22,421)
Net income— — — 264,319 — — — 264,319 
Dividends on common shares ($0.45 per share)
— — — (31,278)— — — (31,278)
Other comprehensive loss during the period— — — — (66,324)— — (66,324)
Balance, September 30, 202272,247,386 $72,247 $1,932,906 $1,239,477 $(50,734)2,894,677 $(74,826)$3,119,070 


3

Three Months Ended September 30, 2021
Common StockCapital SurplusRetained EarningsAccumulated Other Comprehensive Income, Net of TaxTreasury StockTotal Shareholders' Equity
SharesAmountSharesAmount
Balance, June 30, 202172,007,871 $72,008 $1,920,566 $863,828 $25,024 2,240,662 $(44,422)$2,837,004 
Forfeitures of restricted shares(1,945)(2)(31)— — — — (33)
Proceeds from exercise of stock options10,000 10 278 — — — — 288 
Share-based compensation— — 2,151 — — — — 2,151 
Purchase of treasury shares— — — — — 139,829 (6,652)(6,652)
Net income— — — 81,680 — — — 81,680 
Dividends on common shares ($0.15 per share)
— — — (10,529)— — — (10,529)
Other comprehensive loss during the period— — — — (3,139)— — (3,139)
Balance, September 30, 202172,015,926 $72,016 $1,922,964 $934,979 $21,885 2,380,491 $(51,074)$2,900,770 
Nine Months Ended September 30, 2021
Common StockCapital SurplusRetained EarningsAccumulated Other Comprehensive Income, Net of TaxTreasury StockTotal Shareholders' Equity
SharesAmountSharesAmount
Balance, December 31, 202071,753,705 $71,754 $1,913,285 $671,510 $33,505 2,212,224 $(42,966)$2,647,088 
Issuance of restricted shares99,308 99 500 — — — — 599 
Forfeitures of restricted shares(2,695)(3)(50)— — — — (53)
Proceeds from exercise of stock options165,608 166 4,333 — — — — 4,499 
Share-based compensation— — 4,896 — — — — 4,896 
Purchase of treasury shares— — — — — 168,267 (8,108)(8,108)
Net income— — — 294,969 — — — 294,969 
Dividends on common shares ($0.45 per share)
— — — (31,500)— — — (31,500)
Other comprehensive loss during the period— — — — (11,620)— — (11,620)
Balance, September 30, 202172,015,926 $72,016 $1,922,964 $934,979 $21,885 2,380,491 $(51,074)$2,900,770 

See notes to unaudited consolidated financial statements. 
4

AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
 Nine Months Ended
September 30,
 20222021
Operating Activities  
Net income$264,319 $294,969 
Adjustments reconciling net income to net cash provided by (used in) operating activities:  
Depreciation13,808 12,864 
Net losses on sale or disposal of premises and equipment92 3,200 
Net write-downs on other assets— 260 
Provision for credit losses38,807 (38,124)
Net write-downs and (gains) losses on sale of other real estate owned(1,773)(581)
Share-based compensation expense4,859 5,884 
Amortization of intangible assets15,035 11,578 
Amortization of operating lease right of use assets8,783 12,389 
Provision for deferred taxes(21,699)32,074 
Net amortization of investment securities available-for-sale407 2,534 
Net amortization of investment securities held-to-maturity71 14 
Net amortization of other investments556 — 
Net gain on securities(200)(519)
Accretion of discount on purchased loans, net(30)(13,537)
Net amortization on other borrowings324 330 
Amortization of subordinated deferrable interest debentures1,495 1,485 
Loan servicing asset recovery(21,824)(9,990)
Originations of mortgage loans held for sale(3,265,190)(6,231,286)
Payments received on mortgage loans held for sale21,657 38,178 
Proceeds from sales of mortgage loans held for sale3,919,672 5,752,055 
Net (gains) losses on sale of mortgage loans held for sale83,975 (126,533)
Originations of SBA loans(44,664)(51,155)
Proceeds from sales of SBA loans53,961 54,861 
Net gains on sale of SBA loans(5,191)(5,059)
Increase in cash surrender value of bank owned life insurance(5,433)(3,628)
Gain on bank owned life insurance proceeds(55)(603)
Net gains on other loans held for sale— (457)
Loss on sale of mortgage servicing rights316 — 
Change attributable to other operating activities711 1,244 
Net cash provided by (used in) operating activities1,062,789 (257,553)
Investing Activities, net of effects of business combinations  
Proceeds from maturities of time deposits in other banks— 249 
Purchases of securities available-for-sale(894,260)— 
Purchases of investment securities held-to-maturity(52,111)(64,517)
Proceeds from maturities and paydowns of securities available-for-sale147,291 281,244 
Proceeds from maturities and paydowns of securities held-to-maturity1,676 52 
Net (increase) decrease in other investments(13,364)1,102 
Net increase in loans(2,764,936)(215,289)
Purchases of premises and equipment(11,307)(21,990)
Proceeds from sale of premises and equipment 46 993 
Proceeds from sales of other real estate owned5,086 10,141 
Proceeds from sale of mortgage servicing rights119,845 — 
Purchases of bank owned life insurance(50,000)(100,000)
Proceeds from bank owned life insurance101 1,309 
Payments received on other loans held for sale— 9,136 
Proceeds from sales of other loans held for sale— 156,803 
Net cash and cash equivalents paid in acquisitions(14,003)— 
Net cash provided by (used in) investing activities(3,525,936)59,233 
  (Continued)

5

AMERIS BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
 Nine Months Ended
September 30,
 20222021
Financing Activities, net of effects of business combinations  
Net increase (decrease) in deposits$(198,634)$1,875,666 
Net decrease in securities sold under agreements to repurchase(5,845)(7,139)
Proceeds from other borrowings350,000 — 
Repayment of other borrowings(364,539)(110)
Proceeds from exercise of stock options2,324 4,499 
Dividends paid - common stock(31,227)(31,354)
Purchase of treasury shares(22,421)(8,108)
Net cash provided by (used in) financing activities(270,342)1,833,454 
Net increase (decrease) in cash, cash equivalents and restricted cash(2,733,489)1,635,134 
Cash, cash equivalents and restricted cash at beginning of period4,064,657 2,117,306 
Cash, cash equivalents and restricted cash at end of period$1,331,168 $3,752,440 
Supplemental Disclosures of Cash Flow Information  
Cash paid during the period for:  
Interest$42,040 $35,389 
Income taxes82,551 55,651 
Loans transferred to other real estate owned346 2,274 
Loans transferred from loans held for sale to loans held for investment192,425 134,941 
Loans provided for the sales of other real estate owned2,288 1,052 
Right-of-use assets obtained in exchange for new operating lease liabilities1,537 10,270 
Assets acquired in business acquisitions10,641 — 
Liabilities assumed in business acquisitions(3,362)— 
Change in unrealized loss on securities available-for-sale, net of tax(66,324)(11,620)
  (Concluded)

See notes to unaudited consolidated financial statements.

6

AMERIS BANCORP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 2022
 
NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Nature of Business

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Atlanta, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At September 30, 2022, the Bank operated 164 branches in select markets in Georgia, Alabama, Florida, North Carolina 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.

Basis of Presentation

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 (“GAAP”) for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments, consisting of normal recurring adjustments, 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 three and nine month periods ended September 30, 2022 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 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

In preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, interest-bearing deposits in banks, federal funds sold and restricted cash. Restricted cash held for securitization investors, which are reported on the Company's consolidated balance sheets in cash and due from banks, was $0 and $43.0 million at September 30, 2022 and December 31, 2021, respectively.

Reclassifications

Certain reclassifications of prior year amounts have been made to conform with the current year presentations. The reclassifications had no effect on net income or shareholders' equity as previously reported.

Accounting Standards Pending Adoption

ASU No. 2022-02 – Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). ASU 2022-02 eliminates the troubled debt restructuring ("TDR") measurement and recognition guidance and requires that entities evaluate whether the modification represents a new loan or a continuation of an existing loan consistent with the accounting for other loan modifications. Additional disclosures relating to modifications to borrowers experiencing financial difficulty are required under ASU 2022-02. ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination. ASU 2022-02 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The amendments of ASU 2022-02 should be adopted prospectively. The amendments related to the recognition and measurement of TDRs may optionally be adopted using a modified retrospective transition method.
7

Early adoption is permitted. The Company is currently evaluating the impact on the consolidated financial statements of adopting ASU 2022-02.

ASU No. 2021-01 – Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"). ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. Because the guidance is intended to assist stakeholders during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact on the consolidated financial statements of adopting ASU 2021-01.

ASU No. 2020-04 – Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments, which are elective, provide expedients and exceptions for applying GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate that is expected to be discontinued due to reference rate reform. The optional expedients for contract modifications apply consistently for all contracts or transactions within the relevant Codification Topic, Subtopic, or Industry Subtopic that contains the guidance that otherwise would be required to be applied, while those for hedging relationships can be elected on an individual hedging relationship basis. Because the guidance is intended to assist stakeholders during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. The Company has established a working committee with representatives from relevant functional areas to inventory the contracts and accounts that are tied to LIBOR and develop a transition plan for the affected items. The Company is currently evaluating the impact on the consolidated financial statements of adopting ASU 2020-04.

NOTE 2 – INVESTMENT SECURITIES

The amortized cost and estimated fair value of securities available-for-sale along with gross unrealized gains and losses are summarized as follows:

(dollars in thousands)
Securities available-for-sale
Amortized
Cost		Allowance for Credit LossesGross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
September 30, 2022
U.S. Treasuries$520,085 $— $— $(16,275)$503,810 
U.S. government-sponsored agencies1,039 — — (62)977 
State, county and municipal securities40,842 — 10 (1,584)39,268 
Corporate debt securities15,897 (79)— (522)15,296 
SBA pool securities31,063 — 4 (2,216)28,851 
Mortgage-backed securities710,523 — 12 (43,588)666,947 
Total debt securities available-for-sale$1,319,449 $(79)$26 $(64,247)$1,255,149 
December 31, 2021
U.S. government-sponsored agencies$7,084 $— $88 $— $7,172 
State, county and municipal securities45,470 — 2,342 — 47,812 
Corporate debt securities27,897 — 719 (120)28,496 
SBA pool securities44,312 — 958 (69)45,201 
Mortgage-backed securities448,124 — 15,822 (6)463,940 
Total debt securities available-for-sale$572,887 $— $19,929 $(195)$592,621 

8

The amortized cost and estimated fair value of securities held-to-maturity along with gross unrealized gains and losses are summarized as follows:

(dollars in thousands)
Securities held-to-maturity
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
September 30, 2022
State, county and municipal securities$31,905 $— $(6,832)$25,073 
Mortgage-backed securities98,309 — (15,568)82,741 
Total debt securities held-to-maturity$130,214 $— $(22,400)$107,814 
December 31, 2021
State, county and municipal securities$8,905 $4 $(198)$8,711 
Mortgage-backed securities70,945 — (1,450)69,495 
Total debt securities held-to-maturity$79,850 $4 $(1,648)$78,206 

The amortized cost and estimated fair value of debt securities available-for-sale and held-to-maturity as of September 30, 2022, by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying these securities may be called or repaid without penalty. Therefore, these securities are not included in the maturity categories in the following maturity summary:

Available-for-SaleHeld-to-Maturity
(dollars in thousands)
Amortized
Cost		Estimated Fair ValueAmortized
Cost		Estimated Fair Value
Due in one year or less$5,874 $5,861 $— $— 
Due from one year to five years548,134 530,891 — — 
Due from five to ten years25,568 24,709 — — 
Due after ten years29,350 26,741 31,905 25,073 
Mortgage-backed securities710,523 666,947 98,309 82,741 
 $1,319,449 $1,255,149 $130,214 $107,814 

Securities with a carrying value of approximately $663.6 million and $366.7 million at September 30, 2022 and December 31, 2021, respectively, serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law.

The following table shows the gross unrealized losses and estimated fair value of available-for-sale securities aggregated by category and length of time that securities have been in a continuous unrealized loss position at September 30, 2022 and December 31, 2021:

 Less Than 12 Months12 Months or MoreTotal
(dollars in thousands)
Securities available-for-sale
Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses
September 30, 2022      
U.S. Treasuries$503,810 $(16,275)$— $— $503,810 $(16,275)
U.S. government-sponsored agencies977 (62)— — 977 (62)
State, county and municipal securities30,049 (1,584)— — 30,049 (1,584)
Corporate debt securities12,596 (301)1,200 (221)13,796 (522)
SBA pool securities26,326 (2,170)2,191 (46)28,517 (2,216)
Mortgage-backed securities664,877 (43,588)1 — 664,878 (43,588)
Total debt securities available-for-sale$1,238,635 $(63,980)$3,392 $(267)$1,242,027 $(64,247)
December 31, 2021      
Corporate debt securities$— $— $1,380 $(120)$1,380 $(120)
SBA pool securities1,312 (6)2,572 (63)3,884 (69)
Mortgage-backed securities5,514 (6)1 — 5,515 (6)
Total debt securities available-for-sale$6,826 $(12)$3,953 $(183)$10,779 $(195)

9

As of September 30, 2022, the Company’s available-for-sale security portfolio consisted of 441 securities, 425 of which were in an unrealized loss position. At September 30, 2022, the Company held 338 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. At September 30, 2022, the Company held 33 U.S. Small Business Administration (“SBA”) pool securities, 30 state, county and municipal securities, five corporate securities, one U.S. government-sponsored agency security, and 18 U.S. Treasury securities that were in an unrealized loss position.

The following table shows the gross unrealized losses and estimated fair value of held-to-maturity securities aggregated by category and length of time that securities have been in a continuous unrealized loss position at September 30, 2022 and December 31, 2021:

 Less Than 12 Months12 Months or MoreTotal
(dollars in thousands)
Securities held-to-maturity
Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses
September 30, 2022
State, county and municipal securities$24,323 $(6,382)$750 $(450)$25,073 $(6,832)
Mortgage-backed securities36,036 (3,065)46,705 (12,503)82,741 (15,568)
Total debt securities held-to-maturity$60,359 $(9,447)$47,455 $(12,953)$107,814 $(22,400)
December 31, 2021
State, county and municipal securities$3,707 $(198)$— $— $3,707 $(198)
Mortgage-backed securities69,495 (1,450)— — 69,495 (1,450)
Total debt securities held-to-maturity$73,202 $(1,648)$— $— $73,202 $(1,648)

As of September 30, 2022, the Company’s held-to-maturity security portfolio consisted of 24 securities, all of which were in an unrealized loss position. At September 30, 2022, the Company held 18 mortgage-backed securities and six state, county and municipal securities that were in an unrealized loss position.

During 2022 and 2021, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities. 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, 2022 or December 31, 2021.

At September 30, 2022 and December 31, 2021, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate available-for-sale securities in an unrealized loss position on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation, to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security before recovering its amortized cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the above criteria is not met, management evaluates whether the decline in fair value is attributable to credit or resulted from other factors. The Company does not intend to sell these available-for-sale investment securities at an unrealized loss position at September 30, 2022, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Based on the results of management's review, at September 30, 2022, management determined that $79,000 was attributable to credit impairment and an allowance for credit losses was recorded. The remaining $64.2 million in unrealized loss was determined to be from factors other than credit.

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Allowance for credit losses
2022202120222021
Beginning balance$88 $81 $— $112 
Provision for expected credit losses(9)(81)79 (112)
Ending balance$79 $— $79 $— 

10

The Company's held-to-maturity securities have no expected credit losses, and no related allowance for credit losses has been established.

Total net gain (loss) on securities reported on the consolidated statements of income and comprehensive income is comprised of the following for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
Unrealized holding gains (losses) on equity securities$(21)$(2)$(70)$(13)
Net realized gains on sales of other investments— 532 270 532 
Net gain (loss) on securities$(21)$530 $200 $519 

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans are stated at amortized cost. Balances within the major loans receivable categories are presented in the following table:

(dollars in thousands)September 30, 2022December 31, 2021
Commercial, financial and agricultural$2,245,287 $1,875,993 
Consumer installment162,345 191,298 
Indirect automobile137,183 265,779 
Mortgage warehouse980,342 787,837 
Municipal516,797 572,701 
Premium finance1,062,724 798,409 
Real estate – construction and development2,009,726 1,452,339 
Real estate – commercial and farmland7,516,309 6,834,917 
Real estate – residential4,176,143 3,094,985 
 $18,806,856 $15,874,258 

Accrued interest receivable on loans is reported in other assets on the consolidated balance sheets totaling $55.4 million and $54.8 million at September 30, 2022 and December 31, 2021, respectively. The Company recorded an allowance for credit losses of $0 and $214,000 related to deferred interest on loans modified under its Disaster Relief Program at September 30, 2022 and December 31, 2021, respectively.

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 to interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. 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. Past-due loans are loans whose principal or interest is past due 30 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.

11

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

(dollars in thousands)September 30, 2022December 31, 2021
Commercial, financial and agricultural$10,344 $14,214 
Consumer installment412 476 
Indirect automobile393 947 
Real estate – construction and development168 492 
Real estate – commercial and farmland14,172 15,365 
Real estate – residential93,187 53,772 
$118,676 $85,266 

There was no interest income recognized on nonaccrual loans during the nine months ended September 30, 2022 and 2021.

The following table presents an analysis of nonaccrual loans with no related allowance for credit losses:

(dollars in thousands)September 30, 2022December 31, 2021
Commercial, financial and agricultural$— $164 
Real estate – construction and development— 209 
Real estate – commercial and farmland2,715 2,061 
Real estate – residential4,142 7,942 
$6,857 $10,376 

12

The following table presents an analysis of past-due loans as of September 30, 2022 and December 31, 2021:

(dollars in thousands)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
September 30, 2022       
Commercial, financial and agricultural$7,515 $2,494 $10,382 $20,391 $2,224,896 $2,245,287 $2,075 
Consumer installment1,379 763 706 2,848 159,497 162,345 519 
Indirect automobile422 169 230 821 136,362 137,183 
Mortgage warehouse— — — — 980,342 980,342 — 
Municipal— — — — 516,797 516,797 — 
Premium finance12,432 7,499 9,340 29,271 1,033,453 1,062,724 9,340 
Real estate – construction and development20,430 2,003 492 22,925 1,986,801 2,009,726 444 
Real estate – commercial and farmland2,465 372 11,441 14,278 7,502,031 7,516,309 — 
Real estate – residential26,599 8,256 90,488 125,343 4,050,800 4,176,143 — 
Total$71,242 $21,556 $123,079 $215,877 $18,590,979 $18,806,856 $12,378 
December 31, 2021       
Commercial, financial and agricultural$3,431 $2,005 $12,017 $17,453 $1,858,540 $1,875,993 $1,165 
Consumer installment1,786 871 891 3,548 187,750 191,298 584 
Indirect automobile772 185 473 1,430 264,349 265,779 — 
Mortgage warehouse— — — — 787,837 787,837 — 
Municipal— — — — 572,701 572,701 — 
Premium finance6,992 4,340 9,134 20,466 777,943 798,409 9,134 
Real estate – construction and development16,601 1,398 2,190 20,189 1,432,150 1,452,339 1,758 
Real estate – commercial and farmland6,713 1,150 5,924 13,787 6,821,130 6,834,917 7 
Real estate – residential17,729 4,266 49,839 71,834 3,023,151 3,094,985 — 
Total$54,024 $14,215 $80,468 $148,707 $15,725,551 $15,874,258 $12,648 

Collateral-Dependent Loans

Collateral-dependent loans are loans where repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. If the Company determines that foreclosure is probable, these loans are written down to the lower of cost or fair value of the collateral less estimated costs to sell. When repayment is expected to be from the operation of the collateral, the allowance for credit losses is calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the allowance for credit loss as the amount by which the amortized cost basis of the financial asset exceeds the estimated fair value of the collateral.

13

The following table presents an analysis of individually evaluated collateral-dependent financial assets and related allowance for credit losses:

September 30, 2022December 31, 2021
(dollars in thousands)BalanceAllowance for Credit LossesBalanceAllowance for Credit Losses
Commercial, financial and agricultural$7,365 $6,646 $2,613 $723 
Premium finance— — 2,989 30 
Real estate – construction and development280 — 1,432 45 
Real estate – commercial and farmland16,186 1,207 33,332 6,646 
Real estate – residential16,146 2,110 11,712 453 
$39,977 $9,963 $52,078 $7,897 

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:

Pass (Grades 1 - 5) – These grades represent acceptable credit risk to the Company based on factors including creditworthiness of the borrower, current performance and nature of the collateral.

Other Assets Especially Mentioned (Grade 6) – 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.

Substandard (Grade 7) – This grade represents loans which are inadequately protected by the current credit worthiness 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.

Doubtful (Grade 8) – 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.

Loss (Grade 9) – 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 loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following tables present the loan portfolio's amortized cost by class of financing receivable, risk grade and year of origination (in thousands) as of September 30, 2022 and December 31, 2021. Generally, current period renewals of credit are underwritten again at the point of renewal and considered current period originations for purposes of the tables below. The Company had an immaterial amount of revolving loans which converted to term loans and the amortized cost basis of those loans is included in the applicable origination year. There were no loans risk graded 8 or 9 at September 30, 2022 or December 31, 2021.
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As of September 30, 2022
Term Loans by Origination YearRevolving Loans Amortized Cost Basis
20222021202020192018PriorTotal
Commercial, Financial and Agricultural
Risk Grade:
Pass$818,365 $585,385 $193,526 $122,965 $69,367 $50,153 $382,953 $2,222,714 
6— — 105 576 55 2,895 760 4,391 
76,407 1,026 714 3,480 1,308 3,079 2,168 18,182 
Total commercial, financial and agricultural$824,772 $586,411 $194,345 $127,021 $70,730 $56,127 $385,881 $2,245,287 
Consumer Installment
Risk Grade:
Pass$34,089 $15,217 $41,532 $25,909 $19,219 $15,083 $9,875 $160,924 
638 — — — — 128 5 171 
772 148 290 114 189 399 38 1,250 
Total consumer installment$34,199 $15,365 $41,822 $26,023 $19,408 $15,610 $9,918 $162,345 
Indirect Automobile
Risk Grade:
Pass$— $— $— $13,565 $60,812 $61,749 $— $136,126 
6— — — — — 15 — 15 
7— — — 43 194 805 — 1,042 
Total indirect automobile$— $— $— $13,608 $61,006 $62,569 $— $137,183 
Mortgage Warehouse
Risk Grade:
Pass$— $— $— $— $— $— $942,279 $942,279 
6— — — — — — 18,895 18,895 
7— — — — — — 19,168 19,168 
Total mortgage warehouse$— $— $— $— $— $— $980,342 $980,342 
Municipal
Risk Grade:
Pass$17,385 $46,009 $188,438 $9,820 $4,605 $250,540 $— $516,797 
Total municipal$17,385 $46,009 $188,438 $9,820 $4,605 $250,540 $— $516,797 
Premium Finance
Risk Grade:
Pass$1,028,078 $25,252 $54 $— $— $— $— $1,053,384 
77,692 1,647 1 — — — — 9,340 
Total premium finance$1,035,770 $26,899 $55 $— $— $— $— $1,062,724 
Real Estate – Construction and Development
Risk Grade:
Pass$666,198 $798,554 $307,586 $128,258 $8,973 $26,111 $30,577 $1,966,257 
68,341 19,987 432 — 174 189 — 29,123 
720 286 164 5 13,236 635 — 14,346 
Total real estate – construction and development$674,559 $818,827 $308,182 $128,263 $22,383 $26,935 $30,577 $2,009,726 
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As of September 30, 2022
Term Loans by Origination YearRevolving Loans Amortized Cost Basis
20222021202020192018PriorTotal
Real Estate – Commercial and Farmland
Risk Grade:
Pass$1,535,883 $2,039,201 $1,091,901 $868,208 $469,560 $1,312,867 $96,329 $7,413,949 
6607 119 — 31,118 1,125 19,252 — 52,221 
7361 5,235 2,905 11,859 6,734 23,028 17 50,139 
Total real estate – commercial and farmland$1,536,851 $2,044,555 $1,094,806 $911,185 $477,419 $1,355,147 $96,346 $7,516,309 
Real Estate - Residential
Risk Grade:
Pass$1,249,401 $1,226,383 $559,613 $277,910 $120,863 $407,922 $228,525 $4,070,617 
6447 147 94 693 369 3,419 422 5,591 
71,824 15,915 20,652 26,903 11,772 20,911 1,958 99,935 
Total real estate - residential$1,251,672 $1,242,445 $580,359 $305,506 $133,004 $432,252 $230,905 $4,176,143 
Total Loans
Risk Grade:
Pass$5,349,399 $4,736,001 $2,382,650 $1,446,635 $753,399 $2,124,425 $1,690,538 $18,483,047 
69,433 20,253 631 32,387 1,723 25,898 20,082 110,407 
716,376 24,257 24,726 42,404 33,433 48,857 23,349 213,402 
Total loans$5,375,208 $4,780,511 $2,408,007 $1,521,426 $788,555 $2,199,180 $1,733,969 $18,806,856 

As of December 31, 2021
Term Loans by Origination YearRevolving Loans Amortized Cost Basis
20212020201920182017PriorTotal
Commercial, Financial and Agricultural
Risk Grade:
Pass$903,630 $279,037 $188,810 $118,613 $50,737 $40,376 $262,951 $1,844,154 
6190 — 393 427 368 1,832 1,961 5,171 
79,216 1,268 4,098 1,472 2,566 6,019 2,029 26,668 
Total commercial, financial and agricultural$913,036 $280,305 $193,301 $120,512 $53,671 $48,227 $266,941 $1,875,993 
Consumer Installment
Risk Grade:
Pass$35,781 $59,221 $37,195 $27,266 $9,787 $11,021 $9,437 $189,708 
6— — — — — 135 5 140 
759 283 290 216 103 405 94 1,450 
Total consumer installment$35,840 $59,504 $37,485 $27,482 $9,890 $11,561 $9,536 $191,298 
Indirect Automobile
Risk Grade:
Pass$— $— $20,276 $101,969 $90,294 $51,468 $— $264,007 
6— — — 24 10 19 — 53 
7— — 55 234 384 1,046 — 1,719 
Total indirect automobile$— $— $20,331 $102,227 $90,688 $52,533 $— $265,779 
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As of December 31, 2021
Term Loans by Origination YearRevolving Loans Amortized Cost Basis
20212020201920182017PriorTotal
Mortgage Warehouse
Risk Grade:
Pass$— $— $— $— $— $— $787,837 $787,837 
Total mortgage warehouse$— $— $— $— $— $— $787,837 $787,837 
Municipal
Risk Grade:
Pass$44,727 $219,385 $14,831 $5,494 $109,040 $179,224 $— $572,701 
Total municipal$44,727 $219,385 $14,831 $5,494 $109,040 $179,224 $— $572,701 
Premium Finance
Risk Grade:
Pass$787,884 $1,059 $26 $— $302 $4 $— $789,275 
79,039 95 — — — — — 9,134 
Total premium finance$796,923 $1,154 $26 $— $302 $4 $— $798,409 
Real Estate – Construction and Development
Risk Grade:
Pass$826,094 $290,814 $176,476 $35,773 $24,533 $44,514 $21,267 $1,419,471 
66,527 549 — 15,260 — 2,101 — 24,437 
71,143 678 7 2,476 57 1,011 3,059 8,431 
Total real estate – construction and development$833,764 $292,041 $176,483 $53,509 $24,590 $47,626 $24,326 $1,452,339 
Real Estate – Commercial and Farmland
Risk Grade:
Pass$2,186,291 $1,205,578 $1,119,239 $542,295 $486,477 $1,103,675 $80,379 $6,723,934 
6416 — 1,036 14,760 5,334 21,665 — 43,211 
74,709 2,682 11,109 9,076 4,861 35,315 20 67,772 
Total real estate – commercial and farmland$2,191,416 $1,208,260 $1,131,384 $566,131 $496,672 $1,160,655 $80,399 $6,834,917 
Real Estate - Residential
Risk Grade:
Pass$1,171,008 $638,232 $329,247 $149,990 $108,538 $408,240 $217,982 $3,023,237 
6145 66 1,106 505 356 3,717 49 5,944 
72,405 10,167 21,239 11,376 4,597 13,970 2,050 65,804 
Total real estate - residential$1,173,558 $648,465 $351,592 $161,871 $113,491 $425,927 $220,081 $3,094,985 
Total Loans
Risk Grade:
Pass$5,955,415 $2,693,326 $1,886,100 $981,400 $879,708 $1,838,522 $1,379,853 $15,614,324 
67,278 615 2,535 30,976 6,068 29,469 2,015 78,956 
726,571 15,173 36,798 24,850 12,568 57,766 7,252 180,978 
Total loans$5,989,264 $2,709,114 $1,925,433 $1,037,226 $898,344 $1,925,757 $1,389,120 $15,874,258 

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
17

interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

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 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.

In the normal course of business, the Company modifies loans with a modification of the interest rate or terms that are not deemed to be troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first nine months of 2022 and 2021 totaling $296.4 million and $322.8 million, respectively, under such parameters.

As of September 30, 2022 and December 31, 2021, the Company had a balance of $39.8 million and $76.6 million, respectively, in troubled debt restructurings. The Company has recorded $649,000 and $654,000 in previous charge-offs on such loans at September 30, 2022 and December 31, 2021, respectively. The Company’s balance in the allowance for credit losses allocated to such troubled debt restructurings was $2.6 million and $10.5 million at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the loans by class modified as troubled debt restructurings which occurred during the three and nine months ended September 30, 2022 and 2021. These modifications did not have a material impact on the Company’s allowance for credit losses.

Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural1$450 —$— 3$916 6$532 
Consumer installment—— —— —— 27 
Premium finance—— —— 5456 —— 
Real estate – construction and development124 —— 124 —— 
Real estate – commercial and farmland117 —— 299 516,257 
Real estate – residential2268 91,818 61,335 213,270 
Total5$759 9$1,818 17$2,830 34$20,066 

The following table presents the outstanding balance of troubled debt restructurings by class that defaulted (defined as 30 days past due) during the three and nine months ended September 30, 2022 and 2021. These defaults did not have a material impact on the Company's allowance for credit losses.
18


Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural—$— 1$1 1$348 1$1 
Consumer installment—— 11 22 11 
Indirect automobile320 423 927 1676 
Real estate – construction and development124 —— 124 —— 
Real estate – commercial and farmland—— —— 18 —— 
Real estate – residential141,398 4489 232,801 151,111 
Total18$1,442 10$514 37$3,210 33$1,189 

The following table presents the amount of troubled debt restructurings by loan class classified separately as accrual and nonaccrual at September 30, 2022 and December 31, 2021:

September 30, 2022Accruing LoansNon-Accruing Loans
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural8$1,342 3$353 
Consumer installment46 1012 
Indirect automobile170595 25101 
Premium finance5456 —— 
Real estate – construction and development2698 124 
Real estate – commercial and farmland178,091 366 
Real estate – residential20624,515 293,494 
Total412$35,703 71$4,050 


December 31, 2021Accruing LoansNon-Accruing Loans
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural12$1,286 6$83 
Consumer installment716 1735 
Indirect automobile2331,037 52273 
Real estate – construction and development4789 113 
Real estate – commercial and farmland2535,575 55,924 
Real estate – residential21326,879 394,678 
Total494$65,582 120$11,006 

Allowance for Credit Losses on Loans

The allowance for credit losses represents an allowance for expected losses over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company reasonably expects to execute a troubled debt restructuring with a borrower. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged off in accordance with the Federal Financial Institutions Examination Council’s (the “FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged off and any further collections are
19

treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 9 (Loss per the regulatory guidance), the uncollectible portion is charged off.

The Company’s methodologies for estimating the allowance for credit losses consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of loans with similar risk characteristics for which the historical loss experience was observed. The Company utilizes a one year reasonable and supportable forecast period. The Company’s methodologies revert back to historical loss information on a straight-line basis over four quarters after the reasonable and supportable forecast period.

During the nine months ended September 30, 2022, the allowance for credit losses increased due to organic loan growth, partially offset by improvement in forecasted macroeconomic factors. The allowance for credit losses was determined at September 30, 2022 using the Moody's baseline economic forecast. The allowance for credit losses was determined at December 31, 2021 using a weighting of five economic forecasts from Moody's. The Moody's baseline scenario was weighted at 10%, the downside 75th percentile S-2 scenario was weighted at 10%, the downside 90th percentile S-3 scenario was weighted at 50%, the slower trend growth scenario was weighted at 20% and the stagflation scenario was weighted at 10%. The current forecast reflects, among other things, improvements in forecast levels of home prices, commercial real estate prices and unemployment compared with the forecast at December 31, 2021.

20

The following tables detail activity and end of period balances in the allowance for credit losses by portfolio segment for the periods indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three Months Ended September 30, 2022
(dollars in thousands)Commercial,
Financial and
Agricultural		Consumer
Installment		Indirect AutomobileMortgage WarehouseMunicipalPremium Finance
Balance, June 30, 2022$25,658 $5,269 $291 $3,885 $371 $2,762 
Provision for loan losses9,568 (244)(288)(1,884)(9)(638)
Loans charged off(4,722)(1,228)(50)— — (1,205)
Recoveries of loans previously charged off2,201 277 276 — — 1,023 
Balance, September 30, 2022$32,705 $4,074 $229 $2,001 $362 $1,942 
Real Estate – Construction and DevelopmentReal Estate –
Commercial and
Farmland		Real Estate –
Residential		Total
Balance, June 30, 2022$23,232 $59,349 $51,825 $172,642 
Provision for loan losses3,227 (1,200)8,937 17,469 
Loans charged off— (2,014)(53)(9,272)
Recoveries of loans previously charged off96 96 83 4,052 
Balance, September 30, 2022$26,555 $56,231 $60,792 $184,891 
Nine Months Ended September 30, 2022
(dollars in thousands)Commercial,
Financial and
Agricultural		Consumer
Installment		Indirect AutomobileMortgage WarehouseMunicipalPremium Finance
Balance, December 31, 2021$26,829 $6,097 $476 $3,231 $401 $2,729 
Provision for loan losses11,521 1,102 (884)(1,230)(39)(530)
Loans charged off(13,527)(3,790)(179)— — (3,640)
Recoveries of loans previously charged off7,882 665 816 — — 3,383 
Balance, September 30, 2022$32,705 $4,074 $229 $2,001 $362 $1,942 
Real Estate – Construction and DevelopmentReal Estate –
Commercial and
Farmland		Real Estate –
Residential		Total
Balance, December 31, 2021$22,045 $77,831 $27,943 $167,582 
Provision for loan losses3,841 (18,399)32,580 27,962 
Loans charged off— (3,378)(190)(24,704)
Recoveries of loans previously charged off669 177 459 14,051 
Balance, September 30, 2022$26,555 $56,231 $60,792 $184,891 

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Three Months Ended September 30, 2021
(dollars in thousands)Commercial,
Financial and
Agricultural		Consumer
Installment		Indirect AutomobileMortgage WarehouseMunicipalPremium Finance
Balance, June 30, 2021$6,889 $7,824 $1,080 $3,365 $777 $4,539 
Provision for loan losses(1,471)3,063 (268)(287)(27)(456)
Loans charged off(858)(1,647)(178)— — (605)
Recoveries of loans previously charged off1,986 199 278 — — 649 
Balance, September 30, 2021$6,546 $9,439 $912 $3,078 $750 $4,127 
Real Estate – Construction and DevelopmentReal Estate –
Commercial and
Farmland		Real Estate –
Residential		Total
Balance, June 30, 2021$18,999 $88,338 $43,259 $175,070 
Provision for loan losses(6,423)87 1,798 (3,984)
Loans charged off— (210)(39)(3,537)
Recoveries of loans previously charged off45 266 241 3,664 
Balance, September 30, 2021$12,621 $88,481 $45,259 $171,213 
Nine Months Ended September 30, 2021
(dollars in thousands)Commercial,
Financial and
Agricultural		Consumer
Installment		Indirect AutomobileMortgage WarehouseMunicipalPremium Finance
Balance, December 31, 2020$7,359 $4,076 $1,929 $3,666 $791 $3,879 
Provision for loan losses2,606 9,360 (1,219)(588)(41)(847)
Loans charged off(6,757)(4,764)(1,148)— — (3,142)
Recoveries of loans previously charged off3,338 767 1,350 — — 4,237 
Balance, September 30, 2021$6,546 $9,439 $912 $3,078 $750 $4,127 
Real Estate – Construction and DevelopmentReal Estate –
Commercial and
Farmland		Real Estate –
Residential		Total
Balance, December 31, 2020$45,304 $88,894 $43,524 $199,422 
Provision for loan losses(32,767)727 1,307 (21,462)
Loans charged off(212)(1,632)(594)(18,249)
Recoveries of loans previously charged off296 492 1,022 11,502 
Balance, September 30, 2021$12,621 $88,481 $45,259 $171,213 

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NOTE 4 – OTHER BORROWINGS

Other borrowings consist of the following:

(dollars in thousands)September 30, 2022December 31, 2021
FHLB borrowings:  
Fixed Rate Advance due October 20, 2022; fixed interest rate of 3.15%
$100,000 $— 
Fixed Rate Advance due October 24, 2022; fixed interest rate of 3.10%
100,000 — 
Fixed Rate Advance due October 24, 2022; fixed interest rate of 3.10%
100,000 — 
Fixed Rate Advance due March 3, 2025; fixed interest rate of 1.208%
15,000 15,000 
Fixed Rate Advance due March 2, 2027; fixed interest rate of 1.445%
15,000 15,000 
Fixed Rate Advance due March 4, 2030; fixed interest rate of 1.606%
15,000 15,000 
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
1,391 1,400 
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
963 969 
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095%
1,312 1,421 
Subordinated notes payable:  
Subordinated notes payable due June 1, 2026, net of unaccreted purchase accounting fair value adjustment of $— and $500, respectively; fixed interest rate of 5.50%
— 50,500 
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $583 and $681, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%
74,417 74,319 
Subordinated notes payable due December 15, 2029 net of unamortized debt issuance cost of $1,740 and $1,923, respectively; fixed interest rate of 4.25% through December 14, 2024; variable interest rate thereafter at three-month SOFR plus 2.94%
118,260 118,077 
Subordinated notes payable due May 31, 2030 net of unaccreted purchase accounting fair value adjustment of $936 and $1,028, respectively; fixed interest rate of 5.875% through May 31, 2025; variable interest rate thereafter at three-month LIBOR plus 3.63%
75,936 76,028 
Subordinated notes payable due October 1, 2030 net of unamortized debt issuance cost of $1,615 and $1,766, respectively; fixed interest rate of 3.875% through September 30, 2025; variable interest rate thereafter at three-month SOFR plus 3.753%
108,385 108,234 
Securitization Facilities:
Equipment contract backed notes, Series 2018-1 (BCC XIV) due on various dates through 2025 and bear a weighted-average interest rate of 5.11%
— 19,199 
Equipment contract backed notes, Series 2019-1 (BCC XVI) due on various dates through 2027 and bear a weighted-average interest rate of 2.84%
— 139,329 
Equipment contract backed notes, Series 2020-1 (BCC XVII) due on various dates through 2027 and bear a weighted-average interest rate of 1.48%
— 105,403 
$725,664 $739,879 

The advances from the FHLB are collateralized by a blanket lien on all eligible first mortgage loans and other specific loans in addition to FHLB stock. At September 30, 2022, $4.00 billion was available for borrowing on lines with the FHLB.

As of September 30, 2022, the Bank maintained credit arrangements with various financial institutions to purchase federal funds up to $127.0 million.

The Bank also participates in the Federal Reserve discount window borrowings program. At September 30, 2022, the Bank had $3.15 billion of loans pledged at the Federal Reserve discount window and had $2.36 billion available for borrowing.

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available-for-sale. The reclassification for gains included in net income is recorded in net gain (loss) on securities in the consolidated statement of income and comprehensive income.

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The following table presents a summary of the accumulated other comprehensive income balances as well as changes in each of the respective components, net of tax, for the periods indicated:

(dollars in thousands)Unrealized
Gain (Loss)
on Securities		Accumulated
Other Comprehensive
Income (Loss)
Three Months Ended September 30, 2022
Balance, June 30, 2022$(12,635)$(12,635)
Reclassification for gains included in net income, net of tax— — 
Current year changes, net of tax(38,099)(38,099)
Balance, September 30, 2022$(50,734)$(50,734)
Three Months Ended September 30, 2021
Balance, June 30, 2021$25,024 $25,024 
Reclassification for gains included in net income, net of tax— — 
Current year changes, net of tax(3,139)(3,139)
Balance, September 30, 2021$21,885 $21,885 
Nine Months Ended September 30, 2022
Balance, December 31, 2021$15,590 $15,590 
Reclassification for gains included in net income, net of tax— — 
Current year changes, net of tax(66,324)(66,324)
Balance, September 30, 2022$(50,734)$(50,734)
Nine Months Ended September 30, 2021
Balance, December 31, 2020$33,505 $33,505 
Reclassification for gains included in net income, net of tax— — 
Current year changes, net of tax(11,620)(11,620)
Balance, September 30, 2021$21,885 $21,885 

NOTE 6 – WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings per share have been computed based on the following weighted average number of common shares outstanding:

 Three Months Ended
September 30,		Nine Months Ended
September 30,
(share data in thousands)2022202120222021
Average common shares outstanding69,125 69,440 69,213 69,445 
Common share equivalents:
Stock options11 49 20 65 
Nonvested restricted share grants59 142 73 143 
Performance stock units132 125 122 119 
Average common shares outstanding, assuming dilution69,327 69,756 69,428 69,772 

For the three and nine-month periods ended September 30, 2022 and 2021, there were no anti-dilutive securities excluded from the computation of earnings per share.

NOTE 7 – FAIR VALUE MEASURES

The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value
24

measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The Company's loans held for sale under the fair value option are comprised of the following:

(dollars in thousands)September 30, 2022December 31, 2021
Mortgage loans held for sale$295,458 $1,247,997 
SBA loans held for sale2,529 6,635 
Total loans held for sale$297,987 $1,254,632 

The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities.

Net losses of $11.9 million and $44.7 million resulting from changes in fair value of these mortgage loans were recorded in income during the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, a net gain of $5.8 million and a net loss of $9.3 million, respectively, resulting from changes in fair value of these mortgage loans were recorded in income. Net gains of $11.7 million and $10.5 million, respectively, resulting from changes in the fair value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage loans were recorded in income during the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, a net gain of $7.3 million and a net loss of $10.3 million, respectively, resulting from changes in the fair value of the related derivative financial instruments were recorded in income. The changes in fair value of both mortgage loans held for sale and the related derivative financial instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.

The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of September 30, 2022 and December 31, 2021:

(dollars in thousands) 
September 30, 2022December 31, 2021
Aggregate fair value of mortgage loans held for sale$295,458 $1,247,997 
Aggregate unpaid principal balance of mortgage loans held for sale303,786 1,211,646 
Past-due loans of 90 days or more464 746 
Nonaccrual loans464 746 
Unpaid principal balance of nonaccrual loans464 718 

The following table summarizes the difference between the fair value and the principal balance for SBA loans held for sale measured at fair value as of September 30, 2022 and December 31, 2021:

(dollars in thousands) 
September 30, 2022December 31, 2021
Aggregate fair value of SBA loans held for sale$2,529 $6,635 
Aggregate unpaid principal balance of SBA loans held for sale2,177 5,825 
Past-due loans of 90 days or more— — 
Nonaccrual loans— — 

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, loans held for sale under the fair value option and derivative financial instruments are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral-dependent loans, loan servicing rights and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

25

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2022 and December 31, 2021:

Recurring Basis
Fair Value Measurements
 September 30, 2022
(dollars in thousands) 
Fair ValueLevel 1Level 2Level 3
Financial assets:    
Investment securities available-for-sale:
U.S. Treasuries$503,810 $503,810 $— $— 
U.S. government sponsored agencies977 — 977 — 
State, county and municipal securities39,268 — 39,268 — 
Corporate debt securities15,296 — 14,096 1,200 
SBA pool securities28,851 — 28,851 — 
Mortgage-backed securities666,947 — 666,947 — 
Loans held for sale297,987 — 297,987 — 
Mortgage banking derivative instruments23,446 — 23,446 — 
Total recurring assets at fair value$1,576,582 $503,810 $1,071,572 $1,200 
Financial liabilities:    
Mortgage banking derivative instruments$1,681 $— $1,681 $— 
Total recurring liabilities at fair value$1,681 $— $1,681 $— 

Recurring Basis
Fair Value Measurements
 December 31, 2021
(dollars in thousands)Fair ValueLevel 1Level 2Level 3
Financial assets:    
Investment securities available-for-sale:
U.S. government sponsored agencies$7,172 $— $7,172 $— 
State, county and municipal securities47,812 — 47,812 — 
Corporate debt securities28,496 — 27,116 1,380 
SBA pool securities45,201 — 45,201 — 
Mortgage-backed securities463,940 — 463,940 — 
Loans held for sale1,254,632 — 1,254,632 — 
Mortgage banking derivative instruments11,940 — 11,940 — 
Total recurring assets at fair value$1,859,193 $— $1,857,813 $1,380 
Financial liabilities:    
Mortgage banking derivative instruments$710 $— $710 $— 
Total recurring liabilities at fair value$710 $— $710 $— 

The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of September 30, 2022 and December 31, 2021:

 Nonrecurring Basis
Fair Value Measurements
(dollars in thousands)Fair ValueLevel 1Level 2Level 3
September 30, 2022    
Collateral-dependent loans$30,014 $— $— $30,014 
Other real estate owned92 — — 92 
Total nonrecurring assets at fair value$30,106 $— $— $30,106 
December 31, 2021    
Collateral-dependent loans$44,181 $— $— $44,181 
Mortgage servicing rights206,944 — — 206,944 
Total nonrecurring assets at fair value$251,125 $— $— $251,125 

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The inputs used to determine estimated fair value of collateral-dependent loans include market conditions, loan term, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

For the nine months ended September 30, 2022 and the year ended December 31, 2021, there was not a change in the methods and significant assumptions used to estimate fair value.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets:

(dollars in thousands)Fair ValueValuation
Technique		Unobservable InputsRange of
Discounts		Weighted
Average
Discount
September 30, 2022     
Recurring:     
Debt securities available-for-sale$1,200 Discounted par valuesProbability of Default12%12%
Loss Given Default43%43%
Nonrecurring:     
Collateral-dependent loans$30,014 Third-party appraisals and discounted cash flowsCollateral discounts and
discount rates
0% - 50%
31%
Other real estate owned$92 Third-party appraisals and sales contractsCollateral discounts and estimated
costs to sell
24%
24%
December 31, 2021     
Recurring:     
Debt securities available-for-sale$1,380 Discounted par valuesDiscount Rate8%8%
Nonrecurring:    
Collateral-dependent loans$44,181 Third-party appraisals and discounted cash flowsCollateral discounts and
discount rates
0% - 50%
39%
Mortgage servicing rights$206,944 Discounted cash flowsDiscount rate
9% - 10%
9%
Prepayment speed
10% - 40%
13%

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The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows:

Fair Value Measurements
  September 30, 2022
(dollars in thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial assets:     
Cash and due from banks$269,193 $269,193 $— $— $269,193 
Federal funds sold and interest-bearing accounts1,061,975 1,061,975 — — 1,061,975 
Debt securities held-to-maturity130,214 — 107,814 — 107,814 
Loans, net18,591,951 — — 18,289,190 18,289,190 
Accrued interest receivable61,828 — 6,436 55,392 61,828 
Financial liabilities:     
Deposits19,466,919 — 19,463,748 — 19,463,748 
Other borrowings725,664 — 712,395 — 712,395 
Subordinated deferrable interest debentures127,823 — 120,121 — 120,121 
Accrued interest payable5,628 — 5,628 — 5,628 

Fair Value Measurements
  December 31, 2021
(dollars in thousands)Carrying
Amount		Level 1Level 2Level 3Total
Financial assets:     
Cash and due from banks$307,813 $307,813 $— $— $307,813 
Federal funds sold and interest-bearing accounts3,756,844 3,756,844 — — 3,756,844 
Debt securities held-to-maturity79,850 — 78,206 — 78,206 
Loans, net15,662,495 — — 15,509,410 15,509,410 
Accrued interest receivable56,917 — 2,373 54,544 56,917 
Financial liabilities:     
Deposits19,665,553 — 19,667,612 — 19,667,612 
Securities sold under agreements to repurchase5,845 5,845 — — 5,845 
Other borrowings739,879 — 760,829 — 760,829 
Subordinated deferrable interest debentures126,328 — 117,764 — 117,764 
Accrued interest payable4,313 — 4,313 — 4,313 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Loan Commitments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of the Company’s commitments is as follows:

(dollars in thousands)September 30, 2022December 31, 2021
Commitments to extend credit$5,861,437 $4,328,749 
Unused home equity lines of credit327,974 272,029 
Financial standby letters of credit30,236 36,184 
Mortgage interest rate lock commitments245,168 417,126 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral
28

obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary. The Company has not been required to perform on any material financial standby letters of credit and the Company has not incurred any losses on financial standby letters of credit for the nine months ended September 30, 2022 and the year ended December 31, 2021.

The Company maintains an allowance for credit losses on unfunded commitments which is recorded in other liabilities on the consolidated balance sheets. The following table presents activity in the allowance for unfunded commitments for the periods presented:

Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
Balance at beginning of period$43,973 $22,314 $33,185 $32,854 
Provision for unfunded commitments192 (5,516)10,980 (16,056)
Balance at end of period$44,165 $16,798 $44,165 $16,798 

Other Commitments

As of September 30, 2022, letters of credit issued by the FHLB totaling $400.0 million were used to guarantee the Bank’s performance related to a portion of its public fund deposit balances.

Litigation and Regulatory Contingencies

From time to time, the Company and the Bank are subject to various legal proceedings, claims and disputes that arise in the ordinary course of business. The Company and the Bank are also subject to regulatory examinations, information gathering requests, inquiries and investigations in the ordinary course of business. Based on the Company’s current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on the Company’s results of operations and financial condition for any particular period.

The Company’s management and its legal counsel periodically assess contingent liabilities, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

NOTE 9 – SEGMENT REPORTING

The Company has the following five reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying one-to-four family residential mortgage loans. The SBA Division derives its revenues from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination and servicing of commercial insurance premium finance loans.
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The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers.

The following tables present selected financial information with respect to the Company’s reportable business segments for the three and nine months ended September 30, 2022 and 2021:
 Three Months Ended
September 30, 2022
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$164,095 $40,389 $12,490 $3,919 $13,409 $234,302 
Interest expense(10,412)21,106 5,511 1,495 3,621 21,321 
Net interest income174,507 19,283 6,979 2,424 9,788 212,981 
Provision for credit losses10,551 9,043 (1,836)52 (158)17,652 
Noninterest income23,269 38,584 1,516 1,946 9 65,324 
Noninterest expense      
Salaries and employee benefits48,599 25,813 1,055 1,412 1,818 78,697 
Occupancy and equipment11,357 1,460 1 82 83 12,983 
Data processing and communications expenses10,779 1,082 43 29 82 12,015 
Other expenses22,974 11,641 209 100 959 35,883 
Total noninterest expense93,709 39,996 1,308 1,623 2,942 139,578 
Income before income tax expense93,516 8,828 9,023 2,695 7,013 121,075 
Income tax expense22,706 1,854 1,895 566 1,499 28,520 
Net income$70,810 $6,974 $7,128 $2,129 $5,514 $92,555 
Total assets$16,980,520 $4,402,221 $955,711 $259,427 $1,215,778 $23,813,657 
Goodwill958,573 — — — 64,498 1,023,071 
Other intangible assets, net101,225 — — — 9,678 110,903 
 Three Months Ended
September 30, 2021
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$110,708 $33,390 $9,093 $11,986 $7,869 $173,046 
Interest expense(2,816)12,101 381 1,287 432 11,385 
Net interest income113,524 21,289 8,712 10,699 7,437 161,661 
Provision for credit losses(9,578)1,678 (291)(1,104)(380)(9,675)
Noninterest income17,896 55,555 1,037 2,070 4 76,562 
Noninterest expense      
Salaries and employee benefits40,020 36,373 264 1,320 1,694 79,671 
Occupancy and equipment10,196 1,590 — 116 77 11,979 
Data processing and communications expenses9,159 1,357 59 18 88 10,681 
Other expenses21,723 11,675 200 370 897 34,865 
Total noninterest expense81,098 50,995 523 1,824 2,756 137,196 
Income before income tax expense59,900 24,171 9,517 12,049 5,065 110,702 
Income tax expense17,784 5,076 1,999 2,530 1,633 29,022 
Net income$42,116 $19,095 $7,518 $9,519 $3,432 $81,680 
Total assets$16,070,583 $4,247,967 $740,809 $529,044 $944,738 $22,533,141 
Goodwill863,507 — — — 64,498 928,005 
Other intangible assets, net47,768 — — — 12,628 60,396 
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 Nine Months Ended
September 30, 2022
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$435,229 $111,276 $27,779 $15,456 $30,504 $620,244 
Interest expense(25,145)51,919 7,653 3,223 5,705 43,355 
Net interest income460,374 59,357 20,126 12,233 24,799 576,889 
Provision for credit losses25,952 15,129 (1,191)(614)(469)38,807 
Noninterest income68,102 158,028 3,958 5,963 25 236,076 
Noninterest expense
Salaries and employee benefits144,527 88,646 1,546 3,999 5,805 244,523 
Occupancy and equipment33,599 4,337 3 262 255 38,456 
Data processing and communications expenses32,872 3,377 138 86 269 36,742 
Other expenses64,142 37,098 639 1,019 2,975 105,873 
Total noninterest expense275,140 133,458 2,326 5,366 9,304 425,594 
Income before income tax expense227,384 68,798 22,949 13,444 15,989 348,564 
Income tax expense58,822 14,448 4,820 2,823 3,332 84,245 
Net income$168,562 $54,350 $18,129 $10,621 $12,657 $264,319 
 Nine Months Ended
September 30, 2021
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$332,347 $97,674 $28,408 $44,070 $22,248 $524,747 
Interest expense(4,663)34,868 1,070 3,854 1,128 36,257 
Net interest income337,010 62,806 27,338 40,216 21,120 488,490 
Provision for credit losses(37,431)2,772 (591)(2,258)(616)(38,124)
Noninterest income50,805 222,250 3,350 7,358 12 283,775 
Noninterest expense
Salaries and employee benefits120,557 131,009 872 3,639 5,084 261,161 
Occupancy and equipment29,366 4,619 2 354 231 34,572 
Data processing and communications expenses29,640 4,338 176 19 269 34,442 
Other expenses60,196 27,502 263 949 2,670 91,580 
Total noninterest expense239,759 167,468 1,313 4,961 8,254 421,755 
Income before income tax expense185,487 114,816 29,966 44,871 13,494 388,634 
Income tax expense50,436 24,111 6,293 9,423 3,402 93,665 
Net income$135,051 $90,705 $23,673 $35,448 $10,092 $294,969 

NOTE 10 – LOAN SERVICING RIGHTS

The Company sells certain residential mortgage loans and SBA loans to third parties. All such transfers are accounted for as sales and the continuing involvement in the loans sold is limited to certain servicing responsibilities. The Company has also acquired portfolios of residential mortgage, SBA and indirect automobile loans serviced for others. Loan servicing rights are initially recorded at fair value and subsequently recorded at the lower of cost or fair value and are amortized over the remaining service life of the loans, with consideration given to prepayment assumptions. Loan servicing rights are recorded in other assets on the consolidated balance sheets.

The carrying value of the loan servicing rights assets is shown in the table below:

(dollars in thousands)September 30, 2022December 31, 2021
Loan Servicing Rights
Residential mortgage$144,764 $206,944 
SBA4,318 5,556 
Total loan servicing rights$149,082 $212,500 

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Residential Mortgage Loans

The Company sells certain first-lien residential mortgage loans to third party investors, primarily the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). The Company retains the related mortgage servicing rights (“MSRs”) and receives servicing fees on certain of these loans. The net gain on loan sales, MSRs amortization and recoveries/impairment, and ongoing servicing fees on the portfolio of loans serviced for others are recorded in the consolidated statements of income and comprehensive income as part of mortgage banking activity.

During the three- and nine-months ended September 30, 2022, the Company recorded servicing fee income of $18.2 million and $54.0 million, respectively. During the three- and nine-months ended September 30, 2021, the Company recorded servicing fee income of $13.8 million and $35.3 million, respectively. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.

The table below is an analysis of the activity in the Company’s MSRs and valuation allowance:

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Residential mortgage servicing rights2022202120222021
Beginning carrying value, net$257,112 $191,675 $206,944 $130,630 
Additions14,893 6,195 58,145 71,439 
Amortization(6,939)(7,967)(20,515)(22,648)
Recoveries1,332 (1,397)21,824 9,085 
Disposals(121,634)— (121,634)— 
Ending carrying value, net$144,764 $188,506 $144,764 $188,506 

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Residential mortgage servicing valuation allowance2022202120222021
Beginning balance$5,290 $28,925 $25,782 $39,407 
Additions— 1,397 — 1,397 
Recoveries(1,332)— (21,824)(10,482)
Reduction due to disposal(3,958)— (3,958)— 
Ending balance$— $30,322 $— $30,322 

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The key metrics and the sensitivity of the fair value to adverse changes in model inputs and/or assumptions are summarized below:

(dollars in thousands)September 30, 2022December 31, 2021
Residential mortgage servicing rights
Unpaid principal balance of loans serviced for others$9,708,757 $16,786,442 
Composition of residential loans serviced for others:
FHLMC16.55 %21.88 %
FNMA48.85 %60.26 %
GNMA34.60 %17.86 %
Total100.00 %100.00 %
Weighted average term (months)353341
Weighted average age (months)2120
Modeled prepayment speed7.20 %12.96 %
Decline in fair value due to a 10% adverse change(5,103)(8,368)
Decline in fair value due to a 20% adverse change(10,248)(16,157)
Weighted average discount rate10.02 %8.77 %
Decline in fair value due to a 10% adverse change(6,316)(6,984)
Decline in fair value due to a 20% adverse change(12,501)(13,504)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the relationship of a change in input or assumption to the change in fair value may not be linear. In addition, the effect of an adverse variation in a particular input or assumption on the value of the residential mortgage servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the effect of the change in the first.

During the third quarter of 2022, the Company sold servicing rights on residential mortgage loans with an unpaid principal balance of approximately $9 billion, subject to certain post-closing adjustments, to an unrelated financial institution resulting in a reduction of the mortgage servicing right carrying value of $121.6 million.

SBA Loans

All sales of SBA loans, consisting of the guaranteed portion, are executed on a servicing retained basis. These loans, which are partially guaranteed by the SBA, are generally secured by business property such as real estate, inventory, equipment and accounts receivable. The net gain on SBA loan sales, amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income.

During the three- and nine-months ended September 30, 2022, the Company recorded servicing fee income of $907,000 and $2.8 million, respectively. During the three- and nine-months ended September 30, 2021, the Company recorded servicing fee income of $1.0 million and $3.0 million, respectively. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.

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The table below is an analysis of the activity in the Company’s SBA loan servicing rights and valuation allowance:

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
SBA servicing rights2022202120222021
Beginning carrying value, net$4,954 $6,123 $5,556 $5,839 
Additions99 265 873 736 
Amortization(735)(555)(2,111)(1,647)
Recoveries— — — 905 
Ending carrying value, net$4,318 $5,833 $4,318 $5,833 

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
SBA servicing valuation allowance2022202120222021
Beginning balance$— $— $— $905 
Recoveries— — — (905)
Ending balance$— $— $— $— 

(dollars in thousands)September 30, 2022December 31, 2021
SBA servicing rights
Unpaid principal balance of loans serviced for others$364,548 $410,167 
Weighted average life (in years)3.663.65
Modeled prepayment speed18.12 %17.68 %
Decline in fair value due to a 10% adverse change(233)(291)
Decline in fair value due to a 20% adverse change(446)(557)
Weighted average discount rate14.62 %11.92 %
Decline in fair value due to a 100 basis point adverse change(112)(144)
Decline in fair value due to a 200 basis point adverse change(220)(282)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in model inputs and/or assumptions generally cannot be extrapolated because the relationship of a change in input or assumption to the change in fair value may not be linear. In addition, the effect of an adverse variation in a particular input or assumption on the value of the SBA servicing rights is calculated without changing any other input or assumption. In reality, a change in another factor may magnify or counteract the effect of the change in the first.

Indirect Automobile Loans

The Company previously acquired a portfolio of indirect automobile loans serviced for others. These loans, or portions of loans, were sold on a servicing retained basis. Amortization and impairment/recoveries of servicing rights, and ongoing servicing fees are recorded in the consolidated statements of income and comprehensive income as part of other noninterest income. The Company is not actively originating or selling indirect automobile loans.

(dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Indirect automobile servicing rights2022202120222021
Beginning carrying value, net$— $— $— $73 
Amortization— — — (73)
Ending carrying value, net$— $— $— $— 

During the three- and nine-months ended September 30, 2022, the Company recorded servicing fee income of $56,000 and $204,000, respectively. During the three- and nine-months ended September 30, 2021, the Company recorded servicing fee
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income of $135,000 and $510,000, respectively. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.

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

Cautionary Note Regarding Forward-Looking Statements

Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, the following: general competitive, economic, unemployment, political and market conditions and fluctuations, including real estate market conditions, and the effects of such conditions and fluctuations on the creditworthiness of borrowers, collateral values, asset recovery values and the value of investment securities; movements in interest rates and their impacts on net interest margin; expectations on credit quality and performance; competitive pressures on product pricing and services; legislative and regulatory changes; changes in U.S. government monetary and fiscal policy; the impact of the COVID-19 pandemic on the general economy, our customers and the allowance for loan losses; the benefits that may be realized by our customers from government assistance programs and regulatory actions related to the COVID-19 pandemic; the potential impact of the phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR; additional competition in our markets; changes in state and federal banking laws and regulations to which we are subject; financial market conditions and the results of financing efforts; the cost savings and any revenue synergies expected to result from acquisition transactions, which may not be fully realized within the expected timeframes if at all; the success and timing of other business strategies; our outlook and long-term goals for future growth; weather events, natural disasters, geopolitical events, acts of war or terrorism or other hostilities, public health crises and other catastrophic events beyond our control; and other factors discussed in our filings with the Securities and Exchange Commission (the “SEC”) under the Exchange Act.

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.

Overview

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of September 30, 2022, as compared with December 31, 2021, and operating results for the three- and nine-month periods ended September 30, 2022 and 2021. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

This discussion contains certain performance measures determined by methods other than in accordance with GAAP. Management of the Company uses these non-GAAP measures in its analysis of the Company’s performance. These measures are useful when evaluating the underlying performance and efficiency of the Company’s operations and balance sheet. The Company’s management believes that these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company’s management believes that investors may use these non-GAAP financial measures to evaluate the Company’s financial performance without the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Non-GAAP measures include adjusted net income and adjusted net income per diluted share. The Company calculates the regulatory capital ratios using current regulatory report instructions. The Company’s management uses these measures to assess the quality of capital and believes that investors may find them useful in their evaluation of the Company. These capital measures may or may not be necessarily comparable to similar capital measures that may be presented by other companies.
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Critical Accounting Policies

There have been no significant changes to our critical accounting policies from those disclosed in our 2021 Annual Report on Form 10-K. The reader should refer to the notes to our consolidated financial statements in our 2021 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.

Results of Operations for the Three Months Ended September 30, 2022 and 2021

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $92.6 million, or $1.34 per diluted share, for the quarter ended September 30, 2022, compared with $81.7 million, or $1.17 per diluted share, for the same period in 2021. The Company’s return on average assets and average shareholders’ equity were 1.56% and 11.76%, respectively, in the third quarter of 2022, compared with 1.47% and 11.27%, respectively, in the third quarter of 2021. During the third quarter of 2022, the Company recorded pre-tax loss on sale of mortgage servicing rights of $316,000, pre-tax servicing right impairment recovery of $1.3 million, pre-tax gain on bank owned life insurance (BOLI) proceeds of $55,000 and pre-tax natural disaster and pandemic charges of $151,000. During the third quarter of 2021, the Company recorded pre-tax merger and conversion charges of $183,000, pre-tax servicing right impairment of $1.4 million and pre-tax loss on bank premises of $1.1 million. Excluding these adjustment items, the Company’s net income would have been $91.8 million, or $1.32 per diluted share, for the third quarter of 2022 and $83.9 million, or $1.20 per diluted share, for the third quarter of 2021.

Below is a reconciliation of adjusted net income to net income, as discussed above.
 Three Months Ended September 30,
(in thousands, except share and per share data)20222021
Net income$92,555 $81,680 
Adjustment items:  
Merger and conversion charges— 183 
Loss on sale of mortgage servicing rights316 — 
Servicing right impairment (recovery)(1,332)1,398 
Gain on BOLI proceeds(55)— 
Natural disaster and pandemic expenses151 — 
Loss on bank premises— 1,136 
Tax effect of adjustment items (Note 1)
182 (536)
After tax adjustment items(738)2,181 
Adjusted net income$91,817 $83,861 
Weighted average common shares outstanding - diluted69,327,414 69,756,135 
Net income per diluted share$1.34 $1.17 
Adjusted net income per diluted share$1.32 $1.20 
Note 1: Tax effect is calculated utilizing a 21% rate for taxable adjustments. Gain on BOLI proceeds is non-taxable and no tax effect is included. A portion of the merger and conversion charges for the three months ended September 30, 2021 is nondeductible for tax purposes.

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Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the third quarter of 2022 and 2021, respectively:

 Three Months Ended
September 30, 2022
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$164,095 $40,389 $12,490 $3,919 $13,409 $234,302 
Interest expense(10,412)21,106 5,511 1,495 3,621 21,321 
Net interest income174,507 19,283 6,979 2,424 9,788 212,981 
Provision for credit losses10,551 9,043 (1,836)52 (158)17,652 
Noninterest income23,269 38,584 1,516 1,946 9 65,324 
Noninterest expense      
Salaries and employee benefits48,599 25,813 1,055 1,412 1,818 78,697 
Occupancy and equipment11,357 1,460 1 82 83 12,983 
Data processing and communications expenses10,779 1,082 43 29 82 12,015 
Other expenses22,974 11,641 209 100 959 35,883 
Total noninterest expense93,709 39,996 1,308 1,623 2,942 139,578 
Income before income tax expense93,516 8,828 9,023 2,695 7,013 121,075 
Income tax expense22,706 1,854 1,895 566 1,499 28,520 
Net income$70,810 $6,974 $7,128 $2,129 $5,514 $92,555 

 Three Months Ended
September 30, 2021
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
Finance
Division		Total
Interest income$110,708 $33,390 $9,093 $11,986 $7,869 $173,046 
Interest expense(2,816)12,101 381 1,287 432 11,385 
Net interest income113,524 21,289 8,712 10,699 7,437 161,661 
Provision for credit losses(9,578)1,678 (291)(1,104)(380)(9,675)
Noninterest income17,896 55,555 1,037 2,070 4 76,562 
Noninterest expense      
Salaries and employee benefits40,020 36,373 264 1,320 1,694 79,671 
Occupancy and equipment10,196 1,590 — 116 77 11,979 
Data processing and communications expenses9,159 1,357 59 18 88 10,681 
Other expenses21,723 11,675 200 370 897 34,865 
Total noninterest expense81,098 50,995 523 1,824 2,756 137,196 
Income before income tax expense59,900 24,171 9,517 12,049 5,065 110,702 
Income tax expense17,784 5,076 1,999 2,530 1,633 29,022 
Net income$42,116 $19,095 $7,518 $9,519 $3,432 $81,680 
 
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Net Interest Income and Margins

The following table sets forth the average balance, interest income or interest expense, and average interest rate for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the three months ended September 30, 2022 and 2021. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.

 Quarter Ended September 30,
 20222021
(dollars in thousands)Average
Balance		Interest
Income/
Expense		Average
Yield/
Rate Paid		Average
Balance		Interest
Income/
Expense		Average
Yield/
Rate Paid
Assets
Interest-earning assets:
Federal funds sold, interest-bearing deposits in banks, and time deposits in other banks$1,399,529 $7,215 2.05%$3,102,413 $1,253 0.16%
Investment securities1,339,750 10,783 3.19%803,953 5,472 2.70%
Loans held for sale471,070 6,012 5.06%1,497,320 10,618 2.81%
Loans18,146,083 211,223 4.62%14,685,878 156,861 4.24%
Total interest-earning assets21,356,432 235,233 4.37%20,089,564 174,204 3.44%
Noninterest-earning assets2,242,033 1,998,078 
Total assets$23,598,465 $22,087,642 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits$9,758,158 $12,706 0.52%$9,322,590 $2,907 0.12%
Time deposits1,506,761 1,328 0.35%1,919,695 2,199 0.45%
Securities sold under agreements to repurchase92 — —%5,133 4 0.31%
FHLB advances94,357 527 2.22%48,866 195 1.58%
Other borrowings376,942 4,655 4.90%376,489 4,640 4.89%
Subordinated deferrable interest debentures127,560 2,105 6.55%125,567 1,440 4.55%
Total interest-bearing liabilities11,863,870 21,321 0.71%11,798,340 11,385 0.38%
Demand deposits8,259,625 7,168,717 
Other liabilities351,252 245,894 
Shareholders’ equity3,123,718 2,874,691 
Total liabilities and shareholders’ equity$23,598,465 $22,087,642 
Interest rate spread 3.66%3.06%
Net interest income $213,912 $162,819 
Net interest margin  3.97% 3.22%

On a tax-equivalent basis, net interest income for the third quarter of 2022 was $213.9 million, an increase of $51.1 million, or 31.4%, compared with $162.8 million reported in the same quarter in 2021. The higher net interest income is primarily a result of growth in investment securities and loans complemented by disciplined deposit repricing. Average interest earning assets increased $1.27 billion, or 6.3%, from $20.09 billion in the third quarter of 2021 to $21.36 billion for the third quarter of 2022. This growth in interest earning assets resulted primarily from organic loan growth, loans acquired from Balboa Capital and excess liquidity from deposit growth. The Company’s net interest margin during the third quarter of 2022 was 3.97%, up 75 basis points from 3.22% reported in the third quarter of 2021. Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to $4.6 billion during the third quarter of 2022, with weighted average yields of 5.29%, compared with $5.8 billion and 3.37%, respectively, during the third quarter of 2021. Loan production in the banking division amounted to $1.1 billion during the third quarter of 2022, with weighted average yields of 6.26%, compared with $913.3 million and 3.56%, respectively, during the third quarter of 2021.

Total interest income, on a tax-equivalent basis, increased to $235.2 million during the third quarter of 2022, compared with $174.2 million in the same quarter of 2021.  Yields on earning assets increased to 4.37% during the third quarter of 2022, compared with 3.44% reported in the third quarter of 2021. During the third quarter of 2022, loans comprised 87.2% of average earning assets, compared with 80.6% in the same quarter of 2021. Yields on loans increased to 4.62% in the third quarter of 2022, compared with 4.24% in the same period of 2021. Accretion income for the third quarter of 2022 was negative $597,000, compared with $2.9 million in the third quarter of 2021.

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The yield on total interest-bearing liabilities increased from 0.38% in the third quarter of 2021 to 0.71% in the third quarter of 2022. Total funding costs, inclusive of noninterest-bearing demand deposits, increased to 0.42% in the third quarter of 2022, compared with 0.24% during the third quarter of 2021. Deposit costs increased from 0.11% in the third quarter of 2021 to 0.29% in the third quarter of 2022. Non-deposit funding costs increased from 4.48% in the third quarter of 2021 to 4.83% in the third quarter of 2022. Average balances of interest bearing deposits and their respective costs for the third quarter of 2022 and 2021 are shown below:

 Three Months Ended
September 30, 2022		Three Months Ended
September 30, 2021
(dollars in thousands)Average
Balance		Average
Cost		Average
Balance		Average
Cost
NOW$3,701,045 0.40%$3,447,909 0.09%
MMDA5,026,815 0.68%4,966,492 0.16%
Savings1,030,298 0.14%908,189 0.06%
Retail CDs1,506,761 0.35%1,919,184 0.45%
Brokered CDs— —%511 3.11%
Interest-bearing deposits$11,264,919 0.49%$11,242,285 0.18%

Provision for Credit Losses

The Company’s provision for credit losses during the third quarter of 2022 amounted to $17.7 million, compared with a reversal of $9.7 million in the third quarter of 2021. This increase was attributable to organic growth in loans during the quarter. The provision for credit losses for the third quarter of 2022 was comprised of $17.5 million related to loans, $192,000 related to unfunded commitments and negative $9,000 related to other credit losses, compared with negative $4.0 million related to loans, negative $5.5 million related to unfunded commitments and negative $175,000 related to other credit losses for the third quarter of 2021. Non-performing assets as a percentage of total assets increased from 0.43% at December 31, 2021 to 0.55% at September 30, 2022. The increase in non-performing assets is primarily attributable to an increase in nonaccruing loans as a result of rebooked GNMA loans, which the Company has the right, but not the obligation, to repurchase, and one commercial real estate loan totaling $8.5 million. The Company recognized net charge-offs on loans during the third quarter of 2022 of approximately $5.2 million, or 0.11% of average loans on an annualized basis, compared with net recoveries of approximately $127,000, or 0.00%, in the third quarter of 2021. The Company’s total allowance for credit losses on loans at September 30, 2022 was $184.9 million, or 0.98% of total loans, compared with $167.6 million, or 1.06% of total loans, at December 31, 2021. This increase is primarily attributable to organic growth in loans, partially offset by improvement in forecast economic conditions.

Noninterest Income

Total noninterest income for the third quarter of 2022 was $65.3 million, a decrease of $11.2 million, or 14.7%, from the $76.6 million reported in the third quarter of 2021.  Income from mortgage banking activities was $40.4 million in the third quarter of 2022, a decrease of $16.1 million, or 28.5%, from $56.5 million in the third quarter of 2021. Total production in the third quarter of 2022 amounted to $1.26 billion, compared with $2.06 billion in the same quarter of 2021, while spread (gain on sale) decreased to 2.10% in the current quarter, compared with 3.17% in the same quarter of 2021. The retail mortgage open pipeline finished the third quarter of 2022 at $520.0 million, compared with $832.3 million at June 30, 2022 and $1.93 billion at the end of the third quarter of 2021. Service charges on deposit accounts decreased $318,000, or 2.8%, to $11.2 million in the third quarter of 2022, compared with $11.5 million in the third quarter of 2021.

Other noninterest income increased $5.9 million, or 85.5%, to $12.9 million for the third quarter of 2022, compared with $6.9 million during the third quarter of 2021. The increase in other noninterest income was primarily attributable to fee income from Balboa of $4.9 million and an increase in derivative fee income of $1.1 million.

Noninterest Expense

Total noninterest expense for the third quarter of 2022 increased $2.4 million, or 1.7%, to $139.6 million, compared with $137.2 million in the same quarter 2021. Salaries and employee benefits decreased $1.0 million, or 1.2%, from $79.7 million in the third quarter of 2021 to $78.7 million in the third quarter of 2022, due primarily to decreases in variable compensation and overtime tied to mortgage production of $8.9 million and $504,000, respectively, and stock based compensation of $615,000, partially offset by salaries and employee benefits related to Balboa of $10.2 million. Occupancy and equipment expenses increased $1.0 million, or 8.4%, to $13.0 million for the third quarter of 2022, compared with $12.0 million in the third quarter of 2021, due primarily to additional expenses related to Balboa and an increase in real estate taxes. Data processing and
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communications expenses increased $1.3 million, or 12.5%, to $12.0 million in the third quarter of 2022, compared with $10.7 million in the third quarter of 2021. Advertising and marketing expense was $3.6 million in the third quarter of 2022, compared with $2.7 million in the third quarter of 2021. This increase was primarily related to a new marketing campaign. Amortization of intangible assets increased $1.3 million, or 39.1%, from $3.4 million in the third quarter of 2021 to $4.7 million in the third quarter of 2022. This increase was primarily related to intangibles from the acquisition of Balboa Capital Corporation in December 2021, partially offset by a reduction in core deposit intangible amortization. Loan servicing expenses increased $2.2 million, or 29.9%, from $7.4 million in the third quarter of 2021 to $9.6 million in the third quarter of 2022, primarily attributable to additional mortgage loans serviced resulting from strong mortgage production over the previous year. Other noninterest expenses decreased $3.0 million, or 14.2%, from $20.8 million in the third quarter of 2021 to $17.9 million in the third quarter of 2022, due primarily to decreases of $1.6 million in other losses, $2.0 million in loss on sale of bank premises and $548,000 in check card losses. These decreases in other noninterest expenses were partially offset by an increase in forgery losses of $1.9 million.

Income Taxes

Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of nondeductible expenses.  For the third quarter of 2022, the Company reported income tax expense of $28.5 million, compared with $29.0 million in the same period of 2021. The Company’s effective tax rate for the three months ending September 30, 2022 and 2021 was 23.6% and 26.2%, respectively. The decrease in the effective tax rate is primarily a result of a state tax liability adjustment in the third quarter of 2021.

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Results of Operations for the Nine Months Ended September 30, 2022 and 2021

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $264.3 million, or $3.81 per diluted share, for the nine months ended September 30, 2022, compared with $295.0 million, or $4.23 per diluted share, for the same period in 2021. The Company’s return on average assets and average shareholders’ equity were 1.51% and 11.57%, respectively, in the nine months ended September 30, 2022, compared with 1.84% and 14.14%, respectively, in the same period in 2021. During the first nine months of 2022, the Company recorded pre-tax merger and conversion charges of $977,000, pre-tax loss on sale of mortgage servicing rights of $316,000, pre-tax servicing right recovery of $21.8 million, pre-tax gain on BOLI proceeds of $55,000, pre-tax natural disaster and pandemic charges of $151,000 and pre-tax gain on bank premises of $45,000. During the first nine months of 2021, the Company recorded pre-tax merger and conversion charges of $183,000, pre-tax servicing right recovery of $10.0 million, pre-tax gain on BOLI proceeds of $603,000 and pre-tax loss on bank premises of $636,000. Excluding these adjustment items, the Company’s net income would have been $248.3 million, or $3.58 per diluted share, for the nine months ended September 30, 2022 and $287.2 million, or $4.12 per diluted share, for the same period in 2021.

Below is a reconciliation of adjusted net income to net income, as discussed above.
 Nine Months Ended
September 30,
(in thousands, except share and per share data)20222021
Net income available to common shareholders$264,319 $294,969 
Adjustment items:  
Merger and conversion charges977 183 
Loss on sale of mortgage servicing rights316 — 
Servicing right recovery(21,824)(9,990)
Gain on BOLI proceeds(55)(603)
Natural disaster and pandemic charges151 — 
(Gain) loss on bank premises(45)636 
Tax effect of adjustment items (Note 1)
4,490 1,960 
After tax adjustment items(15,990)(7,814)
Adjusted net income$248,329 $287,155 
Weighted average common shares outstanding - diluted69,427,522 69,772,084 
Net income per diluted share$3.81 $4.23 
Adjusted net income per diluted share$3.58 $4.12 
Note 1: Tax effect is calculated utilizing a 21% rate for taxable adjustments. Gain on BOLI proceeds is non-taxable and no tax effect is included. A portion of the merger and conversion charges for the nine months ended September 30, 2022 and 2021 is nondeductible for tax purposes.

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Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities, SBA activities and premium finance activities of the Company during the nine months ended September 30, 2022 and 2021, respectively:

 Nine Months Ended
September 30, 2022
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
 Finance
 Division		Total
Interest income$435,229 $111,276 $27,779 $15,456 $30,504 $620,244 
Interest expense(25,145)51,919 7,653 3,223 5,705 43,355 
Net interest income460,374 59,357 20,126 12,233 24,799 576,889 
Provision for loan losses25,952 15,129 (1,191)(614)(469)38,807 
Noninterest income68,102 158,028 3,958 5,963 25 236,076 
Noninterest expense
Salaries and employee benefits144,527 88,646 1,546 3,999 5,805 244,523 
Occupancy and equipment33,599 4,337 3 262 255 38,456 
Data processing and communications expenses32,872 3,377 138 86 269 36,742 
Other expenses64,142 37,098 639 1,019 2,975 105,873 
Total noninterest expense275,140 133,458 2,326 5,366 9,304 425,594 
Income before income tax expense227,384 68,798 22,949 13,444 15,989 348,564 
Income tax expense58,822 14,448 4,820 2,823 3,332 84,245 
Net income$168,562 $54,350 $18,129 $10,621 $12,657 $264,319 

 Nine Months Ended
September 30, 2021
(dollars in thousands)Banking
Division		Retail
Mortgage
Division		Warehouse
Lending
Division		SBA
Division		Premium
Finance
Division		Total
Interest income$332,347 $97,674 $28,408 $44,070 $22,248 $524,747 
Interest expense(4,663)34,868 1,070 3,854 1,128 36,257 
Net interest income337,010 62,806 27,338 40,216 21,120 488,490 
Provision for loan losses(37,431)2,772 (591)(2,258)(616)(38,124)
Noninterest income50,805 222,250 3,350 7,358 12 283,775 
Noninterest expense
Salaries and employee benefits120,557 131,009 872 3,639 5,084 261,161 
Occupancy and equipment29,366 4,619 2 354 231 34,572 
Data processing and communications expenses29,640 4,338 176 19 269 34,442 
Other expenses60,196 27,502 263 949 2,670 91,580 
Total noninterest expense239,759 167,468 1,313 4,961 8,254 421,755 
Income before income tax expense185,487 114,816 29,966 44,871 13,494 388,634 
Income tax expense50,436 24,111 6,293 9,423 3,402 93,665 
Net income$135,051 $90,705 $23,673 $35,448 $10,092 $294,969 

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Net Interest Income and Margins

The following table sets forth the average balance, interest income or interest expense, and average yield/rate paid for each category of interest-earning assets and interest-bearing liabilities, net interest spread, and net interest margin on average interest-earning assets for the nine months ended September 30, 2022 and 2021. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.

 Nine Months Ended
September 30,
 20222021
(dollars in thousands)Average
Balance		Interest
Income/
Expense		Average
Yield/
Rate Paid		Average
Balance		Interest
Income/
Expense		Average
Yield/
Rate Paid
Assets      
Interest-earning assets:      
Federal funds sold, interest-bearing deposits  in banks, and time deposits in other banks$2,339,364 $13,093 0.75%$2,586,564 $2,394 0.12%
Investment securities1,023,118 22,662 2.96%872,306 17,188 2.63%
Loans held for sale835,418 24,180 3.87%1,496,548 33,218 2.97%
Loans16,951,566 563,223 4.44%14,563,835 475,446 4.36%
Total interest-earning assets21,149,466 623,158 3.94%19,519,253 528,246 3.62%
Noninterest-earning assets2,255,945   1,943,248   
Total assets$23,405,411   $21,462,501   
Liabilities and Shareholders’ Equity      
Interest-bearing liabilities:      
Savings and interest-bearing demand deposits$9,815,352 $18,896 0.26%$9,052,996 $8,801 0.13%
Time deposits1,657,193 4,138 0.33%1,997,248 8,878 0.59%
Federal funds purchased and securities sold under agreements to repurchase1,974 4 0.27%7,085 16 0.30%
FHLB advances64,130 909 1.90%48,909 580 1.59%
Other borrowings398,898 14,256 4.78%376,376 13,961 4.96%
Subordinated deferrable interest debentures127,066 5,152 5.42%125,073 4,021 4.30%
Total interest-bearing liabilities12,064,613 43,355 0.48%11,607,687 36,257 0.42%
Demand deposits7,960,149   6,821,256   
Other liabilities326,293   243,579   
Shareholders’ equity3,054,356   2,789,979   
Total liabilities and shareholders’ equity$23,405,411   $21,462,501   
Interest rate spread  3.46%  3.20%
Net interest income $579,803   $491,989  
Net interest margin  3.67%  3.37%

On a tax-equivalent basis, net interest income for the nine months ended September 30, 2022 was $579.8 million, an increase of $87.8 million, or 17.8%, compared with $492.0 million reported in the same period of 2021. The higher net interest income is a result of growth in average earning assets and disciplined deposit pricing. Average interest earning assets increased $1.63 billion, or 8.4%, from $19.52 billion in the first nine months of 2021 to $21.15 billion for the first nine months of 2022. This growth in interest earning assets resulted primarily from organic growth in average loans and loans acquired from Balboa Capital. The Company’s net interest margin during the first nine months of 2022 was 3.67%, up 30 basis points from 3.37% reported for the first nine months of 2021. Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to $14.5 billion during the first nine months of 2022, with weighted average yields of 4.39%, compared with $19.7 billion and 3.29%, respectively, during the first nine months of 2021. Loan production yields in the lines of business were negatively impacted five basis points during the first nine months of 2021 by originations of Paycheck Protection Program loans in our SBA division. Loan production in the banking division amounted to $3.0 billion during the first nine months of 2022 with weighted average yields of 5.60%, compared with $2.4 billion and 3.69%, respectively, during the first nine months of 2021.

Total interest income, on a tax-equivalent basis, increased to $623.2 million during the nine months ended September 30, 2022, compared with $528.2 million in the same period of 2021. Yields on earning assets increased to 3.94% during the first nine months of 2022, compared with 3.62% reported in the same period of 2021. During the first nine months of 2022, loans comprised 84.1% of average earning assets, compared with 82.3% in the same period of 2021. Yields on loans increased to
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4.44% during the nine months ended September 30, 2022, compared with 4.36% in the same period of 2021. Accretion income for the first nine months of 2022 was $30,000, compared with $13.5 million in the first nine months of 2021.

The yield on total interest-bearing liabilities increased from 0.42% during the nine months ended September 30, 2021 to 0.48% in the same period of 2022. Total funding costs, inclusive of noninterest-bearing demand deposits, increased to 0.29% in the first nine months of 2022, compared with 0.26% during the same period of 2021. Deposit costs increased from 0.13% in the first nine months of 2021 to 0.16% in the same period of 2022. Non-deposit funding costs increased from 4.46% in the first nine months of 2021 to 4.59% in the same period of 2022. The increase in non-deposit funding costs was driven primarily by an increase in index rates. Average balances of interest bearing deposits and their respective costs for the nine months ended September 30, 2022 and 2021 are shown below:

 Nine Months Ended
September 30, 2022		Nine Months Ended
September 30, 2021
(dollars in thousands)Average
Balance		Average
Cost		Average
Balance		Average
Cost
NOW$3,693,829 0.21%$3,315,803 0.10%
MMDA5,117,528 0.33%4,867,509 0.16%
Savings1,003,995 0.08%869,684 0.06%
Retail CDs1,657,193 0.33%1,996,413 0.59%
Brokered CDs— —%835 2.88%
Interest-bearing deposits$11,472,545 0.27%$11,050,244 0.21%
 
Provision for Credit Losses
 
The Company’s provision for credit losses during the nine months ended September 30, 2022 amounted to $38.8 million, compared with negative $38.1 million in the nine months ended September 30, 2021. This increase was primarily attributable to organic growth in loans during the first nine months of 2022 and a release of reserves in the nine months ended September 30, 2021 which resulted from an improved economic forecast, particularly levels of unemployment, home prices and gross domestic product. The provision for credit losses for the first nine months of 2022 was comprised of $28.0 million related to loans, $11.0 million related to unfunded commitments and negative $135,000 related to other credit losses compared with negative $21.5 million related to loans, negative $16.1 million related to unfunded commitments and negative $606,000 related to other credit losses for the same period in 2021. Non-performing assets as a percentage of total assets increased from 0.43% at December 31, 2021 to 0.55% at September 30, 2022. The increase in non-performing assets is primarily attributable to an increase in nonaccruing loans as a result of rebooked GNMA loans, which the Company has the right, but not the obligation, to repurchase, and one commercial real estate loan totaling $8.5 million. Net charge-offs on loans during the first nine months of 2022 were $10.7 million, or 0.08% of average loans on an annualized basis, compared with approximately $6.7 million, or 0.06%, in the first nine months of 2021. The Company’s total allowance for credit losses on loans at September 30, 2022 was $184.9 million, or 0.98% of total loans, compared with $167.6 million, or 1.06% of total loans, at December 31, 2021. This increase is primarily attributable to organic growth in loans, partially offset by improvement in forecast economic conditions.

Noninterest Income

Total noninterest income for the nine months ended September 30, 2022 was $236.1 million, a decrease of $47.7 million, or 16.8%, from the $283.8 million reported for the nine months ended September 30, 2021.  Income from mortgage banking activities decreased $63.1 million, or 28.0%, from $225.2 million in the first nine months of 2021 to $162.0 million in the same period of 2022. Total production in the first nine months of 2022 amounted to $4.52 billion, compared with $7.09 billion in the same period of 2021, while spread (gain on sale) decreased to 2.48% during the nine months ended September 30, 2022, compared with 3.33% in the same period of 2021. The retail mortgage open pipeline was $520.0 million at September 30, 2022, compared with $1.62 billion at December 31, 2021 and $1.93 billion at September 30, 2021. Mortgage-related activities was positively impacted during the first nine months of 2022 by a recovery of previous mortgage servicing right impairment of $21.8 million, compared with a recovery of $9.1 million for the same period in 2021.

Other noninterest income increased $16.0 million, or 74.4%, to $37.5 million for the first nine months of 2022, compared with $21.5 million during the same period of 2021. The increase in other noninterest income was primarily attributable to an increase in fee income from Balboa Capital of $13.8 million and an increase in BOLI income of $1.7 million, partially offset by a decrease of $547,000 in gain on BOLI proceeds.
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Noninterest Expense

Total noninterest expenses for the nine months ended September 30, 2022 increased $3.8 million, or 0.9%, to $425.6 million, compared with $421.8 million in the same period of 2021. Salaries and employee benefits decreased $16.6 million, or 6.4%, from $261.2 million in the first nine months of 2021 to $244.5 million in the same period of 2022 due primarily to decreases in variable compensation tied to mortgage production and overtime in our mortgage division of $36.6 million and $2.0 million, respectively, partially offset by an increase in salaries and employee benefits related to Balboa Capital of $27.8 million. Occupancy and equipment expenses increased $3.9 million, or 11.2%, to $38.5 million for the first nine months of 2022, compared with $34.6 million in the same period of 2021, due primarily to the addition of Balboa Capital, an increase in real estate taxes and a decrease in gain on lease termination. Data processing and communications expenses increased $2.3 million, or 6.7%, to $36.7 million in the first nine months of 2022, from $34.4 million reported in the same period of 2021. Credit resolution-related expenses decreased $1.9 million, or 122.2%, from $1.5 million in the first nine months of 2021 to negative $343,000 in the same period of 2022. This decrease in credit resolution-related expenses primarily resulted from an increase in gain on sale of OREO properties of $2.0 million. Advertising and marketing expense was $8.7 million in the first nine months of 2022, compared with $6.1 million in the first nine months of 2021. Amortization of intangible assets increased $3.5 million, or 29.9%, from $11.6 million in the first nine months of 2021 to $15.0 million in the first nine months of 2022. This increase was primarily related to amortization of intangibles from the acquisition of Balboa Capital Corporation in December 2021, partially offset by a reduction in core deposit intangible amortization. There were $977,000 in merger and conversion charges in the first nine months of 2022, compared with $183,000 in the same period in 2021. Loan servicing expenses increased $10.2 million, or 56.2%, from $18.2 million in the first nine months of 2021 to $28.5 million in the same period of 2022, primarily attributable to additional mortgage loans serviced resulting from strong mortgage production over the previous year. Other noninterest expenses decreased $917,000, or 1.7%, from $54.0 million in the first nine months of 2021 to $53.1 million in the same period of 2022, due primarily to decreases of $2.1 million in other losses, $1.5 million in loss on sale of bank premises and variable expenses tied to production in our mortgage division. These decreases in other noninterest expenses were partially offset by an increase in forgery losses of $3.9 million.

Income Taxes

Income tax expense is influenced by the statutory rate, the amount of taxable income, the amount of tax-exempt income and the amount of nondeductible expenses. For the nine months ended September 30, 2022, the Company reported income tax expense of $84.2 million, compared with $93.7 million in the same period of 2021. The Company’s effective tax rate for the nine months ended September 30, 2022 and 2021 was 24.2% and 24.1%, respectively.

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Financial Condition as of September 30, 2022

Securities

Debt securities classified as available-for-sale are recorded at fair value with unrealized holding gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Securities available-for-sale may be bought and sold in response to changes in market conditions, including, but not limited to, fluctuations in interest rates, changes in securities' prepayment risk, increases in loan demand, general liquidity needs and positioning the portfolio to take advantage of market conditions that create more economically attractive returns. Debt securities are classified as held-to-maturity based on management's positive intent and ability to hold such securities to maturity and are carried at amortized cost. Restricted equity securities are classified as other investment securities and are carried at cost and are periodically evaluated for impairment based on the ultimate recovery of par value or cost basis.

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the expected life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. 

Management and the Company’s ALCO Committee evaluate available-for-sale securities in an unrealized loss position on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation, to determine if credit-related impairment exists. Management first evaluates whether they intend to sell or more likely than not will be required to sell an impaired security before recovering its amortized cost basis. If either criteria is met, the entire amount of unrealized loss is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. If either of the above criteria is not met, management evaluates whether the decline in fair value is attributable to credit or resulted from other factors. If credit-related impairment exists, the Company recognizes an allowance for credit losses, limited to the amount by which the fair value is less than the amortized cost basis. Any impairment not recognized through an allowance for credit losses is recognized in other comprehensive income, net of tax, as a non credit-related impairment. The Company does not intend to sell these available-for-sale investment securities at an unrealized loss position at September 30, 2022, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Based on the results of management's review, at September 30, 2022, management determined that $79,000 was attributable to credit impairment and, accordingly, an allowance for credit losses was established. The remaining $64.2 million in unrealized loss was determined to be from factors other than credit.

The Company's held-to-maturity securities have no expected credit losses, and no related allowance for credit losses has been established.

The following table is a summary of our investment portfolio at the dates indicated:

September 30, 2022December 31, 2021
(dollars in thousands)Amortized CostFair
Value		Amortized CostFair
Value
Securities available-for-sale
U.S. Treasuries$520,085 $503,810 $— $— 
U.S. government-sponsored agencies1,039 977 7,084 7,172 
State, county and municipal securities40,842 39,268 45,470 47,812 
Corporate debt securities15,897 15,296 27,897 28,496 
SBA pool securities31,063 28,851 44,312 45,201 
Mortgage-backed securities710,523 666,947 448,124 463,940 
Total debt securities available-for-sale$1,319,449 $1,255,149 $572,887 $592,621 
Securities held-to-maturity
State, county and municipal securities$31,905 $25,073 $8,905 $8,711 
Mortgage-backed securities98,309 82,741 70,945 69,495 
Total debt securities held-to-maturity$130,214 $107,814 $79,850 $78,206 

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The amounts of securities available-for-sale and held-to-maturity in each category as of September 30, 2022 are shown in the following table according to contractual maturity classifications: (i) one year or less; (ii) after one year through five years; (iii) after five years through ten years; and (iv) after ten years:

U.S. TreasuriesU.S. Government-Sponsored AgenciesState, County and
Municipal Securities
(dollars in thousands)
Securities available-for-sale (1)
AmountYield
 (2)		AmountYield
 (2)		AmountYield
(2)(3)
One year or less$— — %$— — %$5,195 3.21 %
After one year through five years503,810 2.77 977 2.16 18,187 3.96 
After five years through ten years— — — — 8,997 4.20 
After ten years— — — — 6,889 3.70 
$503,810 2.77 %$977 2.16 %$39,268 3.87 %
Corporate Debt SecuritiesSBA Pool SecuritiesMortgage-Backed Securities
(dollars in thousands)
Securities available-for-sale (1)
AmountYield
 (2)		AmountYield
 (2)		AmountYield
 (2)
One year or less$500 3.88 %$166 2.56 %$7,527 3.07 %
After one year through five years1,000 2.40 6,916 2.11 172,943 3.15 
After five years through ten years12,233 4.90 3,479 2.67 209,568 2.95 
After ten years1,563 6.75 18,290 2.70 276,909 3.14 
$15,296 4.93 %$28,851 2.56 %$666,947 3.08 %
State, County and
Municipal Securities		Mortgage-Backed Securities
(dollars in thousands)
Securities held-to-maturity (1)
AmountYield
(2)(3)		AmountYield
 (2)
One year or less$— — %$— — %
After one year through five years— — 11,009 1.01 
After five years through ten years— — 38,753 2.67 
After ten years31,905 3.93 48,547 2.03 
$31,905 3.93 %$98,309 2.17 %
(1)The amortized cost of securities held-to-maturity and fair value of securities available-for-sale are presented based on contractual maturities. Actual cash flows may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.
(2)Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security in that range.
(3)Yields on securities of state and political subdivisions are stated on a taxable-equivalent basis, using a tax rate of 21%.

Loans and Allowance for Credit Losses

At September 30, 2022, gross loans outstanding (including loans and loans held for sale) were $19.10 billion, up $1.98 billion from $17.13 billion reported at December 31, 2021. Loans increased $2.93 billion, or 18.5%, from $15.87 billion at December 31, 2021 to $18.81 billion at September 30, 2022, driven primarily by organic growth. Loans held for sale decreased from $1.25 billion at December 31, 2021 to $298.0 million at September 30, 2022 primarily in our mortgage division.

The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for credit losses ("ACL") on loans in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) consumer installment; (3) indirect automobile; (4) mortgage warehouse; (5) municipal; (6) premium finance; (7) construction and development related real estate; (8) commercial and farmland real estate; and (9) residential real estate. The Company’s management has strategically located its branches in select markets in Georgia, Alabama, Florida, North Carolina and South Carolina to take advantage of the growth in these areas.
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The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past-due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the ACL. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged off.

The Company estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of ACL, except for loans modified under the Disaster Relief Program.

Expected credit losses are reflected in the ACL through a charge to credit loss expense. When the Company deems all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.

The Company measures expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics. Depending on the nature of the pool of financial assets with similar risk characteristics, the Company currently uses the DCF method or the PD×LGD method which may be adjusted for qualitative factors.

The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed. The Company’s methodologies revert back to historical loss information on a straight-line basis over four quarters when the Company can no longer develop reasonable and supportable forecasts.

At the end of the third quarter of 2022, the ACL on loans totaled $184.9 million, or 0.98% of loans, compared with $167.6 million, or 1.06% of loans, at December 31, 2021. Our nonaccrual loans increased from $85.3 million at December 31, 2021 to $118.7 million at September 30, 2022. The increase in nonaccrual loans is attributable to rebooked GNMA loans, which the Company has the right, but not the obligation, to repurchase, and one commercial real estate loan totaling $8.5 million. For the first nine months of 2022, our net charge off ratio as a percentage of average loans increased to 0.08%, compared with 0.06% for the first nine months of 2021. The total provision for credit losses for the first nine months of 2022 was $38.8 million, increasing from a provision release of $38.1 million recorded for the first nine months of 2021. Our ratio of total nonperforming assets to total assets increased from 0.43% at December 31, 2021 to 0.55% at September 30, 2022.

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The following table presents an analysis of the allowance for credit losses on loans, provision for credit losses on loans and net charge-offs as of and for the nine months ended September 30, 2022 and 2021:

Nine Months Ended
September 30,
(dollars in thousands)20222021
Balance of allowance for credit losses on loans at beginning of period$167,582 $199,422 
Provision charged to operating expense27,962 (21,462)
Charge-offs:  
Commercial, financial and agricultural13,527 6,757 
Consumer installment3,790 4,764 
Indirect automobile179 1,148 
Premium finance3,640 3,142 
Real estate – construction and development— 212 
Real estate – commercial and farmland3,378 1,632 
Real estate – residential190 594 
Total charge-offs24,704 18,249 
Recoveries:
Commercial, financial and agricultural7,882 3,338 
Consumer installment665 767 
Indirect automobile816 1,350 
Premium finance3,383 4,237 
Real estate – construction and development669 296 
Real estate – commercial and farmland177 492 
Real estate – residential459 1,022 
Total recoveries14,051 11,502 
Net charge-offs10,653 6,747 
Balance of allowance for credit losses on loans at end of period$184,891 $171,213 

The following table presents an analysis of the allowance for credit losses on loans and net charge-offs for loans held for investment:

As of and for the Nine Months Ended
(dollars in thousands)September 30, 2022September 30, 2021
Allowance for credit losses on loans at end of period$184,891 $171,213 
Net charge-offs for the period10,653 6,747 
Loan balances:
End of period18,806,856 14,824,539 
Average for the period16,951,566 14,563,835 
Net charge-offs as a percentage of average loans (annualized)0.08 %0.06 %
Allowance for credit losses on loans as a percentage of end of period loans0.98 %1.15 %

50

Loans

Loans are stated at amortized cost. Balances within the major loans receivable categories are presented in the following table:

(dollars in thousands)September 30, 2022December 31, 2021
Commercial, financial and agricultural$2,245,287 $1,875,993 
Consumer installment162,345 191,298 
Indirect automobile137,183 265,779 
Mortgage warehouse980,342 787,837 
Municipal516,797 572,701 
Premium finance1,062,724 798,409 
Real estate – construction and development2,009,726 1,452,339 
Real estate – commercial and farmland7,516,309 6,834,917 
Real estate – residential4,176,143 3,094,985 
$18,806,856 $15,874,258 

Non-Performing Assets

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and OREO. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of non-performing loans over $250,000 on a quarterly basis. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

Nonaccrual loans totaled $118.7 million at September 30, 2022, an increase of $33.4 million, or 39.2%, from $85.3 million at December 31, 2021. Accruing loans delinquent 90 days or more totaled $12.4 million at September 30, 2022, a decrease of $270,000, or 2.1%, compared with $12.6 million at December 31, 2021. At September 30, 2022, OREO totaled $843,000, a decrease of $3.0 million, or 77.9%, compared with $3.8 million at December 31, 2021. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process.  At the end of the third quarter of 2022, total non-performing assets as a percent of total assets increased to 0.55% compared with 0.43% at December 31, 2021.

Non-performing assets at September 30, 2022 and December 31, 2021 were as follows:

(dollars in thousands)September 30, 2022December 31, 2021
Nonaccrual loans$118,676 $85,266 
Accruing loans delinquent 90 days or more12,378 12,648 
Repossessed assets60 84 
Other real estate owned843 3,810 
Total non-performing assets$131,957 $101,808 

51

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.

As of September 30, 2022 and December 31, 2021, the Company had a balance of $39.8 million and $76.6 million, respectively, in troubled debt restructurings. These totals do not include COVID-19 loan modifications accounted for under Section 4013 of the CARES Act. The following table presents the amount of troubled debt restructurings by loan class classified separately as accrual and nonaccrual at September 30, 2022 and December 31, 2021:

September 30, 2022Accruing LoansNon-Accruing Loans
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural8$1,342 3$353 
Consumer installment46 1012 
Indirect automobile170595 25101 
Premium finance5456 —— 
Real estate – construction and development2698 124 
Real estate – commercial and farmland178,091 366 
Real estate – residential20624,515 293,494 
Total412$35,703 71$4,050 

December 31, 2021Accruing LoansNon-Accruing Loans
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural12$1,286 6$83 
Consumer installment716 1735 
Indirect automobile2331,037 52273 
Real estate – construction and development4789 113 
Real estate – commercial and farmland2535,575 55,924 
Real estate – residential21326,879 394,678 
Total494$65,582 120$11,006 

The following table presents the amount of troubled debt restructurings by loan class classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2022 and December 31, 2021:

September 30, 2022Loans Currently Paying
Under Restructured Terms		Loans that have Defaulted Under Restructured Terms
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural10$1,347 1$348 
Consumer installment76 712 
Indirect automobile156519 39177 
Premium finance5456 —— 
Real estate – construction and development2698 124 
Real estate – commercial and farmland198,149 18 
Real estate – residential18822,017 475,992 
Total387$33,192 96$6,561 

52

December 31, 2021Loans Currently Paying
Under Restructured Terms		Loans that have Defaulted Under Restructured Terms
Loan Class#
Balance
(in thousands)
#
Balance
(in thousands)
Commercial, financial and agricultural11$1,269 7$100 
Consumer installment1017 1434 
Indirect automobile2331,052 52258 
Real estate – construction and development4789 113 
Real estate – commercial and farmland2941,452 147 
Real estate – residential21526,956 374,601 
Total502$71,535 112$5,053 

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and nonaccrual at September 30, 2022 and December 31, 2021:

September 30, 2022Accruing LoansNon-Accruing Loans
Type of Concession#
Balance
(in thousands)
#
Balance
(in thousands)
Forgiveness of interest3$280 1$55 
Forbearance of interest131,017 142 
Forbearance of principal26421,855 413,261 
Rate reduction only525,038 3257 
Rate reduction, forbearance of interest312,345 12 
Rate reduction, forbearance of principal142,530 21302 
Rate reduction, forgiveness of interest352,638 3131 
Total412$35,703 71$4,050 

December 31, 2021Accruing LoansNon-Accruing Loans
Type of Concession#
Balance
(in thousands)
#
Balance
(in thousands)
Forgiveness of interest3$287 —$— 
Forbearance of interest161,218 115 
Forbearance of principal33249,778 739,783 
Rate reduction only556,321 4200 
Rate reduction, maturity extension—— 11 
Rate reduction, forbearance of interest332,296 6319 
Rate reduction, forbearance of principal182,694 29363 
Rate reduction, forgiveness of interest372,988 6325 
Total494$65,582 120$11,006 

53

The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and nonaccrual at September 30, 2022 and December 31, 2021:

September 30, 2022Accruing LoansNon-Accruing Loans
Collateral Type#
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse3$55 1$8 
Raw land31,717 373 
Hotel and motel1129 —— 
Office3521 —— 
Retail, including strip centers73,980 117 
1-4 family residential20624,515 283,486 
Church22,388 —— 
Automobile/equipment/CD1821,942 38466 
Unsecured5456 —— 
Total412$35,703 71$4,050 

December 31, 2021Accruing LoansNon-Accruing Loans
Collateral Type#
Balance
(in thousands)
#
Balance
(in thousands)
Warehouse3$61 2$272 
Raw land63,776 113 
Hotel and motel422,069 14,798 
Office5710 1485 
Retail, including strip centers87,118 1370 
1-4 family residential21527,129 394,678 
Church22,393 —— 
Automobile/equipment/CD2512,326 75390 
Total494$65,582 120$11,006 

Commercial Lending Practices

The federal bank regulatory agencies previously issued interagency guidance on commercial real estate lending and prudent risk management practices. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including one-to-four family residential construction), multi-family property and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner-occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing or permanent financing of the property. Loans for owner-occupied CRE are generally excluded from the CRE guidance.

The CRE guidance is applicable when either:

(1)total loans for construction, land development, and other land, net of owner-occupied loans, represent 100% or more of a tier I capital plus allowance for credit losses on loans and leases; or
(2)total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner-occupied loans, represent 300% or more of a bank’s tier I capital plus allowance for credit losses on loans and leases.

Banks that are subject to the CRE guidance criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.

As of September 30, 2022, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:

54

(1)within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;
(2)on average, CRE loan sizes are generally larger than non-CRE loan types; and
(3)certain construction and development loans may be less predictable and more difficult to evaluate and monitor.

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of September 30, 2022 and December 31, 2021. The loan categories and concentrations below are based on Federal Reserve Call codes:

September 30, 2022December 31, 2021
(dollars in thousands)Balance% of Total
Loans		Balance% of Total
Loans
Construction and development loans$2,009,726 11%$1,452,339 9%
Multi-family loans714,833 4%596,000 4%
Nonfarm non-residential loans (excluding owner-occupied)4,815,415 26%4,341,436 27%
Total CRE Loans (excluding owner-occupied)
7,539,974 40%6,389,775 40%
All other loan types11,266,882 60%9,484,483 60%
Total Loans$18,806,856 100%$15,874,258 100%

The following table outlines the percentage of construction and development loans and total CRE loans, net of owner-occupied loans, to the Bank’s tier I capital plus allowance for credit losses on loans and leases, and the Company’s internal concentration limits as of September 30, 2022 and December 31, 2021:

Internal
Limit		Actual
September 30, 2022December 31, 2021
Construction and development loans100%79%66%
Total CRE loans (excluding owner-occupied)300%295%291%

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At September 30, 2022, the Company’s short-term investments were $1.06 billion, compared with $3.76 billion at December 31, 2021. At September 30, 2022, the Company had $5.0 million in federal funds sold and $1.06 billion was in interest-bearing deposit balances at correspondent banks and the Federal Reserve Bank of Atlanta.

Derivative Instruments and Hedging Activities

The Company has forward contracts and IRLCs to economically hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of $23.4 million and $11.9 million at September 30, 2022 and December 31, 2021, respectively, and a liability of $1.7 million and $710,000 at September 30, 2022 and December 31, 2021, respectively.

Capital

Common Stock Repurchase Program

On September 19, 2019, the Company announced that its Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock through October 31, 2020. The Company's Board of Directors has subsequently extended the share repurchase program each year since the original authorization, with the most recent extension, which also included the replenishment of the program to $100.0 million, being announced on October 27, 2022. As a result, the Company is currently authorized to engage in additional share repurchases up to $100.0 million through October 31, 2023.  Repurchases of shares must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of September 30, 2022, an aggregate of $41.7 million, or 952,910 shares of the Company's common stock, had been repurchased under the program.

55

Capital Management

Capital management consists of providing equity to support both current and anticipated future operations. The capital resources of the Company are monitored on a periodic basis by state and federal regulatory authorities.

Under the regulatory capital frameworks adopted by the Federal Reserve Board (the "FRB") and the Federal Deposit Insurance Corporation (the "FDIC"), the Company and the Bank must each maintain a common equity Tier 1 capital to total risk-weighted assets ratio of at least 4.5%, a Tier 1 capital to total risk-weighted assets ratio of at least 6%, a total capital to total risk-weighted assets ratio of at least 8% and a leverage ratio of Tier 1 capital to average total consolidated assets of at least 4%. The Company and the Bank are also required to maintain a capital conservation buffer of common equity Tier 1 capital of at least 2.5% of risk-weighted assets in addition to the minimum risk-based capital ratios in order to avoid certain restrictions on capital distributions and discretionary bonus payments.

In March 2020, the Office of the Comptroller of the Currency, the FRB and the FDIC issued an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule provides banking organizations that implement CECL in 2020 the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. As a result, the Company and Bank elected the five-year transition relief allowed under the interim final rule effective March 31, 2020.

As of September 30, 2022, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of for the Company and the Bank at September 30, 2022 and December 31, 2021:

September 30, 2022December 31, 2021
Tier 1 Leverage Ratio (tier 1 capital to average assets)
  
Consolidated9.32%8.63%
Ameris Bank10.70%9.50%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
  
Consolidated10.06%10.46%
Ameris Bank11.56%11.50%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
  
Consolidated10.06%10.46%
Ameris Bank11.56%11.50%
Total Capital Ratio (total capital to risk weighted assets)
  
Consolidated13.15%13.78%
Ameris Bank12.64%12.45%

Interest Rate Sensitivity and Liquidity

The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the ALCO Committee. The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.

The ALCO Committee is comprised of senior officers of Ameris. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.

The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis
56

in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to increase/decrease no more than 20% given a change in selected interest rates of 200 basis points over any 24-month period.

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term assets at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 30% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At September 30, 2022 and December 31, 2021, the net carrying value of the Company’s other borrowings was $725.7 million and $739.9 million, respectively.

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:

September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021
Investment securities available-for-sale to total deposits6.45%5.35%2.96%3.01%3.63%
Loans (net of unearned income) to total deposits96.61%89.21%82.41%80.72%78.71%
Interest-earning assets to total assets90.76%89.88%90.43%90.56%91.20%
Interest-bearing deposits to total deposits57.14%58.02%59.82%60.46%59.56%

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at September 30, 2022 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and are part of the Company’s program to manage interest rate sensitivity.

The Company also had forward contracts and IRLCs to economically hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to an asset of approximately $23.4 million and $11.9 million at September 30, 2022 and December 31, 2021, respectively, and a liability of $1.7 million and $710,000 at September 30, 2022 and December 31, 2021, respectively.

The Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk.” The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “gap management.”

The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a 12-month and
57

24-month period is subjected to gradual and parallel shocks of 100, 200, 300 and 400 basis point increases and decreases in market rates and is monitored on a quarterly basis.

Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

During the quarter ended September 30, 2022, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

58


PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Disclosure concerning legal proceedings can be found in Part I - "Financial Information, Item 1. Financial Statements, Notes to Unaudited Consolidated Financial Statements, Note 8 – Commitments and Contingencies" under the caption, "Litigation and Regulatory Contingencies," which is incorporated herein by reference.

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

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

c) Issuer Purchases of Equity Securities.

The table below sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three-month period ended September 30, 2022. 
Period
Total
Number of
Shares
Purchased(1)
Average Price
Paid Per Share		Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares That
 May Yet be
Purchased
Under the Plans
or Programs(2)
July 1, 2022 through July 31, 2022
3,038 $42.07 — $58,262,530 
August 1, 2022 through August 31, 2022244 $48.06 — $58,262,530 
September 1, 2022 through September 30, 2022— $— — $58,262,530 
Total3,282 $42.52 — $58,262,530 
 
(1)The shares purchased from July 1, 2022 through September 30, 2022 consist of shares of common stock surrendered to the Company in payment of the income tax withholding obligations relating to the vesting of shares of restricted stock.
(2)On September 19, 2019, the Company announced that its Board of Directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock through October 31, 2020. The Company’s Board of Directors has subsequently extended the share repurchase program each year since the original authorization, with the most recent extension, which also included the replenishment of the program to $100.0 million, being announced on October 27, 2022. As a result, the Company is currently authorized to engage in additional share repurchases totaling up to $100.0 million through October 31, 2023. Repurchases of shares must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of September 30, 2022, an aggregate of $41.7 million, or 952,910 shares of the Company's common stock, had been repurchased under the program.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

59

Item 6. Exhibits.
Exhibit
Number		 Description
  
3.1 Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the SEC on August 14, 1987).
   
 Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 26, 1999).
   
 Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the SEC on March 31, 2003).
   
 Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on December 1, 2005).
   
 Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on November 21, 2008).
   
 Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the SEC on June 1, 2011).
Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp's Quarterly Report on Form 10-Q filed with the SEC on August 10, 2020).
 Bylaws of Ameris Bancorp, as amended and restated through June 11, 2020 (incorporated by reference to Exhibit 3.8 to Ameris Bancorp's Quarterly Report on Form 10-Q filed with the SEC on August 10, 2020).
Ameris Bancorp 2021 Omnibus Equity Incentive Plan, as amended and restated through July 26, 2022 (incorporated by reference to Exhibit 10.1 to Ameris Bancorp's Quarterly Report on Form 10-Q filed with the SEC on August 5, 2022).
 Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer.
   
 Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer.
   
 Section 1350 Certification by the Company’s Chief Executive Officer.
 Section 1350 Certification by the Company’s Chief Financial Officer.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
* Management contract or a compensatory plan or arrangement.

60

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Dated: November 7, 2022AMERIS BANCORP
  
 /s/ Nicole S. Stokes
 Nicole S. Stokes
 Chief Financial Officer
(duly authorized signatory and principal accounting and financial officer)

61
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