Ameris Bancorp - Quarter Report: 2021 March (Form 10-Q)

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 March 31, 2021


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number:			001-13901


AMERIS BANCORP
(Exact name of registrant as specified in its charter)


Georgia			58-1456434
(State of incorporation)			(IRS Employer ID No.)


3490 Piedmont Rd N.E., Suite 1550
Atlanta	Georgia	30305
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1 per share	ABCB	Nasdaq 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 filer	ý	Accelerated 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 69,731,426 shares of Common Stock outstanding as of April 30, 2021.

AMERIS BANCORP

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Consolidated Balance Sheets as of March 3 1 , 202 1 and December 31, 2020	1

	Consolidated Statements of Income and Comprehensive Income for the Three Month s E nded March 3 1 , 202 1 and 20 20	2

	Consolidated Statements of Shareholders’ Equity for the Three Month s Ended March 3 1 , 202 1 and 20 20	3

	Consolidated Statements of Cash Flows for the Three Months Ended March 31 , 202 1 and 20 20	4

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	47

Item 4.	Controls and Procedures.	47

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	48

Item 1A.	Risk Factors.	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	48

Item 3.	Defaults Upon Senior Securities.	48

Item 4.	Mine Safety Disclosures.	48

Item 5.	Other Information.	48

Item 6.	Exhibits.	49

Signatures		50

Item 1. Financial Statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Balance Sheets

(dollars in thousands, except per share data)


	March 31, 2021 (unaudited)		December 31, 2020
Assets
Cash and due from banks	$	224,159	$	203,349
Federal funds sold and interest-bearing deposits in banks	2,534,969		1,913,957
Cash and cash equivalents	2,759,128		2,117,306

Time deposits in other banks	249		249
Investment securities available for sale, at fair value, net of allowance for credit losses at $101 and $112	859,652		982,879
Other investments	27,620		28,202
Loans held for sale (includes loan at fair value of $1,509,528 and $1,001,807)	1,509,528		1,167,659

Loans, net of unearned income	14,599,805		14,480,925
Allowance for credit losses	(178,570)		(199,422)
Loans, net	14,421,235		14,281,503

Other real estate owned, net	8,841		11,880
Premises and equipment, net	231,550		222,890
Goodwill	928,005		928,005
Other intangible assets, net	67,848		71,974
Cash value of bank owned life insurance	176,575		176,467
Deferred income taxes, net	22,367		33,314
Other assets	414,529		416,310
Total assets	$	21,427,127	$	20,438,638

Liabilities
Deposits:
Noninterest-bearing	$	6,804,776	$	6,151,070
Interest-bearing	11,071,097		10,806,753
Total deposits	17,875,873		16,957,823
Securities sold under agreements to repurchase	9,320		11,641
Other borrowings	425,231		425,155
Subordinated deferrable interest debentures	124,833		124,345
Other liabilities	234,274		272,586
Total liabilities	18,669,531		17,791,550

Commitments and Contingencies (Note 9)

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; 71,954,088 and 71,753,705 shares issued	71,954		71,754
Capital surplus	1,917,990		1,913,285
Retained earnings	785,984		671,510
Accumulated other comprehensive income, net of tax	26,090		33,505
Treasury stock, at cost, 2,240,662 and 2,212,224 shares	(44,422)		(42,966)
Total shareholders’ equity	2,757,596		2,647,088
Total liabilities and shareholders’ equity	$	21,427,127	$	20,438,638

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (unaudited)

(dollars and shares in thousands, except per share data)


	Three Months Ended March 31,
	2021		2020
Interest income
Interest and fees on loans	$	171,157	$	171,242
Interest on taxable securities	6,118		10,082
Interest on nontaxable securities	141		157
Interest on deposits in other banks and federal funds sold	534		1,287
Total interest income	177,950		182,768

Interest expense
Interest on deposits	6,798		24,102
Interest on other borrowings	6,175		10,721
Total interest expense	12,973		34,823

Net interest income	164,977		147,945
Provision for loan losses	(16,579)		37,047
Provision for unfunded commitments	(11,839)		4,000
Provision for other credit losses	(173)		—
Provision for credit losses	(28,591)		41,047
Net interest income after provision for credit losses	193,568		106,898

Noninterest income
Service charges on deposit accounts	10,829		11,844
Mortgage banking activity	98,486		35,333
Other service charges, commissions and fees	1,016		961
Net loss on securities	(12)		(9)
Other noninterest income	7,654		6,250
Total noninterest income	117,973		54,379

Noninterest expense
Salaries and employee benefits	95,985		75,946
Occupancy and equipment	11,781		12,028
Data processing and communications expenses	11,884		11,954
Credit resolution-related expenses	547		2,198
Advertising and marketing	1,431		2,358
Amortization of intangible assets	4,126		5,631
Merger and conversion charges	—		540
Other noninterest expenses	23,044		27,398
Total noninterest expense	148,798		138,053

Income before income tax expense	162,743		23,224
Income tax expense	37,781		3,902
Net income	124,962		19,322

Other comprehensive income (loss)
Net unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax expense (benefit) of $(1,972) and $5,756	(7,415)		21,653

Net unrealized losses on cash flow hedge during the period, net of tax benefit of $0 and $(26)	—		(97)
Total other comprehensive income (loss)	(7,415)		21,556
Comprehensive income	$	117,547	$	40,878

Basic earnings per common share	$	1.80	$	0.28
Diluted earnings per common share	$	1.79	$	0.28
Weighted average common shares outstanding
Basic	69,392		69,248
Diluted	69,741		69,502

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (unaudited)

(dollars in thousands)


	Three Months Ended March 31, 2021

	Common Stock			Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income, Net of Tax		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance, December 31, 2020	71,753,705	$	71,754	$	1,913,285	$	671,510	$	33,505	2,212,224	$	(42,966)	$	2,647,088

Issuance of restricted shares	86,075	86		513		—		—		—	—		599

Proceeds from exercise of stock options	114,308	114		2,888		—		—		—	—		3,002
Share-based compensation	—	—		1,304		—		—		—	—		1,304
Purchase of treasury shares	—	—		—		—		—		28,438	(1,456)		(1,456)
Net income	—	—		—		124,962		—		—	—		124,962
Dividends on common shares ($0.15 per share)	—	—		—		(10,488)		—		—	—		(10,488)

Other comprehensive income (loss) during the period	—	—		—		—		(7,415)		—	—		(7,415)
Balance, March 31, 2021	71,954,088	$	71,954	$	1,917,990	$	785,984	$	26,090	2,240,662	$	(44,422)	$	2,757,596


	Three Months Ended March 31, 2020

	Common Stock			Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income, Net of Tax		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance, December 31, 2019	71,499,829	$	71,500	$	1,907,108	$	507,950	$	17,995	1,995,996	$	(34,971)	$	2,469,582

Issuance of restricted shares	118,625	119		171		—		—		—	—		290

Proceeds from exercise of stock options	33,532	33		668		—		—		—	—		701
Share-based compensation	—	—		774		—		—		—	—		774
Purchase of treasury shares	—	—		—		—		—		214,716	(7,956)		(7,956)
Net income	—	—		—		19,322		—		—	—		19,322
Dividends on common shares ($0.15 per share)	—	—		—		(10,415)		—		—	—		(10,415)

Cumulative effect of change in accounting for credit losses	—	—		—		(56,704)		—		—	—		(56,704)
Other comprehensive income (loss) during the period	—	—		—		—		21,556		—	—		21,556
Balance, March 31, 2020	71,651,986	$	71,652	$	1,908,721	$	460,153	$	39,551	2,210,712	$	(42,927)	$	2,437,150

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)


	Three Months Ended March 31,
	2021		2020
Operating Activities
Net income	$	124,962	$	19,322
Adjustments reconciling net income to net cash provided by (used in) operating activities:
Depreciation	4,080		3,916
Net losses on sale or disposal of premises and equipment	139		125
Net write-downs on other assets	122		417
Provision for credit losses	(28,591)		41,047
Net write-downs and (gains) losses on sale of other real estate owned	(560)		885
Share-based compensation expense	1,753		559
Amortization of intangible assets	4,126		5,631
Amortization of operating lease right of use assets	2,979		3,400
Provision for deferred taxes	12,919		(7,333)
Net amortization of investment securities available for sale	1,121		1,385
Net loss on securities	12		9
Accretion of discount on purchased loans, net	(6,127)		(6,320)
Net amortization on other borrowings	112		46
Amortization of subordinated deferrable interest debentures	488		485
Loan servicing asset impairment (recovery)	(10,639)		22,165
Originations of mortgage loans held for sale	(2,340,847)		(1,252,379)
Payments received on mortgage loans held for sale	10,680		14,957
Proceeds from sales of mortgage loans held for sale	1,816,503		1,530,122
Net gains on mortgage loans held for sale	(41,720)		(40,809)
Originations of SBA loans	(11,976)		(11,647)
Proceeds from sales of SBA loans	12,518		20,062
Net gains on sale of SBA loans	(1,192)		(1,824)
Increase in cash surrender value of bank owned life insurance	(814)		(969)
Gain on bank owned life insurance proceeds	(603)		—
Net gains on other loans held for sale	(457)		—

Changes in FDIC loss-share payable, net of cash payments	—		(1,506)
Change attributable to other operating activities	(13,597)		(40,757)
Net cash provided by (used in) operating activities	(464,609)		300,989

Investing Activities, net of effects of business combinations


Proceeds from prepayments and maturities of securities available for sale	112,730		76,386

Net (increase) decrease in other investments	570		(14,844)
Net increase in loans	(72,093)		(264,063)
Purchases of premises and equipment	(13,809)		(3,572)
Proceeds from sale of premises and equipment	930		—
Proceeds from sales of other real estate owned	4,048		1,284
Payments paid to FDIC under loss-share agreements	—		(25)
Proceeds from bank owned life insurance	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 received from acquisitions	—		2
Net cash provided by (used in) investing activities	199,624		(204,832)

			(Continued)

AMERIS BANCORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)


	Three Months Ended March 31,
	2021		2020
Financing Activities, net of effects of business combinations
Net increase (decrease) in deposits	$	918,050	$	(182,455)
Net decrease in securities sold under agreements to repurchase	(2,321)		(5,475)
Proceeds from other borrowings	—		2,770,000
Repayment of other borrowings	(36)		(2,625,084)
Repayment of subordinated deferrable interest debentures	—		(5,155)

Proceeds from exercise of stock options	3,002		701
Dividends paid - common stock	(10,432)		(10,426)
Purchase of treasury shares	(1,456)		(7,956)
Net cash provided by (used in) financing activities	906,807		(65,850)

Net increase in cash and cash equivalents	641,822		30,307
Cash and cash equivalents at beginning of period	2,117,306		621,849
Cash and cash equivalents at end of period	$	2,759,128	$	652,156

Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period for:
Interest	$	11,335	$	35,234
Income taxes	(1)		(77)
Loans transferred to other real estate owned	449		3,674
Loans transferred from loans held for sale to loans held for investment	48,313		—

Loans provided for the sales of other real estate owned	—		299


Right-of-use assets obtained in exchange for new operating lease liabilities	—		2,889




Change in unrealized gain (loss) on securities available for sale, net of tax	(7,415)		21,653
Change in unrealized gain (loss) on cash flow hedge, net of tax	—		(97)

			(Concluded)

See notes to unaudited consolidated financial statements.

AMERIS BANCORP AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

March 31, 2021

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 March 31, 2021, the Bank operated 165 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 period ended March 31, 2021 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 and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended.

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 and federal funds sold. The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Atlanta. The required reserve rate was set to 0% effective March 26, 2020 and, accordingly, the Bank had no reserve requirement at March 31, 2021 and December 31, 2020.

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 Adopted in 2021

ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain technical exceptions. ASU 2019-12 also clarifies and amends the accounting for income taxes in certain areas including, among others: (i) franchise taxes that are partially based on income; (ii) whether step ups in the tax basis of goodwill should be considered part of the acquisition to which it related or recognized as a separate transaction; and (iii) requiring the effect of an enacted change in tax laws or rates to be reflected in the annual effective tax rate computation in the interim period that includes the enactment date. During the first quarter of 2021, the Company adopted this ASU and applied the amendments in this update on a modified retrospective basis for the provision related to franchise taxes and prospectively for all other amendments. The adoption did not have a material impact on the Company's consolidated financial statements.

Accounting Standards Pending Adoption

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 of adopting ASU 2021-01 on the consolidated financial statements.

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 of adopting ASU 2020-04 on the consolidated financial statements.

NOTE 2 – INVESTMENT SECURITIES

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


(dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2021
U.S. government sponsored agencies	$	12,138	$	—	$	256	$	—	$	12,394
State, county and municipal securities	60,140		—		2,845		—		62,985
Corporate debt securities	46,131		(101)		946		(229)		46,747
SBA pool securities	54,305		—		1,488		(102)		55,691
Mortgage-backed securities	654,015		—		27,851		(31)		681,835
Total debt securities	$	826,729	$	(101)	$	33,386	$	(362)	$	859,652

December 31, 2020
U.S. government sponsored agencies	$	17,161	$	—	$	343	$	—	$	17,504
State, county and municipal securities	63,286		—		3,492		—		66,778
Corporate debt securities	51,639		(112)		602		(233)		51,896
SBA pool securities	59,973		—		2,620		(96)		62,497
Mortgage-backed securities	748,521		—		35,797		(114)		784,204
Total debt securities	$	940,580	$	(112)	$	42,854	$	(443)	$	982,879

The amortized cost and estimated fair value of debt securities available for sale securities as of March 31, 2021, 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:


(dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	20,247	$	20,462
Due from one year to five years	48,460		50,244
Due from five to ten years	59,558		61,722
Due after ten years	44,449		45,389
Mortgage-backed securities	654,015		681,835
	$	826,729	$	859,652

Securities with a carrying value of approximately $372.8 million and $438.7 million at March 31, 2021 and December 31, 2020, 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 securities aggregated by category and length of time that securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020:


	Less Than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
March 31, 2021


Corporate debt securities	$	2,920	$	(229)	$	—	$	—	$	2,920	$	(229)
SBA pool securities	1,755		(13)		3,798		(89)		5,553		(102)
Mortgage-backed securities	10,102		(28)		374		(3)		10,476		(31)
Total debt securities	$	14,777	$	(270)	$	4,172	$	(92)	$	18,949	$	(362)

December 31, 2020


Corporate debt securities	$	10,159	$	(233)	$	—	$	—	$	10,159	$	(233)
SBA pool securities	—		—		3,948		(96)		3,948		(96)
Mortgage-backed securities	24,120		(114)		2		—		24,122		(114)
Total debt securities	$	34,279	$	(347)	$	3,950	$	(96)	$	38,229	$	(443)

As of March 31, 2021, the Company’s security portfolio consisted of 488 securities, 33 of which were in an unrealized loss position. At March 31, 2021, the Company held 21 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. At March 31, 2021, the Company held nine U.S. Small Business Administration (“SBA”) pool securities and three corporate securities that were in an unrealized loss position.

During 2021 and 2020, 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 March 31, 2021 or December 31, 2020.

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate 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 investment securities at an unrealized loss position at March 31, 2021, 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 March 31, 2021, management determined $101,000 was attributable to credit impairment and established the allowance for credit losses accordingly. The remaining $362,000 in unrealized loss was determined to be from factors other than credit.


(dollars in thousands) Allowance for credit losses	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Beginning balance	$	112	$	—
Provision for expected credit losses	(11)		—



Ending balance	$	101	$	—

At March 31, 2021 and December 31, 2020, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.

Total loss on securities reported on the consolidated statements of income and comprehensive income is comprised of the following for the three months ended March 31, 2021 and 2020:


(dollars in thousands)	March 31, 2021		March 31, 2020

Unrealized holding losses on equity securities	$	(12)	$	(9)

Total loss on securities	$	(12)	$	(9)

NOTE 3 – LOANS

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


(dollars in thousands)	March 31, 2021		December 31, 2020
Commercial, financial and agricultural	$	1,611,029	$	1,627,477
Consumer installment	257,097		306,995
Indirect automobile	482,637		580,083
Mortgage warehouse	880,216		916,353
Municipal	659,228		659,403
Premium finance	706,379		687,841
Real estate – construction and development	1,533,234		1,606,710
Real estate – commercial and farmland	5,616,826		5,300,006
Real estate – residential	2,853,159		2,796,057
	$	14,599,805	$	14,480,925

Included in commercial, financial and agricultural loans at March 31, 2021 and December 31, 2020 above are $792.0 million and $827.4 million, respectively, related to the SBA's Paycheck Protection Program (“PPP”). Accrued interest receivable on loans is reported in other assets on the consolidated balance sheets totaling $67.8 million and $73.4 million at March 31, 2021 and December 31, 2020, respectively. The Company recorded an allowance for credit losses of $556,000 and $718,000 related to deferred interest on loans modified under its Disaster Relief Program at March 31, 2021 and December 31, 2020, 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.

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


(dollars in thousands)	March 31, 2021		December 31, 2020
Commercial, financial and agricultural	$	9,686	$	9,836
Consumer installment	646		709
Indirect automobile	1,530		2,831



Real estate – construction and development	5,421		5,407
Real estate – commercial and farmland	14,046		18,517
Real estate – residential	39,860		39,157
	$	71,189	$	76,457

There was no interest income recognized on nonaccrual loans during the three months ended March 31, 2021 and 2020.

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


(dollars in thousands)	March 31, 2021		December 31, 2020
Commercial, financial and agricultural	$	966	$	764





Real estate – construction and development	66		416
Real estate – commercial and farmland	3,621		7,015
Real estate – residential	6,842		5,299
	$	11,495	$	13,494

The following table presents an analysis of past-due loans as of March 31, 2021 and December 31, 2020:


(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
March 31, 2021
Commercial, financial and agricultural	$	5,729	$	1,094	$	4,922	$	11,745	$	1,599,284	$	1,611,029	$	—
Consumer installment	1,774		1,017		1,128		3,919		253,178		257,097		749
Indirect automobile	1,036		318		971		2,325		480,312		482,637		—
Mortgage warehouse	—		—		—		—		880,216		880,216		—
Municipal	—		—		—		—		659,228		659,228		—
Premium finance	4,693		2,833		4,057		11,583		694,796		706,379		4,057
Real estate – construction and development	28,769		1,898		2,621		33,288		1,499,946		1,533,234		291
Real estate – commercial and farmland	9,796		527		8,114		18,437		5,598,389		5,616,826		—
Real estate – residential	13,307		4,199		35,904		53,410		2,799,749		2,853,159		—
Total	$	65,104	$	11,886	$	57,717	$	134,707	$	14,465,098	$	14,599,805	$	5,097


(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
December 31, 2020
Commercial, financial and agricultural	$	4,576	$	2,018	$	5,652	$	12,246	$	1,615,231	$	1,627,477	$	—
Consumer installment	2,189		1,114		2,318		5,621		301,374		306,995		1,755
Indirect automobile	3,293		1,006		2,171		6,470		573,613		580,083		—
Mortgage warehouse	—		—		—		—		916,353		916,353		—
Municipal	—		—		—		—		659,403		659,403		—
Premium finance	7,188		3,895		6,571		17,654		670,187		687,841		6,571
Real estate – construction and development	13,348		723		5,150		19,221		1,587,489		1,606,710		—
Real estate – commercial and farmland	5,370		1,701		8,651		15,722		5,284,284		5,300,006		—
Real estate – residential	20,519		3,125		34,081		57,725		2,738,332		2,796,057		—
Total	$	56,483	$	13,582	$	64,594	$	134,659	$	14,346,266	$	14,480,925	$	8,326

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 collateral value 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 exceeded the estimated fair value of the collateral.

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


	March 31, 2021				December 31, 2020
(dollars in thousands)	Balance		Allowance for Credit Losses		Balance		Allowance for Credit Losses
Commercial, financial and agricultural	$	5,375	$	1,777	$	5,490	$	2,252




Premium finance	1,577		11		3,523		—
Real estate – construction and development	4,109		619		4,173		512
Real estate – commercial and farmland	93,689		20,378		100,180		21,001
Real estate – residential	12,672		1,579		9,716		891
	$	117,422	$	24,364	$	123,082	$	24,656

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:

Grade 1 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 2 – Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 3 – Good Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 4 – Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 5 – Fair Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 6 – Other Assets Especially Mentioned – 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.

Grade 7 – Substandard – 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.

Grade 8 – Doubtful – 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.

Grade 9 – Loss – 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 March 31, 2021 and December 31, 2020. 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 9 at December 31, 2020.


As of March 31, 2021	Term Loans by Origination Year												Revolving Loans Amortized Cost Basis
	2021		2020		2019		2018		2017		Prior				Total
Commercial, Financial and Agricultural
Risk Grade:
1	$	329,750	$	483,062	$	2,631	$	983	$	295	$	5,290	$	63,365		$	885,376
2	7,799		449		8,991		638		810		976		10,771			30,434
3	30,638		69,131		43,563		14,490		17,168		9,080		61,094			245,164
4	38,031		74,263		59,189		77,684		30,449		35,375		75,733			390,724
5	76		4,191		4,543		4,374		6,345		4,493		6,431			30,453
6	3		12		1,673		470		576		3,847		397			6,978
7	343		3,080		3,790		2,686		4,072		6,361		1,568			21,900


Total commercial, financial and agricultural	$	406,640	$	634,188	$	124,380	$	101,325	$	59,715	$	65,422	$	219,359		$	1,611,029


As of March 31, 2021	Term Loans by Origination Year												Revolving Loans Amortized Cost Basis
	2021		2020		2019		2018		2017		Prior				Total
Consumer Installment
Risk Grade:
1	$	1,597	$	5,577	$	2,625	$	1,308	$	510	$	33	$	155		$	11,805
2	—		—		—		33		1		58		41			133
3	5,983		11,263		5,382		2,045		647		1,921		4,991			32,232
4	11,275		87,762		46,500		35,996		14,116		11,715		3,308			210,672
5	—		46		86		12		25		163		—			332
6	—		—		—		9		—		143		6			158
7	—		287		525		188		94		581		86			1,761

9	—		—		2		—		—		—		2			4
Total consumer installment	$	18,855	$	104,935	$	55,120	$	39,591	$	15,393	$	14,614	$	8,589		$	257,097
Indirect Automobile
Risk Grade:

2	$	—	$	—	$	—	$	75	$	29	$	6,512	$	—		$	6,616
3	—		—		31,573		162,594		159,571		119,905		—			473,643


6	—		—		—		30		33		101		—			164
7	—		—		38		288		354		1,534		—			2,214


Total indirect automobile	$	—	$	—	$	31,611	$	162,987	$	159,987	$	128,052	$	—		$	482,637
Mortgage Warehouse
Risk Grade:


3	$	—	$	—	$	—	$	—	$	—	$	—	$	880,216		$	880,216






Total mortgage warehouse	$	—	$	—	$	—	$	—	$	—	$	—	$	880,216		$	880,216
Municipal
Risk Grade:
1	$	25,045	$	91,812	$	11,565	$	8,540	$	141,216	$	205,673	$	—		$	483,851
2	—		72,903		—		—		—		13,012		—			85,915
3	—		61,551		682		—		5,452		12,648		—			80,333
4	—		6,285		—		—		—		2,844		—			9,129





Total municipal	$	25,045	$	232,551	$	12,247	$	8,540	$	146,668	$	234,177	$	—		$	659,228
Premium Finance
Risk Grade:

2	$	351,490	$	340,097	$	9,738	$	257	$	638	$	100	$	—		$	702,320




7	—		3,980		79		—		—		—		—			4,059


Total premium finance	$	351,490	$	344,077	$	9,817	$	257	$	638	$	100	$	—		$	706,379


As of March 31, 2021	Term Loans by Origination Year												Revolving Loans Amortized Cost Basis
	2021		2020		2019		2018		2017		Prior				Total
Real Estate – Construction and Development
Risk Grade:

2	$	—	$	62	$	—	$	—	$	—	$	—	$	—		$	62
3	14,018		42,007		6,565		4,269		3,444		11,263		873			82,439
4	168,849		545,742		362,783		132,341		49,482		35,491		37,990			1,332,678
5	387		2,136		17,825		38,407		13,755		29,389		106			102,005
6	—		120		892		5,991		598		1,194		—			8,795
7	—		143		3,019		482		629		2,982		—			7,255


Total real estate – construction and development	$	183,254	$	590,210	$	391,084	$	181,490	$	67,908	$	80,319	$	38,969		$	1,533,234
Real Estate – Commercial and Farmland
Risk Grade:
1	$	—	$	—	$	—	$	156	$	—	$	—	$	—		$	156
2	—		7,352		380		448		2,094		13,262		17			23,553
3	186,578		928,268		414,458		181,807		248,378		515,131		52,651			2,527,271
4	87,859		366,846		563,285		396,659		255,335		671,363		43,474			2,384,821
5	1,323		17,020		96,085		71,810		63,286		142,589		4,223			396,336
6	—		—		10,313		15,984		47,716		38,807		3			112,823
7	—		7,714		55,005		18,532		13,038		76,935		642			171,866


Total real estate – commercial and farmland	$	275,760	$	1,327,200	$	1,139,526	$	685,396	$	629,847	$	1,458,087	$	101,010		$	5,616,826
Real Estate - Residential
Risk Grade:
1	$	—	$	—	$	—	$	—	$	—	$	17	$	—		$	17
2	—		36		388		11		99		42,503		1,313			44,350
3	296,261		731,149		434,948		202,552		154,099		467,379		197,899			2,484,287
4	5,768		29,740		17,636		14,464		10,104		61,238		40,174			179,124
5	481		8,581		28,055		9,476		9,202		28,452		3,523			87,770
6	49		418		951		881		367		3,520		107			6,293
7	789		3,385		10,435		13,031		4,406		16,630		2,642			51,318


Total real estate - residential	$	303,348	$	773,309	$	492,413	$	240,415	$	178,277	$	619,739	$	245,658		$	2,853,159


As of December 31, 2020	Term Loans by Origination Year												Revolving Loans Amortized Cost Basis
	2020		2019		2018		2017		2016		Prior				Total
Commercial, Financial and Agricultural
Risk Grade:
1	$	829,710	$	2,912	$	1,055	$	387	$	490	$	4,961	$	36,373		$	875,888
2	1,213		1,512		668		996		172		967		14,317			19,845
3	109,352		54,266		16,932		17,968		7,027		3,905		68,806			278,256
4	86,837		71,645		74,388		37,779		15,359		23,069		85,366			394,443
5	4,061		4,269		4,772		7,443		804		5,842		4,352			31,543
6	21		72		506		193		3,509		1,232		632			6,165
7	3,312		3,460		2,579		3,573		1,294		5,214		1,886			21,318
8	—		—		—		—		—		—		19			19

Total commercial, financial and agricultural	$	1,034,506	$	138,136	$	100,900	$	68,339	$	28,655	$	45,190	$	211,751		$	1,627,477
Consumer Installment
Risk Grade:
1	$	6,782	$	3,001	$	1,550	$	583	$	95	$	1	$	667		$	12,679
2	—		—		46		2		—		63		42			153
3	15,172		6,960		2,838		887		1,455		601		4,389			32,302
4	120,800		53,593		53,182		16,329		3,121		9,437		3,556			260,018
5	49		127		28		30		3		242		8			487
6	—		2		9		—		—		145		—			156
7	30		209		72		105		134		553		97			1,200


Total consumer installment	$	142,833	$	63,892	$	57,725	$	17,936	$	4,808	$	11,042	$	8,759		$	306,995
Indirect Automobile
Risk Grade:

2	$	—	$	—	$	81	$	31	$	5,356	$	3,054	$	—		$	8,522
3	—		35,432		187,656		188,302		103,570		52,781		—			567,741


6	—		—		57		70		62		85		—			274
7	—		163		519		561		1,078		1,225		—			3,546


Total indirect automobile	$	—	$	35,595	$	188,313	$	188,964	$	110,066	$	57,145	$	—		$	580,083
Mortgage Warehouse
Risk Grade:


3	$	—	$	—	$	—	$	—	$	—	$	—	$	916,353		$	916,353






Total mortgage warehouse	$	—	$	—	$	—	$	—	$	—	$	—	$	916,353		$	916,353
Municipal
Risk Grade:
1	$	91,692	$	12,685	$	8,944	$	143,741	$	124,929	$	97,923	$	—		$	479,914
2	73,000		—		—		—		9,410		—		—			82,410
3	39,990		713		—		5,453		7,204		5,489		—			58,849
4	31,394		—		—		—		—		6,836		—			38,230





Total municipal	$	236,076	$	13,398	$	8,944	$	149,194	$	141,543	$	110,248	$	—		$	659,403


As of December 31, 2020	Term Loans by Origination Year												Revolving Loans Amortized Cost Basis
	2020		2019		2018		2017		2016		Prior				Total
Premium Finance
Risk Grade:

2	$	661,614	$	18,236	$	515	$	746	$	121	$	38	$	—		$	681,270




7	5,811		760		—		—		—		—		—			6,571


Total premium finance	$	667,425	$	18,996	$	515	$	746	$	121	$	38	$	—		$	687,841
Real Estate – Construction and Development
Risk Grade:


3	$	59,325	$	7,035	$	6,870	$	8,046	$	3,415	$	6,916	$	1,293		$	92,900
4	605,254		445,496		205,444		50,181		14,672		26,915		68,574			1,416,536
5	1,614		26,720		9,612		13,261		17,712		10,127		107			79,153
6	685		1,036		3,646		1,302		—		4,564		—			11,233
7	15		2,858		566		271		42		3,136		—			6,888


Total real estate – construction and development	$	666,893	$	483,145	$	226,138	$	73,061	$	35,841	$	51,658	$	69,974		$	1,606,710
Real Estate – Commercial and Farmland
Risk Grade:
1	$	—	$	—	$	161	$	—	$	—	$	—	$	—		$	161
2	7,482		540		521		2,131		4,375		10,663		1,138			26,850
3	918,939		370,703		143,591		197,942		224,712		274,665		67,067			2,197,619
4	344,777		584,814		423,241		331,024		242,573		545,745		34,326			2,506,500
5	4,027		39,216		69,173		80,726		25,561		94,461		1,274			314,438
6	—		10,680		4,895		28,139		7,670		31,224		—			82,608
7	250		54,439		18,574		15,489		27,044		55,763		271			171,830


Total real estate – commercial and farmland	$	1,275,475	$	1,060,392	$	660,156	$	655,451	$	531,935	$	1,012,521	$	104,076		$	5,300,006
Real Estate - Residential
Risk Grade:
1	$	—	$	—	$	—	$	—	$	—	$	19	$	—		$	19
2	37		398		12		121		1,275		47,286		1,402			50,531
3	763,101		529,268		254,632		186,531		154,285		388,825		203,491			2,480,133
4	19,296		19,874		15,784		11,607		14,240		53,869		44,276			178,946
5	400		1,768		3,489		3,479		1,151		12,824		3,618			26,729
6	527		1,843		1,030		334		724		3,391		255			8,104
7	3,442		9,387		12,339		4,667		2,157		16,659		2,944			51,595


Total real estate - residential	$	786,803	$	562,538	$	287,286	$	206,739	$	173,832	$	522,873	$	255,986		$	2,796,057

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 interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

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 renews 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 three months of 2021 and 2020 totaling $118.0 million and $71.3 million, respectively, under such parameters.

As of March 31, 2021 and December 31, 2020, the Company had a balance of $87.1 million and $85.0 million, respectively, in troubled debt restructurings. The Company has recorded $1.2 million and $1.2 million in previous charge-offs on such loans at March 31, 2021 and December 31, 2020, respectively. The Company’s balance in the allowance for credit losses allocated to such troubled debt restructurings was $14.2 million and $13.0 million at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the three months ended March 31, 2021 and 2020, the Company modified loans as troubled debt restructurings with principal balances of $8.7 million and $1.0 million, respectively, and these modifications did not have a material impact on the Company’s allowance for credit losses. The following table presents the loans by class modified as troubled debt restructurings which occurred during the three months ended March 31, 2021 and 2020:


	March 31, 2021			March 31, 2020
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	463	—	$	—
Consumer installment	—	—		1	9





Real estate – commercial and farmland	2	7,658		1	64
Real estate – residential	5	572		8	903
Total	11	$	8,693	10	$	976

Troubled debt restructurings with an outstanding balance of $6.2 million and $3.0 million defaulted during the three months ended March 31, 2021 and 2020, respectively, and these defaults did not have a material impact on the Company’s allowance for credit losses. The following table presents for loans the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the three months ended March 31, 2021 and 2020:


	March 31, 2021			March 31, 2020
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	3	$	56	1	$	200
Consumer installment	5	6		—	—
Indirect automobile	16	94		—	—



Real estate – construction and development	1	1		2	287
Real estate – commercial and farmland	2	5,193		2	681
Real estate – residential	11	809		19	1,800
Total	38	$	6,159	24	$	2,968

The following table presents the amount of troubled debt restructurings by loan class classified separately as accrual and nonaccrual at March 31, 2021 and December 31, 2020:


March 31, 2021	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	10	$	930	12	$	854
Consumer installment	8	27		22	53
Indirect automobile	385	1,931		47	321



Real estate – construction and development	4	501		5	706
Real estate – commercial and farmland	27	43,398		10	2,233
Real estate – residential	248	33,324		36	2,818
Total	682	$	80,111	132	$	6,985


December 31, 2020	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	9	$	521	11	$	849
Consumer installment	10	32		20	56
Indirect automobile	437	2,277		51	461



Real estate – construction and development	4	506		5	707
Real estate – commercial and farmland	28	36,707		7	1,401
Real estate – residential	264	38,800		34	2,671
Total	752	$	78,843	128	$	6,145

COVID-19 Deferrals

In response to the COVID-19 pandemic, the Company offered affected borrowers payment relief under its Disaster Relief Program. These modifications primarily consisted of short-term payment deferrals or interest-only periods to assist customers. The Company has also provided payment modifications to certain borrowers in economically sensitive industries of various terms up to nine months. Modifications related to the COVID-19 pandemic and qualifying under the provisions of Section 4013 of the CARES Act are not deemed to be troubled debt restructurings. As of March 31, 2021, $235.4 million in loans remained in payment deferral related to COVID-19 pandemic Disaster Relief Program compared with $332.8 million at December 31, 2020.

The table below presents short-term deferrals related to the COVID-19 pandemic that were not considered TDRs.


	March 31, 2021				December 31, 2020
(dollars in thousands)	COVID-19 Deferrals		Deferrals as a % of total loans		COVID-19 Deferrals		Deferrals as a % of total loans
Commercial, financial and agricultural	$	4,460	0.3	%	$	12,471	0.8	%
Consumer installment	569		0.2	%	1,418		0.5	%
Indirect automobile	3,536		0.7	%	8,936		1.5	%



Real estate – construction and development	418		—	%	11,049		0.7	%
Real estate – commercial and farmland	152,337		2.7	%	179,183		3.4	%
Real estate – residential	74,101		2.6	%	119,722		4.3	%
	$	235,421	1.6	%	$	332,779	2.3	%

Allowance for Credit Losses

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 (“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 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.

During the three months ended March 31, 2021, the allowance for credit losses decreased primarily due to improvement in forecasted macroeconomic factors. The allowance for credit losses was determined at March 31, 2021 using the Moody's baseline economic forecast, which Moody's defines as having a 50% probability the economy will perform better than the baseline projection and the same probability it will perform worse. The current forecast reflects, among other things, improvements in forecast levels of unemployment, home prices and commercial real estate prices compared with the forecast at December 31, 2020.

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 March 31, 2021

(dollars in thousands)	Commercial, Financial and Agricultural		Consumer Installment		Indirect Automobile		Mortgage Warehouse		Municipal		Premium Finance
Balance, December 31, 2020	$	7,359	$	4,076	$	1,929	$	3,666	$	791	$	3,879

Provision for loan losses	2,575		5,806		(528)		(145)		(1)		442
Loans charged off	(2,370)		(1,448)		(829)		—		—		(1,343)
Recoveries of loans previously charged off	727		356		700		—		—		1,122
Balance, March 31, 2021	$	8,291	$	8,790	$	1,272	$	3,521	$	790	$	4,100

	Real Estate – Construction and Development		Real Estate – Commercial and Farmland		Real Estate – Residential		Total
Balance, December 31, 2020	$	45,304	$	88,894	$	43,524	$	199,422

Provision for loan losses	(22,587)		3,671		(5,812)		(16,579)
Loans charged off	(26)		(1,395)		(163)		(7,574)
Recoveries of loans previously charged off	167		41		188		3,301
Balance, March 31, 2021	$	22,858	$	91,211	$	37,737	$	178,570


Three Months Ended March 31, 2020
(dollars in thousands)	Commercial, Financial and Agricultural		Consumer Installment		Indirect Automobile		Mortgage Warehouse		Municipal		Premium Finance
Balance, December 31, 2019	$	4,567	$	3,784	$	—	$	640	$	484	$	2,550
Adjustment to allowance for adoption of ASU 2016-13	2,587		8,012		4,109		463		(92)		4,471

Provision for loan losses	3,080		4,149		564		(1)		130		4,634
Loans charged off	(2,486)		(1,142)		(1,231)		—		—		(831)
Recoveries of loans previously charged off	362		321		344		—		—		684
Balance, March 31, 2020	$	8,110	$	15,124	$	3,786	$	1,102	$	522	$	11,508

	Real Estate – Construction and Development		Real Estate – Commercial and Farmland		Real Estate – Residential		Total
Balance, December 31, 2019	$	5,995	$	9,666	$	10,503	$	38,189
Adjustment to allowance for adoption of ASU 2016-13	12,248		27,073		19,790		78,661

Provision for loan losses	6,734		15,858		1,899		37,047
Loans charged off	—		(928)		(100)		(6,718)
Recoveries of loans previously charged off	342		85		207		2,345
Balance, March 31, 2020	$	25,319	$	51,754	$	32,299	$	149,524

NOTE 4 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At March 31, 2021 and December 31, 2020, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on a daily basis and is required to transfer additional securities if the market value of the securities fall below the repurchase agreement price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the market value of the securities sold under agreements to repurchase.

The following is a summary of the Company’s securities sold under agreements to repurchase at March 31, 2021 and December 31, 2020:


(dollars in thousands)	March 31, 2021		December 31, 2020
Securities sold under agreements to repurchase	$	9,320	$	11,641

At March 31, 2021 and December 31, 2020 the investment securities underlying these agreements were comprised of state, county and municipal securities and mortgage-backed securities.

NOTE 5 – OTHER BORROWINGS

Other borrowings consist of the following:


(dollars in thousands)	March 31, 2021		December 31, 2020
FHLB borrowings:
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%	1,408		1,411
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%	975		977
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095%	1,531		1,567

Subordinated notes payable:
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $780 and $812, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%	74,220		74,188
Subordinated notes payable due December 15, 2029 net of unamortized debt issuance cost of $2,105 and $2,165, respectively; fixed interest rate of 4.25% through December 14, 2024; variable interest rate thereafter at three-month SOFR plus 2.94%	117,895		117,835
Subordinated notes payable due May 31, 2030 net of unaccreted purchase accounting fair value adjustment of $1,119 and $1,150, respectively; fixed interest rate of 5.875% through May 31, 2025; variable interest rate thereafter at three-month LIBOR plus 3.63%	76,119		76,150
Subordinated notes payable due October 1, 2030 net of unamortized debt issuance cost of $1,917 and $1,973, respectively; fixed interest rate of 3.875% through September 30, 2025; variable interest rate thereafter at three-month SOFR plus 3.753%	108,083		108,027
	$	425,231	$	425,155

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 March 31, 2021, $3.55 billion was available for borrowing on lines with the FHLB.

As of March 31, 2021, 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 March 31, 2021, the Company had $3.04 billion of loans pledged at the Federal Reserve discount window and had $2.05 billion available for borrowing.

NOTE 6 – 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 and interest rate swap derivatives. 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. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of March 31, 2021 and 2020:


(dollars in thousands)	Unrealized Gain (Loss) on Derivatives		Unrealized Gain (Loss) on Securities		Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2021	$	—	$	33,505	$	33,505


Reclassification for gains included in net income, net of tax	—		—		—
Current year changes, net of tax	—		(7,415)		(7,415)
Balance, March 31, 2021	$	—	$	26,090	$	26,090


(dollars in thousands)	Unrealized Gain (Loss) on Derivatives		Unrealized Gain (Loss) on Securities		Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2020	$	(147)	$	18,142	$	17,995


Reclassification for gains included in net income, net of tax	—		—		—
Current year changes, net of tax	(97)		21,653		21,556
Balance, March 31, 2020	$	(244)	$	39,795	$	39,551

NOTE 7 – WEIGHTED AVERAGE SHARES OUTSTANDING

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


	Three Months Ended March 31,
(share data in thousands)	2021	2020
Average common shares outstanding	69,392	69,248
Common share equivalents:
Stock options	81	93
Nonvested restricted share grants	172	161
Performance stock units	96	—
Average common shares outstanding, assuming dilution	69,741	69,502

For the three-month periods ended March 31, 2021 and 2020, there were no outstanding options exerciseable for common shares with strike prices that would cause the underlying shares to be anti-dilutive.

NOTE 8 – 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 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)	March 31, 2021		December 31, 2020
Mortgage loans held for sale	$	1,505,121	$	998,050
SBA loans held for sale	4,407		3,757
Total loans held for sale	$	1,509,528	$	1,001,807

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.

A net loss of $25.1 million and a net gain of $15.1 million resulting from fair value changes of these mortgage loans were recorded in income during the three months ended March 31, 2021 and 2020, respectively. A net gain of $27.5 million and net loss of $2.6 million 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 months ended March 31, 2021 and 2020, respectively. The change 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 March 31, 2021 and December 31, 2020:


(dollars in thousands)	March 31, 2021		December 31, 2020
Aggregate fair value of mortgage loans held for sale	$	1,505,121	$	998,050
Aggregate unpaid principal balance of mortgage loans held for sale	1,479,606		947,460
Past-due loans of 90 days or more	—		—
Nonaccrual loans	—		—
Unpaid principal balance of nonaccrual loans	—		—

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 March 31, 2021 and December 31, 2020:


(dollars in thousands)	March 31, 2021		December 31, 2020
Aggregate fair value of SBA loans held for sale	$	4,407	$	3,757
Aggregate unpaid principal balance of SBA loans held for sale	3,849		3,393
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 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.

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 March 31, 2021 and December 31, 2020:


	Recurring Basis Fair Value Measurements
	March 31, 2021
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. government sponsored agencies	$	12,394	$	—	$	12,394	$	—
State, county and municipal securities	62,985		—		62,985		—
Corporate debt securities	46,747		—		45,577		1,170
SBA pool securities	55,691		—		55,691		—
Mortgage-backed securities	681,835		—		681,835		—
Loans held for sale	1,509,528		—		1,509,528		—

Mortgage banking derivative instruments	62,870		—		62,870		—
Total recurring assets at fair value	$	2,432,050	$	—	$	2,430,880	$	1,170


	Recurring Basis Fair Value Measurements
	December 31, 2020
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
Financial assets:
U.S. government sponsored agencies	$	17,504	$	—	$	17,504	$	—
State, county and municipal securities	66,778		—		66,778		—
Corporate debt securities	51,896		—		50,726		1,170
SBA pool securities	62,497		—		62,497		—
Mortgage-backed securities	784,204		—		784,204		—
Loans held for sale	1,001,807		—		1,001,807		—

Mortgage banking derivative instruments	51,756		—		51,756		—
Total recurring assets at fair value	$	2,036,442	$	—	$	2,035,272	$	1,170
Financial liabilities:

Mortgage banking derivative instruments	$	16,415	$	—	$	16,415	$	—
Total recurring liabilities at fair value	$	16,415	$	—	$	16,415	$	—

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 March 31, 2021 and December 31, 2020:


	Nonrecurring Basis Fair Value Measurements
(dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
March 31, 2021
Collateral-dependent loans	$	93,058	$	—	$	—	$	93,058
Other real estate owned	299		—		—		299
Mortgage servicing rights	154,746		—		—		154,746

Total nonrecurring assets at fair value	$	248,103	$	—	$	—	$	248,103

December 31, 2020
Collateral-dependent loans	$	98,426	$	—	$	—	$	98,426
Other real estate owned	4,964		—		—		4,964
Mortgage servicing rights	130,630		—		—		130,630
SBA servicing rights	5,839		—		5,839		—
Total nonrecurring assets at fair value	$	239,859	$	—	$	5,839	$	234,020

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 three months ended March 31, 2021 and the year ended December 31, 2020, 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 Value		Valuation Technique	Unobservable Inputs	Range of Discounts	Weighted Average Discount
March 31, 2021
Recurring:
Investment securities available for sale	$	1,170	Discounted par values	Probability of default	17.1%	17.1%
				Loss given default	39%	39%
Nonrecurring:
Collateral-dependent loans	$	93,058	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	20% - 57%	44%
Other real estate owned	$	299	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 36%	27%
Mortgage servicing rights	$	154,746	Discounted cash flows	Discount rate	9% - 10%	9%
				Prepayment speed	11% - 38%	13%

December 31, 2020
Recurring:
Investment securities available for sale	$	1,170	Discounted par values	Probability of default	18.8%	18.8%
				Loss given default	40%	40%
Nonrecurring:
Collateral-dependent loans	$	98,426	Third-party appraisals and discounted cash flows	Collateral discounts and discount rates	20% - 90%	44%
Other real estate owned	$	4,964	Third-party appraisals and sales contracts	Collateral discounts and estimated costs to sell	15% - 59%	28%
Mortgage servicing rights	$	130,630	Discounted cash flows	Discount rate	9% - 12%	10%
				Prepayment speed	14% - 37%	19%

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
			March 31, 2021
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	224,159	$	224,159	$	—	$	—	$	224,159
Federal funds sold and interest-bearing accounts	2,534,969		2,534,969		—		—		2,534,969
Time deposits in other banks	249		—		249		—		249

Loans, net	14,328,177		—		—		14,339,254		14,339,254
Accrued interest receivable	70,697		—		3,469		67,228		70,697
Financial liabilities:
Deposits	17,875,873		—		17,870,613		—		17,870,613
Securities sold under agreements to repurchase	9,320		9,320		—		—		9,320
Other borrowings	425,231		—		429,650		—		429,650
Subordinated deferrable interest debentures	124,833		—		117,285		—		117,285
Accrued interest payable	7,126		—		7,126		—		7,126


			Fair Value Measurements
			December 31, 2020
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks	$	203,349	$	203,349	$	—	$	—	$	203,349
Federal funds sold and interest-bearing accounts	1,913,957		1,913,957		—		—		1,913,957
Time deposits in other banks	249		—		249		—		249
Loans, net	14,183,077		—		—		14,096,711		14,096,711
Accrued interest receivable	76,254		—		3,567		72,687		76,254
Financial liabilities:
Deposits	16,957,823		—		16,968,606		—		16,968,606
Securities sold under agreements to repurchase	11,641		11,641		—		—		11,641
Other borrowings	425,155		—		431,783		—		431,783
Subordinated deferrable interest debentures	124,345		—		116,280		—		116,280
Accrued interest payable	5,487		—		5,487		—		5,487

NOTE 9 – 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)	March 31, 2021		December 31, 2020
Commitments to extend credit	$	3,193,867	$	2,826,719
Unused home equity lines of credit	257,967		259,015
Financial standby letters of credit	31,359		33,613
Mortgage interest rate lock commitments	1,033,336		1,199,939

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 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 three months ended March 31, 2021 and the year ended December 31, 2020.

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 March 31,
(dollars in thousands)	2021		2020
Balance at beginning of period	$	32,854	$	1,077
Adjustment to reflect adoption of ASU 2016-13	—		12,714

Provision for unfunded commitments	(11,839)		4,000
Balance at end of period	$	21,015	$	17,791

Other Commitments

As of March 31, 2021, letters of credit issued by the FHLB totaling $490.0 million were used to guarantee the Bank’s performance related to a portion of its public fund deposit balances.

Litigation and Regulatory Contingencies

On November 19, 2019, the Company received a subpoena from the Atlanta Regional Office of the Securities and Exchange Commission (the “SEC”), and the Bank received a grand jury subpoena from the United States Attorney’s Office for the Northern District of Georgia, each requesting that the Company and the Bank produce documents and other materials relating to the Company’s acquisition of US Premium Finance Holding Company, the Bank’s sale of certain loans to CEBV LLC and related disclosures. The Company has cooperated fully with the investigation and produced all requested documents responsive to the subpoenas. While the Company remains unable to make any assurances regarding the outcome of the investigation by the United States Attorney's Office, or the impact, if any, that such investigation may have on the Company's business, consolidated financial condition, results of operations or cash flows, the Company received a letter from the SEC staff, dated March 29, 2021, stating that the SEC has concluded its investigation as to the Company and does not intend to recommend any enforcement action against the Company.

Additionally, 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.

COVID-19

The COVID-19 pandemic has caused significant economic dislocation in the United States and an unprecedented slowdown in economic activity, as many state and local governments have intermittently ordered non-essential businesses to close and residents to shelter in place at home. As a result of the pandemic, commercial customers are experiencing varying levels of disruptions or restrictions on their business activity, and consumers are experiencing interrupted income or unemployment. We have outstanding loans to borrowers in certain industries that have been particularly susceptible to the effects of the pandemic, such as hotels, restaurants and other retail businesses. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. The United States government has taken steps to attempt

to mitigate some of the more severe anticipated economic effects of the coronavirus, including the passage of the CARES Act and subsequent legislation, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion. The extent of such impact from the COVID-19 pandemic and related mitigation efforts will depend on future developments, which are highly uncertain, including, but not limited to, the duration of the pandemic and spread of the coronavirus, including a resurgence or additional waves of the virus, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume, especially as a vaccine becomes widely available. This could cause a material, adverse effect on the Company’s business, financial condition and results of operations, including increases in loan delinquencies, problem assets and foreclosures; decreases in the value of collateral securing our loans; increases in our allowance for credit losses; and decreases in the value of our intangible assets.

NOTE 10 – 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.

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 months ended March 31, 2021 and 2020:


	Three Months Ended March 31, 2021
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	112,379	$	30,199	$	10,327	$	18,034	$	7,011	$	177,950
Interest expense	(437)		11,215		421		1,399		375		12,973
Net interest income	112,816		18,984		9,906		16,635		6,636		164,977
Provision for credit losses	(23,904)		(4,553)		(145)		(547)		558		(28,591)
Noninterest income	16,738		97,640		980		2,611		4		117,973
Noninterest expense
Salaries and employee benefits	42,723		49,838		330		1,382		1,712		95,985
Equipment and occupancy expenses	10,120		1,476		1		106		78		11,781
Data processing and telecommunications expenses	10,201		1,546		49		1		87		11,884
Other expenses	19,710		8,189		33		295		921		29,148
Total noninterest expense	82,754		61,049		413		1,784		2,798		148,798
Income before income tax expense	70,704		60,128		10,618		18,009		3,284		162,743
Income tax expense	18,456		12,627		2,230		3,782		686		37,781
Net income	$	52,248	$	47,501	$	8,388	$	14,227	$	2,598	$	124,962

Total assets	$	14,591,933	$	4,086,210	$	886,004	$	1,055,068	$	807,912	$	21,427,127
Goodwill	863,507		—		—		—		64,498		928,005
Other intangible assets, net	53,745		—		—		—		14,103		67,848


	Three Months Ended March 31, 2020
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	132,301	$	33,411	$	4,850	$	3,728	$	8,478	$	182,768
Interest expense	13,926		15,655		1,548		1,547		2,147		34,823
Net interest income	118,375		17,756		3,302		2,181		6,331		147,945
Provision for credit losses	35,997		1,997		(9)		(903)		3,965		41,047
Noninterest income	17,773		34,369		960		1,277		—		54,379
Noninterest expense
Salaries and employee benefits	41,621		31,097		210		1,476		1,542		75,946
Equipment and occupancy expenses	10,347		1,504		1		97		79		12,028
Data processing and telecommunications expenses	10,797		986		41		13		117		11,954
Other expenses	30,645		5,875		34		515		1,056		38,125
Total noninterest expense	93,410		39,462		286		2,101		2,794		138,053
Income (loss) before income tax expense	6,741		10,666		3,985		2,260		(428)		23,224
Income tax expense (benefit)	275		2,408		837		475		(93)		3,902
Net income (loss)	$	6,466	$	8,258	$	3,148	$	1,785	$	(335)	$	19,322

Total assets	$	13,201,373	$	3,466,766	$	548,837	$	252,668	$	754,904	$	18,224,548
Goodwill	867,449		—		—		—		64,498		931,947
Other intangible assets, net	68,857		—		—		—		17,098		85,955

NOTE 11 – 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)	March 31, 2021		December 31, 2020
Loan Servicing Rights
Residential mortgage	$	154,746	$	130,630
SBA	6,445		5,839
Indirect automobile	29		73
Total loan servicing rights	$	161,220	$	136,542

Residential Mortgage Loans

The Company sells certain first-lien residential mortgage loans to third party investors, primarily Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and 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-months ended March 31, 2021, the Company recorded servicing fee income of $10.1 million. During the three-months ended March 31, 2020, the Company recorded servicing fee income of $6.2 million. 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 impairment:


(dollars in thousands)	Three Months Ended March 31,
Residential mortgage servicing rights	2021		2020
Beginning carrying value, net	$	130,630	$	94,902
Additions	21,867		16,061

Amortization	(7,484)		(4,166)
Recoveries/(impairment)	9,733		(20,875)
Ending carrying value, net	$	154,746	$	85,922


(dollars in thousands)	Three Months Ended March 31,
Residential mortgage servicing valuation allowance	2021		2020
Beginning balance	$	39,407	$	104
Additions	—		20,875
Recoveries	(9,733)		—
Ending balance	$	29,674	$	20,979

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)	March 31, 2021			December 31, 2020
Residential mortgage servicing rights

Unpaid principal balance of loans serviced for others	$	14,171,621		$	13,764,529
Composition of residential loans serviced for others:
FHLMC	21.05		%	21.55		%
FNMA	61.40		%	61.75		%
GNMA	17.55		%	16.70		%
Total	100.00		%	100.00		%
Weighted average term (months)	340			340
Weighted average age (months)	20			20
Modeled prepayment speed	13.37		%	18.82		%
Decline in fair value due to a 10% adverse change	(6,886)			(7,154)
Decline in fair value due to a 20% adverse change	(13,262)			(13,664)
Weighted average discount rate	8.76		%	9.50		%
Decline in fair value due to a 10% adverse change	(5,522)			(4,304)
Decline in fair value due to a 20% adverse change	(10,671)			(8,321)

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-months ended March 31, 2021, the Company recorded servicing fee income of $1.0 million. During the three-months ended March 31, 2020, the Company recorded servicing fee income of $1.1 million. 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 SBA loan servicing rights and impairment:


(dollars in thousands)	Three Months Ended March 31,
SBA servicing rights	2021		2020
Beginning carrying value, net	$	5,839	$	7,886
Additions	230		375

Purchase accounting adjustment	—		(1,214)
Amortization	(529)		(363)
Recoveries/(impairment)	905		(1,290)
Ending carrying value, net	$	6,445	$	5,394


(dollars in thousands)	Three Months Ended March 31,
SBA servicing valuation allowance	2021		2020
Beginning balance	$	905	$	141
Additions	—		1,290
Recoveries	(905)		—
Ending balance	$	—	$	1,431


(dollars in thousands)	March 31, 2021			December 31, 2020
SBA servicing rights
Unpaid principal balance of loans serviced for others	$	437,989		$	351,325
Weighted average life (in years)	3.49			3.46
Modeled prepayment speed	19.05		%	19.14		%
Decline in fair value due to a 10% adverse change	(412)			(335)
Decline in fair value due to a 20% adverse change	(783)			(636)
Weighted average discount rate	7.09		%	9.55		%
Decline in fair value due to a 100 basis point adverse change	(188)			(151)
Decline in fair value due to a 200 basis point adverse change	(367)			(295)

Indirect Automobile Loans

The Company 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 March 31,
Indirect automobile servicing rights	2021		2020
Beginning carrying value, net	$	73	$	247

Amortization	(44)		(43)

Ending carrying value, net	$	29	$	204

During the three-months ended March 31, 2021, the Company recorded servicing fee income of $206,000. During the three-months ended March 31, 2020, the Company recorded servicing fee income of $710,000. Servicing fee income includes servicing fees, late fees and ancillary fees earned for each period.

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; changes in commodity prices and interest rates; 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 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 March 31, 2021, as compared with December 31, 2020, and operating results for the three-month periods ended March 31, 2021 and 2020. 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 tangible common equity, tangible book value per common share, 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.

Critical Accounting Policies

There have been no significant changes to our critical accounting policies from those disclosed in our 2020 Annual Report on Form 10-K. The reader should refer to the notes to our consolidated financial statements in our 2020 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.

Results of Operations for the Three Months Ended March 31, 2021 and 2020

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $125.0 million, or $1.79 per diluted share, for the quarter ended March 31, 2021, compared with $19.3 million, or $0.28 per diluted share, for the same period in 2020. The Company’s return on average assets and average shareholders’ equity were 2.44% and 18.80%, respectively, in the first quarter of 2021, compared with 0.43% and 3.16%, respectively, in the first quarter of 2020. During the first quarter of 2021, the Company recorded pre-tax servicing right recovery of $10.6 million, pre-tax gain on bank owned life insurance ("BOLI") proceeds of $603,000 and pre-tax gains on the sale of premises of $264,000. During the first quarter of 2020, the Company incurred pre-tax merger and conversion charges of $540,000, pre-tax servicing right impairment of $22.2 million, pre-tax expenses related to SEC and DOJ investigation of $1.4 million, pre-tax expenses related to the COVID-19 pandemic of $548,000 and pre-tax losses on the sale of premises of $470,000. Excluding these adjustment items, the Company’s net income would have been $115.7 million, or $1.66 per diluted share, for the first quarter of 2021 and $39.2 million, or $0.56 per diluted share, for the first quarter of 2020.

Below is a reconciliation of adjusted net income to net income, as discussed above.


	Three Months Ended March 31,
(in thousands, except share and per share data)	2021		2020
Net income	$	124,962	$	19,322
Adjustment items:
Merger and conversion charges	—		540


Servicing right impairment (recovery)	(10,639)		22,165
Gain on BOLI proceeds	(603)		—
Expenses related to SEC and DOJ investigation	—		1,443
Natural disaster and pandemic expenses	—		548
(Gain) loss on the sale of premises	(264)		470
Tax effect of adjustment items (Note 1)	2,290		(5,283)
After tax adjustment items	(9,216)		19,883
Adjusted net income	$	115,746	$	39,205

Weighted average common shares outstanding - diluted	69,740,860		69,502,022
Net income per diluted share	$	1.79	$	0.28
Adjusted net income per diluted share	$	1.66	$	0.56

Note 1: A portion of the merger and conversion charges for the three months ended March 31, 2020 are nondeductible for tax purposes.

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 first quarter of 2021 and 2020, respectively:


	Three Months Ended March 31, 2021
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	112,379	$	30,199	$	10,327	$	18,034	$	7,011	$	177,950
Interest expense	(437)		11,215		421		1,399		375		12,973
Net interest income	112,816		18,984		9,906		16,635		6,636		164,977
Provision for credit losses	(23,904)		(4,553)		(145)		(547)		558		(28,591)
Noninterest income	16,738		97,640		980		2,611		4		117,973
Noninterest expense
Salaries and employee benefits	42,723		49,838		330		1,382		1,712		95,985
Equipment and occupancy expenses	10,120		1,476		1		106		78		11,781
Data processing and telecommunications expenses	10,201		1,546		49		1		87		11,884
Other expenses	19,710		8,189		33		295		921		29,148
Total noninterest expense	82,754		61,049		413		1,784		2,798		148,798
Income before income tax expense	70,704		60,128		10,618		18,009		3,284		162,743
Income tax expense	18,456		12,627		2,230		3,782		686		37,781
Net income	$	52,248	$	47,501	$	8,388	$	14,227	$	2,598	$	124,962


	Three Months Ended March 31, 2020
(dollars in thousands)	Banking Division		Retail Mortgage Division		Warehouse Lending Division		SBA Division		Premium Finance Division		Total
Interest income	$	132,301	$	33,411	$	4,850	$	3,728	$	8,478	$	182,768
Interest expense	13,926		15,655		1,548		1,547		2,147		34,823
Net interest income	118,375		17,756		3,302		2,181		6,331		147,945
Provision for credit losses	35,997		1,997		(9)		(903)		3,965		41,047
Noninterest income	17,773		34,369		960		1,277		—		54,379
Noninterest expense
Salaries and employee benefits	41,621		31,097		210		1,476		1,542		75,946
Equipment and occupancy expenses	10,347		1,504		1		97		79		12,028
Data processing and telecommunications expenses	10,797		986		41		13		117		11,954
Other expenses	30,645		5,875		34		515		1,056		38,125
Total noninterest expense	93,410		39,462		286		2,101		2,794		138,053
Income before income tax expense	6,741		10,666		3,985		2,260		(428)		23,224
Income tax expense	275		2,408		837		475		(93)		3,902
Net income	$	6,466	$	8,258	$	3,148	$	1,785	$	(335)	$	19,322

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 March 31, 2021 and 2020. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 21% federal tax rate.


	Quarter Ended March 31,
	2021					2020
(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	$	2,165,652	$	534	0.10%	$	446,889	$	1,287	1.16%
Investment securities	957,575		6,296		2.67%	1,456,462		10,281		2.84%
Loans held for sale	1,284,821		10,827		3.42%	1,587,131		13,637		3.46%
Loans	14,453,975		161,473		4.53%	12,712,997		158,636		5.02%
Total interest-earning assets	18,862,023		179,130		3.85%	16,203,479		183,841		4.56%
Noninterest-earning assets	1,872,392					1,852,966
Total assets	$	20,734,415				$	18,056,445

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Savings and interest-bearing demand deposits	$	8,766,563	$	3,048	0.14%	$	6,936,013	$	12,732	0.74%
Time deposits	2,067,410		3,750		0.74%	2,685,399		11,370		1.70%
Federal funds purchased and securities sold under agreements to repurchase	9,284		7		0.31%	15,637		40		1.03%
FHLB advances	48,951		192		1.59%	1,267,303		5,109		1.62%
Other borrowings	376,260		4,638		5.00%	269,454		3,511		5.24%
Subordinated deferrable interest debentures	124,574		1,338		4.36%	127,731		2,061		6.49%
Total interest-bearing liabilities	11,393,042		12,973		0.46%	11,301,537		34,823		1.24%
Demand deposits	6,412,268					4,080,920
Other liabilities	234,100					217,371
Shareholders’ equity	2,695,005					2,456,617
Total liabilities and shareholders’ equity	$	20,734,415				$	18,056,445
Interest rate spread					3.39%					3.32%
Net interest income			$	166,157				$	149,018
Net interest margin					3.57%					3.70%

On a tax-equivalent basis, net interest income for the first quarter of 2021 was $166.2 million, an increase of $17.1 million, or 11.5%, compared with $149.0 million reported in the same quarter in 2020. The higher net interest income is a result of disciplined deposit pricing and a reduction in borrowing costs, partially offset by a decline in the yield on earning assets. Average interest earning assets increased $2.66 billion, or 16.4%, from $16.20 billion in the first quarter of 2020 to $18.86 billion for the first quarter of 2021. This growth in interest earning assets resulted primarily from organic growth in average loans, including PPP loans, and excess liquidity from deposit growth. The Company’s net interest margin during the first quarter of 2021 was 3.57%, down 13 basis points from 3.70% reported in the first quarter of 2020. Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to $7.5 billion during the first quarter of 2021, with weighted average yields of 3.15%, compared with $3.9 billion and 4.15%, respectively, during the first quarter of 2020. Loan production yields in the lines of business were negatively impacted 11 basis points during the first quarter of 2021 by originations of PPP loans in our SBA division. Loan production in the banking division amounted to $600.6 million during the first quarter of 2021 with weighted average yields of 3.80%, compared with $918.4 million and 4.55%, respectively, during the first quarter of 2020.

Total interest income, on a tax-equivalent basis, decreased to $179.1 million during the first quarter of 2021, compared with $183.8 million in the same quarter of 2020. Yields on earning assets decreased to 3.85% during the first quarter of 2021, compared with 4.56% reported in the first quarter of 2020. During the first quarter of 2021, loans comprised 83.4% of average earning assets, compared with 88.3% in the same quarter of 2020. Yields on loans decreased to 4.53% in the first quarter of

2021, compared with 5.02% in the same period of 2020. Accretion income for the first quarter of 2021 was $6.1 million, compared with $6.6 million in the first quarter of 2020.

The yield on total interest-bearing liabilities decreased from 1.24% in the first quarter of 2020 to 0.46% in the first quarter of 2021. Total funding costs, inclusive of noninterest-bearing demand deposits, decreased to 0.30% in the first quarter of 2021, compared with 0.91% during the first quarter of 2020. Deposit costs decreased from 0.71% in the first quarter of 2020 to 0.16% in the first quarter of 2021. Non-deposit funding costs increased from 2.57% in the first quarter of 2020 to 4.48% in the first quarter of 2021. The increase in non-deposit funding costs was driven primarily by a shift in mix from short-term FHLB advances as excess liquidity reduced outstanding FHLB advances. Average balances of interest bearing deposits and their respective costs for the first quarter of 2021 and 2020 are shown below:


	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
(dollars in thousands)	Average Balance		Average Cost	Average Balance		Average Cost
NOW	$	3,182,245	0.12%	$	2,287,947	0.49%
MMDA	4,761,279		0.17%	4,004,644		0.98%
Savings	823,039		0.06%	643,422		0.13%
Retail CDs	2,066,410		0.73%	2,624,209		1.70%
Brokered CDs	1,000		2.43%	61,190		2.01%
Interest-bearing deposits	$	10,833,973	0.25%	$	9,621,412	1.01%

Provision for Credit Losses

The Company’s provision for credit losses during the first quarter of 2021 amounted to a negative $28.6 million, compared with $41.0 million in the first quarter of 2020. This decrease was primarily attributable to an improved economic forecast in our CECL model, particularly levels of unemployment, home prices and commercial real estate prices. The construction and development segment was the largest contributor to the decrease in provision as a result of both a decline in funded balances and an improvement in qualitative factors compared with December 31, 2020. The improvement in qualitative factors is attributable to uncertainty in the forecast and loss drivers used in the December 31, 2020 provision estimate which Management determined were both properly addressed in the first quarter 2021 estimate. The provision for credit losses for the first quarter of 2021 was comprised of negative $16.6 million related to loans, negative $11.8 million related to unfunded commitments and negative $173,000 related to other credit losses compared with $37.0 million related to loans and $4.0 million related to unfunded commitments for the first quarter of 2020. Non-performing assets as a percentage of total assets decreased from 0.48% at December 31, 2020 to 0.40% at March 31, 2021. The decrease in non-performing assets is primarily attributable to a decrease in nonaccruing loans as a result of collection activities and upgrades. Net charge-offs on loans during the first quarter of 2021 were approximately $4.3 million, or 0.12% of average loans on an annualized basis, compared with approximately $4.4 million, or 0.14%, in the first quarter of 2020. The Company’s total allowance for credit losses on loans at March 31, 2021 was $178.6 million, or 1.22% of total loans, compared with $199.4 million, or 1.38% of total loans, at December 31, 2020. This decrease is primarily attributable to the provision release noted above.

Noninterest Income

Total noninterest income for the first quarter of 2021 was $118.0 million, an increase of $63.6 million, or 116.9%, from the $54.4 million reported in the first quarter of 2020. Income from mortgage-related activities was $98.5 million in the first quarter of 2021, an increase of $63.2 million, or 178.7%, from $35.3 million in the first quarter of 2020. Total production in the first quarter of 2021 amounted to $2.63 billion, compared with $1.36 billion in the same quarter of 2020, while spread (gain on sale) increased to 3.95% in the current quarter, compared with 2.88% in the same quarter of 2020. The retail mortgage open pipeline finished the first quarter of 2021 at $2.33 billion, compared with $2.00 billion at December 31, 2020 and $2.43 billion at the end of the first quarter of 2020. Service charges on deposit accounts decreased $1.0 million, or 8.6%, to $10.8 million in the first quarter of 2021, compared with $11.8 million in the first quarter of 2020. This decrease in service charges on deposit accounts is due primarily to a decrease in NSF income resulting from a decline in volume.

Other noninterest income increased $1.4 million, or 22.5%, to $7.7 million for the first quarter of 2021, compared with $6.3 million during the first quarter of 2020. The increase in other noninterest income was primarily attributable to an increase in gain on BOLI proceeds of $603,000 and a decrease in SBA servicing asset impairment of $2.2 million, partially offset by a decrease of $632,000 in gain on sales of SBA loans.

Noninterest Expense

Total noninterest expenses for the first quarter of 2021 increased $10.7 million, or 7.8%, to $148.8 million, compared with $138.1 million in the same quarter 2020. Salaries and employee benefits increased $20.0 million, or 26.4%, from $75.9 million in the first quarter of 2020 to $96.0 million in the first quarter of 2021, due primarily to an increase in variable compensation tied to increased mortgage production of $16.8 million. Occupancy and equipment expenses decreased $247,000, or 2.1%, to $11.8 million for the first quarter of 2021, compared with $12.0 million in the first quarter of 2020, due primarily to a reduction in leased locations related to previously announced efficiency initiatives. Data processing and telecommunications expense decreased $70,000, or 0.6%, to $11.9 million in the first quarter of 2021, compared with $12.0 million in the first quarter of 2020. Advertising and marketing expense was $1.4 million in the first quarter of 2021, compared with $2.4 million in the first quarter of 2020. Amortization of intangible assets decreased $1.5 million, or 26.7%, from $5.6 million in the first quarter of 2020 to $4.1 million in the first quarter of 2021. Core deposit intangibles are being amortized over an accelerated basis; therefore, the expense recorded will decline over the life of the asset. There were no merger and conversion charges in the first quarter of 2021, compared with $540,000 of such charges in the same quarter of 2020. Other noninterest expenses decreased $4.4 million, or 15.9%, from $27.4 million in the first quarter of 2020 to $23.0 million in the first quarter of 2021, due primarily to a decrease of $2.2 million in FDIC insurance, a decrease of $1.7 million in problem loan expenses, and a decrease of $2.3 million in legal and professional fees. These decreases in other noninterest expenses were partially offset by increases in loan servicing expenses of $2.0 million and variable expenses tied to production in our lines of business.

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 first quarter of 2021, the Company reported income tax expense of $37.8 million, compared with $3.9 million in the same period of 2020. The Company’s effective tax rate for the three months ending March 31, 2021 and 2020 was 23.2% and 16.8%, respectively. The increase in the effective tax rate is primarily a result of the benefit recorded in the first quarter of 2020 for loss carrybacks allowed as a result of the CARES Act.

Financial Condition as of March 31, 2021

Securities

Debt securities with readily determinable fair values are classified as available for sale and 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. 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 Asset and Liability Committee (the “ALCO Committee”) evaluate 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 investment securities at an unrealized loss position at March 31, 2021, 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 March 31, 2021, management determined that $101,000 was attributable to credit impairment and established the allowance for credit losses accordingly. The remaining $362,000 in unrealized loss was determined to be from factors other than credit.

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


	March 31, 2021				December 31, 2020
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. government sponsored agencies	$	12,138	$	12,394	$	17,161	$	17,504
State, county and municipal securities	60,140		62,985		63,286		66,778
Corporate debt securities	46,131		46,747		51,639		51,896
SBA pool securities	54,305		55,691		59,973		62,497
Mortgage-backed securities	654,015		681,835		748,521		784,204
Total debt securities	$	826,729	$	859,652	$	940,580	$	982,879

The amounts of securities available for sale in each category as of March 31, 2021 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. Government Sponsored Agencies				State, County and Municipal Securities				Corporate Debt Securities
(dollars in thousands)	Amount		Yield (1)		Amount		Yield (1)(2)		Amount		Yield (1)
One year or less	$	5,065	1.95	%	$	12,394	3.49	%	$	3,003	2.37	%
After one year through five years	7,329		1.93		19,045		3.77		10,799		4.41
After five years through ten years	—		—		20,325		3.84		31,263		5.31
After ten years	—		—		11,221		3.88		1,682		4.35
	$	12,394	1.94	%	$	62,985	3.76	%	$	46,747	4.87	%

	SBA Pool Securities				Mortgage-Backed Securities
(dollars in thousands)	Amount		Yield (1)		Amount		Yield (1)
One year or less	$	—	—	%	$	938	2.90	%
After one year through five years	13,071		2.23		99,423		2.74
After five years through ten years	10,134		2.28		184,302		2.71
After ten years	32,486		2.48		397,172		2.32
	$	55,691	2.38	%	$	681,835	2.48	%

(1)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.

(2)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 March 31, 2021, gross loans outstanding (including loans and loans held for sale) were $16.11 billion, up $460.7 million from $15.65 billion reported at December 31, 2020. Loans held for sale increased from $1.17 billion at December 31, 2020 to $1.51 billion at March 31, 2021 primarily due to strategic slowdown in mortgage deliveries in our mortgage division. Loans increased $118.9 million, or 0.82%, from $14.48 billion at December 31, 2020 to $14.60 billion at March 31, 2021, driven primarily by organic growth net of PPP loan runoff.

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.

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.

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 uses the DCF method, the vintage method, the PD×LGD method or a qualitative approach.

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 it can no longer develop reasonable and supportable forecasts.

At the end of the first quarter of 2021, the ACL on loans totaled $178.6 million, or 1.22% of loans, compared with $199.4 million, or 1.38% of loans, at December 31, 2020. Our nonaccrual loans decreased from $76.5 million at December 31, 2020 to $71.2 million at March 31, 2021. The decrease in nonaccrual loans is primarily attributable to collection activities and upgrades. For the first three months of 2021, our net charge off ratio as a percentage of average loans decreased to 0.12%, compared with 0.14% for the first three months of 2020. The total provision for credit losses for the first three months of 2021 was negative $28.6 million, decreasing from $41.0 million recorded for the first three months of 2020. Our ratio of total nonperforming assets to total assets decreased from 0.48% at December 31, 2020 to 0.40% at March 31, 2021.

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 three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(dollars in thousands)	2021		2020
Balance of allowance for credit losses on loans at beginning of period	$	199,422	$	38,189
Adjustment to allowance for adoption of ASU 2016-13	—		78,661
Provision charged to operating expense	(16,579)		37,047
Charge-offs:
Commercial, financial and agricultural	2,370		2,486
Consumer installment	1,448		1,142
Indirect automobile	829		1,231


Premium finance	1,343		831
Real estate – construction and development	26		—
Real estate – commercial and farmland	1,395		928
Real estate – residential	163		100
Total charge-offs	7,574		6,718

Recoveries:
Commercial, financial and agricultural	727		362
Consumer installment	356		321
Indirect automobile	700		344


Premium finance	1,122		684
Real estate – construction and development	167		342
Real estate – commercial and farmland	41		85
Real estate – residential	188		207
Total recoveries	3,301		2,345
Net charge-offs	4,273		4,373
Balance of allowance for credit losses on loans at end of period	$	178,570	$	149,524

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 Three Months Ended
(dollars in thousands)	March 31, 2021			March 31, 2020
Allowance for credit losses on loans at end of period	$	178,570		$	149,524
Net charge-offs for the period	4,273			4,373
Loan balances:
End of period	14,599,805			13,094,106
Average for the period	14,453,975			12,712,997
Net charge-offs as a percentage of average loans (annualized)	0.12		%	0.14		%
Allowance for credit losses on loans as a percentage of end of period loans	1.22		%	1.14		%

Loans

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


(dollars in thousands)	March 31, 2021		December 31, 2020
Commercial, financial and agricultural	$	1,611,029	$	1,627,477
Consumer installment	257,097		306,995
Indirect automobile	482,637		580,083
Mortgage warehouse	880,216		916,353
Municipal	659,228		659,403
Premium finance	706,379		687,841
Real estate – construction and development	1,533,234		1,606,710
Real estate – commercial and farmland	5,616,826		5,300,006
Real estate – residential	2,853,159		2,796,057
	$	14,599,805	$	14,480,925

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 $71.2 million at March 31, 2021, a decrease of $5.3 million, or 6.9%, from $76.5 million at December 31, 2020. Accruing loans delinquent 90 days or more totaled $5.1 million at March 31, 2021, a decrease of $3.2 million, or 38.8%, compared with $8.3 million at December 31, 2020. At March 31, 2021, OREO totaled $8.8 million, a decrease of $3.0 million, or 25.6%, compared with $11.9 million at December 31, 2020. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process. At the end of the first quarter of 2021, total non-performing assets as a percent of total assets decreased to 0.40% compared with 0.48% at December 31, 2020.

Non-performing assets at March 31, 2021 and December 31, 2020 were as follows:


(dollars in thousands)	March 31, 2021		December 31, 2020
Nonaccrual loans	$	71,189	$	76,457
Accruing loans delinquent 90 days or more	5,097		8,326
Repossessed assets	840		544
Other real estate owned	8,841		11,880
Total non-performing assets	$	85,967	$	97,207

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 March 31, 2021 and December 31, 2020, the Company had a balance of $87.1 million and $85.0 million, respectively, in troubled debt restructurings. These totals do not include COVID-19 loan modifications accounted for under Section 4013 of the CARES Act. Further information on these loans is set forth under the heading "COVID-19 Deferrals" below. The following table presents the amount of troubled debt restructurings by loan class classified separately as accrual and nonaccrual at March 31, 2021 and December 31, 2020:


March 31, 2021	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	10	$	930	12	$	854
Consumer installment	8	27		22	53
Indirect automobile	385	1,931		47	321



Real estate – construction and development	4	501		5	706
Real estate – commercial and farmland	27	43,398		10	2,233
Real estate – residential	248	33,324		36	2,818
Total	682	$	80,111	132	$	6,985


December 31, 2020	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	9	$	521	11	$	849
Consumer installment	10	32		20	56
Indirect automobile	437	2,277		51	461



Real estate – construction and development	4	506		5	707
Real estate – commercial and farmland	28	36,707		7	1,401
Real estate – residential	264	38,800		34	2,671
Total	752	$	78,843	128	$	6,145

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 March 31, 2021 and December 31, 2020:


March 31, 2021	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	13	$	1,604	9	$	179
Consumer installment	8	24		22	56
Indirect automobile	361	1,809		71	443



Real estate – construction and development	4	501		5	706
Real estate – commercial and farmland	30	39,051		7	6,580
Real estate – residential	246	31,225		38	4,918
Total	662	$	74,214	152	$	12,882


December 31, 2020	Loans Currently Paying Under Restructured Terms			Loans that have Defaulted Under Restructured Terms
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	11	$	532	9	$	839
Consumer installment	12	33		18	55
Indirect automobile	411	2,138		77	600



Real estate – construction and development	5	507		4	706
Real estate – commercial and farmland	29	36,512		6	1,595
Real estate – residential	249	35,348		49	6,123
Total	717	$	75,070	163	$	9,918

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and nonaccrual at March 31, 2021 and December 31, 2020:


March 31, 2021	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forgiveness of interest	1	$	72	—	$	—
Forbearance of interest	15	1,162		12	2,042

Forbearance of principal	503	60,940		66	3,095
Forbearance of principal, extended amortization	—	—		1	188
Rate reduction only	62	8,670		6	653
Rate reduction, maturity extension	—	—		1	4
Rate reduction, forbearance of interest	40	3,150		8	386
Rate reduction, forbearance of principal	19	2,579		30	215
Rate reduction, forgiveness of interest	42	3,538		8	402

Total	682	$	80,111	132	$	6,985


December 31, 2020	Accruing Loans			Non-Accruing Loans
Type of Concession	#	Balance (in thousands)		#	Balance (in thousands)
Forgiveness of interest	1	$	73	—	$	—
Forbearance of interest	19	2,255		7	1,044

Forbearance of principal	563	58,131		72	3,372
Forbearance of principal, extended amortization	—	—		1	204
Rate reduction only	66	8,893		4	525
Rate reduction, maturity extension	—	—		1	5
Rate reduction, forbearance of interest	41	3,472		9	389
Rate reduction, forbearance of principal	21	2,609		25	193
Rate reduction, forgiveness of interest	41	3,410		8	412
Rate reduction, forgiveness of principal	—	—		1	1
Total	752	$	78,843	128	$	6,145

The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and nonaccrual at March 31, 2021 and December 31, 2020:


March 31, 2021	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	4	$	242	2	$	304
Raw land	5	4,591		7	1,131
Hotel and motel	5	27,851		—	—
Office	6	1,261		—	—
Retail, including strip centers	9	7,681		3	857
1-4 family residential	251	33,454		37	3,304
Church	1	2,180		1	161

Automobile/equipment/CD	401	2,851		82	1,228


Total	682	$	80,111	132	$	6,985


December 31, 2020	Accruing Loans			Non-Accruing Loans
Collateral Type	#	Balance (in thousands)		#	Balance (in thousands)
Warehouse	4	$	248	2	$	305
Raw land	5	4,611		7	1,135

Hotel and motel	4	22,372		—	—
Office	6	1,281		—	—
Retail, including strip centers	13	8,627		—	—
1-4 family residential	266	38,913		35	3,170
Church	—	—		1	166
Automobile/equipment/CD	454	2,791		82	1,368

Unsecured	—	—		1	1
Total	752	$	78,843	128	$	6,145

COVID-19 Deferrals

In response to the COVID-19 pandemic, the Company offered affected borrowers payment relief under its Disaster Relief Program. These modifications primarily consisted of short-term payment deferrals or interest-only periods to assist customers. The Company has begun providing payment modifications to certain borrowers in economically sensitive industries of various terms up to nine months. Modifications related to the COVID-19 pandemic and qualifying under the provisions of Section 4013 of the CARES Act are not deemed to be troubled debt restructurings. As of March 31, 2021, $235.4 million in loans remained in payment deferral under the COVID-19 pandemic Disaster Relief Program compared with $332.8 million at December 31, 2020.

The table below presents short-term deferrals related to the COVID-19 pandemic that were not considered TDRs as of March 31, 2021 and December 31, 2020.


	March 31, 2021				December 31, 2020
(dollars in thousands	COVID-19 Deferrals		Deferrals as a % of total loans		COVID-19 Deferrals		Deferrals as a % of total loans
Commercial, financial and agricultural	$	4,460	0.3	%	$	12,471	0.8	%
Consumer installment	569		0.2	%	1,418		0.5	%
Indirect automobile	3,536		0.7	%	8,936		1.5	%



Real estate – construction and development	418		—	%	11,049		0.7	%
Real estate – commercial and farmland	152,337		2.7	%	179,183		3.4	%
Real estate – residential	74,101		2.6	%	119,722		4.3	%
	$	235,421	1.6	%	$	332,779	2.3	%

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 bank’s total risk-based capital; 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 total risk-based capital.

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 March 31, 2021, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:

(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 March 31, 2021 and December 31, 2020. The loan categories and concentrations below are based on Federal Reserve Call codes:


	March 31, 2021			December 31, 2020
(dollars in thousands)	Balance		% of Total Loans	Balance		% of Total Loans
Construction and development loans	$	1,533,235	11%	$	1,606,710	11%
Multi-family loans	467,621		3%	347,951		2%
Nonfarm non-residential loans (excluding owner-occupied)	3,449,882		24%	3,260,389		23%
Total CRE Loans (excluding owner-occupied)	5,450,738		37%	5,215,050		36%
All other loan types	9,149,067		63%	9,265,875		64%
Total Loans	$	14,599,805	100%	$	14,480,925	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 total risk-based capital, and the Company’s internal concentration limits as of March 31, 2021 and December 31, 2020:


	Internal Limit	Actual
		March 31, 2021	December 31, 2020
Construction and development loans	100%	68%	74%
Total CRE loans (excluding owner-occupied)	300%	240%	241%

Short-Term Investments

The Company’s short-term investments are comprised of federal funds sold and interest-bearing deposits in banks. At March 31, 2021, the Company’s short-term investments were $2.53 billion, compared with $1.91 billion at December 31, 2020. At March 31, 2021, the Company had $20.0 million in federal funds sold and $2.51 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 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 $62.9 million and $51.8 million at March 31, 2021 and December 31, 2020, respectively, and a liability of $0 and $16.4 million at March 31, 2021 and December 31, 2020, 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. On October 22, 2020, the Company announced that its Board of Directors approved the extension of the share repurchase program through October 31, 2021. 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 March 31, 2021, $14.3 million, or 358,664 shares of the Company's common stock, had been repurchased under the program.

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 and 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 March 31, 2021, 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 March 31, 2021 and December 31, 2020:


	March 31, 2021	December 31, 2020
Tier 1 Leverage Ratio (tier 1 capital to average assets)
Consolidated	9.18%	8.99%
Ameris Bank	10.58%	10.39%
CET1 Ratio (common equity tier 1 capital to risk weighted assets)
Consolidated	11.45%	11.14%
Ameris Bank	13.20%	12.87%
Tier 1 Capital Ratio (tier 1 capital to risk weighted assets)
Consolidated	11.45%	11.14%
Ameris Bank	13.20%	12.87%
Total Capital Ratio (total capital to risk weighted assets)
Consolidated	15.27%	15.27%
Ameris Bank	14.31%	14.19%

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 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 March 31, 2021 and December 31, 2020, the net carrying value of the Company’s other borrowings was $425.2 million and $425.2 million, respectively.

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


	March 31, 2021	December 31, 2020	September 30, 2020	June 30, 2020	March 31, 2020
Investment securities available for sale to total deposits	4.81%	5.80%	6.96%	7.95%	9.77%
Loans (net of unearned income) to total deposits	81.67%	85.39%	93.03%	93.03%	94.58%
Interest-earning assets to total assets	91.15%	90.88%	90.66%	90.51%	89.57%
Interest-bearing deposits to total deposits	61.93%	63.73%	63.21%	64.11%	69.47%

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 March 31, 2021 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 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 $62.9 million and $51.8 million at March 31, 2021 and December 31, 2020, respectively, and a liability of $0 and $16.4 million at March 31, 2021 and December 31, 2020, 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 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 March 31, 2021, 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.

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 9 – 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, 2020.

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 March 31, 2021.


Period	Total Number of Shares Purchased(2)	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(1)
January 1, 2021 through January 31, 2021	317	$	38.07	—	$	85,723,412
February 1, 2021 through February 28, 2021	10,971	$	46.88	—	$	85,723,412
March 1, 2021 through March 31, 2021	17,150	$	54.18	—	$	85,723,412
Total	28,438	$	51.19	—	$	85,723,412

(1)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. On October 22, 2020, the Company announced that its Board of Directors approved the extension of the share repurchase program through October 31, 2021. 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 March 31, 2021, $14.3 million, or 358,664 shares of the Company's common stock, had been repurchased under the new program.

(2)The shares purchased from January 1, 2021 through March 31, 2021 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.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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).

3.2						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).

3.3						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).

3.4						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).

3.5						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).

3.6						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).

3.7						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).

3.8						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).

31.1						Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer.

31.2						Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer.

32.1						Section 1350 Certification by the Company’s Chief Executive Officer.

32.2						Section 1350 Certification by the Company’s Chief Financial Officer.

101.INS						XBRL 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.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover 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.

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: May 7, 2021			AMERIS BANCORP

			/s/ Nicole S. Stokes
			Nicole S. Stokes
			Chief Financial Officer (duly authorized signatory and principal accounting and financial officer)