Exhibit 99.1
| For Immediate Release |
Media Contact: |
Jackie Smith (803) 231-3486 |
| |
Analyst Contact: |
Jim Mabry (843) 529-5593 |
South State Corporation Reports Fourth
Quarter 2019 Results and
Declares Increase in Quarterly Cash
Dividend
COLUMBIA,
S.C.—January 27, 2020—South State Corporation (NASDAQ: SSB) today released its unaudited results of
operations and other financial information for the three-month and twelve-month period ended December 31, 2019.
The Company reported
consolidated net income of $1.45 per diluted common share for the three months ended December 31, 2019, compared to $1.35
per diluted common share for the three months ended December 31, 2018. For the year ended December 31, 2019, net income
totaled $5.36 per diluted common share, compared to $4.86 per diluted common share, an increase of 10.3%.
Adjusted net income
(non-GAAP) totaled $1.48 per diluted share for the three months ended December 31, 2019, compared to $1.35 per diluted share
one year ago. For the year ended December 31, 2019, adjusted net income (non-GAAP) totaled $5.63 per diluted share, compared
to $5.50 per diluted share, an increase of 2.4%.
Soundness
Balance sheet strength
and optionality remains a core commitment. Asset quality was exceptional with net charge-offs on non-acquired loans at 0.06% in
the fourth quarter of 2019 and 0.04% for fiscal year 2019. Capital levels were strong and tangible book value increased by 7.8%
in 2019. We preserved the integrity of our balance sheet while repurchasing over 2.1 million shares, or ~6%, of the Company’s
outstanding common stock during 2019.
Profitability
The Company enacted
several initiatives in 2019 to improve our operating leverage including closing thirteen branches, termination of the pension plan,
and began the process of implementing a new commercial loan system. Expenses decreased in FY19 by $16.3 million (GAAP) and $0.6
million (adjusted – non-GAAP), a decrease of 3.9% and 0.2%, respectively. We remain focused on controlling expense growth
and recently announced additional branch optimization plans for 2020.
Loan / Deposit Growth
During 2019, we invested
in expansion of our branch presence in Raleigh, NC, and opened a new market headquarters in Richmond, VA. We continue to recruit
talent from large institutions and benefit from our deep and dense footprint in vibrant economic markets. Net loan growth was 3.2%
in 2019 fueled by 9% growth in C&I loans. Overall deposits grew by 4.6% to over $12.1 billion, and we added ~4,500 transaction
accounts during the year.
Quarterly Cash Dividend
The Company’s
Board of Directors voted to increase the common stock dividend this quarter by $0.01 to $0.47 per share, which is a 2.2% increase
compared to last quarter, and a $0.09 per share increase, or 23.7%, compared to the same quarter one year ago. The dividend will
be payable on February 14, 2020 to shareholders of record as of February 7, 2020. This dividend represents the 8th
consecutive quarterly increase in the cash dividend paid to the shareholders of SSB.
Fourth Quarter 2019 Financial Performance
| | |
Three Months Ended | | |
Twelve Months Ended | |
| | |
Dec. 31, | | |
Sept. 30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | | |
Dec. 31, | |
| (Dollars in thousands, except per share data) | |
2019 | | |
2019 | | |
2019 | | |
2018 | | |
2018 | | |
2019 | | |
2018 | |
| INCOME STATEMENT | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Loans, including fees (8) | |
$ | 132,615 | | |
$ | 134,953 | | |
$ | 135,388 | | |
$ | 131,834 | | |
$ | 132,541 | | |
$ | 534,790 | | |
$ | 521,478 | |
| Investment securities, federal funds sold and securities purchased under agreements to resell | |
| 14,839 | | |
| 15,048 | | |
| 14,594 | | |
| 11,556 | | |
| 11,327 | | |
| 56,037 | | |
| 45,730 | |
| Total interest income | |
| 147,454 | | |
| 150,001 | | |
| 149,982 | | |
| 143,390 | | |
| 143,868 | | |
| 590,827 | | |
| 567,208 | |
| Interest expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
| 15,227 | | |
| 16,655 | | |
| 17,393 | | |
| 16,645 | | |
| 15,310 | | |
| 65,920 | | |
| 45,452 | |
| Federal funds purchased, securities sold under agreements to repurchase, and other borrowings | |
| 5,771 | | |
| 5,973 | | |
| 5,410 | | |
| 3,478 | | |
| 2,166 | | |
| 20,632 | | |
| 8,540 | |
| Total interest expense | |
| 20,998 | | |
| 22,628 | | |
| 22,803 | | |
| 20,123 | | |
| 17,476 | | |
| 86,552 | | |
| 53,992 | |
| Net interest income | |
| 126,456 | | |
| 127,373 | | |
| 127,179 | | |
| 123,267 | | |
| 126,392 | | |
| 504,275 | | |
| 513,216 | |
| Provision for loan losses | |
| 3,557 | | |
| 4,028 | | |
| 3,704 | | |
| 1,488 | | |
| 3,734 | | |
| 12,777 | | |
| 13,783 | |
| Net interest income after provision for loan losses | |
| 122,899 | | |
| 123,345 | | |
| 123,475 | | |
| 121,779 | | |
| 122,658 | | |
| 491,498 | | |
| 499,433 | |
| Noninterest income | |
| 36,307 | | |
| 37,582 | | |
| 37,618 | | |
| 32,058 | | |
| 35,642 | | |
| 143,565 | | |
| 145,749 | |
| Pre-tax operating expense | |
| 99,134 | | |
| 96,364 | | |
| 97,803 | | |
| 97,125 | | |
| 96,664 | | |
| 400,086 | | |
| 391,059 | |
| Branch consolid./acquisition and merger expense | |
| 1,494 | | |
| -- | | |
| 2,078 | | |
| 1,114 | | |
| -- | | |
| 4,552 | | |
| 29,868 | |
| Pension plan termination expense | |
| -- | | |
| -- | | |
| 9,526 | | |
| -- | | |
| -- | | |
| -- | | |
| 4,539 | |
| Total noninterest expense | |
| 100,628 | | |
| 96,364 | | |
| 109,407 | | |
| 98,239 | | |
| 96,664 | | |
| 404,638 | | |
| 420,927 | |
| Income before provision for income taxes | |
| 58,578 | | |
| 64,563 | | |
| 51,686 | | |
| 55,598 | | |
| 61,636 | | |
| 230,425 | | |
| 224,255 | |
| Provision for income taxes | |
| 9,487 | | |
| 12,998 | | |
| 10,226 | | |
| 11,231 | | |
| 12,632 | | |
| 43,942 | | |
| 45,384 | |
| Net income | |
$ | 49,091 | | |
$ | 51,565 | | |
$ | 41,460 | | |
$ | 44,367 | | |
$ | 49,004 | | |
$ | 186,483 | | |
$ | 178,871 | |
| Adjusted net income (non-GAAP) (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (GAAP) | |
$ | 49,091 | | |
$ | 51,565 | | |
$ | 41,460 | | |
$ | 44,367 | | |
$ | 49,004 | | |
$ | 186,483 | | |
$ | 178,871 | |
| Securities losses (gains), net of tax | |
| (20 | ) | |
| (349 | ) | |
| (1,371 | ) | |
| (432 | ) | |
| 2 | | |
| (2,173 | ) | |
| 520 | |
| Provision for income taxes, deferred tax revaluation | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| (990 | ) |
| FHLB prepayment penalty | |
| -- | | |
| -- | | |
| -- | | |
| 107 | | |
| -- | | |
| 107 | | |
| -- | |
| Pension plan termination expense, net of tax | |
| -- | | |
| -- | | |
| 7,641 | | |
| -- | | |
| -- | | |
| 7,641 | | |
| -- | |
| Branch consolid./acquisition and merger expense, net of tax | |
| 1,252 | | |
| - | | |
| 1,667 | | |
| 782 | | |
| -- | | |
| 3,701 | | |
| 23,692 | |
| Adjusted net income (non-GAAP) | |
$ | 50,323 | | |
$ | 51,216 | | |
$ | 49,397 | | |
$ | 44,824 | | |
$ | 49,006 | | |
$ | 195,759 | | |
$ | 202,093 | |
| Basic earnings per common share | |
$ | 1.46 | | |
$ | 1.51 | | |
$ | 1.18 | | |
$ | 1.25 | | |
$ | 1.36 | | |
$ | 5.40 | | |
$ | 4.90 | |
| Diluted earnings per common share | |
$ | 1.45 | | |
$ | 1.50 | | |
$ | 1.17 | | |
$ | 1.25 | | |
$ | 1.35 | | |
$ | 5.36 | | |
$ | 4.86 | |
| Adjusted net income per common share - Basic (non-GAAP) (3) | |
$ | 1.49 | | |
$ | 1.50 | | |
$ | 1.41 | | |
$ | 1.26 | | |
$ | 1.36 | | |
$ | 5.66 | | |
$ | 5.53 | |
| Adjusted net income per common share - Diluted (non-GAAP) (3) | |
$ | 1.48 | | |
$ | 1.49 | | |
$ | 1.40 | | |
$ | 1.26 | | |
$ | 1.35 | | |
$ | 5.63 | | |
$ | 5.50 | |
| Dividends per common share | |
$ | 0.46 | | |
$ | 0.43 | | |
$ | 0.40 | | |
$ | 0.38 | | |
$ | 0.36 | | |
$ | 1.67 | | |
$ | 1.38 | |
| Basic weighted-average common shares outstanding | |
| 33,677,851 | | |
| 34,056,771 | | |
| 35,089,129 | | |
| 35,445,087 | | |
| 36,154,922 | | |
| 34,560,544 | | |
| 36,530,112 | |
| Diluted weighted-average common shares outstanding | |
| 33,964,216 | | |
| 34,300,206 | | |
| 35,299,747 | | |
| 35,618,705 | | |
| 36,364,873 | | |
| 34,797,444 | | |
| 36,775,632 | |
| Effective tax rate | |
| 16.20 | % | |
| 20.13 | % | |
| 19.78 | % | |
| 20.20 | % | |
| 20.49 | % | |
| 19.07 | % | |
| 20.24 | % |
The Company reported
consolidated net income of $49.1 million, or $1.45 per diluted common share for the three months ended December 31, 2019,
a decrease of $2.5 million, or 4.8% from the third quarter of 2019. Diluted EPS was $1.50 in the third quarter of 2019, or $51.6
million. Compared to the fourth quarter of 2018, Diluted EPS improved $0.10, due to the decline in weighted average diluted share
count of 2.4 million shares. The decline in weighted-average diluted shares resulted from the continuation of the Company repurchasing
common shares over the past year. Net interest income decreased by $917,000 compared to the third quarter of 2019 on lower interest
income, offset partially by lower expense. The provision for loan losses decreased by $471,000, with the nonacquired provision
for loan losses increasing $978,000 compared to third quarter of 2019; while the acquired loan loss provision declined by $1.4
million. Noninterest income was down $1.3 million compared to third quarter of 2019 to $36.3 million in the fourth quarter of
2019. Excluding securities gains, noninterest income decreased by $862,000 in the fourth quarter of 2019. Noninterest expense
was higher in the fourth quarter of 2019 compared to the third quarter of 2019 by $4.3 million due primarily to higher FDIC assessment
cost of $1.1 million, higher branch consolidation cost of $1.5 million, and higher business development and staff related cost
of $887,000. The Company received a $760,000 credit on its FDIC assessment in 4Q 2019, which was lower than the credit received
in 3Q 2019 of $1.6 million. The efficiency ratio and adjusted efficiency ratio were 61.6% and 60.7% in 4Q 2019, respectively,
compared to 58.4% for both in the third quarter of 2019.
Income Tax Expense
During the fourth quarter
of 2019, our effective income tax rate decreased to 16.20% from 20.13% in the third quarter of 2019 and from 20.49% in the fourth
quarter of 2018. The primary factor in the lower effective tax rate in the fourth quarter of 2019 was the recognition of additional
income tax credits received, specifically one credit totaling approximately $2.4 million. During 2019, the Company has increased
its investment in qualified affordable housing projects and other tax advantaged opportunities by approximately $39.4 million,
resulting in the additional tax credits available to assist in lowering the effective tax rate in 2019 compared to 2018. In addition,
pre-tax income was lower in the fourth quarter of 2019 by approximately $6.0 million than in the third quarter of 2019, further
lowering the effective rate for the quarter. Compared to the fourth quarter of 2018, the lower effective rate was the result of
additional federal tax credits discussed above and lower pre-tax income.
Current Expected Credit Losses (“CECL”)
- update
Consistent with our
prior estimates, the current estimate of our allowance for credit losses (ACL) with the adoption of ASU 2016-13 (CECL) is expected
to be between $105.0 and $120.0 million, including the liability for unfunded commitments. The increase in the ACL is driven by
the acquired non-credit impaired loan portfolio (ANCI), the non-acquired loan portfolio, and reserve on unfunded commitments. The
total increase will range between $43.0 million and $58.0 million (pre-tax) from the allowance for loan losses and reserve on unfunded
commitments recorded at December 31, 2019. The estimated decline in equity, net of tax, will range from $33.5 million to $45.2
million. Our loan portfolio is segregated into 10 loan segments (models) that use a 24-month forecast period and a 12-month reversion
period. Based upon the estimates described above, our tangible common equity ratio will reduce by 20 – 30 basis points. The
estimates of the initial impact from the adoption of CECL were based upon our current analysis, composition, characteristics and
quality of our loan portfolio, as well as assumptions, management judgments, and forecasted economic conditions, and are subject
to continued review and refinement during the first quarter of 2020.
Balance Sheet and Capital
| | |
Ending Balance | |
| | |
Dec. 31, | | |
Sept. 30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | |
| (dollars in thousands, except
per share and share data) | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | |
| BALANCE SHEET | |
| | |
| | |
| | |
| | |
| |
| Assets | |
| | |
| | |
| | |
| | |
| |
| Cash and cash equivalents | |
$ | 688,704 | | |
$ | 719,194 | | |
$ | 851,971 | | |
$ | 949,591 | | |
$ | 408,983 | |
| Investment securities: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Securities available for sale, at fair value | |
| 1,956,047 | | |
| 1,813,134 | | |
| 1,717,276 | | |
| 1,466,249 | | |
| 1,517,067 | |
| Other investments | |
| 49,124 | | |
| 49,124 | | |
| 49,124 | | |
| 40,624 | | |
| 25,604 | |
| Total investment securities | |
| 2,005,171 | | |
| 1,862,258 | | |
| 1,766,400 | | |
| 1,506,873 | | |
| 1,542,671 | |
| Loans held for sale | |
| 59,363 | | |
| 87,393 | | |
| 47,796 | | |
| 33,297 | | |
| 22,925 | |
| Loans: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquired credit impaired | |
| 356,782 | | |
| 390,714 | | |
| 419,961 | | |
| 452,258 | | |
| 485,119 | |
| Acquired non-credit impaired | |
| 1,760,427 | | |
| 1,965,603 | | |
| 2,180,281 | | |
| 2,378,737 | | |
| 2,594,826 | |
| Non-acquired | |
| 9,252,831 | | |
| 8,928,512 | | |
| 8,621,327 | | |
| 8,310,613 | | |
| 7,933,286 | |
| Less allowance for non-acquired loan losses | |
| (56,927 | ) | |
| (54,937 | ) | |
| (53,590 | ) | |
| (52,008 | ) | |
| (51,194 | ) |
| Loans, net | |
| 11,313,113 | | |
| 11,229,892 | | |
| 11,167,979 | | |
| 11,089,600 | | |
| 10,962,037 | |
| Other real estate owned ("OREO") | |
| 11,964 | | |
| 13,415 | | |
| 14,506 | | |
| 11,297 | | |
| 11,410 | |
| Premises and equipment, net | |
| 317,321 | | |
| 323,506 | | |
| 321,348 | | |
| 322,553 | | |
| 241,076 | |
| Bank owned life insurance | |
| 234,567 | | |
| 233,206 | | |
| 231,708 | | |
| 230,629 | | |
| 230,105 | |
| Deferred tax asset | |
| 31,316 | | |
| 27,844 | | |
| 28,240 | | |
| 31,884 | | |
| 37,128 | |
| Mortgage servicing rights | |
| 30,525 | | |
| 28,674 | | |
| 30,332 | | |
| 32,415 | | |
| 34,727 | |
| Core deposit and other intangibles | |
| 49,816 | | |
| 53,083 | | |
| 56,351 | | |
| 59,619 | | |
| 62,900 | |
| Goodwill | |
| 1,002,900 | | |
| 1,002,900 | | |
| 1,002,900 | | |
| 1,002,900 | | |
| 1,002,900 | |
| Other assets | |
| 176,332 | | |
| 170,717 | | |
| 163,806 | | |
| 136,229 | | |
| 119,466 | |
| Total assets | |
$ | 15,921,092 | | |
$ | 15,752,082 | | |
$ | 15,683,337 | | |
$ | 15,406,887 | | |
$ | 14,676,328 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liabilities and Shareholders' Equity | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Noninterest-bearing | |
$ | 3,245,306 | | |
$ | 3,307,532 | | |
$ | 3,255,906 | | |
$ | 3,219,864 | | |
$ | 3,061,769 | |
| Interest-bearing | |
$ | 8,931,790 | | |
| 8,716,255 | | |
| 8,666,374 | | |
| 8,699,107 | | |
| 8,585,164 | |
| Total deposits | |
| 12,177,096 | | |
| 12,023,787 | | |
| 11,922,280 | | |
| 11,918,971 | | |
| 11,646,933 | |
| Federal funds purchased and securities sold under agreements to repurchase |
|
|
298,741 |
|
|
|
269,072 |
|
|
|
298,029 |
|
|
|
276,891 |
|
|
|
270,649 |
|
| Other borrowings | |
| 815,936 | | |
| 815,771 | | |
| 816,414 | | |
| 616,250 | | |
| 266,084 | |
| Other liabilities | |
| 256,306 | | |
| 292,496 | | |
| 272,636 | | |
| 218,298 | | |
| 126,366 | |
| Total liabilities | |
| 13,548,079 | | |
| 13,401,126 | | |
| 13,309,359 | | |
| 13,030,410 | | |
| 12,310,032 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shareholders' equity: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Preferred stock - $.01 par value; authorized 10,000,000 shares | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| -- | |
| Common stock - $2.50 par value; authorized 80,000,000 shares | |
| 84,361 | | |
| 84,757 | | |
| 86,839 | | |
| 88,421 | | |
| 89,574 | |
| Surplus | |
| 1,607,740 | | |
| 1,617,004 | | |
| 1,676,229 | | |
| 1,719,396 | | |
| 1,750,495 | |
| Retained earnings | |
| 679,895 | | |
| 646,325 | | |
| 609,444 | | |
| 582,034 | | |
| 551,108 | |
| Accumulated other comprehensive income (loss) | |
| 1,017 | | |
| 2,870 | | |
| 1,466 | | |
| (13,374 | ) | |
| (24,881 | ) |
| Total shareholders' equity | |
| 2,373,013 | | |
| 2,350,956 | | |
| 2,373,978 | | |
| 2,376,477 | | |
| 2,366,296 | |
| Total liabilities and shareholders' equity | |
$ | 15,921,092 | | |
$ | 15,752,082 | | |
$ | 15,683,337 | | |
$ | 15,406,887 | | |
$ | 14,676,328 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common shares issued and outstanding | |
| 33,744,385 | | |
| 33,902,726 | | |
| 34,735,587 | | |
| 35,368,521 | | |
| 35,829,549 | |
At December 31,
2019, the Company’s total assets were $15.9 billion, an increase of $1.2 billion from December 31, 2018, and an increase
of 8.5%. During the fourth quarter of 2019, changes in the balance sheet include the following:
| 1. | Net loan growth totaled $85.2 million, or 3.0% annualized. Non-acquired loans increased by $324.3
million or 14.4% annualized, and acquired loans decreased by $239.1 million, or 40.3% annualized. |
| 2. | Investment securities portfolio grew by $142.9 million to $2.0 billion, representing 12.6% of total
assets. |
| 3. | Non-interest bearing deposits declined by $62.2 million, or 7.5% annualized. |
| 4. | Interest bearing deposits grew by $215.5 million, or 9.8% annualized. |
| 5. | Equity increased by $22.1 million as the Company only repurchased 165,000 common shares totaling
$12.4 million, and at an average price of $74.88 per share. |
The Company’s
book value per common share increased to $70.32 per share at December 31, 2019, compared to $69.34 at September 30,
2019 and $66.04 at December 31, 2018. Total equity (capital) increased by $22.1 million due to net income totaling $49.1
million, offset by the dividend paid of $15.5 million during the fourth quarter of 2019. Tangible book value (“TBV”)
per common share increased by $0.93 per share to $39.13 at December 31, 2019, compared to $38.20 at September 30, 2019,
and increased by $2.83 per share, or 7.8%, from $36.30 at December 31, 2018.
Performance and Capital Ratios
| | |
Three
Months Ended | | |
Twelve
Months Ended |
| | |
Dec. 31, | | |
Sept.
30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | | |
Dec. 31, | | |
Dec. 31, | |
| PERFORMANCE
RATIOS | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | | |
2019 | | |
2018 | |
| Return
on average assets (annualized) | |
| 1.23 | % | |
| 1.31 | % | |
| 1.08 | % | |
| 1.21 | % | |
| 1.33 | % | |
| 1.21 | % | |
| 1.23 | % |
| Adjusted
return on average assets (annualized) (non-GAAP) (3) | |
| 1.26 | % | |
| 1.30 | % | |
| 1.28 | % | |
| 1.23 | % | |
| 1.33 | % | |
| 1.27 | % | |
| 1.39 | % |
| Return
on average equity (annualized) | |
| 8.26 | % | |
| 8.70 | % | |
| 6.98 | % | |
| 7.61 | % | |
| 8.24 | % | |
| 7.89 | % | |
| 7.63 | % |
| Adjusted
return on average equity (annualized) (non-GAAP) (3) | |
| 8.47 | % | |
| 8.64 | % | |
| 8.32 | % | |
| 7.69 | % | |
| 8.24 | % | |
| 8.28 | % | |
| 8.62 | % |
| Return
on average tangible common equity (annualized) (non-GAAP) (7) | |
| 15.79 | % | |
| 16.62 | % | |
| 13.38 | % | |
| 14.66 | % | |
| 15.91 | % | |
| 15.11 | % | |
| 14.93 | % |
| Adjusted
return on average tangible common equity (annualized) (non-GAAP) (3) (7) | |
| 16.17 | % | |
| 16.51 | % | |
| 15.79 | % | |
| 14.80 | % | |
| 15.91 | % | |
| 15.82 | % | |
| 16.76 | % |
| Efficiency
ratio (tax equivalent) | |
| 61.64 | % | |
| 58.40 | % | |
| 66.87 | % | |
| 63.24 | % | |
| 59.43 | % | |
| 62.52 | % | |
| 63.57 | % |
| Adjusted
efficiency ratio (non-GAAP) (9) | |
| 60.73 | % | |
| 58.40 | % | |
| 59.78 | % | |
| 62.52 | % | |
| 59.43 | % | |
| 60.33 | % | |
| 59.06 | % |
| Dividend
payout ratio (2) | |
| 31.62 | % | |
| 28.48 | % | |
| 33.89 | % | |
| 30.29 | % | |
| 26.63 | % | |
| 30.94 | % | |
| 28.27 | % |
| Book value per common
share | |
$ | 70.32 | | |
$ | 69.34 | | |
$ | 68.34 | | |
$ | 67.19 | | |
$ | 66.04 | | |
| | | |
| | |
| Tangible
common equity per common share (non-GAAP) (7) | |
$ | 39.13 | | |
$ | 38.20 | | |
$ | 37.85 | | |
$ | 37.15 | | |
$ | 36.30 | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| CAPITAL
RATIOS | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Equity-to-assets | |
| 14.90 | % | |
| 14.92 | % | |
| 15.14 | % | |
| 15.42 | % | |
| 16.12 | % | |
| | | |
| | |
| Tangible
equity-to-tangible assets (non-GAAP) (7) | |
| 8.88 | % | |
| 8.81 | % | |
| 8.99 | % | |
| 9.16 | % | |
| 9.56 | % | |
| | | |
| | |
| Tier
1 common equity (6) | |
| 11.3 | % | |
| 11.2 | % | |
| 11.6 | % | |
| 11.9 | % | |
| 12.1 | % | |
| | | |
| | |
| Tier
1 leverage (6) | |
| 9.7 | % | |
| 9.7 | % | |
| 10.0 | % | |
| 10.5 | % | |
| 10.7 | % | |
| | | |
| | |
| Tier
1 risk-based capital (6) | |
| 12.3 | % | |
| 12.2 | % | |
| 12.6 | % | |
| 12.9 | % | |
| 13.1 | % | |
| | | |
| | |
| Total
risk-based capital (6) | |
| 12.8 | % | |
| 12.7 | % | |
| 13.1 | % | |
| 13.4 | % | |
| 13.6 | % | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| OTHER
DATA | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Number of branches | |
| 155 | | |
| 157 | | |
| 156 | | |
| 168 | | |
| 168 | | |
| | | |
| | |
| Number
of employees (full-time equivalent basis) | |
| 2,547 | | |
| 2,544 | | |
| 2,544 | | |
| 2,589 | | |
| 2,602 | | |
| | | |
| | |
Asset Quality
| | |
Ending Balance | |
| | |
Dec. 31, | | |
Sept 30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | |
| (Dollars in thousands) | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | |
| NONPERFORMING ASSETS: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-acquired | |
| | | |
| | | |
| | | |
| | | |
| | |
| Non-acquired nonperforming loans | |
$ | 22,816 | | |
$ | 19,187 | | |
$ | 15,605 | | |
$ | 15,910 | | |
$ | 15,018 | |
| Non-acquired OREO and other nonperforming assets | |
| 3,705 | | |
| 3,724 | | |
| 4,374 | | |
| 4,070 | | |
| 4,037 | |
| Total non-acquired nonperforming assets | |
| 26,521 | | |
| 22,911 | | |
| 19,979 | | |
| 19,980 | | |
| 19,055 | |
| Acquired | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquired nonperforming loans | |
| 11,114 | | |
| 9,596 | | |
| 9,985 | | |
| 14,558 | | |
| 13,651 | |
| Acquired OREO and other nonperforming assets | |
| 8,579 | | |
| 9,938 | | |
| 10,412 | | |
| 7,782 | | |
| 7,755 | |
| Total acquired nonperforming assets | |
| 19,693 | | |
| 19,534 | | |
| 20,397 | | |
| 22,340 | | |
| 21,406 | |
| Total nonperforming assets | |
$ | 46,214 | | |
$ | 42,445 | | |
$ | 40,376 | | |
$ | 42,320 | | |
$ | 40,461 | |
| | |
Three
Months Ended | | |
Twelve
Months Ended | |
| | |
Dec. 31, | | |
Sept
30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | | |
Dec. 31, | | |
Dec. 31, | |
| | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | | |
2019 | | |
2018 | |
| ASSET QUALITY RATIOS: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Allowance for
non-acquired loan losses as a percentage of non-acquired loans (1) | |
| 0.62 | % | |
| 0.62 | % | |
| 0.62 | % | |
| 0.63 | % | |
| 0.65 | % | |
| 0.62 | % | |
| 0.65 | % |
| Allowance for
non-acquired loan losses as a percentage of non-acquired nonperforming loans | |
| 249.50 | % | |
| 286.32 | % | |
| 343.42 | % | |
| 326.89 | % | |
| 340.88 | % | |
| 249.50 | % | |
| 340.88 | % |
| Net charge-offs on
non-acquired loans as a percentage of average non-acquired loans (annualized) (1) | |
| 0.06 | % | |
| 0.05 | % | |
| 0.02 | % | |
| 0.02 | % | |
| 0.06 | % | |
| 0.04 | % | |
| 0.04 | % |
| Net charge-offs on
acquired non-credit impaired loans as a percentage of average acquired non-credit impaired loans (annualized) (1) | |
| -0.01 | % | |
| 0.15 | % | |
| 0.25 | % | |
| 0.03 | % | |
| 0.09 | % | |
| 0.11 | % | |
| 0.06 | % |
| Total nonperforming assets as a percentage
of total assets | |
| 0.29 | % | |
| 0.27 | % | |
| 0.26 | % | |
| 0.27 | % | |
| 0.28 | % | |
| | | |
| | |
| Excluding Acquired
Assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| NPLs as a percentage of
period end non-acquired loans (1) | |
| 0.25 | % | |
| 0.21 | % | |
| 0.18 | % | |
| 0.19 | % | |
| 0.19 | % | |
| | | |
| | |
| Total nonperforming
assets as a percentage of total non-acquired loans and repossessed assets (1) (4) | |
| 0.29 | % | |
| 0.26 | % | |
| 0.23 | % | |
| 0.24 | % | |
| 0.24 | % | |
| | | |
| | |
| Total nonperforming assets as a percentage
of total assets (5) | |
| 0.17 | % | |
| 0.15 | % | |
| 0.13 | % | |
| 0.13 | % | |
| 0.13 | % | |
| | | |
| | |
Total nonperforming
assets increased by $3.8 million to $46.2 million, representing 0.29% of total assets, an increase of 2 basis points compared to
September 30, 2019. Non-performing acquired non-credit impaired loans increased by $1.5 million and totaled $11.1 million.
Legacy non-performing loans increased by $3.6 million during the fourth quarter of 2019 to $22.8 million at December 31, 2019.
The allowance for loan losses as a percentage of non-acquired nonaccrual loans was 250% at December 31, 2019, down from 286%
in the third quarter of 2019, and down from 341% at December 31, 2018.
At December 31,
2019, the allowance for non-acquired loan losses was $56.9 million, or 0.62%, of non-acquired period-end loans and $54.9 million,
or 0.62%, at September 30, 2019, and $51.2 million, or 0.65% at December 31, 2018. Net charge-offs within the non-acquired
portfolio were $1.5 million, or 0.06% annualized, in the fourth quarter of 2019, compared to $1.1 million, or 0.05% annualized,
in the third of 2019. Fourth quarter 2018 net charge-offs totaled $1.1 million, or 0.06% annualized. Net charge-offs (recoveries)
related to the non-acquired loan portfolio totaled $348,000 during the fourth quarter of 2019 and ($188,000) for the twelve months
ended December 31, 2019. The remaining net charge-offs were from overdraft and ready reserve accounts and totaled $1.1 million,
for the fourth quarter of 2019, and, for the twelve months ended December 31, 2019, totaled $3.7 million.
During the fourth quarter
of 2019, the provision for loan losses totaled $3.5 million for the non-acquired loan portfolio compared to $2.5 million in the
third quarter of 2019, and $2.5 million in the fourth quarter of 2018.
Net charge offs (recoveries)
related to “acquired non-credit impaired loans” were ($36,000), or -0.01% annualized, in the fourth quarter of 2019;
and the Company recorded a “negative” provision for loan losses, accordingly. Net charge-offs in the third quarter
of 2019 totaled $760,000, or 0.15% annualized, and in the fourth quarter of 2018, net charge-offs totaled $574,000, or 0.09% annualized.
During the fourth quarter
of 2019, the Company recorded net impairment of $134,000 within the acquired credit impaired loan pools compared to $786,000 in
the third quarter of 2019. During the fourth quarter of 2018, the Company recorded net impairment of $710,000.
Total OREO decreased
during the fourth quarter with the disposition of property from both the nonacquired and acquired OREO assets. The decline totaled
$1.5 million with a balance of $12.0 million at December 31, 2019. The OREO balance at December 31, 2018 was $11.4 million.
Net Interest Income and Margin
| | |
Three Months Ended | |
| | |
December 31, 2019 | | |
September 30, 2019 | | |
December 31, 2018 | |
| | |
Average | | |
Income/ | | |
Yield/ | | |
Average | | |
Income/ | | |
Yield/ | | |
Average | | |
Income/ | | |
Yield/ | |
| (Dollars in thousands) | |
Balance | | |
Expense | | |
Rate | | |
Balance | | |
Expense | | |
Rate | | |
Balance | | |
Expense | | |
Rate | |
| YIELD ANALYSIS | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Interest-Earning Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Federal funds sold, reverse repo, and time deposits | |
$ | 573,957 | | |
$ | 2,337 | | |
| 1.62 | % | |
$ | 491,627 | | |
$ | 2,676 | | |
| 2.16 | % | |
$ | 172,849 | | |
$ | 1,032 | | |
| 2.37 | % |
| Investment securities (taxable) | |
| 1,713,050 | | |
| 11,016 | | |
| 2.55 | % | |
| 1,638,461 | | |
| 10,785 | | |
| 2.61 | % | |
| 1,358,978 | | |
| 8,838 | | |
| 2.58 | % |
| Investment securities (tax-exempt) | |
| 176,261 | | |
| 1,486 | | |
| 3.34 | % | |
| 181,434 | | |
| 1,587 | | |
| 3.47 | % | |
| 188,666 | | |
| 1,457 | | |
| 3.06 | % |
| Loans held for sale | |
| 73,541 | | |
| 664 | | |
| 3.58 | % | |
| 58,829 | | |
| 541 | | |
| 3.65 | % | |
| 24,820 | | |
| 291 | | |
| 4.65 | % |
| Loans | |
| 11,297,402 | | |
| 131,951 | | |
| 4.63 | % | |
| 11,225,593 | | |
| 134,412 | | |
| 4.75 | % | |
| 10,928,294 | | |
| 132,250 | | |
| 4.80 | % |
| Total interest-earning assets | |
| 13,834,211 | | |
| 147,454 | | |
| 4.23 | % | |
| 13,595,944 | | |
| 150,001 | | |
| 4.38 | % | |
| 12,673,607 | | |
| 143,868 | | |
| 4.50 | % |
| Noninterest-earning assets | |
| 2,024,648 | | |
| | | |
| | | |
| 2,014,172 | | |
| | | |
| | | |
| 1,924,666 | | |
| | | |
| | |
| Total Assets | |
$ | 15,858,859 | | |
| | | |
| | | |
$ | 15,610,116 | | |
| | | |
| | | |
$ | 14,598,273 | | |
| | | |
| | |
| Interest-Bearing Liabilities: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Transaction and money market accounts | |
$ | 5,768,724 | | |
$ | 8,010 | | |
| 0.55 | % | |
$ | 5,581,057 | | |
$ | 8,932 | | |
| 0.63 | % | |
$ | 5,310,048 | | |
$ | 8,498 | | |
| 0.63 | % |
| Savings deposits | |
| 1,313,991 | | |
| 769 | | |
| 0.23 | % | |
| 1,323,377 | | |
| 1,027 | | |
| 0.31 | % | |
| 1,416,227 | | |
| 1,324 | | |
| 0.37 | % |
| Certificates and other time deposits | |
| 1,684,633 | | |
| 6,448 | | |
| 1.52 | % | |
| 1,730,567 | | |
| 6,696 | | |
| 1.54 | % | |
| 1,804,939 | | |
| 5,488 | | |
| 1.21 | % |
| Federal funds purchased and repurchase agreements | |
| 290,287 | | |
| 590 | | |
| 0.81 | % | |
| 272,900 | | |
| 612 | | |
| 0.89 | % | |
| 273,994 | | |
| 660 | | |
| 0.96 | % |
| Other borrowings | |
| 815,847 | | |
| 5,181 | | |
| 2.52 | % | |
| 816,188 | | |
| 5,361 | | |
| 2.61 | % | |
| 122,676 | | |
| 1,506 | | |
| 4.87 | % |
| Total interest-bearing liabilities | |
| 9,873,482 | | |
| 20,998 | | |
| 0.84 | % | |
| 9,724,089 | | |
| 22,628 | | |
| 0.92 | % | |
| 8,927,884 | | |
| 17,476 | | |
| 0.78 | % |
| Noninterest-bearing liabilities | |
| 3,628,741 | | |
| | | |
| | | |
| 3,534,873 | | |
| | | |
| | | |
| 3,310,416 | | |
| | | |
| | |
| Shareholders' equity | |
| 2,356,636 | | |
| | | |
| | | |
| 2,351,154 | | |
| | | |
| | | |
| 2,359,973 | | |
| | | |
| | |
| Total Non-IBL and shareholders' equity | |
| 5,985,377 | | |
| | | |
| | | |
| 5,886,027 | | |
| | | |
| | | |
| 5,670,389 | | |
| | | |
| | |
| Total liabilities and shareholders' equity | |
$ | 15,858,859 | | |
| | | |
| | | |
$ | 15,610,116 | | |
| | | |
| | | |
$ | 14,598,273 | | |
| | | |
| | |
| Net interest income and margin (NON-TAX EQUIV.) | |
| | | |
$ | 126,456 | | |
| 3.63 | % | |
| | | |
$ | 127,373 | | |
| 3.72 | % | |
| | | |
$ | 126,392 | | |
| 3.96 | % |
| Net interest margin (TAX EQUIVALENT) | |
| | | |
| | | |
| 3.64 | % | |
| | | |
| | | |
| 3.73 | % | |
| | | |
| | | |
| 3.98 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Overall Cost of Funds (including demand deposits) | |
| | | |
| | | |
| 0.63 | % | |
| | | |
| | | |
| 0.69 | % | |
| | | |
| | | |
| 0.57 | % |
Non-taxable equivalent
net interest income was $126.5 million for the fourth quarter of 2019, a decrease of $917,000 from the third quarter of 2019. The
decrease resulted from lower interest income of $2.5 million in loan interest income partially offset by lower interest expense
totaling $1.6 million. All funding components declined from the third quarter of 2019 in a declining rate environment. Interest
income from the loan portfolio declined by $2.5 million, which was attributable to lower yields in the acquired loan portfolio
and the non-acquired loan portfolio. The yield on the acquired loan portfolio declined to 6.28% at December 31, 2019 from
6.32% at September 30, 2019; while the non-acquired loan portfolio declined to 4.23% at December 31, 2019 from 4.31%
at September 30, 2019. The average balance of loans increased by $71.8 million in the fourth quarter of 2019.
Tax-equivalent net
interest margin declined 9 basis points from the third quarter of 2019 and declined by 34 basis points from the fourth quarter
of 2018. During the fourth quarter of 2019, the Company’s average total assets increased to $15.9 billion, an increase of
$248.7 million from the third quarter of 2019, and an increase of $1.3 billion from the fourth quarter of 2018. Average earning
assets totaled $13.8 billion up $238.3 million from third quarter of 2019, and up $1.2 billion from the fourth quarter of 2018.
Average interest-bearing liabilities totaled $9.9 billion at December 31, 2019, an increase of $149.4 million from September 30,
2019; and up $945.6 million from December 31, 2018. Average non-interest bearing liabilities increased by $93.9 million, from
September 30, 2019, to $3.6 billion; and was up $318.3 million from December 31, 2018. Including the impact of noninterest
bearing deposits, the Company’s overall cost of funds declined to 63 basis points for the fourth quarter of 2019 compared
to 69 basis points in the third quarter of 2019, and increased when compared to 57 basis points one year ago.
Acquired Loans and Accretable Yield
The first table
below reflects the quarterly roll forward of the acquired credit impaired loan accretable yield. The table reflects the amount
of acquired credit impaired loan interest income recognized each quarter, split between (1) contractual loan interest; and
(2) the accretion recognized from the performance of the acquired credit impaired loans.
The second table
below shows the split between principal and interest that will be accreted into interest income over the expected remaining
life of the acquired credit impaired (ACI) loans, the third table shows the nonaccretable difference split between principal
and interest which is not expected to be collected, and the fourth table shows “total acquired accretion income”
recorded over the past five quarters. The amount decreased in the fourth quarter of 2019 to $7.4 million when compared $8.1 million
in the third quarter of 2019, as the loan balances for the acquired loan portfolios declined.
The amount of acquired
noncredit impaired (ANCI) discount recognized in the fourth quarter of 2019 was $3.9 million compared to $2.7 million recognized
in the third quarter of 2019. The increase recognized was primarily related to a larger decline in acquired consumer owner occupied
loans than in prior quarters. The remaining balance of the discount on the acquired noncredit impaired loan portfolio totals $20.3
million at December 31, 2019, $24.2 million at September 30, 2019, and $33.4 million at December 31, 2018.
| | |
Dec. 31, | | |
Sept.
30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | |
| | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | |
| 1 - Accretable Yield
Rollforward (Acquired credit impaired loans) | |
| | | |
| | | |
| | | |
| | | |
| | |
| (Dollars in thousands) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance
at beginning of period | |
$ | 90,135 | | |
$ | 100,613 | | |
$ | 106,978 | | |
$ | 116,754 | | |
$ | 114,985 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contractual
interest income * | |
| (6,000 | ) | |
| (6,327 | ) | |
| (7,111 | ) | |
| (7,078 | ) | |
| (7,837 | ) |
| Accretion
on acquired loans | |
| (2,835 | ) | |
| (4,691 | ) | |
| (5,167 | ) | |
| (5,120 | ) | |
| (5,099 | ) |
| Additions
(decreases) from Park Sterling Bank Acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Improved
cash flows affecting nonaccretable difference | |
| 817 | | |
| 541 | | |
| 5,994 | | |
| 2,474 | | |
| 14,698 | |
| Other
changes, net | |
| (19 | ) | |
| (1 | ) | |
| (81 | ) | |
| (52 | ) | |
| 7 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance
at end of period | |
$ | 82,098 | | |
$ | 90,135 | | |
$ | 100,613 | | |
$ | 106,978 | | |
$ | 116,754 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
|
*
Contractual interest income does not include interest income from loan advances post-acquisition on lines of credit, late fees
or other loan fees. |
| | |
| | |
| | |
| | |
| | |
| |
| 2 - Principal &
Interest of Accretable Yield Period End Balance | |
| | |
| | |
| | |
| | |
| |
| Principal
- expected to be collected in future periods and recorded as interest income | |
$ | 35,436 | | |
$ | 39,220 | | |
$ | 43,616 | | |
$ | 46,673 | | |
$ | 48,896 | |
| Interest
- expected to be collected in future periods and recorded as interest income | |
| 46,662 | | |
| 50,915 | | |
| 56,997 | | |
| 60,305 | | |
| 67,858 | |
| Total
accretable balance at period end | |
$ | 82,098 | | |
$ | 90,135 | | |
$ | 100,613 | | |
$ | 106,978 | | |
$ | 116,754 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| 3
- Principal & Interest of the Nonaccretable Difference | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contractual
principal which is not expected to be collected | |
$ | 9,122 | | |
$ | 9,878 | | |
$ | 13,151 | | |
$ | 15,203 | | |
$ | 19,055 | |
| Contractual
interest which is not expected to be collected | |
| 4,817 | | |
| 5,414 | | |
$ | 5,005 | | |
| 9,079 | | |
| 5,763 | |
| Total
nonaccretable difference | |
$ | 13,939 | | |
$ | 15,292 | | |
$ | 18,156 | | |
$ | 24,282 | | |
$ | 24,818 | |
| | |
| Three months Ended | |
| | |
| Dec. 31, | | |
| Sept
30, | | |
| June 30, | | |
| Mar. 31 | | |
| Dec. 31, | |
| | |
| 2019 | | |
| 2019 | | |
| 2019 | | |
| 2019 | | |
| 2018 | |
| 4
- Acquired accretion income over Past 5 Quarters | |
| | | |
| | | |
| | | |
| | | |
| | |
| (in
thousands) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Acquired
non credit impaired accretion income and fees | |
$ | 3,896 | | |
$ | 2,667 | | |
$ | 3,209 | | |
$ | 3,237 | | |
$ | 3,792 | |
| Acquired
credit impaired accretion income | |
| 2,835 | | |
| 4,691 | | |
| 5,167 | | |
| 5,120 | | |
| 5,099 | |
| Other
interest and late fees | |
| 685 | | |
| 712 | | |
| 773 | | |
| 780 | | |
| 770 | |
| Total
acquired accretion income | |
$ | 7,416 | | |
$ | 8,070 | | |
$ | 9,149 | | |
$ | 9,137 | | |
$ | 9,662 | |
Noninterest Income and Expense
| | |
Three
Months Ended | | |
Twelve
Months Ended | |
| | |
Dec. 31, | | |
Sept.
30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | | |
Dec. 31, | | |
Dec. 31, | |
| (Dollars
in thousands) | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | | |
2019 | | |
2018 | |
| Noninterest
income: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Fees
on deposit accounts | |
$ | 19,161 | | |
$ | 19,725 | | |
$ | 18,741 | | |
$ | 17,808 | | |
$ | 18,704 | | |
$ | 75,435 | | |
$ | 81,649 | |
| Mortgage banking income | |
| 3,757 | | |
| 6,115 | | |
| 5,307 | | |
| 2,385 | | |
| 2,501 | | |
| 17,564 | | |
| 13,590 | |
| Trust and investment services income | |
| 6,935 | | |
| 7,320 | | |
| 7,720 | | |
| 7,269 | | |
| 7,621 | | |
| 29,244 | | |
| 30,229 | |
| Securities (losses) gains, net | |
| 24 | | |
| 437 | | |
| 1,709 | | |
| 541 | | |
| (3 | ) | |
| 2,711 | | |
| (655 | ) |
| Recoveries of fully charged off acquired loans | |
| 2,232 | | |
| 1,401 | | |
| 1,347 | | |
| 1,867 | | |
| 2,737 | | |
| 6,847 | | |
| 9,117 | |
| Other | |
| 4,198 | | |
| 2,584 | | |
| 2,794 | | |
| 2,188 | | |
| 4,082 | | |
| 11,764 | | |
| 11,819 | |
| Total noninterest income | |
$ | 36,307 | | |
$ | 37,582 | | |
$ | 37,618 | | |
$ | 32,058 | | |
$ | 35,642 | | |
$ | 143,565 | | |
$ | 145,749 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Noninterest
expense: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Salaries and employee benefits | |
$ | 58,218 | | |
$ | 59,551 | | |
$ | 58,547 | | |
$ | 58,431 | | |
$ | 57,705 | | |
$ | 234,747 | | |
$ | 233,130 | |
| Pension plan termination expense | |
| - | | |
| - | | |
| 9,526 | | |
| -- | | |
| -- | | |
| 9,526 | | |
| -- | |
| Occupancy expense | |
| 12,113 | | |
| 11,883 | | |
| 11,849 | | |
| 11,612 | | |
| 11,804 | | |
| 47,457 | | |
| 49,165 | |
| Information services expense | |
| 8,919 | | |
| 8,878 | | |
| 8,671 | | |
| 9,009 | | |
| 7,877 | | |
| 35,477 | | |
| 34,322 | |
| FHLB prepayment penalty | |
| -- | | |
| -- | | |
| -- | | |
| 134 | | |
| -- | | |
| 134 | | |
| - | |
| OREO expense and loan related | |
| 1,013 | | |
| 597 | | |
| 881 | | |
| 751 | | |
| 831 | | |
| 3,242 | | |
| 3,510 | |
| Business development and staff related | |
| 2,905 | | |
| 2,018 | | |
| 2,171 | | |
| 2,288 | | |
| 2,822 | | |
| 9,382 | | |
| 10,132 | |
| Amortization of intangibles | |
| 3,267 | | |
| 3,268 | | |
| 3,268 | | |
| 3,281 | | |
| 3,537 | | |
| 13,084 | | |
| 14,209 | |
| Professional fees | |
| 2,862 | | |
| 2,442 | | |
| 2,781 | | |
| 2,240 | | |
| 3,148 | | |
| 10,325 | | |
| 8,883 | |
| Supplies, printing and postage expense | |
| 1,464 | | |
| 1,418 | | |
| 1,495 | | |
| 1,504 | | |
| 1,480 | | |
| 5,881 | | |
| 5,839 | |
| FDIC assessment and other regulatory charges | |
| 1,327 | | |
| 228 | | |
| 1,455 | | |
| 1,535 | | |
| 1,340 | | |
| 4,545 | | |
| 8,405 | |
| Advertising and marketing | |
| 1,491 | | |
| 1,052 | | |
| 959 | | |
| 807 | | |
| 1,273 | | |
| 4,309 | | |
| 4,221 | |
| Other operating expenses | |
| 5,555 | | |
| 5,029 | | |
| 5,726 | | |
| 5,667 | | |
| 4,847 | | |
| 21,977 | | |
| 19,243 | |
| Branch consolid. or merger / convers related exp. | |
| 1,494 | | |
| - | | |
| 2,078 | | |
| 980 | | |
| - | | |
| 4,552 | | |
| 29,868 | |
| Total noninterest expense | |
$ | 100,628 | | |
$ | 96,364 | | |
$ | 109,407 | | |
$ | 98,239 | | |
$ | 96,664 | | |
$ | 404,638 | | |
$ | 420,927 | |
Noninterest income
totaled $36.3 million for the fourth quarter of 2019 and $37.6 million in the third quarter of 2019, a decrease of $1.3 million.
The largest variance was in mortgage banking income which declined by $2.4 million. This decline was the result of lower secondary
market income totaling $2.1 million and lower mortgage servicing related income accounting for the difference. Trust and investment
services income was lower by $385,000, and fees on deposit accounts were lower by $564,000. These decreases were more than offset
by more recoveries on acquired loans totaling $831,000 (received one large recovery which was not anticipated in the fourth quarter
of 2019); higher other income totaling $1.6 million from capital markets income and gain on the sale of loans.
Compared to the fourth
quarter of 2018, noninterest income increased by $665,000 due primarily to fees on deposit accounts and mortgage banking income.
These were offset partially by lower trust and investment services income and lower recoveries of acquired loans.
Noninterest expense
was $100.6 million in the fourth quarter of 2019, an increase of $4.3 million from $96.4 million in the third quarter of 2019.
The increase was primarily related to the following: (1) the closure of one branch in late October resulted in branch
consolidation cost totaling $1.5 million, (2) higher FDIC assessment and other regulatory expense of $1.1 million related
to a credit received from the FDIC in the third quarter of 2019 totaling $1.6 million, and (3) higher business development
and staff related cost of $887,000 from higher recruitment and relocation cost, higher business development and higher travel.
Adjusted noninterest expense totaled $99.1 million in 4Q 2019, which was $2.8 million higher than third quarter of 2019, and resulted
in an adjusted efficiency ratio of 60.7% compared to 58.4% in third quarter of 2019.
Compared to the fourth
quarter of 2018, noninterest expense was higher by $4.0 million. The net increase was primarily due to the following: (1)
branch consolidated cost of $1.5 million, from the closure of one branch in late October 2019, (2) higher information
services expense of $1.0 million due primarily to lower credits received from our core processor, (3) higher salary and employee
benefits totaling $513,000, which was the result of higher salary, benefits and commissions partially offset by lower incentive,
and (4) higher other expense related to more passive losses related to CRA investments acquired in 2019. Adjusted noninterest
expense (non-GAAP) increased $2.5 million, or 10.1% annualized, compared to the fourth quarter of 2018. Adjusted noninterest expense
decreased by $633,000, or 0.02%, in 2019 to $390.4 million compared to $391.1 million in 2018.
With today’s
announcement that South State Corporation (“South State”) has entered into a merger agreement with CenterState Bank
Corporation (“CenterState”), South State has canceled its live conference webcast to review fourth quarter 2019 financial
results that was scheduled for Tuesday, January 28, 2019 at 10:00 am ET. Instead, South State and CenterState will jointly
host a live conference call and webcast today at 8:30 am ET to discuss the merger, and South State will also discuss its fourth
quarter 2019 financial results. To listen to the live call, please dial 877-506-9272 and enter 10138864 for the conference ID.
The number for international participants is 412-380-2004. The webcast of the conference call, along with related slides, will
be accessible through South State’s and CenterState’s websites as well. The conference call will also be available
for replay beginning at 2:00 p.m. Eastern Time on January 27, 2020 until 9:00 a.m. on February 10, 2020. To
listen to the replay dial 877-344-7529 or 412-317-0088. The passcode is 10138864.
***************
South State Corporation is a financial
services company headquartered in Columbia, South Carolina with approximately $15.9 billion in assets. South State Bank, the Company’s
primary subsidiary, provides consumer, commercial, mortgage, and wealth management solutions throughout the Carolinas, Georgia
and Virginia. South State has served customers since 1934. Additional information is available at www.SouthStateBank.com.
Non-GAAP Measures
Statements included in this press release
include non-GAAP measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures
to GAAP measures. Management believes that these non-GAAP measures provide additional useful information which allows readers to
evaluate the ongoing performance of the Company. Non-GAAP measures should not be considered as an alternative to any measure of
performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial
condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the
company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute
for analysis of the company's results or financial condition as reported under GAAP.
| | |
Three
Months Ended | | |
Twelve
Months Ended | |
| | |
Dec. 31, | | |
Sept.
30, | | |
June 30, | | |
Mar. 31, | | |
Dec. 31, | | |
Dec. 31, | | |
Dec. 31, | |
| (Dollars in thousands, except per share
data) | |
2019 | | |
2019 | | |
2019 | | |
2019 | | |
2018 | | |
2019 | | |
2018 | |
| RECONCILIATION OF GAAP TO Non-GAAP | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Adjusted net income (non-GAAP) (3) | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Net
income (GAAP) | |
$ | 49,091 | | |
$ | 51,565 | | |
$ | 41,460 | | |
$ | 44,367 | | |
$ | 49,004 | | |
$ | 186,483 | | |
$ | 178,871 | |
| Securities
losses (gains), net of tax | |
| (20 | ) | |
| (349 | ) | |
| (1,371 | ) | |
| (432 | ) | |
| 2 | | |
| (2,173 | ) | |
| 520 | |
| Provision
for income taxes - Deferred Tax Asset Write-Off | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| -- | | |
| (990 | ) |
| Pension
plan termination expense, net of tax | |
| -- | | |
| -- | | |
| 7,641 | | |
| -- | | |
| -- | | |
| 7,641 | | |
| -- | |
| FHLB
prepayment penalty, net of tax | |
| -- | | |
| -- | | |
| -- | | |
| 107 | | |
| -- | | |
| 107 | | |
| -- | |
| Merger
and branch consolidation/acq. expense, net of tax | |
| 1,252 | | |
| -- | | |
| 1,667 | | |
| 782 | | |
| -- | | |
| 3,701 | | |
| 23,692 | |
| Adjusted
net income (non-GAAP) | |
$ | 50,323 | | |
$ | 51,216 | | |
$ | 49,397 | | |
$ | 44,824 | | |
$ | 49,006 | | |
$ | 195,759 | | |
$ | 202,093 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted
net income per common share - Basic (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Earnings per common share - Basic (GAAP) | |
$ | 1.45 | | |
$ | 1.51 | | |
$ | 1.18 | | |
$ | 1.25 | | |
$ | 1.36 | | |
$ | 5.40 | | |
$ | 4.90 | |
| Effect
to adjust for securities losses (gains) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.04 | ) | |
| (0.01 | ) | |
| - | | |
| (0.06 | ) | |
| 0.01 | |
| Effect
to adjust for provision for income tax DTA Write-Off | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (0.03 | ) |
| Effect
to adjust for pension plan termination expense, net of tax | |
| - | | |
| - | | |
| 0.22 | | |
| - | | |
| - | | |
| 0.22 | | |
| -- | |
| Effect
to adjust for FHLB prepayment penalty, net of tax | |
| - | | |
| - | | |
| - | | |
| 0.00 | | |
| - | | |
| - | | |
| -- | |
| Effect
to adjust for merger & branch consol./acq expenses, net of tax | |
| 0.04 | | |
| - | | |
| 0.05 | | |
| 0.02 | | |
| - | | |
| 0.10 | | |
| 0.65 | |
| Adjusted
net income per common share - Basic (non-GAAP) | |
$ | 1.48 | | |
$ | 1.50 | | |
$ | 1.41 | | |
$ | 1.26 | | |
$ | 1.36 | | |
$ | 5.66 | | |
$ | 5.53 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted
net income per common share - Diluted (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Earnings per common share - Diluted (GAAP) | |
$ | 1.45 | | |
$ | 1.50 | | |
$ | 1.17 | | |
$ | 1.25 | | |
$ | 1.35 | | |
$ | 5.36 | | |
$ | 4.86 | |
| Effect
to adjust for securities losses (gains) | |
| - | | |
| (0.01 | ) | |
| (0.04 | ) | |
| (0.01 | ) | |
| - | | |
| (0.06 | ) | |
| 0.01 | |
| Effect
to adjust for provision for income tax DTA Write-Off | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (0.02 | ) |
| Effect
to adjust for pension plan termination expense, net of tax | |
| - | | |
| - | | |
| 0.22 | | |
| - | | |
| - | | |
| 0.22 | | |
| -- | |
| Effect
to adjust for FHLB prepayment penalty, net of tax | |
| - | | |
| - | | |
| - | | |
| 0.00 | | |
| - | | |
| 0.00 | | |
| -- | |
| Effect
to adjust for merger & branch consol./acq expenses, net of tax | |
| 0.04 | | |
| - | | |
| 0.05 | | |
| 0.02 | | |
| - | | |
| 0.11 | | |
| 0.65 | |
| Adjusted
net income per common share - Diluted (non-GAAP) | |
$ | 1.49 | | |
$ | 1.49 | | |
$ | 1.40 | | |
$ | 1.26 | | |
$ | 1.35 | | |
$ | 5.63 | | |
$ | 5.50 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted Return
of Average Assets (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Return on average assets (GAAP) | |
| 1.23 | % | |
| 1.31 | % | |
| 1.08 | % | |
| 1.21 | % | |
| 1.33 | % | |
| 1.21 | % | |
| 1.23 | % |
| Effect
to adjust for securities losses (gains) | |
| 0.00 | % | |
| -0.01 | % | |
| -0.04 | % | |
| -0.01 | % | |
| 0.00 | % | |
| -0.01 | % | |
| 0.00 | % |
| Effect
to adjust for provision for income tax DTA Write-Off | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| -0.01 | % |
| Effect
to adjust for pension plan termination expense, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 0.20 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.05 | % | |
| 0.00 | % |
| Effect
to adjust for FHLB prepayment penalty, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Effect
to adjust for merger & branch consol./acq expenses, net of tax | |
| 0.03 | % | |
| 0.00 | % | |
| 0.04 | % | |
| 0.03 | % | |
| 0.00 | % | |
| 0.02 | % | |
| 0.17 | % |
| Adjusted
return on average assets (non-GAAP) | |
| 1.26 | % | |
| 1.30 | % | |
| 1.28 | % | |
| 1.23 | % | |
| 1.33 | % | |
| 1.27 | % | |
| 1.39 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted Return
of Average Equity (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Return on average equity (GAAP) | |
| 8.26 | % | |
| 8.70 | % | |
| 6.98 | % | |
| 7.61 | % | |
| 8.24 | % | |
| 7.89 | % | |
| 7.63 | % |
| Effect
to adjust for securities losses (gains) | |
| 0.00 | % | |
| -0.06 | % | |
| -0.23 | % | |
| -0.07 | % | |
| 0.00 | % | |
| -0.09 | % | |
| 0.02 | % |
| Effect
to adjust for provision for income tax DTA Write-Off | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| -0.06 | % |
| Effect
to adjust for pension plan termination expense, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 1.29 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.32 | % | |
| 0.00 | % |
| Effect
to adjust for FHLB prepayment penalty, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.02 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Effect
to adjust for merger & branch consol./acq expenses, net of tax | |
| 0.21 | % | |
| 0.00 | % | |
| 0.28 | % | |
| 0.13 | % | |
| 0.00 | % | |
| 0.16 | % | |
| 1.03 | % |
| Adjusted
return on average equity (non-GAAP) | |
| 8.47 | % | |
| 8.64 | % | |
| 8.32 | % | |
| 7.69 | % | |
| 8.24 | % | |
| 8.28 | % | |
| 8.62 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted
Return on Average Common Tangible Equity (3) (7) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Return on average common equity (GAAP) | |
| 8.26 | % | |
| 8.70 | % | |
| 6.98 | % | |
| 7.61 | % | |
| 8.24 | % | |
| 7.89 | % | |
| 7.63 | % |
| Effect
to adjust for securities losses (gains) | |
| 0.00 | % | |
| -0.06 | % | |
| -0.23 | % | |
| -0.07 | % | |
| 0.00 | % | |
| 0.32 | % | |
| 0.02 | % |
| Effect
to adjust for provision for income tax DTA Write-Off | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| -0.06 | % |
| Effect
to adjust for pension plan termination expense, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 1.29 | % | |
| 0.00 | % | |
| 0.00 | % | |
| -0.09 | % | |
| 0.00 | % |
| Effect
to adjust for FHLB prepayment penalty, net of tax | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.02 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Effect
to adjust for merger & branch consol./acq expenses, net of tax | |
| 0.21 | % | |
| 0.00 | % | |
| 0.28 | % | |
| 0.13 | % | |
| 0.00 | % | |
| 0.16 | % | |
| 1.01 | % |
| Effect
to adjust for intangible assets | |
| 7.70 | % | |
| 7.87 | % | |
| 7.47 | % | |
| 7.11 | % | |
| 7.67 | % | |
| 7.54 | % | |
| 8.16 | % |
| Adjusted
return on average common tangible equity (non-GAAP) | |
| 16.17 | % | |
| 16.51 | % | |
| 15.79 | % | |
| 14.80 | % | |
| 15.91 | % | |
| 15.82 | % | |
| 16.76 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Tangible Book
Value Per Common Share (7) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Book value per common share (GAAP) | |
$ | 70.32 | | |
$ | 69.34 | | |
$ | 68.34 | | |
$ | 67.19 | | |
$ | 66.04 | | |
| | | |
| | |
| Effect
to adjust for intangible assets | |
| (31.19 | ) | |
| (31.14 | ) | |
| (30.49 | ) | |
| (30.04 | ) | |
| (29.74 | ) | |
| | | |
| | |
| Tangible
book value per common share (non-GAAP) | |
$ | 39.13 | | |
$ | 38.20 | | |
$ | 37.85 | | |
$ | 37.15 | | |
$ | 36.30 | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Tangible
Equity-to-Tangible Assets (7) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Equity-to-assets (GAAP) | |
| 14.90 | % | |
| 14.92 | % | |
| 15.14 | % | |
| 15.42 | % | |
| 16.12 | % | |
| | | |
| | |
| Effect
to adjust for intangible assets | |
| -6.02 | % | |
| -6.11 | % | |
| -6.15 | % | |
| -6.26 | % | |
| -6.56 | % | |
| | | |
| | |
| Tangible
equity-to-tangible assets (non-GAAP) | |
| 8.88 | % | |
| 8.81 | % | |
| 8.99 | % | |
| 9.16 | % | |
| 9.56 | % | |
| | | |
| | |
Footnotes to tables:
| (1) | Loan data
excludes mortgage loans held for sale. |
| (2) | The
dividend payout ratio is calculated by dividing total dividends paid during the period
by the total net income for the same period. |
| (3) | Adjusted
earnings, adjusted return on average assets, and adjusted return on average equity are
non-GAAP measures and exclude the after-tax effect of gains on acquisitions, gains or
losses on sales of securities, other-than-temporary-impairment (OTTI), and merger and
branch consolidation related expense. It also reflects an adjustment for the deferred
tax asset revaluation of $990,000 included in the 12 months ended December 31, 2018.
Management believes that non-GAAP adjusted measures provide additional useful information
that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures
should not be considered as an alternative to any measure of performance or financial
condition as promulgated under GAAP, and investors should consider the company's performance
and financial condition as reported under GAAP and all other relevant information when
assessing the performance or financial condition of the company. Non-GAAP measures have
limitations as analytical tools, and investors should not consider them in isolation
or as a substitute for analysis of the company's results or financial condition as reported
under GAAP. Adjusted earnings and the related adjusted return measures (non-GAAP) exclude
the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and
branch consolidation related expense of $1.5 million, $2.1 million, and $980,000, for
the quarters ended December 31, 2019, June 30, 2019, and March 31, 2019,
respectively; (b) securities (losses) gains, net of $24,000, $437,000, $1.7 million,
$541,000, and ($3,000), for the quarters ended December 31, 2019, September 30,
2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively;
(c) Pension plan termination expense of $9.5 million for the quarter ended June 30,
2019; and (d) FHLB prepayment penalty of $134,000 for the quarter ended March 31,
2019. |
| (4) | Repossessed
assets include OREO and other nonperforming assets. |
| (5) | Calculated
by dividing total non-acquired NPAs by total assets. |
| (6) | December 31,
2019 ratios are estimated and may be subject to change pending the final filing of the
FR Y-9C; all other periods are presented as filed. |
| (7) | The
tangible measures are non-GAAP measures and exclude the effect of period end or average
balance of intangible assets. The tangible returns on equity and common equity measures
also add back the after-tax amortization of intangibles to GAAP basis net income. Management
believes that these non-GAAP tangible measures provide additional useful information,
particularly since these measures are widely used by industry analysts for companies
with prior merger and acquisition activities. Non-GAAP measures should not be considered
as an alternative to any measure of performance or financial condition as promulgated
under GAAP, and investors should consider the company's performance and financial condition
as reported under GAAP and all other relevant information when assessing the performance
or financial condition of the company. Non-GAAP measures have limitations as analytical
tools, and investors should not consider them in isolation or as a substitute for analysis
of the company's results or financial condition as reported under GAAP. The sections
titled "Reconciliation of Non-GAAP to GAAP" provide tables that reconcile non-GAAP
measures to GAAP. |
| (8) | Includes
noncash loan interest income related to the discount on acquired performing loans of
$3.9 million, $2.7 million, $3.2 million, $3.2 million, and $3.8 million, respectively,
during the five quarters above. |
| (9) | Adjusted
efficiency ratio is calculated by taking the noninterest expense excluding branch consolidation
cost and merger cost and the FHLB prepayment penalty divided by net interest income and
noninterest income excluding securities gains (losses) and OTTI. |
Cautionary Statement Regarding Forward-Looking Statements
Statements included in this communication, which are not
historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe
harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements are based on, among other things, management’s beliefs, assumptions, current
expectations, estimates and projections about the financial services industry, the economy and South State Corporation
(“South State”). Words and phrases such as “may,” “approximately,”
“continue,” “should,” “expects,” “projects,” “anticipates,”
“is likely,” “look ahead,” “look forward,” “believes,” “will,”
“intends,” “estimates,” “strategy,” “plan,”
“could,” “potential,” “possible” and variations of such words and similar expressions are
intended to identify such forward-looking statements. South State cautions readers that forward looking statements are
subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things,
timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated
results. Such risks, uncertainties and assumptions, include, among others, the following: (1) economic downturn risk,
potentially resulting in deterioration in the credit markets, greater than expected noninterest expenses, excessive loan
losses and other negative consequences, which risks could be exacerbated by potential negative economic developments
resulting from federal spending cuts and/or one or more federal budget-related impasses or actions; (2) increased
expenses, loss of revenues, and increased regulatory scrutiny associated with our total assets having exceeded $10.0 billion;
(3) controls and procedures risk, including the potential failure or circumvention of our controls and procedures or
failure to comply with regulations related to controls and procedures; (4) ownership dilution risk associated with
potential acquisitions in which South State’s stock may be issued as consideration for an acquired company;
(5) potential deterioration in real estate values; (6) the impact of competition with other financial
institutions, including pricing pressures (including those resulting from the Tax Cuts and Jobs Act) and the resulting
impact, including as a result of compression to net interest margin; (7) credit risks associated with an obligor’s
failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any
loan-related document; (8) interest risk involving the effect of a change in interest rates on the bank’s
earnings, the market value of the bank’s loan and securities portfolios, and the market value of South State’s
equity; (9) liquidity risk affecting the bank’s ability to meet its obligations when they come due;
(10) risks associated with an anticipated increase in South State’s investment securities portfolio, including
risks associated with acquiring and holding investment securities or potentially determining that the amount of investment
securities South State desires to acquire are not available on terms acceptable to South State; (11) price risk focusing on
changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (12)
transaction risk arising from problems with service or product delivery; (13) compliance risk involving risk to earnings or
capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical
standards; (14) regulatory change risk resulting from new laws, rules, regulations, accounting principles,
proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may
require higher levels of capital above the current regulatory-mandated minimums and including the impact of the recently
enacted Tax Cuts and Jobs Act, the Consumer Financial Protection Bureau rules and regulations, and the possibility of
changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to
loan loss recognition (CECL); (15) strategic risk resulting from adverse business decisions or improper implementation of
business decisions; (16) reputation risk that adversely affects earnings or capital arising from negative public opinion;
(17) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (18) cybersecurity risk
related to the dependence of South State on internal computer systems and the technology of outside service providers, as
well as the potential impacts of third party security breaches, subjects each company to potential business disruptions or
financial losses resulting from deliberate attacks or unintentional events; (19) greater than expected noninterest expenses;
(20) noninterest income risk resulting from the effect of regulations that prohibit financial institutions from charging
consumer fees for paying overdrafts on ATM and one-time debit card transactions, unless the consumer consents or opts in to
the overdraft service for those types of transactions; (21) excessive loan losses; (22) failure to realize synergies and
other financial benefits from, and to limit liabilities associated with, mergers and acquisitions within the expected time
frame; (23) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with
merger and acquisition integration, including, without limitation, and potential difficulties in maintaining
relationships with key personnel; (24) the risks of fluctuations in market prices for South State common stock that may or
may not reflect economic condition or performance of South State; (25) the payment of dividends on South State common stock
is subject to regulatory supervision as well as the discretion of the board of directors of South State, South State’s
performance and other factors; (26) operational, technological, cultural, regulatory, legal, credit and other risks
associated with the exploration, consummation and integration of potential future acquisition, whether involving stock or
cash consideration; (27) risks related to the proposed merger of South State and CenterState, including, among others,
(i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take
longer than anticipated to be realized, (ii) disruption to the parties’ businesses as a result of the announcement
and pendency of the merger, (iii) the occurrence of any event, change or other circumstances that could give rise to the
termination of the merger agreement between CenterState and South State, (iv) the risk that the integration of each
party’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are
otherwise unable to successfully integrate each party’s businesses into the other’s businesses,
(v) the failure to obtain the necessary approvals by the shareholders of South State or CenterState, (vi) the
amount of the costs, fees, expenses and charges related to the merger, (vii) the ability of each of South State and
CenterState to obtain required governmental approvals of the merger (and the risk that such approvals may result in the
imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction),
(viii) reputational risk and the reaction of each company's customers, suppliers, employees or other business partners
to the merger, (ix) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected
delay in closing the merger, (x) the possibility that the merger may be more expensive to complete than anticipated,
including as a result of unexpected factors or events and (xi) the dilution caused by South State’s issuance of
additional shares of its common stock in the merger, and (28) other risks and uncertainties disclosed in South State’s
most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) or
disclosed in documents filed or furnished by South State with or to the SEC after the filing of such Annual Reports on
Form 10-K, and of which could cause actual results to differ materially from future results expressed, implied or
otherwise anticipated by such forward-looking statements.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time. South State does not undertake any obligation to update or otherwise
revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required
by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
