Note 17 — Capital Ratios

The Company is subject to regulations with respect to certain risk-based capital ratios. These risk-based capital ratios measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The values of both balance sheet and off-balance sheet items are adjusted based on the rules to reflect categorical credit risk. In addition to the risk-based capital ratios, the regulatory agencies have also established a leverage ratio for assessing capital adequacy. The leverage ratio is equal to Tier 1 capital divided by total consolidated on-balance sheet assets (minus amounts deducted from Tier 1 capital). The leverage ratio does not involve assigning risk weights to assets.

In July 2013, the Federal Reserve announced its approval of a final rule to implement the regulatory capital reforms developed by the Basel Committee on Banking Supervision (“Basel III”), among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules became effective January 1, 2015, subject to a phase-in period for certain aspects of the new rules.

As applied to the Company and the Bank, the new rules include a new minimum ratio of common equity Tier 1 capital ("CET1") to risk-weighted assets of 4.5%. The new rules also raised the minimum required ratio of Tier 1 capital to risk-weighted assets from 4% to 6%. The minimum required leverage ratio under the new rules is 4%. The minimum required total capital to risk-weighted assets ratio remains at 8% under the new rules.

In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the new rules a covered banking organization is also required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of common equity Tier 1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer will be phased in incrementally over time, beginning January 1, 2016 and becoming fully effective on January 1, 2019, and will ultimately consist of an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets.

The Bank is also subject to the regulatory framework for prompt corrective action, which identifies five capital categories for insured depository institutions (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) and is based on specified thresholds for each of the three risk-based regulatory capital ratios (CET1, Tier 1 capital and total capital) and for the leverage ratio.

The following table presents actual and required capital ratios as of March 31, 2017, December 31, 2016 and March 31, 2016 for the Company and the Bank under the Basel III capital rules. The minimum required capital amounts presented include the minimum required capital levels as of March 31, 2017 based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


					Minimum Capital				Minimum Capital				Required to be
					Required - Basel III				Required - Basel III				Considered Well
	Actual				Phase-In Schedule				Fully Phased In				Capitalized
(Dollars in thousands)	Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
March 31, 2017
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	959,802	11.90	%	$	463,854	5.75	%	$	564,691	7.00	%	$	524,356	6.50	%
South State Bank (the Bank)		998,061	12.37	%		463,767	5.75	%		564,586	7.00	%		524,259	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		1,030,559	12.77	%		584,859	7.25	%		685,697	8.50	%		645,362	8.00	%
South State Bank (the Bank)		998,061	12.37	%		584,750	7.25	%		685,569	8.50	%		645,241	8.00	%
Total capital to risk-weighted assets:
Consolidated		1,074,107	13.31	%		746,199	9.25	%		847,037	10.50	%		806,702	10.00	%
South State Bank (the Bank)		1,041,277	12.91	%		746,060	9.25	%		846,879	10.50	%		806,552	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		1,030,559	10.05	%		410,054	4.00	%		410,054	4.00	%		512,567	5.00	%
South State Bank (the Bank)		998,061	9.75	%		409,567	4.00	%		409,567	4.00	%		511,959	5.00	%
December 31, 2016:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	788,544	11.66	%	$	346,730	5.125	%	$	473,582	7.00	%	$	439,755	6.50	%
South State Bank (the Bank)		815,823	12.06	%		346,629	5.125	%		473,444	7.00	%		439,627	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		841,266	12.43	%		448,212	6.625	%		575,064	8.50	%		541,237	8.00	%
South State Bank (the Bank)		815,823	12.06	%		448,081	6.625	%		574,896	8.50	%		541,079	8.00	%
Total capital to risk-weighted assets:
Consolidated		881,957	13.04	%		583,521	8.625	%		710,374	10.50	%		676,546	10.00	%
South State Bank (the Bank)		856,388	12.66	%		583,351	8.625	%		710,166	10.50	%		676,349	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		841,266	9.88	%		340,612	4.00	%		340,612	4.00	%		425,765	5.00	%
South State Bank (the Bank)		815,823	9.58	%		340,483	4.00	%		340,483	4.00	%		425,604	5.00	%
March 31, 2016:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	720,309	11.56	%	$	319,222	5.125	%	$	436,011	7.00	%	$	404,867	6.50	%
South State Bank (the Bank)		749,214	12.03	%		319,190	5.125	%		435,967	7.00	%		404,826	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		772,046	12.39	%		412,653	6.625	%		529,442	8.50	%		498,298	8.00	%
South State Bank (the Bank)		749,214	12.03	%		412,611	6.625	%		529,388	8.50	%		498,247	8.00	%
Total capital to risk-weighted assets:
Consolidated		811,352	13.03	%		537,228	8.625	%		615,784	10.50	%		586,461	10.00	%
South State Bank (the Bank)		788,417	12.66	%		537,173	8.625	%		615,460	10.50	%		586,153	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		772,046	9.41	%		328,059	4.00	%		328,059	4.00	%		410,074	5.00	%
South State Bank (the Bank)		749,214	9.14	%		327,842	4.00	%		327,842	4.00	%		409,803	5.00	%

As of March 31, 2017, December 31, 2016, and March 31, 2016, the capital ratios of the Company and the Bank were well in excess of the minimum regulatory requirements and exceeded the thresholds for the “well capitalized” regulatory classification.