Capital Ratios

9 Months Ended

Sep. 30, 2019

Capital Ratios

Capital Ratios

Note 16 — Capital Ratios

We are 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 CET1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer was phased in incrementally over time, beginning January 1, 2016 and become fully effective on January 1, 2019. The fully phased-in

capital conservation buffer consists 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 September 30, 2019, December 31, 2018 and September 30, 2018 for the Company and the Bank under the Basel III capital rules. The minimum required capital amounts presented below include the minimum required capital levels based on the phase-in provisions of the Basel III Capital Rules. The minimum required capital levels plus the capital conservation buffer under the Basel III capital rules became fully phased-in as of January 1, 2019. 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
September 30, 2019
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	1,302,034	11.22	%	$	812,276	7.00	%	$	812,276	7.00	%	$	754,257	6.50	%
South State Bank (the Bank)		1,392,599	12.00	%		812,284	7.00	%		812,284	7.00	%		754,263	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		1,414,138	12.19	%		986,336	8.50	%		986,336	8.50	%		928,316	8.00	%
South State Bank (the Bank)		1,392,599	12.00	%		986,345	8.50	%		986,345	8.50	%		928,324	8.00	%
Total capital to risk-weighted assets:
Consolidated		1,474,728	12.71	%		1,218,415	10.50	%		1,218,415	10.50	%		1,160,395	10.00	%
South State Bank (the Bank)		1,453,189	12.52	%		1,218,426	10.50	%		1,218,426	10.50	%		1,160,405	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		1,414,138	9.72	%		581,786	4.00	%		581,786	4.00	%		727,232	5.00	%
South State Bank (the Bank)		1,392,599	9.58	%		581,648	4.00	%		581,648	4.00	%		727,060	5.00	%
December 31, 2018:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	1,335,826	12.05	%	$	706,981	6.38	%	$	776,293	7.00	%	$	720,844	6.50	%
South State Bank (the Bank)		1,427,764	12.87	%		707,039	6.38	%		776,356	7.00	%		720,902	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		1,447,428	13.05	%		873,330	7.88	%		942,642	8.50	%		887,192	8.00	%
South State Bank (the Bank)		1,427,764	12.87	%		873,401	7.88	%		942,718	8.50	%		887,264	8.00	%
Total capital to risk-weighted assets:
Consolidated		1,503,561	13.56	%		1,095,128	9.88	%		1,164,440	10.50	%		1,108,990	10.00	%
South State Bank (the Bank)		1,483,897	13.38	%		1,095,217	9.88	%		1,164,534	10.50	%		1,109,080	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		1,447,428	10.65	%		543,506	4.00	%		543,506	4.00	%		679,383	5.00	%
South State Bank (the Bank)		1,427,764	10.51	%		543,387	4.00	%		543,387	4.00	%		679,234	5.00	%
September 30, 2018:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	1,356,267	12.30	%	$	702,980	6.38	%	$	771,899	7.00	%	$	716,764	6.50	%
South State Bank (the Bank)		1,449,326	13.14	%		703,049	6.38	%		771,975	7.00	%		716,834	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		1,467,703	13.31	%		868,387	7.88	%		937,306	8.50	%		882,170	8.00	%
South State Bank (the Bank)		1,449,326	13.14	%		868,472	7.88	%		937,399	8.50	%		882,258	8.00	%
Total capital to risk-weighted assets:
Consolidated		1,521,875	13.80	%		1,088,929	9.88	%		1,157,849	10.50	%		1,102,713	10.00	%
South State Bank (the Bank)		1,503,498	13.63	%		1,089,037	9.88	%		1,157,963	10.50	%		1,102,822	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		1,467,703	10.82	%		542,720	4.00	%		542,720	4.00	%		678,401	5.00	%
South State Bank (the Bank)		1,449,326	10.68	%		542,575	4.00	%		542,575	4.00	%		678,219	5.00	%

As of September 30, 2019, December 31, 2018, and September 30, 2018, 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.