Summary of Significant Accounting Policies (Policies)	6 Months Ended
Jun. 30, 2020
Summary of Significant Accounting Policies
Allowance for Credit Losses	Allowance for Credit Losses (“ACL”) On January 1, 2020, we adopted the requirements of Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, sometimes referred to herein as ASU 2016-13. Topic 326 was subsequently amended by ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; ASU No. 2019-05, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; and ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This standard applies to all financial assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities and unfunded commitments. We applied the standard’s provisions using the modified retrospective method as a cumulative-effect adjustment to retained earnings as of January 1, 2020. With this transition method, we did not have to restate comparative prior periods presented in the financial statements related to Topic 326, but will present comparative prior periods disclosures using the previous accounting guidance for the allowance for loan losses. This adoption method is considered a change in accounting principle requiring additional disclosure of the nature of and reason for the change, which is solely a result of the adoption of the required standard. ACL – Investment Securities Management uses a systematic methodology to determine its ACL for investment securities held to maturity. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the held-to-maturity portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. Management monitors the held-to-maturity portfolio to determine whether a valuation account would need to be recorded. The Company currently has no investment securities held to maturity. Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the investment securities and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2020, the accrued interest receivable for investment securities available for sale recorded in Other Assets was $11.4 million. Management no longer evaluates securities for other-than-temporary impairment, otherwise referred to herein as OTTI, as ASC Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities, changes the accounting for recognizing impairment on available-for-sale debt securities. Each quarter management evaluates impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. Management considers the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the Statements of Income. ACL - Loans The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. We established the incremental increase in the ACL at the adoption through equity and subsequent adjustments through a provision for credit losses charged to earnings. We record loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized. Management uses systematic methodologies to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. The Company’s ACL recorded in the balance sheet reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans. As South State Corporation (“South State”) and CenterState Bank Corporation (“CSFL”) and each company’s wholly owned bank subsidiaries, South State Bank (“SSB”) and CenterState Bank, N.A. (“CSB”) merged effective June 7, 2020, management collectively evaluated loans utilizing two different methodologies for the second quarter 2020. Management plans to consolidate the two methodologies into one during the second half of 2020. For the legacy SSB loans, the Company collectively evaluates loans that share similar risk characteristics. In general, Management has segmented loans by loan purpose. The Company collectively evaluates loans within the following 10 consumer and commercial segments: Consumer 1-4 Family Mortgage, Home Equity Line of Credit (“HELOC”), Consumer Non-Mobile Homes, Mobile Homes, Ready Reserve, Overdrafts, Land and Builder Finance Group Construction, Commercial Real Estate Owner-Occupied and Commercial Non-Real Estate, Commercial Income-Producing, and Business Express (“BEX”) and Microbusiness. The Consumer 1-4 Family Mortgage segment is further segmented by vintage year of origination or renewal. Although BEX and Microbusiness loans would typically be segmented within other commercial segments, Management has determined that BEX and Microbusiness loans share unique commercial risk characteristics such that there is a streamlined underwriting process more similar in nature to a consumer underwriting process. Legacy SSB Commercial loans that have a total credit exposure greater than $100,000 but less than $1.5 million are eligible for the expedited BEX process; Commercial loans of $100,000 or less, which are typically for equipment, fleet or other small business needs, are eligible for the expedited Microbusiness process. For collectively evaluated legacy SSB loans, the Company in general uses four modeling approaches to estimate expected credit losses. The Company applies a vintage modeling methodology for the Consumer 1-4 Family Mortgage segment. The Company applies a statistical linear regression modeling methodology for the HELOC, Consumer Non-Mobile Homes, Land and Builder Finance Group Construction, Commercial Real Estate Owner- Occupied and Commercial Non-Real Estate, Commercial Income-Producing, and Ready Reserve segments. The Company applies a loss rate modeling methodology that includes one macroeconomic driver for the Mobile Homes and BEX and Microbusiness segments. Further, the Company applies an average loss rate modeling methodology for the Overdrafts segment. A prepayment assumption is inherently embedded in the vintage modeling methodology. For all other modeling approaches, the Company projects the contractual run-off of its portfolio at the segment level and incorporates a prepayment assumption in order to estimate exposure at default. For legacy SSB loans, management has determined that the Company’s historical loss experience provides the best basis for its assessment of expected credit losses to determine the ACL. The Company utilized its own internal data to measure historical credit loss experience with similar risk characteristics within the legacy SSB loan segments over an economic cycle. Management reviewed the historical loss information to appropriately adjust for differences in current asset specific risk characteristics. Management also considered further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that existed for the period over which historical information was evaluated. For the majority of segment models for collectively evaluated loans, the Company incorporated at least one macroeconomic driver either using a statistical regression modeling methodology or simple loss rate modeling methodology. For legacy SSB loans, management considers forward-looking information in estimating expected credit losses. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by Management to determine the best estimate within the range of expected credit losses. The baseline forecast incorporates a 50% probability of the United States economy performing better than this projection and the same as the probability that it will perform worse. The baseline forecast was used for the two-year reasonable and supportable forecast period. Management determined that the forecast period was consistent with how the Company has historically forecasted for its profitability planning. Management has evaluated the appropriateness of the reasonable and supportable forecast for the current period along with the inputs used in the estimation of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to historical loss information within four quarters using a straight-line approach. Management may apply different reversion techniques depending on the economic environment for the financial asset portfolio and as of the current period has utilized a linear reversion technique. Management has evaluated the appropriateness of a reversion period for the current period and noted that it was reasonable. Management has excluded the legacy South State’s purchased failed financial institution’s transaction loss history in its reversion to the historical average loss rate. Included in its systematic methodology to determine its ACL for legacy SSB loans held for investment and certain off-balance-sheet credit exposures, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) Concentration Risk, 2) Trends in Industry Conditions, 3) Trends in Portfolio Nature, Quality, and Composition, 4) Model Limitations, and 5) Other Qualitative Adjustments. For Concentration Risk, the Company incorporates qualitative adjustments to the formulaic model results for large loan concentrations, industry concentrations, geographic concentrations, and new market territories with limited or no loss history available. For Trends in Industry Conditions, the Company incorporates qualitative adjustments to the formulaic model result for drivers selected by our Credit Administration department that were not incorporated in the final statistical model or loss rate model. For Trends in Portfolio Nature, Quality, and Composition, the Company incorporates qualitative adjustments to the formulaic model results for underwriting exception trends, classified asset trends, delinquency trends, lending policies and procedures, and appraisal policies. For Model Limitations, the Company incorporates qualitative adjustments to the formulaic model results for predictive power, data limitations, and forecast risk. For Other Qualitative Adjustments, the Company incorporates qualitative adjustments to the formulaic model results for staff turnover rate/experience, staff coverage rate, changes in the training, legal or regulatory changes, natural disasters/weather events, political climate, and other “one-off” items. For acquired CSFL loans, the allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments, or pools, for analysis. The Discounted Cash Flow (DCF) method is utilized for each loan in a pool, and the results are aggregated to the pool level. A periodic tendency to default and absolute loss given default are applied to a projective model of the loan’s cash flow while considering prepayment and principal curtailment effects. The analysis produces expected cash flows for each instrument in the pool by pairing loan-level term information (maturity date, payment amount, interest rate, etc.) with top-down pool assumptions (default rates, prepayment speeds). The company has identified the following portfolio segments: Commercial Real Estate, Multifamily, Hotel/Lodging, Municipal, Commercial and Industrial, Construction and Land Development, Residential Construction, Residential 1^st Mortgage, Residential 2^nd Mortgage, Home Equity Lines of Credit, and Consumer and Other. For acquired CSFL loans, Management has determined that the peer loss experience provides the best basis for its assessment of expected credit losses to determine the ACL. The Company utilized peer call report data to measure historical credit loss experience with similar risk characteristics within the acquired CSFL loan segments over an economic cycle. For the majority of segment models for collectively evaluated loans, the Company incorporated at least two macroeconomic drivers using a statistical regression modeling methodology. Management considers forward-looking information in estimating expected credit losses. For acquired CSFL loans, the Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by Management to determine the best estimate within the range of expected credit losses. The baseline forecast incorporates a 50% probability of the United States economy performing better than this projection and the same as the probability that it will perform worse. Management has evaluated the appropriateness of the reasonable and supportable forecast scenarios and has made adjustments as needed. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors within four quarters using a straight-line approach. The Company generally utilizes a four quarter forecast and a four quarter reversion period for acquired CSFL loans. Included in its systematic methodology to determine its ACL for acquired CSFL loans, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) Lending Policy 2) Economic conditions not captured in models 3) Volume and Mix of Loan Portfolio 4) Past Due Trends 5) Concentration Risk 6) External Factors 7) Model Limitations. When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. Considering the size of the Company, management maintains a net book balance threshold of $1.0 million for individually-evaluated loans unless further analysis in the future suggests a change is needed to this threshold based on the credit environment at that time. Prior to the current quarter, the net book balance threshold was $250,000 for legacy SSB loans and $500,000 for acquired CSFL loans. Generally, individually-evaluated loans other than Troubled Debt Restructurings, otherwise referred to herein as “TDRs,” are on nonaccrual status. Based on the threshold above, consumer financial assets will generally remain in pools unless they meet the dollar threshold. The expected credit losses on individually-evaluated loans will be estimated based on discounted cash flow analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral-dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset. Management measures expected credit losses over the contractual term of a loan. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expects it will execute a TDR with a borrower. In the event of a reasonably-expected TDR, the Company factors the reasonably-expected TDR into the current expected credit losses estimate. The effects of a TDR are recorded when an individual asset is specifically identified as a reasonably-expected TDR. For legacy SSB consumer loans, the point at which a TDR is reasonably expected is when the Company approves the borrower’s application for a modification (i.e. the borrower qualifies for the TDR) or when the Credit Administration department approves loan concessions on substandard loans. For legacy SSB commercial loans, the point at which a TDR is reasonably expected is when the Company approves the loan for modification or when the Credit Administration department approves loan concessions on substandard loans. The Company uses a discounted cash flow methodology to calculate the effect of the concession provided to the borrower in TDR within the ACL. There were no new TDRs added from the CSFL merger. A restructuring that results in only a delay in payments that is insignificant is not considered an economic concession. In accordance with the CARES Act, the Company implemented loan modification programs in response to the COVID-19 pandemic in order to provide borrowers with flexibility with respect to repayment terms. The Company’s payment relief assistance includes forbearance, deferrals, extension and re-aging programs, along with certain other modification strategies. The Company elected the accounting policy in the CARES Act to not apply TDR accounting to loans modified for borrowers impacted by the COVID-19 pandemic. For purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e. allowance for credit losses) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition day, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the unpaid principal balance and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s acquired credit-impaired loans (i.e. ACI or Purchased Credit Impaired) were treated as PCD loans. Further, the legacy CSFL loans that were individually evaluated were identified as PCD loans. The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2020, the accrued interest receivable for loans recorded in Other Assets was $94.5 million. The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the expected credit loss will be recorded as a liability on the balance sheet with an offsetting income statement expense. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable. As of June 30, 2020, the liability recorded for expected credit losses on unfunded commitments in Other Liabilities was $21.1 million. The current adjustment to the ACL for unfunded commitments would be recognized through the provision for credit losses in the Statements of Income.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Summary of Significant Accounting Policies

Allowance for Credit Losses (“ACL”)

On January 1, 2020, we adopted the requirements of Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, sometimes referred to herein as ASU 2016-13. Topic 326 was subsequently amended by ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; ASU No. 2019-05, Codification Improvements to Topic 326, Financial Instruments-Credit Losses; and ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This standard applies to all financial assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities and unfunded commitments. We applied the standard’s provisions using the modified retrospective method as a cumulative-effect adjustment to retained earnings as of January 1, 2020. With this transition method, we did not have to restate comparative prior periods presented in the financial statements related to Topic 326, but will present comparative prior periods disclosures using the previous accounting guidance for the allowance for loan losses. This adoption method is considered a change in accounting principle requiring additional disclosure of the nature of and reason for the change, which is solely a result of the adoption of the required standard.

ACL – Investment Securities

Management uses a systematic methodology to determine its ACL for investment securities held to maturity. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the held-to-maturity portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. Management monitors the held-to-maturity portfolio to determine whether a valuation account would need to be recorded. The Company currently has no investment securities held to maturity.

Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the investment securities and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2020, the accrued interest receivable for investment securities available for sale recorded in Other Assets was $11.4 million.

Management no longer evaluates securities for other-than-temporary impairment, otherwise referred to herein as OTTI, as ASC Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities, changes the accounting for recognizing impairment on available-for-sale debt securities. Each quarter management evaluates impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. Management considers the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the Statements of Income.

ACL - Loans

The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. We established the incremental increase in the ACL at the adoption through equity and subsequent adjustments through a provision for credit losses charged to earnings. We record loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized.

Management uses systematic methodologies to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. The Company’s ACL recorded in the balance sheet reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans.

As South State Corporation (“South State”) and CenterState Bank Corporation (“CSFL”) and each company’s wholly owned bank subsidiaries, South State Bank (“SSB”) and CenterState Bank, N.A. (“CSB”) merged effective June 7, 2020, management collectively evaluated loans utilizing two different methodologies for the second quarter 2020. Management plans to consolidate the two methodologies into one during the second half of 2020.

For the legacy SSB loans, the Company collectively evaluates loans that share similar risk characteristics. In general, Management has segmented loans by loan purpose. The Company collectively evaluates loans within the following 10 consumer and commercial segments: Consumer 1-4 Family Mortgage, Home Equity Line of Credit (“HELOC”), Consumer Non-Mobile Homes, Mobile Homes, Ready Reserve, Overdrafts, Land and Builder Finance Group Construction, Commercial Real Estate Owner-Occupied and Commercial Non-Real Estate, Commercial Income-Producing, and Business Express (“BEX”) and Microbusiness. The Consumer 1-4 Family Mortgage segment is further segmented by vintage year of origination or renewal. Although BEX and Microbusiness loans would typically be segmented within other commercial segments, Management has determined that BEX and Microbusiness loans share unique commercial risk characteristics such that there is a streamlined underwriting process more similar in nature to a consumer underwriting process. Legacy SSB Commercial loans that have a total credit exposure greater than $100,000 but less than $1.5 million are eligible for the expedited BEX process; Commercial loans of $100,000 or less, which are typically for equipment, fleet or other small business needs, are eligible for the expedited Microbusiness process.

For collectively evaluated legacy SSB loans, the Company in general uses four modeling approaches to estimate expected credit losses. The Company applies a vintage modeling methodology for the Consumer 1-4 Family Mortgage segment. The Company applies a statistical linear regression modeling methodology for the HELOC, Consumer Non-Mobile Homes, Land and Builder Finance Group Construction, Commercial Real Estate Owner-

Occupied and Commercial Non-Real Estate, Commercial Income-Producing, and Ready Reserve segments. The Company applies a loss rate modeling methodology that includes one macroeconomic driver for the Mobile Homes and BEX and Microbusiness segments. Further, the Company applies an average loss rate modeling methodology for the Overdrafts segment. A prepayment assumption is inherently embedded in the vintage modeling methodology. For all other modeling approaches, the Company projects the contractual run-off of its portfolio at the segment level and incorporates a prepayment assumption in order to estimate exposure at default.

For legacy SSB loans, management has determined that the Company’s historical loss experience provides the best basis for its assessment of expected credit losses to determine the ACL. The Company utilized its own internal data to measure historical credit loss experience with similar risk characteristics within the legacy SSB loan segments over an economic cycle. Management reviewed the historical loss information to appropriately adjust for differences in current asset specific risk characteristics. Management also considered further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that existed for the period over which historical information was evaluated. For the majority of segment models for collectively evaluated loans, the Company incorporated at least one macroeconomic driver either using a statistical regression modeling methodology or simple loss rate modeling methodology.

For legacy SSB loans, management considers forward-looking information in estimating expected credit losses. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by Management to determine the best estimate within the range of expected credit losses. The baseline forecast incorporates a 50% probability of the United States economy performing better than this projection and the same as the probability that it will perform worse. The baseline forecast was used for the two-year reasonable and supportable forecast period. Management determined that the forecast period was consistent with how the Company has historically forecasted for its profitability planning. Management has evaluated the appropriateness of the reasonable and supportable forecast for the current period along with the inputs used in the estimation of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to historical loss information within four quarters using a straight-line approach. Management may apply different reversion techniques depending on the economic environment for the financial asset portfolio and as of the current period has utilized a linear reversion technique. Management has evaluated the appropriateness of a reversion period for the current period and noted that it was reasonable. Management has excluded the legacy South State’s purchased failed financial institution’s transaction loss history in its reversion to the historical average loss rate.

Included in its systematic methodology to determine its ACL for legacy SSB loans held for investment and certain off-balance-sheet credit exposures, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) Concentration Risk, 2) Trends in Industry Conditions, 3) Trends in Portfolio Nature, Quality, and Composition, 4) Model Limitations, and 5) Other Qualitative Adjustments. For Concentration Risk, the Company incorporates qualitative adjustments to the formulaic model results for large loan concentrations, industry concentrations, geographic concentrations, and new market territories with limited or no loss history available. For Trends in Industry Conditions, the Company incorporates qualitative adjustments to the formulaic model result for drivers selected by our Credit Administration department that were not incorporated in the final statistical model or loss rate model. For Trends in Portfolio Nature, Quality, and Composition, the Company incorporates qualitative adjustments to the formulaic model results for underwriting exception trends, classified asset trends, delinquency trends, lending policies and procedures, and appraisal policies. For Model Limitations, the Company incorporates qualitative adjustments to the formulaic model results for predictive power, data limitations, and forecast risk. For Other Qualitative Adjustments, the Company incorporates qualitative adjustments to the formulaic model results for staff turnover rate/experience, staff coverage rate, changes in the training, legal or regulatory changes, natural disasters/weather events, political climate, and other “one-off” items.

For acquired CSFL loans, the allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments, or pools, for analysis. The Discounted Cash Flow (DCF) method is utilized for each loan in a pool, and the results are aggregated to the pool level. A periodic tendency to default and absolute loss given default are applied to a projective model of the

loan’s cash flow while considering prepayment and principal curtailment effects. The analysis produces expected cash flows for each instrument in the pool by pairing loan-level term information (maturity date, payment amount, interest rate, etc.) with top-down pool assumptions (default rates, prepayment speeds). The company has identified the following portfolio segments: Commercial Real Estate, Multifamily, Hotel/Lodging, Municipal, Commercial and Industrial, Construction and Land Development, Residential Construction, Residential 1^st Mortgage, Residential 2^nd Mortgage, Home Equity Lines of Credit, and Consumer and Other.

For acquired CSFL loans, Management has determined that the peer loss experience provides the best basis for its assessment of expected credit losses to determine the ACL. The Company utilized peer call report data to measure historical credit loss experience with similar risk characteristics within the acquired CSFL loan segments over an economic cycle. For the majority of segment models for collectively evaluated loans, the Company incorporated at least two macroeconomic drivers using a statistical regression modeling methodology.

Management considers forward-looking information in estimating expected credit losses. For acquired CSFL loans, the Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by Management to determine the best estimate within the range of expected credit losses. The baseline forecast incorporates a 50% probability of the United States economy performing better than this projection and the same as the probability that it will perform worse. Management has evaluated the appropriateness of the reasonable and supportable forecast scenarios and has made adjustments as needed. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors within four quarters using a straight-line approach. The Company generally utilizes a four quarter forecast and a four quarter reversion period for acquired CSFL loans.

Included in its systematic methodology to determine its ACL for acquired CSFL loans, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) Lending Policy 2) Economic conditions not captured in models 3) Volume and Mix of Loan Portfolio 4) Past Due Trends 5) Concentration Risk 6) External Factors 7) Model Limitations.

When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. Considering the size of the Company, management maintains a net book balance threshold of $1.0 million for individually-evaluated loans unless further analysis in the future suggests a change is needed to this threshold based on the credit environment at that time. Prior to the current quarter, the net book balance threshold was $250,000 for legacy SSB loans and $500,000 for acquired CSFL loans. Generally, individually-evaluated loans other than Troubled Debt Restructurings, otherwise referred to herein as “TDRs,” are on nonaccrual status. Based on the threshold above, consumer financial assets will generally remain in pools unless they meet the dollar threshold. The expected credit losses on individually-evaluated loans will be estimated based on discounted cash flow analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral-dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset.

Management measures expected credit losses over the contractual term of a loan. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expects it will execute a TDR with a borrower. In the event of a reasonably-expected TDR, the Company factors the reasonably-expected TDR into the current expected credit losses estimate. The effects of a TDR are recorded when an individual asset is specifically identified as a reasonably-expected TDR. For legacy SSB consumer loans, the point at which a TDR is reasonably expected is when the Company approves the borrower’s application for a modification (i.e. the borrower qualifies for the TDR) or when the Credit Administration department approves loan concessions on substandard loans. For legacy SSB commercial loans, the point at which a TDR is reasonably expected is when the Company approves the loan for modification or when the Credit Administration department approves loan concessions on substandard loans. The Company uses a discounted cash flow methodology to calculate the effect of the concession provided to the borrower in TDR within the ACL. There were no new TDRs added from the CSFL merger.

A restructuring that results in only a delay in payments that is insignificant is not considered an economic concession. In accordance with the CARES Act, the Company implemented loan modification programs in response to the COVID-19 pandemic in order to provide borrowers with flexibility with respect to repayment terms. The Company’s payment relief assistance includes forbearance, deferrals, extension and re-aging programs, along with certain other modification strategies. The Company elected the accounting policy in the CARES Act to not apply TDR accounting to loans modified for borrowers impacted by the COVID-19 pandemic.

For purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e. allowance for credit losses) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition day, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the unpaid principal balance and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s acquired credit-impaired loans (i.e. ACI or Purchased Credit Impaired) were treated as PCD loans. Further, the legacy CSFL loans that were individually evaluated were identified as PCD loans.

The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2020, the accrued interest receivable for loans recorded in Other Assets was $94.5 million.

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the expected credit loss will be recorded as a liability on the balance sheet with an offsetting income statement expense. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable. As of June 30, 2020, the liability recorded for expected credit losses on unfunded commitments in Other Liabilities was $21.1 million. The current adjustment to the ACL for unfunded commitments would be recognized through the provision for credit losses in the Statements of Income.