Mergers and Acquisitions (Tables)

6 Months Ended

Jun. 30, 2020

Mergers and Acquisitions

Schedule of proforma information

	Pro Forma		Pro Forma		Pro Forma		Pro Forma
	Three Months Ended		Three Months Ended		Six Months Ended		Six Month Ended
(Dollars in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Total revenues (net interest income plus noninterest income)	$	415,049	$	353,372	$	785,210	$	678,648
Net interst income	$	266,431	$	277,811	$	536,670	$	541,729
Net adjusted income available to the common shareholder	$	116,891	$	101,120	$	167,968	$	214,400
EPS - basic	$	1.64	$	1.37	$	2.37	$	3.10
EPS - diluted	$	1.64	$	1.36	$	2.36	$	3.08

CSFL

Mergers and Acquisitions

Schedule of assets acquired, liabilities assumed, and fair value of total consideration transferred

The CSFL transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition.

			Initial
	As Recorded		Fair Value			As Recorded by
(Dollars in thousands, except per share data)	by CSFL		Adjustments			the Company
Assets
Cash and cash equivalents	$	2,566,450	$	—		$	2,566,450
Investment securities		1,188,403		5,507	(a)		1,193,910
Loans held for sale		453,578		—			453,578
Loans, net of allowance and mark		12,969,091		(48,342)	(b)		12,920,749
Premises and equipment		324,396		2,392	(c)		326,788
Intangible assets		1,294,211		(1,163,349)	(d)		130,862
OREO and repossessed assets		10,849		(791)	(e)		10,058
Bank owned life insurance		333,053		—			333,053
Deferred tax asset		54,123		(8,681)	(f)		45,442
Other assets		1,061,136		(604)	(g)		1,060,532
Total assets	$	20,255,290	$	(1,213,868)		$	19,041,422
Liabilities
Deposits:
Noninterest-bearing	$	5,291,443	$	—		$	5,291,443
Interest-bearing		10,312,370		19,702	(h)		10,332,072
Total deposits		15,603,813		19,702			15,623,515
Federal funds purchased and securities sold under agreements to repurchase		401,546		—			401,546
Other borrowings		278,900		(7,401)	(i)		271,499
Other liabilities		1,088,048		(4,592)	(j)		1,083,456
Total liabilities		17,372,307		7,709			17,380,016
Net identifiable assets acquired over (under) liabilities assumed		2,882,983		(1,221,577)			1,661,406
Goodwill		—		600,483			600,483
Net assets acquired over liabilities assumed	$	2,882,983	$	(621,094)		$	2,261,889
Consideration:
South State Corporation common shares issued							37,271,069
Purchase price per share of the Company's common stock						$	60.27
Company common stock issued ($2,246,327) and cash exchanged for fractional shares ($74)						$	2,246,401
Stock option conversion							8,080
Restricted stock conversion							7,407
Fair value of total consideration transferred						$	2,261,888

Explanation of fair value adjustments

(a)— Represents the reversal of CSFL's existing fair value adjustments of $40.7 million and the adjustment to record securities at fair value (premium) totaling $46.2 million (includes reclassification of all securities held as HTM to AFS totaling $175.7 million).

(b)— Represents approximately 2.04%, or $269.1 million, total mark of the loan portfolio including a 1.97%, or $259.7 million credit mark, based on a third party valuation. Also, includes the reversal of CSFL's ending allowance for credit losses of $158.2 million and fair value adjustments of $62.6 million.

(c)— Represents the MTM adjustment of $4.0 million on leased assets partially offset by the write-off of deminimus fixed assets of $1.6 million.

(d)— Represents approximately a 1.28% core deposit intangible, or $125.9 million from a third party valuation. This amount is net of $84.9 million existing core deposit intangible and $1.2 billion of existing goodwill from CSFL’s prior transactions that was reversed.

(e)— Represents the reversal of prior valuation reserves of $878,000 and recorded new valuation reserves of $1.7 million on both OREO and other repossessed assets.

(f)— Represents deferred tax assets related to fair value adjustments with effective tax rate of 22.0%. This includes an adjustment from the CSFL tax rate to our tax rate. The difference in tax rates relates to state income taxes.

(g)— Represents a valuation reserve of bank property held for sale of $3.8 million and a fair value adjustment of a lease receivable of $116,000. These amounts are offset by positive fair value adjustment for investment in low income housing of $3.3 million.

(h)— Represents estimated premium for fixed maturity time deposits of $20.2 million partially offset by the reversal of existing CSFL fair value adjustments related to time deposit marks from other merger transactions of $546,000.

(i)— Represents the recording of a discount of $12.5 million on TRUPs from a third party valuation partially offset by the reversal of the existing CSFL discount on TRUPs and other debt of $5.1 million.

(j)— Represents the reversal of an existing $7.1 million unfunded commitment reserve at purchase date partially offset by a fair value adjustment to increase lease liabilities associated with rental facilities totaling $2.5 million.