Mergers and Acquisitions (Tables)

9 Months Ended

Sep. 30, 2021

Mergers and Acquisitions

Schedule of proforma information

	Pro Forma
	Nine Months Ended
(Dollars in thousands)	September 30, 2020
Total revenues (net interest income plus noninterest income)	$	1,163,057
Net interest income	$	799,727
Net adjusted income available to the common shareholder	$	240,838
EPS - basic	$	3.40
EPS - diluted	$	3.38

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.

			Initial			Subsequent
	As Recorded		Fair Value			Fair Value			As Recorded by
(Dollars in thousands)	by CSFL		Adjustments			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)		29,834	(b)		12,950,583
Premises and equipment		308,150		2,392	(c)		2,893	(c)		313,435
Intangible assets		1,294,211		(1,163,349)	(d)		10,000	(d)		140,862
OREO and repossessed assets		10,849		(791)	(e)		(49)	(e)		10,009
Bank owned life insurance		333,053		—			—			333,053
Deferred tax asset		54,123		(8,681)	(f)		(7,820)	(f)		37,622
Other assets		967,059		(604)	(g)		(1,069)	(g)		965,386
Total assets	$	20,144,967	$	(1,213,868)		$	33,789		$	18,964,888
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		977,725		(4,592)	(j)		857	(j)		973,990
Total liabilities		17,261,984		7,709			857			17,270,550
Net identifiable assets acquired over (under) liabilities assumed		2,882,983		(1,221,577)			32,932			1,694,338
Goodwill		—		600,483			(38,113)			562,370
Net assets acquired over liabilities assumed	$	2,882,983	$	(621,094)		$	(5,181)		$	2,256,708
Consideration:
SouthState 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										2,900
Restricted stock conversion										7,407
Fair value of total consideration transferred									$	2,256,708	(k)

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. Fair value was subsequently adjusted by $29.8 million due to a reduction in the loan mark (discount).

(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. Subsequently, the fair value on certain bank premises was adjusted by $2.9 million based on updated appraisals received.

(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. Approximately $10.0 million in a customer list intangible related to the correspondent banking business was subsequently identified and recorded in the third quarter of 2020.

(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. The fair value was subsequently adjusted based on gains and losses recognized from sales of OREO and other repossessed assets.

(f)— Represents deferred tax assets related to fair value adjustments measured using an estimated 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. Additional deferred tax liability related to subsequent fair value adjustments identified and an updated estimated tax rate of 23.78% was approximately $7.8 million.

(g)— Represents a valuation reserve of bank property held for sale of $4.4 million, a fair value adjustment of a lease receivable of $116,000 and a fair value adjustment of interest receivable of $501,000. 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 leased facilities totaling $2.5 million. The discount rate applied to the bank owned life insurance split dollar liability was subsequently adjusted resulting in an increase in the other liability of $857,000.

(k)— The purchase price, or the fair value of total consideration transferred, decreased by $5.2 million to $2.9 million for stock options assumed and converted in the merger. The stock options assumed reflect their intrinsic value based upon a Black Sholes valuation.