Capital Ratios

9 Months Ended

Sep. 30, 2024

Capital Ratios

Capital Ratios

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.

Under current regulations, the Company and the Bank are subject to a minimum required ratio of common equity Tier 1 capital (“CET1”) to risk-weighted assets of 4.5% and a minimum required ratio of Tier 1 capital to risk-weighted assets of 6%. The minimum required leverage ratio is 4%. The minimum required total capital to risk-weighted assets ratio is 8%.

In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, 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 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, 2024, and December 31, 2023, for the Company and the Bank under the current capital rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations.

									Required to be
					Minimum Capital				Considered Well
	Actual				Required – Basel III				Capitalized
(Dollars in thousands)	Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
September 30, 2024:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	4,430,297	12.37	%	$	2,506,088	7.00	%	$	2,327,081	6.50	%
SouthState Bank (the Bank)		4,702,224	13.15	%		2,503,356	7.00	%		2,324,544	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		4,430,297	12.37	%		3,043,106	8.50	%		2,864,100	8.00	%
SouthState Bank (the Bank)		4,702,224	13.15	%		3,039,789	8.50	%		2,860,978	8.00	%
Total capital to risk-weighted assets:
Consolidated		5,271,150	14.72	%		3,759,131	10.50	%		3,580,125	10.00	%
SouthState Bank (the Bank)		5,152,981	14.41	%		3,755,033	10.50	%		3,576,222	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		4,430,297	9.98	%		1,776,398	4.00	%		2,220,497	5.00	%
SouthState Bank (the Bank)		4,702,224	10.59	%		1,775,892	4.00	%		2,219,865	5.00	%
December 31, 2023:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	4,159,187	11.75	%	$	2,476,926	7.00	%	$	2,300,003	6.50	%
SouthState Bank (the Bank)		4,424,466	12.52	%		2,473,961	7.00	%		2,297,250	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		4,159,187	11.75	%		3,007,696	8.50	%		2,830,773	8.00	%
SouthState Bank (the Bank)		4,424,466	12.52	%		3,004,096	8.50	%		2,827,384	8.00	%
Total capital to risk-weighted assets:
Consolidated		4,983,012	14.08	%		3,715,389	10.50	%		3,538,466	10.00	%
SouthState Bank (the Bank)		4,858,292	13.75	%		3,710,942	10.50	%		3,534,230	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		4,159,187	9.42	%		1,765,295	4.00	%		2,206,619	5.00	%
SouthState Bank (the Bank)		4,424,466	10.03	%		1,764,736	4.00	%		2,205,921	5.00	%

As of September 30, 2024, and December 31, 2023, the capital ratios of the Company and the Bank were in excess of the minimum regulatory requirements and exceeded the thresholds for the “well capitalized” regulatory classification.

With the implementation of ASU 2016-13 in January 2020, the Company recorded additional allowance for credit losses for loans of $54.4 million, deferred tax assets of $12.6 million, an additional reserve for unfunded commitments of $6.4 million and an adjustment to retained earnings of $44.8 million. Instead of recognizing the effects from ASU 2016-13 at adoption, the standard included a transitional method option for recognizing the adoption date effects on the Company’s regulatory capital calculations over a three-year phase-in. In March 2020, in response to the COVID-19 pandemic, the regulatory agencies provided an additional transitional method option of a two-year deferral for the start of the three-year phase-in of the recognition of the adoption date effects of ASU 2016-13 along with an option to defer the current impact on regulatory capital calculations of ASU 2016-13 during the first two years (“5-year method”). Under this 5-year method, the Company would recognize an estimate of the previous incurred loss method for determining the allowance for credit losses in regulatory capital calculations and the difference from the CECL method would be deferred for two years. After two years, the effects from adoption date and the deferral difference from the first two years of applying CECL would be phased-in over three years using the straight-line method. The regulatory rules provided a one-time opportunity at the end of the first quarter of 2020 for covered banking organizations to choose its transition option for CECL. The Company chose the 5-year method and is deferring the recognition of the effects from adoption date and the CECL difference from the first two years of application. This amount was fixed as of December 31, 2021, and that amount began the three-year phase out in the first quarter of 2022 with the final 25% being phased out in 2024.