Mergers and Acquisitions

3 Months Ended

Mar. 31, 2025

Mergers and Acquisitions

Mergers and Acquisitions

Note 4 — Mergers and Acquisitions

Independent Bank Group, Inc. (“Independent”)

On January 1, 2025, the Company acquired Independent in an all-stock merger transaction. Upon the terms and subject to the conditions set forth in the merger agreement for the Independent transaction, Independent merged with and into the Company, with the Company continuing as the surviving corporation in the merger. Immediately following the merger, Independent’s wholly owned banking subsidiary, Independent Bank merged with and into the Bank, with the Bank continuing as the surviving bank. Shareholders of Independent received 0.60 shares of the Company’s common stock for each share of Independent common stock they owned. In total, the purchase price for Independent was $2.5 billion.

In the Independent acquisition, the Company acquired $13.1 billion of loans, at fair value, net of $600.6 million, or 4.4%, estimated discount to the outstanding principal balance, representing 38.7% of the Company’s total loans at December 31, 2024. Of the total loans acquired, management identified $2.8 billion that had more than insignificantly deteriorated since origination and were thus determined to be PCD loans.

The operating results of Independent have been included in the consolidated financial statement from the acquisition date. Due to the integration of Independent's financial information into the Bank as of acquisition date, it is impractical to separately disclose the revenue and earnings of Independent.

During the three months ended March 31, 2025, the Company incurred approximately $66.5 million of acquisition costs related to the Independent acquisition. These acquisition costs are reported in Merger, Branch Consolidation, Severance Related and Other Expenses on the Company’s Consolidated Statements of Net Income.

The Independent acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The Company recognized goodwill on this acquisition of $1.2 billion. The goodwill was calculated based on the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date, and subject to change as additional information becomes available during the measurement period. In addition to the preliminary fair value adjustments for assets acquired and liabilities assumed from Independent, the table below includes on the line adjustments representing expenses contingent upon the consummation of the acquisition incurred by Independent, as well as reclassifications to conform with the Company’s presentation and other adjustments.

						Reclassifications			Adjusted		Preliminary			Fair Value of
	As Recorded		On The Line			and Other			Acquired		Fair Value			Net Assets Acquired at
(Dollars in thousands)	by Independent		Adjustments			Adjustments			Balance Sheet		Adjustments			Date of Acquisition
Assets
Cash and cash equivalents	$	1,043,293	$	—		$	(2,415)	(d)	$	1,040,878	$	—		$	1,040,878
Investment securities		1,644,381		—			2,782	(e)		1,647,163		(56,711)	(i)		1,590,452
Loans held for sale		12,430		—			—			12,430		—			12,430
Loans held for investment, net of allowance for credit losses		13,452,928		—			750	(f)		13,453,678		(445,321)	(j)		13,008,357
Premises and equipment, net		348,071		—			33,133	(g)		381,204		(65,530)	(k)		315,674
Bank owned life insurance		252,001		—			—			252,001		—			252,001
Deferred tax asset		72,362		6,596	(a)		231	(h)		79,189		35,374	(l)		114,563
Bank property held for sale		—		—			—			—		72,000	(m)		72,000
Goodwill		476,021		—			—			476,021		(476,021)	(n)		—
Core deposit and other intangible assets		38,808		—			—			38,808		373,270	(o)		412,078
Other assets		226,032		(23,000)	(b)		(35,915)	(e, g)		167,117		(11,530)	(p)		155,587
Total assets	$	17,566,327	$	(16,404)		$	(1,434)		$	17,548,489	$	(574,469)		$	16,974,020
Liabilities
Deposits:
Noninterest-bearing	$	3,241,446	$	—		$	(3,276)	(d)	$	3,238,170	$	—		$	3,238,170
Interest-bearing		11,966,362		—			2,459	(d)		11,968,821		1,722	(q)		11,970,543
Total deposits		15,207,808		—			(817)			15,206,991		1,722			15,208,713
Other borrowings		354,713		—			—			354,713		5,809	(r)		360,522
Other liabilities		95,409		6,859	(c)		(1,103)	(d)		101,165		(4,488)	(s)		96,677
Total liabilities		15,657,930		6,859			(1,920)			15,662,869		3,043			15,665,912
Net identifiable assets acquired over liabilities assumed		1,908,397		(23,263)			486			1,885,620		(577,512)			1,308,108
Goodwill		—		—			—			—		1,164,953			1,164,953
Net assets acquired over liabilities assumed	$	1,908,397	$	(23,263)		$	486		$	1,885,620	$	587,441		$	2,473,061
Consideration:
SouthState Corporation common shares issued															24,858,731
Purchase price per share of the Company's common stock														$	99.48
Company common stock issued														$	2,472,947
Cash exchanged for fractional shares															114
Fair value of total consideration transferred														$	2,473,061

On the Line Adjustments

(a) represents deferred tax assets related to the on the line adjustments which were contingent upon the consummation of the merger.

(b) represents acquiree investment banker fees contingent upon the consummation of the merger paid by Independent prior to the effective time of the merger.

(c) represents employer payroll taxes related to the acceleration of outstanding stock awards that fully vested upon the consummation of the merger.

Reclassification and Other Adjustments

(d) represents the reclassification of cash and other in-process accounts between cash and cash equivalents, deposits and other liabilities to conform with SouthState's presentation, and miscellaneous accruals.

(e) represents the reclassification of other investments from other assets to investment securities to conform with SouthState's presentation.

(f) represents a loan recovery received by Independent effective as of the acquisition date.

(g) represents the reclassification of right of use assets and software from other assets to premises and equipment, net to conform with SouthState's presentation.

(h) represents deferred tax assets related to other miscellaneous adjustments.

Fair Value Adjustments

(i) represents an adjustment of $56.7 million to record investment securities at fair value.

(j) represents approximately 1.6%, or $214.8 million, preliminary credit mark on the loan portfolio and 4.4% total preliminary mark, or $600.6 million, including interest rate discount, derived from a third party valuation. Also includes the reversal of Independent's ending allowance for credit losses of $133.0 million and $22.2 million of existing Independent fair value adjustments.

(k) represents the preliminary fair value adjustments of $65.5 million on bank premises and equipment, inclusive of bank property transferred to held for sale as of the acquisition date.

(l) represents net deferred tax assets related to the preliminary fair value adjustments with effective tax rate of 23.5%. This includes an adjustment from Independent's blended tax rate to SouthState's blended tax rate. The difference in tax rates relates to state income taxes.

(m) represents a transfer of $72.0 million of bank real estate to bank property held for sale.

(n) represents the reversal of Independent's existing goodwill.

(o) represents preliminary core deposit intangibles ("CDI") of $412.1 million, or 3.6% of core deposits, derived from a third party valuation, net of $38.8 million of existing CDI from prior transactions completed by Independent and reversed on the acquisition date.

(p) represents preliminary fair value adjustments on repossessed real estate of $4.2 million and write-offs of $7.3 million of prepaids and miscellaneous other assets.

(q) represents preliminary premium for fixed maturity time deposits of $1.7 million derived from a third party valuation.

(r) represents the reversal of the existing Independent discount and issuance costs on trust preferred securities and subordinated debentures of $7.6 million, and recording the preliminary net discount of $1.8 million for trust preferred securities and subordinated debentures derived from a third party valuation.

(s) represents the reversal of $2.9 million of the existing reserve for unfunded commitments, a preliminary fair value adjustment of $2.2 million for lease liabilities, net of adjustments of approximately $660 thousand for miscellaneous accruals.

Comparative and Pro Forma Financial Information for the Independent Acquisition

Pro-forma data for the three months ended March 31, 2024 listed in the table below presents pro-forma information as if the Independent acquisition occurred at the beginning of 2024. These results combine the historical results of Independent in the Company’s Consolidated Statements of Income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the Independent acquisition taken place on January 1, 2024.

Merger-related costs of $66.5 million from the Independent acquisition were incurred during the first quarter of 2025. No adjustments have been made to reduce the impact of any Other Real Estate Owned (“OREO”) write downs, investment securities sold or repayment of borrowings recognized by Independent in 2024. Expenses related to systems conversions and other costs of integration are expected to be recorded during 2025 for the Independent acquisition. The Company expects to achieve further operating cost savings and other business synergies as a result of the Independent acquisition, which are not reflected in the pro forma amounts below. The total revenues presented below represent pro-forma net interest income plus pro-forma noninterest income:

	Pro Forma
	Three Months Ended
(Dollars in thousands)	March 31, 2024
Total revenues (net interest income plus noninterest income)	$	599,479
Net interest income	$	515,051
Net adjusted income available to the common shareholder	$	108,272
EPS — basic	$	1.07
EPS — diluted	$	1.07