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South State Corporation Reports Increase in 2014 Net Income of 55.4%; Increases Quarterly Cash Dividend

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South State Corporation (NASDAQ:SSB) today released its unaudited results of operations and other financial information for the three-month and twelve-month periods ended December 31, 2014. Annual (2014) highlights include the following:

  • Net income available to the common shareholder improved by 55.4% to $74.4 million
    • Earnings per share (EPS) – diluted was $3.08 compared to $2.38 in 2013, an increase of 29.4%
    • Operating earnings available to the common shareholder improved by 42.9% to $90.6 million
    • Operating EPS – diluted was $3.75 compared to $3.16 in 2013, an increase of 18.7%
    • Increased dividend paid to common shareholders by 10.8%
  • Non-acquired loan growth for 2014 was $602.6 million or 21.0%
    • C&I loans grew by $84.1 million or 26.1%
    • Construction & land development loans grew by $64.3 million or 21.4%
    • Consumer real estate loans grew by $265.4 million or 33.0%
    • Commercial owner occupied loans grew by $74.4 million or 8.9%
    • Consumer non real estate loans grew by $52.9 million or 38.8%
  • Performance ratio improvement
    • Return on average assets improved to 0.95% from 0.77%
    • Operating return on average assets improved to 1.15% from 1.02%
    • Return on average tangible equity improved to 13.77% from 11.54%
    • Operating return on average tangible common equity improved to 16.56% from 15.00%
    • Efficiency ratio improved to 71.41% from 75.85%
  • Balance sheet and tangible book value continued to strengthen
    • Net loan growth of $28.4 million (non-acquired loan growth offset the acquired loan run off)
    • OREO decreased $22.2 million, or 34.2% to $42.7 million
    • Noninterest bearing deposits increased by $153.5 million or 10.3%
    • Tangible book value improved to $25.59 per share, a $3.23 per share increase, or 14.5%
    • Tangible common equity to tangible assets improved to 8.28% from 7.13%
  • Asset quality continued improvement
    • Nonperforming assets (NPAs) declined by 26.4%, or $28.6 million, to $79.6 million
    • NPAs to total assets improved to 1.02% from 1.36% in 2013
    • Net charge offs on non-acquired loans declined to 0.16% in 2014 compared to 0.41% in 2013
    • Coverage ratio on non-acquired non-performing loans improved to 121.1% from 81.2% in 2013

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.23 per share payable on its common stock. This per share amount is $0.01 per share, or 4.5% higher than the dividend paid in the immediately preceding quarter and is $0.04 per share, or 21.1%, higher than a year ago. The dividend will be payable on February 20, 2015 to shareholders of record as of February 13, 2015.

Fourth Quarter 2014 Financial Performance

Please refer to the accompanying tables for detailed comparative data on results of operations and financial results.

The Company reported consolidated net income available to common shareholders of $21.2 million, or $0.88 per diluted common share for the three months ended December 31, 2014 up from $19.3 million, or $0.80 per diluted common share for the three months ended September 30, 2014. The $1.9 million increase was primarily the result of $1.2 million increase in net interest income, a decline in the provision for loan losses of $610,000, an increase in noninterest income of $850,000, lower noninterest expenses of $380,000, partially offset by an increase in the provision for income taxes of $1.1 million. During the quarter, our effective income tax rate remained low at 30.77% similar to the 30.16% in third quarter of 2014. The low rate in the fourth quarter of 2014 was primarily the result of additional state income tax credits acquired during the quarter. The full year effective tax rate was 32.30% compared to 34.00% for 2013. Going forward, the Company expects to have an effective tax rate of approximately 34%.

“I am pleased to report an increase in net income of 55.4% and a 10.8% increase in our dividends paid during 2014. It was a transformational year for our company, as we completed the integration of First Federal, consolidated our five brands into South State and made significant gains in building a platform that will carry our company forward,” said Robert R. Hill, Jr., CEO of South State Corporation. “During the year much changed, but our continued focus on our customers allowed us to attract new customer relationships while retaining and enhancing existing relationships. The quality of our loan portfolio was also a major contributor to our success this year. Our total non-performing assets declined to approximately the 1% level, while net charge offs declined to 0.16%. The strength of our balance sheet, 16.56% operating return on tangible common equity, and the significant steps undertaken to continue building our infrastructure should have us very well-positioned for the future.”

Asset Quality

During the fourth quarter of 2014, overall asset quality continued to improve. Non-acquired NPAs, excluding acquired loans and acquired other real estate owned (OREO), declined by $3.4 million, or 8.5%, to $36.5 million. Non-acquired nonperforming loans decreased by $2.0 million, or 6.4%, and non-acquired OREO decreased $1.4 million, or 15.1%. Non-acquired NPAs as a percentage of total non-acquired loans and repossessed assets declined to 1.05% compared to 1.20% in the third quarter of 2014. Total NPAs, including acquired NPAs, declined by $8.6 million from the third quarter 2014 level of $88.2 million to $79.6 million at December 31, 2014.

During the fourth quarter, the Company reported $7.6 million in nonperforming loans related to “acquired non-credit impaired loans”. This was an increase of $1.8 million from the third quarter of 2014. Additionally, acquired nonperforming OREO and other assets owned declined by $7.1 million from September 30, 2014. From December 31, 2013, total nonperforming assets, including acquired assets, has declined by more than 26%, or $28.6 million.

At December 31, 2014, the allowance for non-acquired loan losses was $34.5 million or 1.00% of non-acquired period-end loans. The current allowance for loan losses provides 1.21 times coverage of period-end non-acquired nonperforming loans, up from 1.14 times at the end of the third quarter of 2014 and up from 0.81 times at December 31, 2013. Net charge-offs within the non-acquired portfolio were $1.1 million for the quarter or 0.13% annualized, down from the third quarter of 2014 of $2.1 million or 0.26% annualized, and down from the fourth quarter of 2013 of $1.8 million or 0.26% annualized.

During the quarter, net charge offs related to “acquired non-credit impaired loans” were $490,000 or 0.14% annualized, and the Company recorded a provision for loan losses, accordingly.

Total OREO decreased by $8.5 million during the fourth quarter to $42.7 million compared to the third quarter of 2014 of $51.3 million. This decline was the result of our continued effort in disposing of these assets. Additionally, non-acquired OREO write downs during the fourth quarter were $100,000 on four assets compared to $950,000 on fifteen assets in the third quarter. As a result, our OREO and loan related costs were down $850,000 during the quarter to $2.5 million compared to the third quarter of $3.4 million.

Net Interest Income and Margin

Non-taxable equivalent net interest income was $81.6 million for the fourth quarter of 2014, a $1.2 million increase from the third quarter of 2014, resulting primarily from the following:

1. A $118.5 million decrease in the average balance of acquired loans from the third quarter of 2014, coupled with the fourth quarter recast where loan pools nonaccretable yield reduced by approximately $51.0 million (the majority coming from loan pools of the First Federal acquired loan pools). This release resulted in net improved accretable yield of approximately $40.0 million which will be recognized over time. In the fourth quarter, the yield on the acquired loan portfolio increased 40 basis points from 7.28% to 7.68% resulting in an increase of $136,000 in interest income;

2. A $136.8 million increase in the average balance of non-acquired loans which resulted in an increase in interest income of approximately $800,000; while the yield declined from 4.15% during the third quarter to 4.08% in the fourth quarter; and

3. The decrease in interest expense from funding sources was $150,000. Transaction and money market accounts were responsible for the majority of this decline which was driven primarily by a decline in interest rates.

Tax-equivalent net interest margin increased 7 basis points from the third quarter of 2014 and declined by 19 basis points from the fourth quarter of 2013. The Company’s average yield on interest-earning assets increased 6 basis points while the average rate on interest-bearing liabilities decreased 1 basis point from the third quarter of 2014. During the fourth quarter of 2014, the Company’s average total assets slightly decreased to $7.9 billion and average earning assets remained at $6.9 billion. Average interest-bearing liabilities declined by approximately $78.8 million to $5.2 billion. Average non-interest bearing demand deposits increased by $22.5 million during the quarter and by $167.9 million from December 31, 2013.

Noninterest Income and Expense

Noninterest income was higher than the third quarter of 2014 by approximately $850,000 to $25.3 million for the fourth quarter of 2014. The increase was primarily the result of lower amortization of the FDIC indemnification asset by $650,000 and higher other revenue of $460,000. These two were partially offset by declines in service charges on deposit accounts and lower bankcard services income. Compared to the fourth quarter of 2013, noninterest income grew by $4.7 million due primarily to the reduced amortization of the indemnification asset by $3.3 million and improved mortgage banking income of $1.6 million.

Noninterest expense was $74.7 million in the fourth quarter of 2014, down from $75.1 million in the third quarter of 2014. This decrease from the third quarter of 2014 was primarily due to lower cost in salaries and employee benefits, OREO expense and other loan related, and merger-branding related charges. These three categories were offset with increases due primarily to discretionary related spending, timing relative to the conversion during third quarter, loan production related cost, and passive losses from investments for tax credits which increased $800,000 during the quarter.

The efficiency ratio for the quarter was 69.3%, down from 71.0% in the third quarter. Our operating efficiency ratio, which excludes merger and brand-related expenses and OREO and loan related expenses, increased to 62.7% compared to 61.3% in the third quarter.

Compared to the fourth quarter of 2013, noninterest expense was down from the fourth quarter of 2013 by $9.2 million. There was a decline in most categories from a year ago led by merger/branding related, OREO expense and other loan related, salaries and employee benefits, furniture and equipment expense and information services expense. These declines were offset by increases in supplies, printing and postage and an increase in passive losses related to certain tax advantaged investments.

Balance Sheet and Capital

At December 31, 2014, the Company’s total assets were $7.8 billion, down from $7.9 billion at September 30, 2014, and at December 31, 2013. Since December 31, 2013, the Company has experienced asset growth in the following areas: investment securities portfolio by $14.3 million or 1.8%, non-acquired loans by $602.6 million, or 21.0%, and loans held for sale by $29.7 million, or 97.1%. Loans held for sale increased primarily from the increase in closings of mortgage loans from the pipeline. Fully offsetting these increases were decreases in acquired loans by $574.2 million, the FDIC receivable by $64.3 million, cash and cash equivalents by $61.6 million, decrease in deferred tax assets of $30.2 million and OREO by $22.2 million.

The Company’s book value per common share increased to $40.78 per share at December 31, 2014, compared to $40.07 at September 30, 2014. Capital increased by $17.9 million due primarily to net income of $21.2 million, which was offset by the common dividend paid of $5.3 million. Accumulated comprehensive loss decreased by $764,000, net of tax, in the fourth quarter, primarily the result of the increased unrealized gain in the available for sale investment securities portfolio, which was partially offset by an unrealized loss in the pension plan recorded in the fourth quarter. At December 31, 2014, capital was $3.5 million greater than the level at December 31, 2013 even with the redemption of $65.0 million of preferred stock in March of 2014 and paying cash dividends of $20.8 million during 2014 (both common and preferred). Tangible book value (“TBV”) per common share increased by $0.81 per share to $25.59 at December 31, 2014, from $24.78 at September 30, 2014. This increase was primarily the result of the strong net income during the quarter, net of the dividend paid to shareholders. In addition, tangible common equity to tangible assets increased to 8.28% at December 31, 2014 up from 7.96% at the end of the third quarter of 2014. Tangible common equity was 7.13% at December 31, 2013.

The total risk-based capital ratio is estimated to be 14.3% up from September 30, 2014 of 14.1%. Tier 1 leverage ratio increased to approximately 9.4% from 9.1% at September 30, 2014. The increase was driven by net income for the quarter. The Company’s capital position remains “well-capitalized” by all measures at December 31, 2014.

“Our tangible book value increased by $0.81 per share during the quarter, a 13.0% annualized increase, to $25.59, while our tangible common equity to tangible assets increased from 7.96% at the end third quarter to 8.28% at December 31, 2014″ said John C. Pollok, COO and CFO. “In addition during 2014, GAAP diluted earnings per share improved from $0.55 per share in the fourth quarter of 2013 to $0.88 per share in the fourth quarter of 2014, a 60.0% increase, and operating diluted earnings per share improved from $0.80 per share in the fourth quarter of 2013 to $1.01 per share in the fourth quarter of 2014, a 26.3% increase.”

South State Corporation will hold a conference call today, January 27th; at 11 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing 877-506-9272. The number for international participants is 412-380-2004. The conference ID number is 10058469. Participants can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available beginning January 27th by 2:00 p.m. Eastern Time until 9:00 a.m. on February 11, 2015. To listen to the replay, dial 877-344-7529 or 412-317-0088. The passcode is 10058469.

South State Corporation is the largest bank holding company headquartered in South Carolina. Founded in 1933, the company’s primary subsidiary, South State Bank, has been serving the financial needs of its local communities in 19 South Carolina counties, 12 Georgia counties and 4 North Carolina counties for over 80 years. The bank also operates Minis & Co., Inc. and First Southeast 401K Fiduciaries, Inc., both registered investment advisors; and First Southeast Investor Services, Inc., a limited purpose broker-dealer. South State Corporation has assets of approximately $7.8 billion and its stock is traded under the symbol SSB on the NASDAQ Global Select Market. More information can be found at www.SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide additional useful information. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP.

Cautionary Statement Regarding Forward Looking Statements

Statements included in this report which are not historical in nature are intended to be, and are hereby identified as, forward looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934. Forward looking statements generally include words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. The Company cautions readers that forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from anticipated results. Such risks and uncertainties, include, among others, the following possibilities: (1) the outcome of any legal proceedings instituted against the Company; (2) credit risks associated with an obligor’s failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any loan-related document; (3) interest risk involving the effect of a change in interest rates on the bank’s earnings, the market value of the bank’s loan and securities portfolios, and the market value of the Company’s equity; (4) liquidity risk affecting the bank’s ability to meet its obligations when they come due; (5) risks associated with an anticipated increase in the Company’s investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities the Company desires to acquire are not available on terms acceptable to the Company; (6) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (7) transaction risk arising from problems with service or product delivery; (8) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (9) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, increased capital requirements (including, without limitation, the impact of the capital rules adopted to implement Basel III), Consumer Financial Protection Bureau rules and regulations, and potential changes in accounting principles relating to loan loss recognition; (10) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (11) reputation risk that adversely affects earnings or capital arising from negative public opinion; (12) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (13) cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, subjects the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (14) economic downturn risk potentially resulting in deterioration in the credit markets, greater than expected non-interest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from federal spending cuts and/or one or more federal budget-related impasses or actions; (15) greater than expected noninterest expenses; (16) excessive loan losses; (17) failure to realize synergies and other financial benefits from, and to limit liabilities associated with, mergers and acquisitions, including, without limitation, the merger with First Financial Holdings, Inc. (“FFCH”), within the expected time frame; (18) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with merger and acquisition integration, including, without limitation, with respect to FFCH, and including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related-matters; (19) the risks of fluctuations in market prices for Company common stock that may or may not reflect economic condition or performance of the Company; (20) the payment of dividends on Company common stock is subject to regulatory supervision as well as the discretion of the board of directors of the Company, the Company’s performance and other factors; and (21) other risks and uncertainties disclosed in the Company’s most recent Annual Report on Form 10-K filed with the SEC or disclosed in documents filed or furnished by the Company with or to the SEC after the filing of such Annual report on Form 10-K, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward looking statements. The Company undertakes no obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

SOUTH STATE CORPORATION AND SUBSIDIARY
(Unaudited)
(Dollars in thousands, except per share data)
Fourth
Three Months Ended Quarter Twelve Months Ended YTD
December 31, September 30, June 30, March 31, December 31, 2014 – 2013 December 31, 2014 – 2013
EARNINGS SUMMARY (non tax equivalent) 2014 2014 2014 2014 2013 % Change 2014 2013 % Change
Interest income (A) $ 85,380 $ 84,348 $ 84,831 $ 87,463 $ 88,766 -3.8 % $ 342,022 $ 286,348 19.4 %
Interest expense 3,829 3,979 3,858 3,996 4,351 -12.0 % 15,662 12,987 20.6 %
Net interest income 81,551 80,369 80,973 83,467 84,415 -3.4 % 326,360 273,361 19.4 %
Provision for loan losses (1) 1,481 2,091 2,169 849 (12 ) -12441.7 % 6,590 1,886 249.4 %
Noninterest income 25,299 24,453 24,399 20,545 20,649 22.5 % 94,696 53,720 76.3 %
Noninterest expense 74,676 75,058 75,889 77,415 83,888 -11.0 % 303,038 250,620 20.9 %
Income before provision for income taxes 30,693 27,673 27,314 25,748 21,188 44.9 % 111,428 74,575 49.4 %
Provision for income taxes 9,445 8,346 9,368 8,832 7,204 31.1 % 35,991 25,356 41.9 %
Net income 21,248 19,327 17,946 16,916 13,984 51.9 % 75,437 49,219 53.3 %
Preferred stock dividends 1,073 812 1,073 1,354
Net income available to common shareholders (GAAP) $ 21,248 $ 19,327 $ 17,946 $ 15,843 $ 13,172 61.3 % $ 74,364 $ 47,865 55.4 %
Effective tax rate 30.77 % 30.16 % 34.30 % 34.30 % 34.00 % 32.30 % 34.00 %
Basic weighted-average common shares 23,911,515 23,898,982 23,892,245 23,873,178 23,825,636 0.4 % 23,897,051 19,865,674 20.3 %
Diluted weighted-average common shares 24,189,289 24,160,461 24,140,600 24,116,174 24,079,350 0.5 % 24,153,657 20,077,108 20.3 %
Earnings per common share – Basic $ 0.89 $ 0.81 $ 0.75 $ 0.66 $ 0.55 61.8 % $ 3.11 $ 2.41 29.0 %
Earnings per common share – Diluted 0.88 0.80 0.74 0.66 0.55 60.0 % 3.08 2.38 29.4 %
Cash dividends declared per common share $ 0.22 $ 0.21 $ 0.20 $ 0.19 $ 0.19 15.8 % $ 0.82 $ 0.74 10.8 %
Dividend payout ratio (2) 25.00 % 26.22 % 26.89 % 28.91 % 34.74 % -28.0 % 26.61 % 31.91 % -16.6 %
Operating Earnings (non-GAAP) (3)
Net income (GAAP) $ 21,248 $ 19,327 $ 17,946 $ 16,916 $ 13,984 51.9 % $ 75,437 $ 49,219 53.3 %
Securities (gains) losses, net of tax 63 (58 ) 1
Merger and branding related expense, net of tax 3,184 4,781 4,277 3,932 6,147 -48.2 % 16,207 15,514
Net operating earnings (loss) (non-GAAP) 24,432 24,171 22,165 20,848 20,131 21.4 % 91,646 64,733 41.6 %
Preferred stock dividends 1,073 812 1,073 1,354
Net operating earnings (loss) available to common shareholders (non-GAAP) $ 24,432 $ 24,171 $ 22,165 $ 19,775 $ 19,319 26.5 % $ 90,573 $ 63,379 42.9 %
Operating earnings (loss) per common share – Basic $ 1.02 $ 1.01 $ 0.93 $ 0.83 $ 0.81 25.9 % $ 3.79 $ 3.19 18.8 %
Operating earnings (loss) per common share – Diluted 1.01 1.00 0.92 0.82 0.80 26.3 % 3.75 3.16 18.7 %
Fourth

Quarter

AVERAGE for Quarter Ended AVERAGE for Twelve Months YTD
December 31, September 30, June 30, March 31, December 31, 2014 – 2013 December 31, December 31, 2014 – 2013
BALANCE SHEET HIGHLIGHTS 2014 2014 2014 2014 2013 % Change 2014 2013 % Change
Loans held for sale $ 46,540 $ 50,116 $ 50,423 $ 29,386 $ 35,673 30.5 % $ 38,745 $ 45,015 -13.9 %
Acquired non-credit impaired loans 1,347,453 1,429,100 1,479,412 1,575,392 1,614,294 -16.5 % 1,458,309 710,836 105.2 %
Acquired credit impaired loans, net of allowance for acquired loan losses 951,038 987,874 1,077,960 1,162,467 1,269,015 -25.1 % 1,042,573 1,102,589 -5.4 %
Non-acquired loans 3,382,795 3,246,025 3,061,529 2,909,175 2,793,522 21.1 % 3,151,482 2,677,450 17.7 %
Total loans (1) 5,681,286 5,662,999 5,618,901 5,647,034 5,676,831 0.1 % 5,652,364 4,490,875 25.9 %
FDIC receivable for loss share agreements 27,372 38,061 60,967 83,010 105,554 -74.1 % 52,161 118,977 -56.2 %
Total investment securities 819,625 822,833 810,909 801,263 699,592 17.2 % 813,733 610,252 33.3 %
Intangible assets 367,622 369,460 374,021 377,265 379,894 -3.2 % 372,058 235,341 58.1 %
Earning assets 6,928,942 6,930,480 6,910,549 6,842,708 6,881,478 0.7 % 6,868,918 5,539,057 24.0 %
Total assets 7,891,909 7,952,004 7,942,953 7,959,787 7,977,604 -1.1 % 7,938,437 6,354,973 24.9 %
Noninterest-bearing deposits 1,678,589 1,656,120 1,591,002 1,485,014 1,510,734 11.1 % 1,604,421 1,215,052 32.0 %
Interest-bearing deposits 4,838,316 4,900,038 4,986,465 5,033,181 5,098,095 -5.1 % 4,938,857 4,037,194 22.3 %
Total deposits 6,516,905 6,556,158 6,577,467 6,518,195 6,608,829 -1.4 % 6,543,278 5,252,246 24.6 %
Federal funds purchased and repurchase agreements 238,842 256,000 247,672 273,636 229,382 4.1 % 253,948 274,080 -7.3 %
Other borrowings 101,173 101,090 101,763 102,269 101,948 -0.8 % 101,195 76,421 32.4 %
Shareholders’ common equity (excludes preferred stock) 976,396 959,536 942,935 931,961 914,335 6.8 % 952,848 684,753 39.2 %
Shareholders’ equity 976,396 959,536 942,935 994,073 979,335 -0.3 % 968,163 712,890 35.8 %
South State Corporation
(Unaudited)
(Dollars in thousands)
Fourth
ENDING Balance Quarter
December 31, September 30, June 30, March 31, December 31, 2014 – 2013
BALANCE SHEET HIGHLIGHTS 2014 2014 2014 2014 2013 % Change
Loans held for sale $ 60,270 $ 56,595 $ 56,407 $ 57,200 $ 30,586 97.1 %
Acquired non-credit impaired loans 1,327,999 1,377,343 1,447,583 1,512,201 1,600,935 -17.0 %
Acquired credit impaired loans 926,767 988,524 1,056,495 1,124,809 1,232,256 -24.8 %
Non-acquired loans 3,467,826 3,304,708 3,174,625 2,979,958 2,865,216 21.0 %
Total loans (1) 5,722,592 5,670,575 5,678,703 5,616,968 5,698,407 0.4 %
FDIC receivable for loss share agreements 22,161 30,983 43,766 67,984 86,447 -74.4 %
Total investment securities 826,943 826,021 816,648 814,533 812,603 1.8 %
Intangible assets 366,927 368,979 371,118 375,315 377,596 -2.8 %
Allowance for acquired credit impaired loan losses (7,365 ) (8,032 ) (9,159 ) (11,046 ) (11,618 ) -36.6 %
Allowance for non-acquired loan losses (1) (34,539 ) (34,804 ) (35,422 ) (34,669 ) (34,331 ) 0.6 %
Premises and equipment 171,772 173,425 184,113 187,127 188,114 -8.7 %
Total assets 7,826,227 7,880,088 7,993,686 7,990,975 7,931,498 -1.3 %
Noninterest-bearing deposits 1,639,953 1,654,308 1,623,291 1,581,157 1,486,445 10.3 %
Interest-bearing deposits 4,821,092 4,863,920 4,952,847 5,049,496 5,067,699 -4.9 %
Total deposits 6,461,045 6,518,228 6,576,138 6,630,653 6,554,144 -1.4 %
Federal funds purchased and repurchase agreements 221,541 231,229 280,595 254,985 211,401 4.8 %
Other borrowings 101,210 101,127 101,045 100,963 102,060 -0.8 %
Total liabilities 6,841,307 6,913,093 7,040,668 7,056,812 6,950,029 -1.6 %
Shareholders’ common equity (excludes preferred stock) 984,920 966,995 953,018 934,163 916,469 7.5 %
Shareholders’ equity 984,920 966,995 953,018 934,163 981,469 0.4 %
Common shares issued and outstanding 24,150,702 24,135,220 24,130,006 24,118,243 24,104,124 0.2 %
Fourth
ENDING Balance Quarter
December 31, September 30, June 30, March 31, December 31, 2014 – 2013
NONPERFORMING ASSETS (ENDING BALANCE) (7) 2014 2014 2014 2014 2013 % Change
Non-acquired
Non-acquired nonaccrual loans $ 18,569 $ 20,419 $ 26,546 $ 29,190 $ 31,333 -40.7 %
Restructured loans 9,425 9,633 8,409 8,156 10,690 -11.8 %
Non-acquired other real estate owned (“OREO”) 7,947 9,360 9,003 12,187 13,456 -40.9 %
Accruing loans past due 90 days or more 522 429 358 96 258 102.3 %
Other nonperforming assets
Total non-acquired nonperforming assets 36,463 39,841 44,316 49,629 55,737 -34.6 %
Acquired non-credit impaired loans
Acquired nonaccrual loans 7,538 5,359
Acquired accruing loans past due 90 days or more 108 501
Total acquired non-credit impaired loans 7,646 5,860
Acquired OREO and other nonperforming assets
OREO covered under FDIC loss share agreements 16,227 18,961 21,999 29,003 27,520 -41.0 %
OREO not covered under FDIC loss share agreements 18,552 22,929 22,732 22,957 23,941 -22.5 %
Other nonperforming assets 694 640 811 1,032 943
Total acquired OREO and other nonperforming assets 35,473 42,530 45,542 52,992 52,404 -32.3 %
Total acquired nonperforming assets 43,119 48,390 45,542 52,992 52,404 -17.7 %
Total nonperforming assets $ 79,582 $ 88,231 $ 89,858 $ 102,621 $ 108,141 -26.4 %
Excluding Acquired Assets
NPLs as a percentage of period end non-acquired loans 0.82 % 0.92 % 1.11 % 1.26 % 1.48 %
Total nonperforming assets as a percentage of total non-acquired loans and repossessed assets (1) (4)
1.05 % 1.20 % 1.39 % 1.66 % 1.94 %
Total nonperforming assets as a percentage of total assets (5)
0.47 % 0.51 % 0.55 % 0.62 % 0.70 %
Including Acquired Assets
NPLs as a percentage of period end loans 0.63 % 0.64 % 0.62 % 0.67 % 0.74 %
Total nonperforming assets as a percentage of total loans and repossessed assets (1) (4)
1.38 % 1.54 % 1.57 % 1.81 % 1.88 %
Total nonperforming assets as a percentage of total assets
1.02 % 1.12 % 1.12 % 1.28 % 1.36 %
South State Corporation
(Unaudited)
(Dollars in thousands)
Fourth
Quarter
Quarter Ended Twelve Months Ended YTD
December 31, September 30, June 30, March 31, December 31, 2014 – 2013 December 31, December 31, 2014 – 2013
ALLOWANCE FOR LOAN LOSSES (1) 2014 2014 2014 2014 2013 % Change 2014 2013 % Change
Non-acquired Loans:
Balance at beginning of period $ 34,804 $ 35,422 $ 34,669 $ 34,331 $ 36,145 -3.7 % $ 34,331 $ 44,378 -22.6 %
Loans charged off (849 ) (1,500 ) (1,359 ) (901 ) (2,778 ) -69.4 % (4,609 ) (13,568 ) -66.0 %
Overdrafts charged off (695 ) (1,213 ) (530 ) (469 ) (389 ) 78.7 % (2,907 ) (1,720 ) 69.0 %
Loan recoveries 201 362 413 817 1,215 -83.5 % 1,793 3,572 -49.8 %
Overdraft recoveries 203 213 144 221 138 47.1 % 781 651 20.0 %
Net charge-offs (1,140 ) (2,138 ) (1,332 ) (332 ) (1,814 ) -37.2 % (4,942 ) (11,065 ) -55.3 %
Provision for loan losses on non-acquired loans 875 1,520 2,085 670 5,150 1,018 405.9 %
Balance at end of period, non-acquired loans $ 34,539 $ 34,804 $ 35,422 $ 34,669 $ 34,331 0.6 % $ 34,539 $ 34,331 0.6 %
Acquired Non-Credit Impaired Loans:
Balance at beginning of period $ $ $ $ $ $ $
Loans charged off (653 ) (879 ) (1,531 )
Overdrafts charged off
Loan recoveries 163 441 604
Overdraft recoveries
Net charge-offs (490 ) (438 ) (927 )
Provision for loan losses on acquired non-credit impaired loans 490 438 927
Balance at end of period, acquired non-credit impaired loans $ $ $ $ $ $ $
Total provision for loan losses charged to operations $ 1,223 $ 2,091 $ 2,169 $ 849 $ (12 ) $ 6,331 $ 1,886
Allowance for non-acquired loan losses as a percentage of non-acquired loans (1)
1.00 % 1.05 % 1.12 % 1.16 % 1.20 % 1.00 % 1.20 %
Allowance for non-acquired loan losses as a percentage of non-acquired nonperforming loans
121.12 % 114.18 % 100.31 % 92.59 % 81.20 % 121.12 % 81.20 %
Net charge-offs on non-acquired loans as a percentage of average non-acquired loans (annualized) (1)
0.13 % 0.26 % 0.17 % 0.05 % 0.26 % 0.16 % 0.41 %
Net charge-offs on acquired non-credit impaired loans as a percentage of average acquired non-credit impaired loans (annualized) (1)
0.14 % 0.12 % 0.00 % 0.00 % 0.00 % 0.06 % 0.00 %
DAY 2 VALUATION ALLOWANCE ON ACQUIRED CREDIT IMPAIRED LOANS
Balance at beginning of period $ 8,032 $ 9,159 $ 11,046 $ 11,618 $ 12,260 $ 11,618 $ 17,218
Provision for loan losses on acquired credit impaired loans:
Provision for loan losses before benefit attributable
to FDIC loss share agreements (118 ) (658 ) (1,438 ) 304 73 (1,910 ) (918 )
Benefit attributable to FDIC loss share agreements (24 ) 791 1,522 (125 ) (85 ) 2,164 1,786
Net provision for loan losses on acquired credit impaired loans (142 ) 133 84 179 (12 ) 254 868
Provision for loan losses recorded through the FDIC
loss share receivable 24 (791 ) (1,522 ) 125 85 (2,164 ) (1,786 )
Reduction due to loan removals (12) (550 ) (469 ) (449 ) (876 ) (715 ) (2,344 ) (4,682 )
Balance at end of period, acquired credit impaired loans $ 7,364 $ 8,032 $ 9,159 $ 11,046 $ 11,618 $ 7,364 $ 11,618
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
Fourth
ENDING Balance Quarter
December 31, September 30, June 30, March 31, December 31, 2014 – 2013
LOAN PORTFOLIO (ENDING balance) (1) 2014 2014 2014 2014 2013 % Change
Acquired loans:
Acquired covered loans:
Commercial non-owner occupied real estate:
Construction and land development $ 20,275 $ 22,291 $ 30,859 $ 37,757 $ 43,396 -53.3 %
Commercial non-owner occupied 35,035 36,653 47,017 50,814 53,525 -34.5 %
Total commercial non-owner occupied real estate 55,310 58,944 77,876 88,571 96,921 -42.9 %
Consumer real estate:
Consumer owner occupied 30,304 31,757 36,017 37,111 38,946 -22.2 %
Home equity loans 35,509 35,471 33,684 34,627 35,884 -1.0 %
Total consumer real estate 65,813 67,228 69,701 71,738 74,830 -12.0 %
Commercial owner occupied real estate 45,986 54,776 72,247 78,861 88,722 -48.2 %
Commercial and industrial 9,887 10,450 11,711 11,964 14,475 -31.7 %
Other income producing property 20,820 22,445 27,521 29,471 31,739 -34.4 %
Consumer non real estate 675 821 1,583 1,772 1,878 -64.1 %
Total acquired covered loans 198,491 214,664 260,639 282,377 308,565 -35.7 %
Acquired non-covered loans:
Commercial non-owner occupied real estate:
Construction and land development 65,959 76,167 86,830 96,981 129,289 -49.0 %
Commercial non-owner occupied 181,652 192,322 191,637 204,094 226,530 -19.8 %
Total commercial non-owner occupied real estate 247,611 268,489 278,467 301,075 355,819 -30.4 %
Consumer real estate:
Consumer owner occupied 842,995 879,302 912,346 951,131 981,834 -14.1 %
Home equity loans 294,589 303,615 313,318 324,686 335,241 -12.1 %
Total consumer real estate 1,137,584 1,182,917 1,225,664 1,275,817 1,317,075 -13.6 %
Commercial owner occupied real estate 176,268 188,482 188,490 200,370 211,030 -16.5 %
Commercial and industrial 67,028 62,003 69,953 76,016 98,046 -31.6 %
Other income producing property 139,496 146,819 154,100 160,498 171,544 -18.7 %
Consumer non real estate 288,288 302,493 326,765 340,857 371,112 -22.3 %
Total acquired non-covered loans 2,056,275 2,151,203 2,243,439 2,354,633 2,524,626 -18.6 %
Total acquired loans 2,254,766 2,365,867 2,504,078 2,637,010 2,833,191 -20.4 %
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development 364,221 385,318 371,751 319,441 299,951 21.4 %
Commercial non-owner occupied 333,590 318,470 302,961 285,145 291,170 14.6 %
Total commercial non-owner occupied real estate 697,811 703,788 674,712 604,586 591,121 18.0 %
Consumer real estate:
Consumer owner occupied 786,778 702,521 637,071 595,652 548,170 43.5 %
Home equity loans 283,934 276,341 271,028 263,057 257,139 10.4 %
Total consumer real estate 1,070,712 978,862 908,099 858,709 805,309 33.0 %
Commercial owner occupied real estate 907,913 881,403 849,048 845,728 833,513 8.9 %
Commercial and industrial 405,923 355,580 353,211 333,574 321,824 26.1 %
Other income producing property 150,928 154,822 151,928 158,186 143,204 5.4 %
Consumer non real estate 189,317 183,451 170,982 147,710 136,410 38.8 %
Other 45,222 46,802 66,645 31,465 33,835 33.7 %
Total non-acquired loans 3,467,826 3,304,708 3,174,625 2,979,958 2,865,216 21.0 %
Total loans (net of unearned income) (1) $ 5,722,592 $ 5,670,575 $ 5,678,703 $ 5,616,968 $ 5,698,407 0.4 %
Loans held for sale $ 60,270 $ 56,595 $ 56,407 $ 57,200 $ 30,586 97.1 %
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
Quarter Ended Twelve Months Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
SELECTED RATIOS 2014 2014 2014 2014 2013 2014 2013
Return on average assets (annualized) 1.07 % 0.96 % 0.91 % 0.86 % 0.70 % 0.95 % 0.77 %
Operating return on average assets (annualized) (non-GAAP) (3) 1.23 % 1.21 % 1.12 % 1.06 % 1.00 % 1.15 % 1.02 %
Return on average common equity (annualized) 8.63 % 7.99 % 7.63 % 6.89 % 5.72 % 7.80 % 6.99 %
Return on average equity (annualized) 8.63 % 7.99 % 7.63 % 6.90 % 5.67 % 7.79 % 6.90 %
Operating return on average common equity (annualized) (non-GAAP) (3) 9.93 % 9.99 % 9.43 % 8.61 % 8.38 % 9.51 % 9.26 %
Operating return on average equity (annualized) (non-GAAP) (3) 9.93 % 9.99 % 9.43 % 8.51 % 8.16 % 9.47 % 9.08 %
Return on average tangible common equity (annualized) (non-GAAP) (10) 14.77 % 13.97 % 13.62 % 12.59 % 10.90 % 13.77 % 11.54 %
Operating return on average tangible common equity (annualized) (non-GAAP) (10) 16.85 % 17.23 % 16.59 % 15.47 % 15.46 % 16.56 % 15.00 %
Return on average tangible equity (annualized) (non-GAAP) (10) 14.77 % 13.97 % 13.62 % 12.03 % 10.25 % 13.60 % 10.86 %
Net interest margin (tax equivalent) 4.72 % 4.65 % 4.75 % 4.99 % 4.91 % 4.80 % 5.00 %
Efficiency ratio (tax equivalent) 69.34 % 70.98 % 71.52 % 73.84 % 79.22 % 71.41 % 75.85 %
Operating efficiency ratio excluding OREO expense 62.73 % 61.32 % 63.62 % 64.06 % 66.30 % 62.98 % 64.87 %
Book value per common share $ 40.78 $ 40.07 $ 39.50 $ 38.73 $ 40.72
Tangible common equity per common share (non-GAAP) (10) $ 25.59 $ 24.78 $ 24.12 $ 23.17 $ 22.36
Common shares issued and outstanding 24,150,702 24,135,220 24,130,006 24,118,243 24,104,124
Common equity-to-assets 12.58 % 12.27 % 11.92 % 11.69 % 11.55 %
Equity-to-assets 12.58 % 12.27 % 11.92 % 11.69 % 12.37 %
Tangible common equity-to-tangible assets (non-GAAP) (10) 8.28 % 7.96 % 7.63 % 7.34 % 7.13 %
Tangible equity-to-tangible assets (non-GAAP) (10) 8.28 % 7.96 % 7.63 % 7.34 % 7.99 %
Tier 1 leverage (9) 9.4 % 9.1 % 8.9 % 8.6 % 9.3 %
Tier 1 risk-based capital (9) 13.5 % 13.2 % 12.9 % 12.7 % 13.5 %
Total risk-based capital (9) 14.3 % 14.1 % 13.8 % 13.6 % 14.4 %
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
Quarter Ended Twelve Months Ended YTD
December 31, September 30, June 30, March 31, December 31, December 31, December 31, 2014 – 2013
RECONCILIATION OF NON-GAAP TO GAAP 2014 2014 2014 2014 2013 2014 2013 % Change
Pre-tax, Pre-provision Operating Earnings (6)
Net income (GAAP) $ 21,248 $ 19,327 $ 17,946 $ 16,916 $ 13,984 $ 75,437 $ 49,219 53.3 %
Provision for loan losses (1) 1,481 2,091 2,169 849 (12 ) 6,590 1,886 249.4 %
Provision for income taxes 9,445 8,346 9,368 8,832 7,204 35,991 25,356 41.9 %
Pre-tax, pre-provision income 32,174 29,764 29,483 26,597 21,176 118,018 76,461 54.4 %
Securities gains 90 (88 ) 2
Merger and branding related expense 4,599 6,846 6,510 5,985 9,314 23,940 22,534
Pre-tax, pre-provision operating earnings (non-GAAP) $ 36,773 $ 36,700 $ 35,905 $ 32,582 $ 30,490 $ 141,960 $ 98,995 43.4 %
Operating Return of Average Assets (3)
Operating return on average assets (non-GAAP) 1.23 % 1.21 % 1.12 % 1.06 % 1.00 % 1.15 % 1.02 %
Effect to adjust for securities gains (losses) 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Effect to adjust for merger and branding related expenses -0.16 % -0.25 % -0.21 % -0.20 % -0.30 % -0.20 % -0.25 %
Return on average assets (GAAP) 1.07 % 0.96 % 0.91 % 0.86 % 0.70 % 0.95 % 0.77 %
Operating Return of Average Common Equity (3)
Operating return on average equity (non-GAAP) 9.93 % 9.99 % 9.43 % 8.61 % 8.38 % 9.51 % 9.26 %
Effect to adjust for securities gains (losses) 0.00 % -0.03 % 0.02 % 0.00 % 0.00 % 0.00 % 0.00 %
Effect to adjust for merger and branding related expenses -1.30 % -1.97 % -1.82 % -1.72 % -2.66 % -1.71 % -2.27 %
Return on average common equity (GAAP) 8.63 % 7.99 % 7.63 % 6.89 % 5.72 % 7.80 % 6.99 %
Operating Return of Average Equity (3)
Operating return on average equity (non-GAAP) 9.93 % 9.99 % 9.43 % 8.51 % 8.16 % 9.47 % 9.08 %
Effect to adjust for securities gains (losses) 0.00 % -0.03 % 0.02 % 0.00 % 0.00 % 0.00 % 0.00 %
Effect to adjust for merger and branding related expenses -1.30 % -1.97 % -1.82 % -1.61 % -2.49 % -1.68 % -2.18 %
Return on average equity (GAAP) 8.63 % 7.99 % 7.63 % 6.90 % 5.67 % 7.79 % 6.90 %
Return on Average Common Tangible Equity
Return on average common tangible equity (non-GAAP) 14.77 % 13.97 % 13.62 % 12.59 % 10.90 % 13.77 % 11.54 %
Effect to adjust for intangible assets -6.14 % -5.98 % -5.99 % -5.70 % -5.18 % -5.97 % -4.55 %
Return on average common equity (GAAP) 8.63 % 7.99 % 7.63 % 6.89 % 5.72 % 7.80 % 6.99 %
Operating Return on Average Common Tangible Equity
Operating return on average common tangible equity (non-GAAP) 16.85 % 17.23 % 16.59 % 15.47 % 15.46 % 16.56 % 15.00 %
Effect to adjust for securities gains (losses) 0.00 % -0.03 % 0.02 % 0.00 % 0.00 % 0.00 % 0.00 %
Effect to adjust for merger and branding related expenses -1.29 % -1.98 % -1.82 % -1.71 % -2.67 % -1.70 % -2.27 %
Effect to adjust for intangible assets -6.93 % -7.24 % -7.17 % -6.87 % -7.07 % -7.06 % -5.74 %
Return on average common equity (GAAP) 8.63 % 7.99 % 7.63 % 6.89 % 5.72 % 7.80 % 6.99 %
Return on Average Tangible Equity (10)
Return on average tangible equity (non-GAAP) 14.77 % 13.97 % 13.62 % 12.03 % 10.25 % 13.60 % 10.86 %
Effect to adjust for intangible assets -6.14 % -5.98 % -5.99 % -5.13 % -4.58 % -5.81 % -3.96 %
Return on average equity (GAAP) 8.63 % 7.99 % 7.63 % 6.90 % 5.67 % 7.79 % 6.90 %
Operating efficiency ratio excluding OREO expense
Operating efficiency ratio excluding OREO expense 62.73 % 61.32 % 63.62 % 64.06 % 66.30 % 62.98 % 64.87 %
Effect to adjust for OREO and loan related expense 2.34 % 3.19 % 1.77 % 4.07 % 4.13 % 2.79 % 4.16 %
Effect to adjust for merger and branding expenses 4.27 % 6.47 % 6.13 % 5.71 % 8.79 % 5.64 % 6.82 %
Efficiency ratio (Tax Equivalent) 69.34 % 70.98 % 71.52 % 73.84 % 79.22 % 71.41 % 75.85 %
Tangible Book Value Per Common Share (10)
Tangible book value per common share (non-GAAP) $ 25.59 $ 24.78 $ 24.12 $ 23.17 $ 22.36
Effect to adjust for intangible assets 15.19 15.29 15.38 15.56 18.36
Book value per common share (GAAP) $ 40.78 $ 40.07 $ 39.50 $ 38.73 $ 40.72
Tangible Common Equity-to-Tangible Assets
Tangible common equity-to-tangible assets (non-GAAP) 8.28 % 7.96 % 7.63 % 7.34 % 7.13 %
Effect to adjust for intangible assets 4.30 % 4.31 % 4.29 % 4.35 % 4.42 %
Common equity-to-assets (GAAP) 12.58 % 12.27 % 11.92 % 11.69 % 11.55 %
Tangible Equity-to-Tangible Assets (10)
Tangible equity-to-tangible assets (non-GAAP) 8.28 % 7.96 % 7.63 % 7.34 % 7.99 %
Effect to adjust for intangible assets 4.30 % 4.31 % 4.29 % 4.35 % 4.38 %
Equity-to-assets (GAAP) 12.58 % 12.27 % 11.92 % 11.69 % 12.37 %
South State Corporation
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 31, 2014 December 31, 2013
Average Interest Average Average Interest Average
YIELD ANALYSIS Balance Earned/Paid Yield/Rate Balance Earned/Paid Yield/Rate
Interest-Earning Assets:
Federal funds sold, reverse repo, and time deposits $ 381,491 $ 463 0.48 % $ 469,382 $ 541 0.46 %
Investment securities (taxable) 675,672 3,898 2.29 % 548,725 3,392 2.45 %
Investment securities (tax-exempt) 143,953 1,126 3.10 % 150,867 1,191 3.13 %
Loans held for sale 46,540 636 5.42 % 35,673 357 3.97 %
Acquired loans, net of allowance for acquired loan losses 2,298,491 44,505 7.68 % 2,883,309 52,278 7.19 %
Non-acquired loans (1) 3,382,795 34,752 4.08 % 2,793,522 31,007 4.40 %
Total interest-earning assets 6,928,942 85,380 4.89 % 6,881,478 88,766 5.12 %
Noninterest-Earning Assets:
Cash and due from banks 145,225 160,164
Other assets 852,523 972,372
Allowance for non-acquired loan losses (34,781 ) (36,410 )
Total noninterest-earning assets 962,967 1,096,126
Total Assets $ 7,891,909 $ 7,977,604
Interest-Bearing Liabilities:
Transaction and money market accounts $ 2,911,247 $ 765 0.10 % $ 2,860,770 $ 888 0.12 %
Savings deposits 658,664 119 0.07 % 647,969 120 0.07 %
Certificates and other time deposits 1,268,408 1,362 0.43 % 1,590,114 1,748 0.44 %
Federal funds purchased and repurchase agreements 238,842 80 0.13 % 229,382 82 0.14 %
Other borrowings 101,173 1,503 5.89 % 106,812 1,513 5.62 %
Total interest-bearing liabilities 5,178,334 3,829 0.29 % 5,435,047 4,351 0.32 %
Noninterest-Bearing Liabilities:
Demand deposits 1,678,589 1,510,734
Other liabilities 58,590 52,488
Total noninterest-bearing liabilities (“Non-IBL”) 1,737,179 1,563,222
Shareholders’ equity 976,396 979,335
Total Non-IBL and shareholders’ equity 2,713,575 2,542,557
Total liabilities and shareholders’ equity $ 7,891,909 $ 7,977,604
Net interest income and margin (NON-TAX EQUIV.) $ 81,551 4.67 % $ 84,415 4.87 %
Net interest margin (TAX EQUIVALENT) 4.72 % 4.91 %
South State Corporation
(Unaudited)
(Dollars in thousands)
Twelve Months Ended
December 31, 2014 December 31, 2013
Average Interest Average Average Interest Average
YIELD ANALYSIS Balance Earned/Paid Yield/Rate Balance Earned/Paid Yield/Rate
Interest-Earning Assets:
Federal funds sold, reverse repo, and time deposits $ 364,076 $ 1,793 0.49 % $ 392,915 $ 1,906 0.49 %
Investment securities (taxable) 667,033 15,758 2.36 % 458,344 11,073 2.42 %
Investment securities (tax-exempt) 146,700 4,589 3.13 % 151,908 4,773 3.14 %
Loans held for sale 38,745 1,766 4.56 % 45,015 1,620 3.60 %
Acquired loans, net of allowance for acquired loan losses 2,500,882 186,655 7.46 % 1,813,425 148,597 8.19 %
Non-acquired loans (1) 3,151,482 131,461 4.17 % 2,677,450 118,379 4.42 %
Total interest-earning assets 6,868,918 342,022 4.98 % 5,539,057 286,348 5.17 %
Noninterest-Earning Assets:
Cash and due from banks 193,993 125,324
Other assets 910,560 730,784
Allowance for non-acquired loan losses (35,034 ) (40,192 )
Total noninterest-earning assets 1,069,519 815,916
Total Assets $ 7,938,437 $ 6,354,973
Interest-Bearing Liabilities:
Transaction and money market accounts $ 2,894,137 $ 3,295 0.11 % $ 2,280,055 $ 2,897 0.13 %
Savings deposits 663,659 488 0.07 % 479,367 398 0.08 %
Certificates and other time deposits 1,381,049 5,518 0.40 % 1,277,772 5,194 0.41 %
Federal funds purchased and repurchase agreements 253,948 357 0.14 % 274,080 426 0.16 %
Other borrowings 101,195 6,004 5.93 % 76,421 4,072 5.33 %
Total interest-bearing liabilities 5,293,988 15,662 0.30 % 4,387,695 12,987 0.30 %
Noninterest-Bearing Liabilities:
Demand deposits 1,604,421 1,215,052
Other liabilities 71,865 39,336
Total noninterest-bearing liabilities (“Non-IBL”) 1,676,286 1,254,388
Shareholders’ equity 968,163 712,890
Total Non-IBL and shareholders’ equity 2,644,449 1,967,278
Total liabilities and shareholders’ equity $ 7,938,437 $ 6,354,973
Net interest income and margin (NON-TAX EQUIV.) $ 326,360 4.75 % $ 273,361 4.94 %
Net interest margin (TAX EQUIVALENT) 4.80 % 5.00 %
South State Corporation
(Unaudited)
(Dollars in thousands)
Fourth
Three Months Ended Quarter Twelve Months Ended YTD
December 31, September 30, June 30, March 31, December 31, 2014 – 2013 December 31, 2014 – 2013
NONINTEREST INCOME & EXPENSE 2014 2014 2014 2014 2013 % Change 2014 2013 % Change
Noninterest income:
Service charges on deposit accounts $ 8,986 $ 9,126 $ 9,144 $ 8,988 $ 10,097 -11.0 % 36,244 30,561 18.6 %
Bankcard services income 7,320 7,489 7,741 7,084 7,230 1.2 % 29,634 21,844 35.7 %
Mortgage banking income 4,072 4,124 4,683 3,291 2,520 61.6 % 16,170 9,149 76.7 %
Trust and investment services income 4,499 4,490 4,812 4,543 4,315 4.3 % 18,344 12,661 44.9 %
Securities gains, net (8) (90 ) 88 (2 )
Amortization of FDIC indemnification asset (4,177 ) (4,825 ) (5,815 ) (7,078 ) (7,429 ) 43.8 % (21,895 ) (29,535 ) -25.9 %
Other 4,599 4,139 3,746 3,717 3,916 17.4 % 16,201 9,040 79.2 %
Total noninterest income $ 25,299 $ 24,453 $ 24,399 $ 20,545 $ 20,649 22.5 % $ 94,696 $ 53,720 76.3 %
Noninterest expense:
Salaries and employee benefits $ 39,034 $ 40,029 $ 40,276 $ 39,093 $ 40,634 -3.9 % $ 158,432 $ 122,096 29.8 %
Information services expense 3,724 3,417 4,279 4,424 4,381 -15.0 % 15,844 14,469 9.5 %
OREO expense and loan related 2,520 3,374 1,875 4,064 4,344 -42.0 % 11,833 13,727 -13.8 %
Net occupancy expense 5,701 5,387 5,731 5,640 5,894 -3.3 % 22,459 17,590 27.7 %
Furniture and equipment expense 3,100 3,166 3,264 3,741 3,816 -18.8 % 13,271 12,111 9.6 %
Merger and branding related expense 4,599 6,846 6,510 5,985 9,314 -50.6 % 23,940 22,534 6.2 %
Business development and staff related 1,736 1,482 1,747 1,578 1,778 -2.4 % 6,543 5,519 18.6 %
FDIC assessment and other regulatory charges 1,321 1,268 1,267 1,576 1,193 10.7 % 5,432 5,034 7.9 %
Supplies, printing and postage expense 2,074 1,681 1,599 1,583 1,551 33.7 % 6,937 4,891 41.8 %
Bankcard expense 2,043 2,141 2,187 2,192 2,287 -10.7 % 8,563 6,550 30.7 %
Amortization of intangibles 2,052 2,080 2,084 2,104 2,287 -10.3 % 8,320 6,081 36.8 %
Professional fees 1,459 1,068 1,190 1,243 1,430 2.0 % 4,960 4,210 17.8 %
Advertising and marketing 1,172 837 1,054 1,093 1,729 -32.2 % 4,156 4,532 -8.3 %
Other 4,141 2,282 2,826 3,099 3,250 27.4 % 12,348 11,276 9.5 %
Total noninterest expense $ 74,676 $ 75,058 $ 75,889 $ 77,415 $ 83,888 -11.0 % $ 303,038 $ 250,620 20.9 %
Notes:
(A) Includes noncash loan interest income related the discount on acquired performing loans on $2.3 million; $2.4 million; $2.2 million; $3.0 million; and $3.5 million, respectively during the five quarters above, and for the year ended the amounts were $9.9 million and $6.7 million.
(1) Loan data excludes mortgage loans held for sale.
(2) The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.
(3) Operating earnings, operating return on average assets, and operating return on average equity are non-GAAP measures and exclude the after-tax effect of gains on acquisitions, gains or losses on sales of securities, OTTI, and merger and branding related expense. Management believes that non-GAAP operating measures provide additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP. Operating earnings and the related operating return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branding related expense of $4.6 million, $6.8 million, $6.5 million, $6.0 million, and $9.3 million, for the quarters ended December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014, and December 31, 2013, respectively; and (b) securities gains (losses) of ($90,000) and $88,000 for the quarters ended September 30, 2014 and June 30, 2014.
(4) Repossessed assets includes OREO and other nonperforming assets.
(5) Calculated by dividing total non-acquired NPAs by total assets.
(6) Pre-tax, pre-provision operating earnings is a non-GAAP measure and excludes the effect of the provision for loan losses, the provision for income taxes, the gains on acquisitions, gains or losses on sales of securities, OTTI, and merger and branding related expense. Management believes that non-GAAP pre-tax, pre-provision operating earnings provides additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP.
(7) Acquired credit impaired loans are not included in non-performing assets because the accretion method is being used for these acquired loan pools.
(8) If an other-than-temporary impairment charge was recorded during the quarter, the amount would be reflected in the “securities gains (losses), net” line item.
(9) December 31, 2014 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed. All ratios are rounded down to one decimal point.
(10) The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP. The sections titled “Reconciliation of Non-GAAP to GAAP” provide tables that reconcile non-GAAP measures to GAAP.
(11) Classified asset data excludes acquired assets.
(12) The allowance for acquired loan losses is reduced for any loan removals, which occur when a loan has been fully paid off, fully charged off, sold or transferred to OREO.
SOUTH STATE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
December 31, December 31,
2014 2013
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 229,901 $ 212,473
Interest-bearing deposits with banks 7,456 4,770
Federal funds sold and securities
purchased under agreements to resell 180,512 262,218
Total cash and cash equivalents 417,869 479,461
Investment securities:
Securities held to maturity
(fair value of $10,233, and $12,891, respectively) 9,659 12,426
Securities available for sale, at fair value 806,766 786,791
Other investments 10,518 13,386
Total investment securities 826,943 812,603
Loans held for sale 60,270 30,586
Loans:
Acquired credit impaired (covered of $182,464, and $289,123, respectively; non-covered of $736,938, and $931,515, respectively), net of allowance for loan losses
919,402 1,220,638
Acquired non-credit impaired (covered of $9,376, and $7,824, respectively; non-covered of $1,318,623, and $1,593,111, respectively)
1,327,999 1,600,935
Non-acquired 3,467,826 2,865,216
Less allowance for non-acquired loan losses (34,539 ) (34,331 )
Loans, net 5,680,688 5,652,458
Goodwill 317,688 317,688
Premises and equipment, net 171,772 188,114
Bank owned life insurance 99,140 97,197
FDIC receivable for loss share agreements 22,161 86,447
Deferred tax asset 42,692 72,914
Other real estate owned (covered of $16,227, and $27,520, respectively;
non-covered of $26,499, and $37,398, respectively) 42,726 64,918
Core deposit and other intangibles 49,239 59,908
Mortgage servicing rights 21,601 20,729
Other assets 73,438 48,475
Total assets $ 7,826,227 $ 7,931,498
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing $ 1,639,953 $ 1,486,445
Interest-bearing 4,821,092 5,067,699
Total deposits 6,461,045 6,554,144
Federal funds purchased and securities
sold under agreements to repurchase 221,541 211,401
Other borrowings 101,210 102,060
Other liabilities 57,511 82,424
Total liabilities 6,841,307 6,950,029
Shareholders’ equity:
Preferred stock – $.01 par value; authorized 10,000,000 shares; 0, and 65,000 shares issued and outstanding, respectively
1
Common stock – $2.50 par value; authorized 40,000,000 shares; 24,150,702, and 24,104,124 shares issued and outstanding, respectively
60,377 60,260
Surplus 701,764 762,354
Retained earnings 223,156 168,577
Accumulated other comprehensive (loss) (377 ) (9,723 )
Total shareholders’ equity 984,920 981,469
Total liabilities and shareholders’ equity $ 7,826,227 $ 7,931,498
SOUTH STATE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
Interest income:
Loans, including fees $ 79,893 $ 83,642 $ 319,882 $ 268,596
Investment securities:
Taxable 3,898 3,392 15,758 11,073
Tax-exempt 1,126 1,191 4,589 4,773
Federal funds sold and securities
purchased under agreements to resell 463 541 1,793 1,906
Total interest income 85,380 88,766 342,022 286,348
Interest expense:
Deposits 2,246 2,756 9,301 8,489
Federal funds purchased and securities sold under agreements to repurchase
80 82 357 426
Other borrowings 1,503 1,513 6,004 4,072
Total interest expense 3,829 4,351 15,662 12,987
Net interest income 81,551 84,415 326,360 273,361
Provision for loan losses 1,481 (12 ) 6,590 1,886
Net interest income after provision for loan losses 80,070 84,427 319,770 271,475
Noninterest income:
Service charges on deposit accounts 8,986 10,097 36,244 30,561
Bankcard services income 7,320 7,230 29,634 21,844
Mortgage banking income 4,072 2,520 16,170 9,149
Trust and investment services income 4,499 4,315 18,344 12,661
Securities gains (losses), net (2 )
Amortization of FDIC indemnification asset (4,177 ) (7,429 ) (21,895 ) (29,535 )
Other 4,599 3,916 16,201 9,040
Total noninterest income 25,299 20,649 94,696 53,720
Noninterest expense:
Salaries and employee benefits 39,034 40,634 158,432 122,096
Information services expense 3,724 4,381 15,844 14,470
OREO expense and loan related 2,520 4,344 11,833 13,727
Net occupancy expense 5,701 5,894 22,459 17,590
Furniture and equipment expense 3,100 3,816 13,271 12,112
Merger and branding related expense 4,599 9,314 23,940 22,534
FDIC assessment and other regulatory charges 1,321 1,193 5,432 5,034
Supplies, printing and postage expense 2,074 1,551 6,937 4,891
Bankcard expense 2,043 2,287 8,563 6,550
Amortization of intangibles 2,052 2,287 8,320 6,081
Professional fees 1,459 1,430 4,960 4,210
Advertising and marketing 1,172 1,729 4,156 4,532
Other 5,877 5,028 18,891 16,794
Total noninterest expense 74,676 83,888 303,038 250,621
Earnings:
Income before provision for income taxes 30,693 21,188 111,428 74,574
Provision for income taxes 9,445 7,204 35,991 25,355
Net income 21,248 13,984 75,437 49,219
Preferred stock dividends 812 1,073 1,354
Accretion on preferred stock discount
Net income available to common shareholders $ 21,248 $ 13,172 $ 74,364 $ 47,865
Earnings per common share:
Basic $ 0.89 $ 0.55 $ 3.11 $ 2.41
Diluted $ 0.88 $ 0.55 3.08 2.38
Dividends per common share $ 0.22 $ 0.19 $ 0.82 $ 0.74
Weighted-average common shares outstanding:
Basic 23,912 23,826 23,897 19,866
Diluted 24,189 24,079 24,154 20,077

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