South State Corporation Reports Operating Results of $0.92 per share; Increases Quarterly Cash Dividend

COLUMBIA, S.C.--()--South State Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and six-month periods ended June 30, 2014. Highlights of the second quarter 2014 include the following:

  • Net income available to common shareholders of $17.9 million, or $0.74 diluted EPS in 2Q 2014, up 13.3%, compared to $15.8 million, or $0.66 diluted EPS in 1Q 2014, and up 43.2% from $12.5 million, or $0.74 diluted EPS in 2Q 2013;
  • Operating earnings of $22.2 million, which exclude merger and branding expenses and include preferred stock dividends, or $0.92 diluted operating EPS in 2Q 2014, up 12.1%, compared to $19.8 million, or $0.82 diluted operating EPS in 1Q 2014, and up 69.1% from $13.1 million, or $0.77 diluted operating EPS in 2Q 2013;
  • Rebranded and changed the name to South State Corporation and South State Bank;
  • Return on average assets was 0.91% annualized in 2Q 2014 compared to 0.86% in 1Q 2014 and 0.99% in 2Q 2013; Operating return on average assets was 1.12% annualized in 2Q 2014 compared to 1.06% in 1Q 2014 and 1.04% in 2Q 2013;
  • Return on average tangible common equity was 13.6% annualized in 2Q 2014 compared to 12.6% in 1Q 2014, and 13.5% in 2Q 2013; Operating return on average tangible common equity was 16.6% in 2Q 2014 compared to 15.5% in 1Q 2014 and 14.1% in 2Q 2013;
  • Tangible common equity per share increased by $1.02 during the second quarter to $24.13;
  • Net charge-offs of non-acquired loans increased to 0.17% annualized in 2Q 2014, compared to 0.05% annualized in 1Q 2014 and decreased from 0.40% annualized in 2Q 2013;
  • Operating efficiency ratio decreased to 63.6% in 2Q2014, compared to 64.1% in 1Q2014 and 63.8% in 2Q2013;
  • Legacy loan growth for 2Q 2014 was $194.7 million or 26.1% annualized.

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.21 per share payable on its common stock. This per share amount is $0.01 per share, or 5.0% higher than the dividend paid in the immediately preceding quarter and is $0.02 per share, or 10.5%, higher than a year ago. The dividend will be payable on August 22, 2014 to shareholders of record as of August 15, 2014.

Second 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 $17.9 million, or $0.74 per diluted common share for the three months ended June 30, 2014 up from $15.8 million, or $0.66 per diluted common share for the three months ended March 31, 2014. This $2.1 million increase was primarily the result of improved noninterest income, lower noninterest expense, and the elimination of the preferred stock dividend with the redemption of the preferred stock in March of 2014. These three improvements were offset by lower net interest income, higher provision for loan losses and higher provision for income taxes in terms of dollars (same effective tax rate).

“The second quarter was highlighted by very strong organic loan growth of $195 million. This was complemented by improved growth and profitability in mortgage banking, wealth management, and bankcard services,” said Robert R. Hill, Jr., CEO of South State Corporation. “I am especially pleased with our operating return on tangible common equity of 16.6% and our increase in tangible book value per share by $1.02. The combination of the merger with First Financial, good credit quality, and strong organic growth resulted in operating earnings of $22.2 million, a 69% increase over the second quarter of 2013.”

Asset Quality

During the second quarter of 2014, the Company’s trend of improved asset quality continued, excluding acquired loans and acquired other real estate owned (OREO), as nonperforming loans declined by $2.1 million, or 5.7%. Non-acquired nonperforming assets (NPAs) as a percentage of total non-acquired loans and repossessed assets declined to 1.39% compared to 1.66% in the first quarter of 2014. NPAs, excluding acquired NPAs, declined by $5.3 million from the first quarter 2014 level.

At June 30, 2014, the allowance for non-acquired loan losses was $35.4 million or 1.12% of non-acquired period-end loans. The current allowance for loan losses provides 1.00 times coverage of period-end non-acquired nonperforming loans, up from 0.93 times at the end of the first quarter of 2014. Net charge-offs within the non-acquired portfolio were $1.3 million for the quarter or 0.17% annualized, up from the first quarter of 2014 of $332,000 or 0.05% annualized, and down from the second quarter of 2013 of $2.6 million or 0.40% annualized.

OREO decreased by more than $10.4 million during the second quarter to $53.7 million compared to the first quarter of 2014 of $64.1 million. Non-acquired OREO declined by $3.2 million, while acquired (covered and uncovered) OREO declined by $7.2 million. This decline was partially the result of an auction which was held in late May where approximately $5.5 million in OREO assets (both acquired and non-acquired) were sold. The remaining decline of $4.9 million was from the recurring transactions of OREO during the quarter. OREO and loan related costs were down significantly as well during the quarter to $1.9 million compared to the first quarter of $4.3 million.

Net Interest Income and Margin

Non-taxable equivalent net interest income was $81.0 million for the second quarter of 2014, a $2.4 million decrease from the first quarter of 2014, resulting primarily from the following:

1. A $180.5 million decrease in the average balance of acquired loans from the first quarter of 2014, coupled with a decrease of 23 basis points in the yield on acquired loans from 7.56% to 7.33% which resulted in a decrease of $4.3 million; which was partially offset by

2. Non-acquired loans average balance growing by more than $152.4 million, however, the yield on these loans declined from 4.25% during the first quarter to 4.18% resulting in an increase in interest income of $1.4 million; and

3. The decline in interest expense on certificates and other time deposits of $148,000, from both a decline in the average rate and a decline in the average balance.

Tax-equivalent net interest margin decreased 24 basis points from the first quarter of 2014 and by 26 basis points from the second quarter of 2013. The Company’s average yield on interest-earning assets decreased 26 basis points while the average rate on interest-bearing liabilities declined 1 basis point from the first quarter of 2014. During the second quarter of 2014, the Company’s average total assets remained at approximately $7.9 billion and average earning assets increased slightly to $6.9 billion. Average interest-bearing liabilities declined by approximately $73.1 million.

Noninterest Income and Expense

Noninterest income was up by more than $3.7 million in the second quarter of 2014 to $24.4 million compared to the first quarter of 2014 of $20.7 million. Increases in all categories contributed and were led by mortgage banking income, bankcard services, trust and investment services, and a reduction in the negative accretion on the indemnification asset, all totaling $3.5 million. Compared to the second quarter of 2013, noninterest income grew significantly by $15.9 million due primarily to the First Financial merger and the reduction in negative accretion on the indemnification asset.

Noninterest expense was $75.9 million in the second quarter of 2014, down from $77.4 million from the first quarter of 2014. This decrease from the first quarter of 2014 was primarily due to much lower OREO expense and loan related cost by $2.4 million. This decline was partially offset by an increase in salaries and employee benefits by $1.2 million which was attributable to hiring new loan producers and support personnel, overtime pay and merit increases. During the quarter, the company incurred $1.3 million of branding related cost and $5.2 million of merger cost, which combined was $525,000 more than first quarter 2014. Many of the other noninterest expense categories declined, except for occupancy, information services, and business development and staff related compared to the first quarter. The efficiency ratio for the quarter was 71.5%, down from 73.8% in the first quarter. Our operating efficiency ratio, which excludes merger and branding expenses and OREO and loan related expenses, declined to 63.6% compared to 64.1% in the first quarter.

Compared to the second quarter of 2013, noninterest expense was $31.0 million higher than second quarter of 2014. This significant increase was primarily the result of the First Financial merger.

Balance Sheet and Capital

At June 30, 2014, the Company’s total assets were $8.0 billion, up from $5.0 billion at June 30, 2013, and from $7.9 billion at December 31, 2013. Since December 31, 2013, the Company has experienced asset growth in the following areas: cash and short-term investments by $110.1 million, or 23.0%, non-acquired loans by $309.4 million, or 10.8%, and loans held for sale by $25.8 million, or 84.4%. Loans held for sale increased primarily from the increase in closings of mortgage loans from the pipeline during the quarter. Partially offsetting these increases were decreases in acquired loans by $319.2 million, the FDIC receivable by $50.2 million and OREO by $11.2 million.

The Company’s book value per common share increased to $39.50 per share at June 30, 2014, compared to $38.73 at March 31, 2014. Capital increased by $18.9 million due primarily to net income of $17.9 million, which was offset by the common dividend paid of $4.8 million. Accumulated comprehensive income increased by $4.5 million, net of tax, in the second quarter, primarily the result of change in the fair value of the available for sale investment securities portfolio. In March of 2014, the Company redeemed $65.0 million of preferred stock, which resulted in a decline in capital. Tangible book value (“TBV”) per common share increased by $1.02 per share to $24.13 at June 30, 2014 from $23.11, at March 31, 2014. This increase was primarily the result of the strong net income, reduced intangibles (from purchase accounting adjustments and amortization charges), and improvement in accumulated other comprehensive income (AFS securities).

In addition, tangible common equity to tangible assets increased to 7.64% at June 30, 2014 up from 7.32% at the end of the first quarter of 2014.

The total risk-based capital ratio is estimated to be around 13.8% up from March 31, 2014 of 13.6%. Tier 1 leverage ratio increased to approximately 8.9% from 8.6% at March 31, 2014. The increase was driven by net income for the quarter. The Company’s capital position remains “well-capitalized” by all measures at June 30, 2014.

“Our balance sheet reflected solid improvement during the quarter as net loan balances grew by more than $60.0 million, OREO declined by more than $10.4 million, noninterest bearing deposits continued to increase by more than $42.0 million and equity improved by more than $18.8 million,” said John C. Pollok, COO and CFO. “Our cost savings for the second quarter came in as expected, and slightly better than first quarter cost savings, as we closed only two branches. We anticipate additional cost savings during third quarter as eight more branches will be consolidated or closed, and the conversion from last week triggers various systems cost savings that will impact us beginning in August. Our fourth quarter results should reflect the majority of our cost savings initiatives.”

South State Corporation will hold a conference call today, July 29th, 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 10048886. Participants can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available beginning July 29th by 2:00 p.m. Eastern Time until 9:00 a.m. on August 13, 2014. To listen to the replay, dial 877-344-7529 or 412-317-0088. The pass code is 10048886.

South State Corporation is the largest publicly traded 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 $8.0 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)
             
Second
Three Months Ended Quarter Six Months Ended YTD
June 30, March 31, December 31, September 30, June 30, 2014 - 2013 June 30, 2014 - 2013
EARNINGS SUMMARY (non tax equivalent)   2014     2014     2013     2013     2013   % Change   2014     2013   % Change  
Interest income (A) $ 84,831 $ 87,338 $ 88,748 $ 83,808 $ 57,530 47.5 % $ 172,169 $ 113,699 51.4 %
Interest expense   3,858     3,996     4,359     4,029     2,246   71.8 %   7,854       4,614   70.2 %
Net interest income 80,973 83,342 84,389 79,779 55,284 46.5 % 164,315 109,085 50.6 %
Provision for loan losses (1) 2,169 849 (12 ) 659 179 1111.7 % 3,018 1,239 143.6 %
Noninterest income 24,399 20,679 20,683 15,157 8,485 187.6 % 45,078 18,008 150.3 %
Noninterest expense   75,889     77,423     83,896     75,419     44,885   69.1 %   153,312       91,326   67.9 %
Income before provision for income taxes 27,314 25,749 21,188 18,858 18,705 46.0 % 53,063 34,528 53.7 %
Provision for income taxes   9,368     8,832     7,204     6,804     6,173   51.8 %   18,200       11,347   60.4 %
Net income 17,946 16,917 13,984 12,054 12,532 43.2 % 34,863 23,181 50.4 %
Preferred stock dividends   --     1,073     812     542     --     1,073     --  
Net income available to common shareholders (GAAP) $ 17,946   $ 15,844   $ 13,172   $ 11,512   $ 12,532   43.2 % $ 33,790   $ 23,181   45.8 %
 
Effective tax rate 34.30 % 34.30 % 34.00 % 36.08 % 33.00 % 34.30 % 32.86 %
 
Basic weighted-average common shares 23,892,245 23,873,178 23,825,636 21,893,528 16,790,167 42.3 % 23,881,649 16,803,656 42.1 %
Diluted weighted-average common shares 24,140,600 24,116,174 24,079,350 22,127,979 16,989,818 42.1 % 24,126,105 16,986,172 42.0 %
 
Earnings per common share - Basic $ 0.75 $ 0.66 $ 0.55 $ 0.53 $ 0.75 0.0 % $ 1.41 $ 1.38 2.2 %
Earnings per common share - Diluted 0.74 0.66 0.55 0.52 0.74 0.0 % 1.40 1.36 2.9 %
 
Cash dividends declared per common share $ 0.20 $ 0.19 $ 0.19 $ 0.19 $ 0.18 11.1 % $ 0.39 $ 0.36 8.3 %
Dividend payout ratio (2) 26.89 % 28.91 % 34.74 % 39.71 % 24.46 % 9.9 % 27.84 % 26.43 % 5.3 %
 
Operating Earnings (non-GAAP) (3)
Net income (GAAP) $ 17,946 $ 16,917 $ 13,984 $ 12,054 $ 12,532 43.2 % $ 34,863 $ 23,181 50.4 %
Securities (gains) losses, net of tax (58 ) -- -- -- -- (58 ) --
Merger and branding related expense, net of tax   4,277     3,932     6,147     7,326     576   642.3 %   8,209     1,897  

Net operating earnings (loss) (non-GAAP)

22,165 20,849 20,131 19,380 13,108 69.1 % 43,015 25,078 71.5 %
Preferred stock dividends   --     1,073     812     542     --     1,073     --  

Net operating earnings (loss) available to

 common shareholders (non-GAAP)

$ 22,165   $ 19,776   $ 19,319   $ 18,838   $ 13,108   69.1 % $ 41,942   $ 25,078   67.2 %
 
Operating earnings (loss) per common share - Basic $ 0.93 $ 0.83 $ 0.81 $ 0.86 $ 0.78 19.2 % $ 1.76 $ 1.49 18.1 %
Operating earnings (loss) per common share - Diluted 0.92 0.82 0.80 0.85 0.77 19.5 % 1.74 1.48 17.6 %
 
Second
AVERAGE for Quarter Ended Quarter AVERAGE for Six Months YTD
June 30, March 31, December 31, September 30, June 30, 2014 - 2013 June 30, June 30, 2014 - 2013
BALANCE SHEET HIGHLIGHTS   2014     2014     2013     2013     2013   % Change   2014     2013   % Change  
Loans held for sale $ 50,423 $ 29,386 $ 35,673 $ 53,204 $ 40,040 25.9 % $ 39,962 $ 45,597 -12.4 %
Acquired non-credit impaired loans 1,479,412 1,575,392 1,635,418 1,227,822 72,998 1926.6 % 1,529,501 71,434 2041.1 %

Acquired credit impaired loans, net of

allowance for acquired loan losses

1,077,960 1,162,467 1,247,891 1,199,761 854,234 26.2 % 1,117,616 890,495 25.5 %
Non-acquired loans 3,061,529 2,909,175 2,793,522 2,698,580 2,629,897 16.4 % 2,985,772 2,603,368 14.7 %
Total loans (1) 5,618,901 5,647,034 5,676,831 5,126,163 3,557,129 58.0 % 5,632,889 3,565,297 58.0 %
FDIC receivable for loss share agreements 60,967 83,010 105,554 116,849 114,724 -46.9 % 71,928 126,881 -43.3 %
Total investment securities 810,909 801,263 699,592 656,658 527,926 53.6 % 806,113 540,501 49.1 %
Intangible assets 374,021 377,265 379,894 308,730 123,881 201.9 % 375,634 124,565 201.6 %
Earning assets 6,910,549 6,842,708 6,880,973 6,254,128 4,496,053 53.7 % 6,898,827 4,492,640 53.6 %
Total assets 7,942,953 7,959,787 7,977,604 7,214,418 5,069,993 56.7 % 7,951,324 5,093,368 56.1 %
Noninterest-bearing deposits 1,591,002 1,485,014 1,510,734 1,359,137 1,023,668 55.4 % 1,538,300 996,685 54.3 %
Interest-bearing deposits 4,986,465 5,033,181 5,098,095 4,626,023 3,150,909 58.3 % 5,009,696 3,193,523 56.9 %
Total deposits 6,577,467 6,518,195 6,608,829 5,985,160 4,174,577 57.6 % 6,547,996 4,190,208 56.3 %
Federal funds purchased and repurchase agreements 247,672 273,636 229,382 251,551 297,025 -16.6 % 260,582 308,251 -15.5 %
Other borrowings 101,763 102,269 101,948 93,849 54,461 86.9 % 102,014 54,587 86.9 %
Shareholders' common equity (excludes preferred stock) 942,935 931,961 914,335 790,554 517,141 82.3 % 937,479 514,282 82.3 %
Shareholders' equity 942,935 994,073 979,335 837,185 517,141 82.3 % 968,363 514,282 88.3 %
South State Corporation
(Unaudited)
(Dollars in thousands)
          Second
ENDING Balance Quarter
June 30, March 31, December 31, September 30, June 30, 2014 - 2013
BALANCE SHEET HIGHLIGHTS   2014     2014     2013     2013     2013   % Change
Loans held for sale $ 56,407 $ 57,200 $ 30,586 $ 52,467 $ 47,980 17.6 %
Acquired non-credit impaired loans 1,447,583 1,512,201 1,598,051 1,665,333 69,653 1978.3 %
Acquired credit impaired loans 1,056,495 1,124,809 1,227,698 1,328,889 835,051 26.5 %
Non-acquired loans 3,174,625 2,979,958 2,865,216 2,741,242 2,665,595 19.1 %
Total loans (1) 5,678,703 5,616,968 5,690,965 5,735,464 3,570,299 59.1 %
FDIC receivable for loss share agreements 43,766 67,984 93,947 115,773 104,048 -57.9 %
Total investment securities 816,648 814,533 812,603 652,610 531,579 53.6 %
Intangible assets 370,756 376,676 379,015 381,302 126,451 193.2 %
Allowance for acquired credit impaired loan losses (9,159 ) (11,046 ) (11,618 ) (12,260 ) (14,461 ) -36.7 %
Allowance for non-acquired loan losses (1) (35,422 ) (34,669 ) (34,331 ) (36,145 ) (38,625 ) -8.3 %
Premises and equipment 184,113 187,127 188,114 184,959 109,794 67.7 %
Total assets 7,993,686 7,990,975 7,931,498 8,028,441 5,043,078 58.5 %
Noninterest-bearing deposits 1,623,291 1,581,157 1,487,798 1,481,791 1,038,382 56.3 %
Interest-bearing deposits 4,952,847 5,049,496 5,067,699 5,181,315 3,144,587 57.5 %
Total deposits 6,576,138 6,630,653 6,555,497 6,663,106 4,182,969 57.2 %
Federal funds purchased and repurchase agreements 280,595 254,985 211,401 233,792 262,447 6.9 %
Other borrowings 101,045 100,963 102,060 101,347 54,372 85.8 %
Total liabilities 7,040,668 7,056,812 6,950,029 7,058,415 4,526,486 55.5 %
Shareholders' common equity (excludes preferred stock) 953,018 934,163 916,469 905,026 516,592 84.5 %
Shareholders' equity 953,018 934,163 981,469 970,026 516,592 84.5 %
 
Common shares issued and outstanding 24,130,006 24,118,243 24,104,124 24,066,545 17,032,061 41.7 %
 
Second
ENDING Balance Quarter
June 30, March 31, December 31, September 30, June 30, 2014 - 2013
NONPERFORMING ASSETS (ENDING BALANCE) (7)   2014     2014     2013     2013     2013   % Change
Non-acquired
Non-acquired nonaccrual loans $ 26,546 $ 29,190 $ 31,333 $ 38,631 $ 40,854 -35.0 %
Restructured loans 8,409 8,156 10,690 10,837 11,689 -28.1 %
Non-acquired other real estate owned ("OREO") 9,003 12,187 13,456 16,555 15,950 -43.6 %
Accruing loans past due 90 days or more 358 96 258 122 198 80.8 %
Other nonperforming assets   --     --     --     --     --  
Total non-acquired nonperforming assets   44,316     49,629     55,737     66,145     68,691   -35.5 %
Acquired non-credit impaired loans
Acquired nonaccrual loans -- -- -- -- --
Acquired accruing loans past due 90 days or more   --     --     --     --     --  
Total acquired non-credit impaired loans   --     --     --     --     --  
Acquired OREO and other nonperforming assets
OREO covered under FDIC loss share agreements 21,999 29,003 27,520 40,543 35,142 -37.4 %
OREO not covered under FDIC loss share agreements 22,732 22,957 23,941 18,775 17,536 29.6 %
Other nonperforming assets   811     1,032     943     718     --  
Total acquired OREO and other nonperforming assets   45,542     52,992     52,404     60,036     52,678   -13.5 %
Total acquired nonperforming assets   45,542     52,992     52,404     60,036     52,678   -13.5 %
Total nonperforming assets $ 89,858   $ 102,621   $ 108,141   $ 126,181   $ 121,369   -26.0 %
 
Excluding Acquired Assets
NPLs as a percentage of period end non-acquired loans   1.11 %   1.26 %   1.48 %   1.81 %   1.98 %
Total nonperforming assets as a percentage of
total non-acquired loans and repossessed assets (1) (4)   1.39 %   1.66 %   1.94 %   2.40 %   2.56 %
Total nonperforming assets as a percentage
of total assets (5)   0.55 %   0.62 %   0.70 %   0.82 %   1.36 %
Including Acquired Assets
NPLs as a percentage of period end loans   0.62 %   0.67 %   0.74 %   0.86 %   1.47 %
Total nonperforming assets as a percentage of
total loans and repossessed assets (1) (4)   1.57 %   1.81 %   1.88 %   2.16 %   3.32 %
Total nonperforming assets as a percentage
of total assets   1.12 %   1.28 %   1.36 %   1.57 %   2.41 %
South State Corporation
(Unaudited)
(Dollars in thousands)
            Second      
Quarter Ended Quarter Six Months Ended YTD
June 30, March 31, December 31, September 30, June 30, 2014 - 2013 June 30, June 30, 2014 - 2013
ALLOWANCE FOR LOAN LOSSES (1) 2014 2014 2013 2013 2013 % Change 2014 2013 % Change
Non-acquired Loans:
Balance at beginning of period $ 34,669 $ 34,331 $ 36,145 $ 38,625 $ 41,669 -16.8 % $ 34,331 $ 44,378 -22.6 %
Loans charged off (1,359 ) (901 ) (2,778 ) (3,815 ) (2,827 ) -51.9 % (2,260 ) (6,975 ) -67.6 %
Overdrafts charged off (530 ) (469 ) (389 ) (479 ) (393 ) 34.9 % (999 ) (852 ) 17.3 %
Loan recoveries 413 817 1,215 1,095 436 -5.3 % 1,230 1,262 -2.5 %
Overdraft recoveries   144     221     138     154     140   2.9 %   365     359   1.7 %
Net charge-offs (1,332 ) (332 ) (1,814 ) (3,045 ) (2,644 ) -49.6 % (1,664 ) (6,206 ) -73.2 %
Provision for loan losses on non-acquired loans   2,085     670     --     565     (400 ) -621.3 %   2,755     453   508.2 %
Balance at end of period, non-acquired loans $ 35,422   $ 34,669   $ 34,331   $ 36,145   $ 38,625   -8.3 % $ 35,422   $ 38,625   -8.3 %
 
Allowance for non-acquired loan losses as a
percentage of non-acquired loans (1)   1.12 %   1.16 %   1.20 %   1.32 %   1.45 %   1.12 %   1.45 %
Allowance for non-acquired loan losses as a
percentage of non-acquired nonperforming loans   100.31 %   92.59 %   81.20 %   72.89 %   73.23 %   100.31 %   73.23 %
Net charge-offs on non-acquired loans as a percentage of
average non-acquired loans (annualized) (1)   0.17 %   0.05 %   0.26 %   0.45 %   0.40 %   0.11 %   0.48 %
 
DAY 2 VALUATION ALLOWANCE ON ACQUIRED LOANS
Balance at beginning of period $ 11,046 $ 11,618 $ 12,260 $ 14,461 $ 15,605 $ 11,618 $ 17,218
Provision for loan losses on acquired loans:
Provision for loan losses before benefit attributable
to FDIC loss share agreements (1,438 ) 304 73 (456 ) 320 (1,134 ) (535 )
Benefit attributable to FDIC loss share agreements   1,522     (125 )   (85 )   550     259     1,397     1,322  
Net provision for loan losses on acquired loans   84     179     (12 )   94     579     263     787  
Provision for loan losses recorded through the FDIC
loss share receivable (1,522 ) 125 85 (550 ) (259 ) (1,397 ) (1,322 )
Reduction due to loan removals (12)   (449 )   (876 )   (715 )   (1,745 )   (1,464 )   (1,325 )   (2,222 )
Balance at end of period, acquired credit impaired loans $ 9,159   $ 11,046   $ 11,618   $ 12,260   $ 14,461   $ 9,159   $ 14,461  
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
          Second
ENDING Balance Quarter
June 30, March 31, December 31, September 30, June 30, 2014 - 2013
LOAN PORTFOLIO (ENDING balance) (1)   2014   2014   2013   2013   2013 % Change  
Acquired loans:
Acquired covered loans:
Commercial non-owner occupied real estate:
Construction and land development $ 30,859 $ 37,757 $ 43,396 $ 50,582 $ 31,647 -2.5 %
Commercial non-owner occupied   47,017   50,814   53,525   62,985   42,945 9.5 %
Total commercial non-owner occupied real estate 77,876 88,571 96,921 113,567 74,592 4.4 %
Consumer real estate:
Consumer owner occupied 36,017 37,111 38,946 41,379 39,005 -7.7 %
Home equity loans   33,684   34,627   35,884   37,943   20,857 61.5 %

Total consumer real estate

69,701 71,738 74,830 79,322 59,862 16.4 %
Commercial owner occupied real estate 72,247 78,861 88,722 93,309 41,401 74.5 %
Commercial and industrial 11,711 11,964 14,475 16,596 9,454 23.9 %
Other income producing property 27,521 29,471 31,739 37,543 34,941 -21.2 %
Consumer non real estate   1,583   1,772   1,878   2,322   1,696 -6.7 %
Total acquired covered loans 260,639 282,377 308,565 342,659 221,946 17.4 %
Acquired non-covered loans:
Commercial non-owner occupied real estate:
Construction and land development 86,830 96,981 129,289 134,342 72,453 19.8 %
Commercial non-owner occupied   191,637   204,094   226,530   245,046   158,100 21.2 %
Total commercial non-owner occupied real estate 278,467 301,075 355,819 379,388 230,553 20.8 %
Consumer real estate:
Consumer owner occupied 912,346 951,131 974,392 1,013,022 90,258 910.8 %
Home equity loans   313,318   324,686   335,241   349,517   70,903 341.9 %
Total consumer real estate 1,225,664 1,275,817 1,309,633 1,362,539 161,161 660.5 %
Commercial owner occupied real estate 188,490 200,370 211,030 230,849 124,312 51.6 %
Commercial and industrial 69,953 76,016 98,046 111,135 61,237 14.2 %
Other income producing property 154,100 160,498 171,544 183,996 97,747 57.7 %
Consumer non real estate   326,765   340,857   371,112   383,656   7,748 4117.4 %
Total acquired non-covered loans   2,243,439   2,354,633   2,517,184   2,651,563   682,758 228.6 %
Total acquired loans 2,504,078 2,637,010 2,825,749 2,994,222 904,704 176.8 %
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development 371,751 319,441 299,951 288,199 285,370 30.3 %
Commercial non-owner occupied   302,961   285,145   291,170   282,678   298,769 1.4 %
Total commercial non-owner occupied real estate 674,712 604,586 591,121 570,877 584,139 15.5 %
Consumer real estate:
Consumer owner occupied 637,071 595,652 548,170 498,734 460,434 38.4 %
Home equity loans   271,028   263,057   257,139   255,291   250,988 8.0 %
Total consumer real estate 908,099 858,709 805,309 754,025 711,422 27.6 %
Commercial owner occupied real estate 849,048 845,728 833,513 814,259 802,125 5.8 %
Commercial and industrial 353,211 333,574 321,824 301,845 294,580 19.9 %
Other income producing property 151,928 158,186 143,204 140,024 136,957 10.9 %
Consumer non real estate 170,982 147,710 136,410 116,312 104,239 64.0 %
Other   66,645   31,465   33,835   43,900   32,133 107.4 %
Total non-acquired loans   3,174,625   2,979,958   2,865,216   2,741,242   2,665,595 19.1 %
Total loans (net of unearned income) (1) $ 5,678,703 $ 5,616,968 $ 5,690,965 $ 5,735,464 $ 3,570,299 59.1 %
 
Loans held for sale $ 56,407 $ 57,200 $ 30,586 $ 52,467 $ 47,980 17.6 %
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
                 
Quarter Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
SELECTED RATIOS   2014     2014     2013     2013     2013   2014   2013  
 
Return on average assets (annualized)   0.91 %   0.86 %   0.70 %   0.66 %   0.99 % 0.88 % 0.92 %
 
Operating return on average assets (annualized) (non-GAAP) (3)   1.12 %   1.06 %   1.00 %   1.07 %   1.04 % 1.09 % 0.99 %
 
Return on average common equity (annualized)   7.63 %   6.89 %   5.72 %   5.78 %   9.72 % 7.27 % 9.09 %
 
Return on average equity (annualized)   7.63 %   6.90 %   5.67 %   5.71 %   9.72 % 7.26 % 9.09 %
 
Operating return on average common equity (annualized) (non-GAAP) (3)   9.43 %   8.61 %   8.38 %   9.45 %   10.17 % 9.02 % 9.83 %
 
Operating return on average equity (annualized) (non-GAAP) (3)   9.43 %   8.51 %   8.16 %   9.18 %   10.17 % 8.96 % 9.83 %
 
Return on average tangible common equity (annualized) (non-GAAP) (10)   13.62 %   12.59 %   10.90 %   10.39 %   13.48 % 13.12 % 12.71 %
 
Operating return on average tangible common equity (annualized) (non-GAAP) (10)   16.59 %   15.47 %   15.46 %   16.43 %   14.07 % 16.04 % 13.69 %
 
Return on average tangible equity (annualized) (non-GAAP) (10)   13.62 %   12.03 %   10.25 %   9.88 %   13.48 % 12.80 % 12.71 %
 
Net interest margin (tax equivalent)   4.75 %   4.99 %   4.91 %   5.11 %   5.01 % 4.85 % 4.97 %
 
Efficiency ratio (tax equivalent)   71.52 %   73.84 %   79.22 %   78.74 %   69.49 % 72.68 % 70.92 %
 
Operating efficiency ratio excluding OREO expense   63.62 %   64.06 %   66.30 %   64.27 %   63.79 % 63.84 % 64.13 %
 
Book value per common share $ 39.50   $ 38.73   $ 40.72   $ 40.31   $ 30.33  
 
Tangible common equity per common share (non-GAAP) (10) $ 24.13   $ 23.11   $ 22.30   $ 21.76   $ 22.91  
 
Common shares issued and outstanding   24,130,006     24,118,243     24,104,124     24,066,545     17,032,061  
 
Common equity-to-assets   11.92 %   11.69 %   11.55 %   11.27 %   10.24 %
 
Equity-to-assets   11.92 %   11.69 %   12.37 %   12.08 %   10.24 %
 
Tangible common equity-to-tangible assets (non-GAAP) (10)   7.64 %   7.32 %   7.12 %   6.85 %   7.94 %
 
Tangible equity-to-tangible assets (non-GAAP) (10)   7.64 %   7.32 %   7.98 %   7.70 %   7.94 %
 
Tier 1 leverage (9)   8.9 %   8.6 %   9.3 %   10.0 %   9.2 %
 
Tier 1 risk-based capital (9)   12.9 %   12.7 %   13.5 %   13.1 %   13.6 %
 
Total risk-based capital (9)   13.8 %   13.6 %   14.4 %   14.4 %   14.8 %
South State Corporation
(Unaudited)
(Dollars in thousands, except per share data)
                   
Quarter Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
RECONCILIATION OF NON-GAAP TO GAAP 2014   2014   2013   2013   2013   2014   2013  
 
Pre-tax, Pre-provision Operating Earnings (6)
Net income (GAAP) $ 17,946 $ 16,917 $ 13,984 $ 12,054 $ 12,532 $ 34,863 $ 23,181 50.4 %
Provision for loan losses (1) 2,169 849 (12 ) 659 179 3,018 1,239 143.6 %
Provision for income taxes   9,368     8,832     7,204     6,804     6,173     18,200       11,347   60.4 %
Pre-tax, pre-provision income 29,483 26,598 21,176 19,517 18,884 56,081 35,767 56.8 %
Securities gains (88 ) -- -- -- -- (88 ) --
Merger and branding related expense   6,510     5,985     9,314     10,397     860     12,495     2,823  
Pre-tax, pre-provision operating earnings (non-GAAP) $ 35,905   $ 32,583   $ 30,490   $ 29,914   $ 19,744   $ 68,488   $ 38,590   77.5 %
 
Operating Return of Average Assets (3)
Operating return on average assets (non-GAAP) 1.12 % 1.06 % 1.00 % 1.07 % 1.04 % 1.09 % 0.99 %
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   -0.21 %   -0.20 %   -0.30 %   -0.41 %   -0.05 %   -0.21 %   -0.07 %
Return on average assets (GAAP)   0.91 %   0.86 %   0.70 %   0.66 %   0.99 %   0.88 %   0.92 %
 
Operating Return of Average Common Equity (3)
Operating return on average equity (non-GAAP) 9.43 % 8.61 % 8.38 % 9.45 % 10.17 % 9.02 % 9.83 %
Effect to adjust for securities gains (losses) 0.02 % 0.00 % 0.00 % 0.00 % 0.00 % 0.01 % 0.00 %
Effect to adjust for merger and branding related expenses   -1.82 %   -1.72 %   -2.66 %   -3.67 %   -0.45 %   -1.76 %   -0.74 %
Return on average common equity (GAAP)   7.63 %   6.89 %   5.72 %   5.78 %   9.72 %   7.27 %   9.09 %
 
Operating Return of Average Equity (3)
Operating return on average equity (non-GAAP) 9.43 % 8.51 % 8.16 % 9.18 % 10.17 % 8.96 % 9.83 %
Effect to adjust for securities gains (losses) 0.02 % 0.00 % 0.00 % 0.00 % 0.00 % 0.01 % 0.00 %
Effect to adjust for merger and branding related expenses   -1.82 %   -1.61 %   -2.49 %   -3.47 %   -0.45 %   -1.71 %   -0.74 %
Return on average equity (GAAP)   7.63 %   6.90 %   5.67 %   5.71 %   9.72 %   7.26 %   9.09 %
 
Return on Average Common Tangible Equity
Return on average common tangible equity (non-GAAP) 13.62 % 12.59 % 10.90 % 10.39 % 13.48 % 13.12 % 12.71 %
Effect to adjust for intangible assets   -5.99 %   -5.70 %   -5.18 %   -4.61 %   -3.76 %   -5.85 %   -3.62 %
Return on average common equity (GAAP)   7.63 %   6.89 %   5.72 %   5.78 %   9.72 %   7.27 %   9.09 %
 
Operating Return on Average Common Tangible Equity
Operating return on average common tangible equity (non-GAAP) 16.59 % 15.47 % 15.46 % 16.43 % 14.07 % 16.04 % 13.69 %
Effect to adjust for securities gains (losses) 0.02 % 0.00 % 0.00 % 0.00 % 0.00 % 0.01 % 0.00 %
Effect to adjust for merger and branding related expenses -1.82 % -1.71 % -2.67 % -3.68 % -0.45 % -1.77 % -0.74 %
Effect to adjust for intangible assets   -7.17 %   -6.87 %   -7.07 %   -6.97 %   -3.90 %   -7.02 %   -3.86 %
Return on average common equity (GAAP)   7.63 %   6.89 %   5.72 %   5.78 %   9.72 %   7.27 %   9.09 %
 
Return on Average Tangible Equity (10)
Return on average tangible equity (non-GAAP) 13.62 % 12.03 % 10.25 % 9.88 % 13.48 % 12.80 % 12.71 %
Effect to adjust for intangible assets   -5.99 %   -5.13 %   -4.58 %   -4.17 %   -3.76 %   -5.54 %   -3.62 %

Return on average equity (GAAP)

  7.63 %   6.90 %   5.67 %   5.71 %   9.72 %   7.26 %   9.09 %
 
Operating efficiency ratio excluding OREO expense
Operating efficiency ratio excluding OREO expense 63.62 % 64.06 % 66.30 % 64.27 % 63.79 % 63.84 % 64.13 %
Effect to adjust for OREO and loan related expense 1.77 % 4.07 % 4.13 % 3.61 % 4.37 % 2.91 % 4.60 %
Effect to adjust for merger and branding expenses   6.13 %   5.71 %   8.79 %   10.86 %   1.33 %   5.93 %   2.19 %
Efficiency ratio (Tax Equivalent)   71.52 %   73.84 %   79.22 %   78.74 %   69.49 %   72.68 %   70.92 %
 
Tangible Book Value Per Common Share (10)
Tangible book value per common share (non-GAAP) $ 24.13 $ 23.11 $ 22.30 $ 21.76 $ 22.91
Effect to adjust for intangible assets   15.36     15.62     18.42     18.54     7.42  
Book value per common share (GAAP) $ 39.50   $ 38.73   $ 40.72   $ 40.31   $ 30.33  
 
Tangible Common Equity-to-Tangible Assets
Tangible common equity-to-tangible assets (non-GAAP) 7.64 % 7.32 % 7.12 % 6.85 % 7.94 %
Effect to adjust for intangible assets   4.28 %   4.37 %   4.43 %   4.42 %   2.30 %
Common equity-to-assets (GAAP)   11.92 %   11.69 %   11.55 %   11.27 %   10.24 %
 
Tangible Equity-to-Tangible Assets (10)
Tangible equity-to-tangible assets (non-GAAP) 7.64 % 7.32 % 7.98 % 7.70 % 7.94 %
Effect to adjust for intangible assets   4.28 %   4.37 %   4.39 %   4.38 %   2.30 %
Equity-to-assets (GAAP)   11.92 %   11.69 %   12.37 %   12.08 %   10.24 %
South State Corporation
(Unaudited)
(Dollars in thousands)
         
Three Months Ended
June 30, 2014 June 30, 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 $ 430,316 $ 441 0.41 % 370,958 $ 444 0.48 %
Investment securities (taxable) 663,751 3,997 2.42 % 378,426 2,096 2.22 %
Investment securities (tax-exempt) 147,158 1,071 2.92 % 149,500 1,174 3.15 %
Loans held for sale 50,423 676 5.38 % 40,040 337 3.38 %
Acquired loans, net of allowance for acquired loan losses 2,557,372 46,759 7.33 % 927,232 24,492 10.59 %
Non-acquired loans (1)   3,061,529     31,887 4.18 %   2,629,897     28,987 4.42 %
Total interest-earning assets 6,910,549 84,831 4.92 % 4,496,053 57,530 5.13 %
 
Noninterest-Earning Assets:
Cash and due from banks 251,533 96,132
Other assets 815,797 519,351
Allowance for non-acquired loan losses   (34,926 )   (41,543 )
Total noninterest-earning assets   1,032,404     573,940  
Total Assets $ 7,942,953   $ 5,069,993  
 
Interest-Bearing Liabilities:
Transaction and money market accounts $ 2,893,767 $ 824 0.11 % $ 1,832,006 $ 570 0.12 %
Savings deposits 675,286 124 0.07 % 353,574 81 0.09 %
Certificates and other time deposits 1,417,413 1,312 0.37 % 974,957 812 0.33 %
Federal funds purchased and repurchase agreements 247,672 89 0.14 % 297,025 115 0.16 %
Other borrowings   101,763     1,508 5.94 %   54,461     668 4.92 %
Total interest-bearing liabilities 5,335,901 3,857 0.29 % 3,512,023 2,246 0.26 %
 
Noninterest-Bearing Liabilities:
Demand deposits 1,591,002 1,015,075
Other liabilities   73,115     25,754  
Total noninterest-bearing liabilities ("Non-IBL") 1,664,117 1,040,829
Shareholders' equity   942,935     517,141  
Total Non-IBL and shareholders' equity   2,607,052     1,557,970  
Total liabilities and shareholders' equity $ 7,942,953   $ 5,069,993  
   
Net interest income and margin (NON-TAX EQUIV.) $ 80,974 4.70 % $ 55,284 4.93 %
Net interest margin (TAX EQUIVALENT) 4.75 % 5.01 %
South State Corporation
(Unaudited)
(Dollars in thousands)
           
Six Months Ended
June 30, 2014 June 30, 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 $ 419,863 $ 901 0.43 % $ 341,245 $ 862 0.51 %
Investment securities (taxable) 657,967 7,878 2.41 % 386,627 4,257 2.22 %
Investment securities (tax-exempt) 148,146 2,227 3.03 % 153,874 2,381 3.12 %
Loans held for sale 39,962 755 3.81 % 45,597 719 3.18 %
Acquired loans, net of allowance for acquired loan losses 2,647,117 91,770 6.99 % 961,929 47,862 10.03 %
Non-acquired loans (1)   2,985,772     68,638 4.64 %   2,603,368     57,618 4.46 %
Total interest-earning assets 6,898,827 172,169 5.03 % 4,492,640 113,699 5.10 %
 
Noninterest-Earning Assets:
Cash and due from banks 228,225 108,002
Other assets 859,331 535,658
Allowance for non-acquired loan losses   (35,059 )   (42,932 )
Total noninterest-earning assets   1,052,497     600,728  
Total Assets $ 7,951,324   $ 5,093,368  
 
Interest-Bearing Liabilities:
Transaction and money market accounts $ 2,887,999 $ 1,638 0.11 % $ 1,843,716 $ 1,176 0.13 %
Savings deposits 665,833 243 0.07 % 351,781 162 0.09 %
Certificates and other time deposits 1,455,842 2,781 0.39 % 1,004,439 1,684 0.34 %
Federal funds purchased and repurchase agreements 260,582 191 0.15 % 308,251 251 0.16 %
Other borrowings   102,014     3,009 5.95 %   54,587     1,340 4.95 %
Total interest-bearing liabilities 5,372,270 7,862 0.30 % 3,562,774 4,613 0.26 %
 
Noninterest-Bearing Liabilities:
Demand deposits 1,538,300 991,523
Other liabilities   72,391     24,789  
Total noninterest-bearing liabilities ("Non-IBL") 1,610,691 1,016,312
Shareholders' equity   968,363     514,282  
Total Non-IBL and shareholders' equity   2,579,054     1,530,594  
Total liabilities and shareholders' equity $ 7,951,324   $ 5,093,368  
   
Net interest income and margin (NON-TAX EQUIV.) $ 164,307 4.80 % $ 109,086 4.90 %
Net interest margin (TAX EQUIVALENT) 4.85 % 4.97 %
South State Corporation
(Unaudited)
(Dollars in thousands)
          Second      
Three Months Ended Quarter Six Months Ended YTD
June 30, March 31, December 31, September 30, June 30, 2014 - 2013 June 30, 2014 - 2013
NONINTEREST INCOME & EXPENSE 2014   2014   2013   2013   2013   % Change   2014   2013   % Change  
Noninterest income:
Service charges on deposit accounts $ 9,144 $ 8,988 $ 10,098 $ 8,966 $ 5,736 59.4 % 18,132 11,497 57.7 %
Bankcard services income 7,741 7,124 7,252 6,493 4,244 82.4 % 14,865 8,138 82.7 %
Mortgage banking income 4,683 3,291 2,489 1,342 1,922 143.7 % 7,974 5,277 51.1 %
Trust and investment services income 4,812 4,543 4,316 3,593 2,439 97.3 % 9,355 4,752 96.9 %
Securities gains, net (8) 88 -- -- -- -- 88 --
Amortization of FDIC indemnification asset (5,815 ) (7,078 ) (7,429 ) (7,625 ) (7,310 ) 20.5 % (12,893 ) (14,481 ) -11.0 %
Other   3,746     3,811     3,957     2,388     1,454   157.6 %   7,557     2,825   167.5 %
Total noninterest income $ 24,399   $ 20,679   $ 20,683   $ 15,157   $ 8,485   187.6 % $ 45,078   $ 18,008   150.3 %
 
Noninterest expense:
Salaries and employee benefits $ 40,276 $ 39,093 $ 40,634 $ 34,464 $ 23,746 69.6 % $ 79,369 $ 46,998 68.9 %
Information services expense 4,313 4,222 4,323 3,827 2,992 44.2 % 8,535 6,183 38.0 %
OREO expense and loan related 1,875 4,269 4,375 3,461 2,820 -33.5 % 6,144 5,922 3.7 %
Net occupancy expense 5,731 5,590 5,855 5,046 3,272 75.2 % 11,321 6,617 71.1 %
Furniture and equipment expense 3,264 3,754 3,824 3,523 2,266 44.0 % 7,018 4,782 46.8 %
Merger and branding related expense 6,510 5,985 9,314 10,397 860 657.0 % 12,495 2,823 342.6 %
Business development and staff related 1,756 1,567 1,773 1,235 1,276 37.6 % 3,323 2,504 32.7 %
FDIC assessment and other regulatory charges 1,267 1,576 1,193 1,521 1,096 15.6 % 2,843 2,320 22.5 %
Bankcard expense 2,187 2,299 2,283 1,752 1,236 76.9 % 4,486 2,400 86.9 %
Amortization of intangibles 2,084 2,104 2,287 1,738 1,022 103.9 % 4,188 2,056 103.7 %
Professional fees 1,190 1,270 1,438 1,328 760 56.6 % 2,460 1,451 69.5 %
Advertising and marketing 1,054 1,134 1,301 1,150 648 62.7 % 2,188 1,490 46.8 %
Other   4,382     4,560     5,296     5,977     2,891   51.6 %   8,942     5,780   54.7 %
Total noninterest expense $ 75,889   $ 77,423   $ 83,896   $ 75,419   $ 44,885   69.1 % $ 153,312   $ 91,326   67.9 %
Notes:

(A) Includes noncash loan interest income related the discount on acquired performing loans on $2.2 million; $3.0 million; $3.5 million; $2.5 million and $812,000, respectively during the five quarters above, and for the six months ended the amounts were $5.2 million and $1.1 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 $6.5 million, $6.0 million, $9.3 million, $10.4 million, and $860,000, for the quarters ended June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, respectively; and (b) securities gains of $88,000 for the quarter ended 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) June 30, 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)
     
June 30, December 31, June 30,
2014   2013   2013  
ASSETS (Unaudited) (Unaudited)
Cash and cash equivalents:
Cash and due from banks $ 388,852 $ 184,611 $ 157,362
Interest-bearing deposits with banks 6,418 32,632 4,478
Federal funds sold and securities
purchased under agreements to resell   194,253     262,218     274,641  
Total cash and cash equivalents   589,523     479,461     436,481  
Investment securities:
Securities held to maturity
(fair value of $11,058, $12,891, and $13,047, respectively) 10,389 12,426 12,427
Securities available for sale, at fair value 795,741 786,791 511,347
Other investments   10,518     13,386     7,805  
Total investment securities   816,648     812,603     531,579  
Loans held for sale   56,407     30,586     47,980  
Loans:
Acquired credit impaired (covered of $243,942, $289,122, and $207,485, respectively; non-covered of
$803,394, $926,958 and $613,105, respectively), net of allowance for loan losses 1,047,336 1,216,080 820,590
Acquired non-credit impaired (covered of $7,538, $7,824, and $0, respectively;
non-covered of $1,440,045, $1,590,227 and $69,653, respectively) 1,447,583 1,598,051 69,653
Non-acquired 3,174,625 2,865,216 2,665,595
Less allowance for non-acquired loan losses   (35,422 )   (34,331 )   (38,625 )
Loans, net   5,634,122     5,645,016     3,517,213  
Goodwill 317,385 319,107 103,292
Premises and equipment, net 184,113 188,114 109,794
Bank owned life insurance 97,933 97,197 43,286
FDIC receivable for loss share agreements 43,766 93,947 104,048
Deferred tax asset 66,780 76,690 36,144
Other real estate owned (covered of $21,998, $27,520, and $35,142, respectively;
non-covered of $31,735, $37,398, and $33,486, respectively) 53,733 64,918 68,628
Core deposit and other intangibles 53,371 59,908 23,159
Mortgage servicing rights 21,015 20,729 --
Other assets   58,890     43,222     21,474  
Total assets $ 7,993,686   $ 7,931,498   $ 5,043,078  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 1,623,291 $ 1,487,798 $ 1,038,382
Interest-bearing   4,952,847     5,067,699     3,144,587  
Total deposits 6,576,138 6,555,497 4,182,969
Federal funds purchased and securities
sold under agreements to repurchase 280,595 211,401 262,447
Other borrowings 101,045 102,060 54,372
Other liabilities   82,890     81,071     26,698  
Total liabilities   7,040,668     6,950,029     4,526,486  
 
Shareholders' equity:
Preferred stock - $.01 par value; authorized 10,000,000 shares;
0, 65,000, and 0 shares issued and outstanding, respectively -- 1 --
Common stock - $2.50 par value; authorized 40,000,000 shares; 24,130,006,
24,104,124, and 17,017,904 shares issued and outstanding, respectively 60,325 60,260 42,580
Surplus 699,324 762,354 330,563
Retained earnings 192,961 168,577 153,040

 

Accumulated other comprehensive (loss)   408     (9,723 )   (9,591 )
Total shareholders' equity   953,018     981,469     516,592  

 

Total liabilities and shareholders' equity $ 7,993,686   $ 7,931,498   $ 5,043,078  
SOUTH STATE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
       
Three Months Ended Six Months Ended
June 30, June 30,
2014   2013   2014   2013  
Interest income:
Loans, including fees $ 79,322 $ 53,816 $ 161,163 $ 106,199
Investment securities:
Taxable 3,997 2,096 7,878 4,257
Tax-exempt 1,071 1,174 2,227 2,381
Federal funds sold and securities
purchased under agreements to resell   441     444     901     862  
Total interest income   84,831     57,530     172,169     113,699  
Interest expense:
Deposits 2,261 1,463 4,654 3,023
Federal funds purchased and securities
sold under agreements to repurchase 89 115 191 251
Other borrowings   1,508     668     3,009     1,340  
Total interest expense   3,858     2,246     7,854     4,614  
Net interest income 80,973 55,284 164,315 109,085
Provision for loan losses   2,169     179     3,018     1,239  
Net interest income after provision for loan losses   78,804     55,105     161,297     107,846  
Noninterest income:
Service charges on deposit accounts 9,144 5,736 18,132 11,497
Bankcard services income 7,741 4,244 14,865 8,138
Mortgage banking income 4,683 1,922 7,974 5,277
Trust and investment services income 4,812 2,439 9,355 4,752
Securities gains (losses), net 88 -- 88 --
Amortization of FDIC indemnification asset (5,815 ) (7,310 ) (12,893 ) (14,481 )
Other   3,746     1,454     7,557     2,825  
Total noninterest income   24,399     8,485     45,078     18,008  
Noninterest expense:
Salaries and employee benefits 40,276 23,746 79,369 46,998
Information services expense 4,313 2,992 8,535 6,184
OREO expense and loan related 1,875 2,820 6,144 5,922
Net occupancy expense 5,731 3,272 11,321 6,617
Furniture and equipment expense 3,264 2,266 7,018 4,783
Merger and branding related expense 6,510 860 12,495 2,823
FDIC assessment and other regulatory charges 1,267 1,096 2,843 2,320
Bankcard expense 2,187 1,236 4,486 2,400
Amortization of intangibles 2,084 1,022 4,188 2,056
Professional fees 1,190 760 2,460 1,451
Advertising and marketing 1,054 648 2,188 1,490
Other   6,138     4,167     12,265     8,282  
Total noninterest expense   75,889     44,885     153,312     91,326  
Earnings:
Income before provision for income taxes 27,314 18,705 53,063 34,528
Provision for income taxes   9,368     6,173     18,200     11,347  
Net income 17,946 12,532 34,863 23,181
Preferred stock dividends -- -- 1,073 --
Accretion on preferred stock discount   --     --     --     --  
Net income available to common shareholders $ 17,946   $ 12,532   $ 33,790   $ 23,181  
Earnings per common share:
Basic $ 0.75   $ 0.75   $ 1.41   $ 1.38  
Diluted $ 0.74   $ 0.74     1.40     1.36  
 
Dividends per common share $ 0.20   $ 0.18   $ 0.39   $ 0.36  
 
Weighted-average common shares outstanding:
Basic 23,892 16,790 23,882 16,804
Diluted 24,141 16,990 24,126 16,986

Contacts

South State Corporation
Media Contact:
Donna Pullen, 803-765-4558
or
Analyst Contact:
John C. Pollok, 803-765-4628

Sharing

Contacts

South State Corporation
Media Contact:
Donna Pullen, 803-765-4558
or
Analyst Contact:
John C. Pollok, 803-765-4628