UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~September 30, 2017~~March 31, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the transition period from to

Commission file number 001-12669

~~SOUTH STATE CORPORATION~~SOUTHSTATE CORPORATION

(Exact name of registrant as specified in its charter)

South Carolina		57-0799315
(State or other jurisdiction of incorporation)		(~~IRS~~I.R.S. Employer Identification No.)

~~520 Gervais Street~~
~~Columbia,~~1101 First Street South, ~~Carolina~~Suite 202		~~29201~~
Winter Haven, Florida		33880
(Address of principal executive offices)		(Zip Code)

~~(800) 277-2175~~(863) 293-4710

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, $2.50 par value	SSB	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐◻

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data file required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒		Accelerated Filer ☐

Non-Accelerated Filer ☐		Smaller Reporting Company ☐

		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date:



Class
~~Class~~		Outstanding as of ~~October 31, 2017~~May 1, 2024
Common Stock, $2.50 par value		~~29,294,271~~

~~Table of Contents~~

~~South State Corporation and Subsidiary~~

~~September 30 2017 Form 10-Q~~

~~INDEX~~

		~~Page~~76,188,904

Table of Contents

SouthState Corporation and Subsidiaries

March 31, 2024 Form 10-Q

INDEX

		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements

	~~Condensed~~ Consolidated Balance Sheets at ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016~~2023	3


	~~Condensed~~ Consolidated Statements of Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	4


	~~Condensed~~ Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	5


	~~Condensed~~ Consolidated Statements of Changes in Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	6


	~~Condensed~~ Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	7


	Notes to ~~Condensed~~ Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54 45

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	79 73

Item 4.	Controls and Procedures	79 74

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	80 74

Item 1A.	Risk Factors	80 74

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80 75

Item 3.	Defaults Upon Senior Securities	80 75

Item 4.	Mine Safety Disclosures	80 75

Item 5.	Other Information	81 75

Item 6.	Exhibits	81 76

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

~~South State~~SouthState Corporation and ~~Subsidiary~~Subsidiaries

~~Condensed~~

Consolidated Balance ~~Sheets~~Sheets

(Dollars in thousands, except par value)


	March 31,		December 31,
	2024		2023
		(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	478,271	$	510,922
Federal funds sold and interest-earning deposits with banks		493,378		236,435
Deposits in other financial institutions (restricted cash)		237,808		251,520
Total cash and cash equivalents		1,209,457		998,877
Trading securities, at fair value		66,188		31,321
Investment securities:
Securities held to maturity (fair value of $2,016,567 and $2,084,736)		2,446,589		2,487,440
Securities available for sale, at fair value		4,598,400		4,784,388
Other investments		187,285		192,043
Total investment securities		7,232,274		7,463,871
Loans held for sale		56,553		50,888
Loans:
Acquired - non-purchased credit deteriorated loans		4,534,583		4,796,913
Acquired - purchased credit deteriorated loans		1,031,283		1,108,813
Non-acquired loans		27,101,444		26,482,763
Less allowance for credit losses		(469,654)		(456,573)
Loans, net		32,197,656		31,931,916
Premises and equipment, net		512,635		519,197
Bank owned life insurance (“BOLI”)		997,562		991,454
Deferred tax assets		170,818		164,354
Derivatives assets		176,784		172,939
Mortgage servicing rights		87,970		85,164
Core deposit and other intangibles		83,193		88,776
Goodwill		1,923,106		1,923,106
Other assets		430,642		480,161
Total assets	$	45,144,838	$	44,902,024
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	10,546,410	$	10,649,274
Interest-bearing		26,632,024		26,399,635
Total deposits		37,178,434		37,048,909
Federal funds purchased		273,367		248,162
Securities sold under agreements to repurchase		281,324		241,023
Corporate and subordinated debentures		391,812		391,904
Other borrowings		—		100,000
Reserve for unfunded commitments		53,229		56,303
Derivative liabilities		954,788		804,486
Other liabilities		464,875		478,139
Total liabilities		39,597,829		39,368,926
Shareholders’ equity:
Common stock - $2.50 par value; authorized 160,000,000 shares; 76,177,163 and 76,022,039 shares issued and outstanding, respectively		190,443		190,055
Surplus		4,230,345		4,240,413
Retained earnings		1,749,215		1,685,166
Accumulated other comprehensive loss		(622,994)		(582,536)
Total shareholders’ equity		5,547,009		5,533,098
Total liabilities and shareholders’ equity	$	45,144,838	$	44,902,024

The Accompanying Notes are an Integral Part of the Financial Statements.

September 30,

December 31,

September 30,


2017

2016

2016

(Unaudited)

(Note 1)

(Unaudited)

ASSETS









Cash and cash equivalents:

Cash and due from banks

$
197,984

$
201,966

$
168,774

Interest-bearing deposits with banks

137,543

36,241

66,335

Federal funds sold and securities purchased under agreements to resell

68,407

136,241

272,408

Total cash and cash equivalents

403,934

374,448

507,517

Investment securities:

Securities held to maturity (fair value of $3,732, $6,250 and $7,076, respectively)

3,678

6,094

6,851

Securities available for sale, at fair value

1,320,679

999,405

925,374

Other investments

12,439

9,482

9,482

Total investment securities

1,336,796

1,014,981

941,707

Loans held for sale

46,321

50,572

57,052

Loans:

Acquired credit impaired, net of allowance for loan losses

578,863

602,546

632,617

Acquired non-credit impaired

1,455,555

836,699

885,657

Non-acquired

6,230,327

5,241,041

5,008,113

Less allowance for non-acquired loan losses

(41,541)

(36,960)

(37,319)

Loans, net

8,223,204

6,643,326

6,489,068

Other real estate owned

13,527

18,316

22,211

Premises and equipment, net

198,146

183,510

179,450

Bank owned life insurance

151,402

104,148

103,427

Deferred tax assets

41,664

31,123

25,357

Mortgage servicing rights

29,937

29,037

23,064

Core deposit and other intangibles

50,472

39,848

41,738

Goodwill

597,236

338,340

338,340

Other assets

76,471

72,943

68,234

Total assets

$
11,169,110

$
8,900,592

$
8,797,165

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Noninterest-bearing

$
2,505,570

$
2,199,046

$
2,176,155

Interest-bearing

6,556,451

5,135,377

5,071,251

Total deposits

9,062,021

7,334,423

7,247,406

Federal funds purchased and securities sold under agreements to repurchase

291,099

313,773

305,268

Other borrowings

83,307

55,358

55,306

Other liabilities

99,858

62,450

65,053

Total liabilities

9,536,285

7,766,004

7,673,033

Shareholders’ equity:

Preferred stock - $.01 par value; authorized 10,000,000 shares;  no shares issued and outstanding

—

—

—

Common stock - $2.50 par value; authorized 40,000,000 shares; 29,267,369, 24,230,392 and 24,209,122 shares issued and outstanding, respectively

73,168

60,576

60,523

Surplus

1,136,352

711,307

705,124

Retained earnings

427,093

370,916

354,490

Accumulated other comprehensive income (loss)

(3,788)

(8,211)

3,995

Total shareholders’ equity

1,632,825

1,134,588

1,124,132

Total liabilities and shareholders’ equity

$
11,169,110

$
8,900,592

$
8,797,165

Table of Contents

SouthState Corporation and Subsidiaries

Consolidated Statements of Income (unaudited)

(In thousands, except per share data)


	Three Months Ended
	March 31,
	2024		2023
Interest income:
Loans, including fees	$	463,688	$	393,366
Investment securities:
Taxable		39,745		41,565
Tax-exempt		5,568		6,557
Federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with banks		8,254		8,921
Total interest income		517,255		450,409
Interest expense:
Deposits		160,162		55,942
Federal funds purchased and securities sold under agreements to repurchase		4,727		2,853
Corporate and subordinated debentures		6,009		5,735
Other borrowings		2,421		4,616
Total interest expense		173,319		69,146
Net interest income		343,936		381,263
Provision for credit losses		12,686		33,091
Net interest income after provision for credit losses		331,250		348,172
Noninterest income:
Fees on deposit accounts		33,145		29,859
Mortgage banking income		6,169		4,332
Trust and investment services income		10,391		9,937
Correspondent banking and capital markets income		4,311		13,594
SBA income		4,363		3,722
Securities gains, net		—		45
Other income		13,179		9,866
Total noninterest income		71,558		71,355
Noninterest expense:
Salaries and employee benefits		150,453		144,060
Occupancy expense		22,577		21,533
Information services expense		22,353		19,925
OREO and loan related expense		606		169
Amortization of intangibles		5,998		7,299
Supplies, printing and postage expense		2,540		2,640
Professional fees		3,115		3,702
FDIC assessment and other regulatory charges		8,534		6,294
FDIC special assessment		3,854		—
Advertising and marketing		1,984		2,118
Merger, branch consolidation, severance related and other expense		4,513		9,412
Other expense		22,763		23,353
Total noninterest expense		249,290		240,505
Earnings:
Income before provision for income taxes		153,518		179,022
Provision for income taxes		38,462		39,096
Net income	$	115,056	$	139,926
Earnings per common share:
Basic	$	1.51	$	1.84
Diluted	$	1.50	$	1.83
Weighted average common shares outstanding:
Basic		76,301		75,902
Diluted		76,660		76,389

The Accompanying Notes are an Integral Part of the Financial Statements.

Table of Contents

~~South State~~SouthState Corporation and ~~Subsidiary~~Subsidiaries

~~Condensed~~ Consolidated Statements of Comprehensive Income (unaudited)

(Dollars in ~~thousands, except per share data)~~thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Interest income:

Loans, including fees

$
95,864

$
77,344

$
281,216

$
231,752

Investment securities:

Taxable

6,646

4,309

20,897

13,579

Tax-exempt

1,320

962

4,147

2,970

Federal funds sold and securities purchased under agreements to resell

581

666

1,916

2,174

Total interest income

104,411

83,281

308,176

250,475

Interest expense:

Deposits

2,974

1,412

8,132

4,380

Federal funds purchased and securities sold under agreements to repurchase

276

137

756

418

Other borrowings

842

487

2,576

1,431

Total interest expense

4,092

2,036

11,464

6,229

Net interest income

100,319

81,245

296,712

244,246

Provision for loan losses

2,062

912

8,082

6,198

Net interest income after provision for loan losses

98,257

80,333

288,630

238,048

Noninterest income:

Fees on deposit accounts

22,448

20,776

66,322

62,439

Mortgage banking income

3,446

6,286

14,210

16,104

Trust and investment services income

6,310

4,877

18,703

14,573

Securities gains, net

1,278

—

1,388

122

Other-than-temporary impairment losses

(753)

—

(753)

—

Recoveries on acquired loans

1,944

2,207

5,647

5,130

Amortization of FDIC indemnification asset, net

—

—

—

(5,901)

Other

1,367

1,194

4,532

5,032

Total noninterest income

36,040

35,340

110,049

97,499

Noninterest expense:

Salaries and employee benefits

47,245

41,972

143,711

123,941

Net occupancy expense

6,214

5,464

18,650

16,364

Information services expense

6,003

5,237

18,776

15,353

Furniture and equipment expense

3,751

3,234

11,422

9,157

OREO expense and loan related

1,753

2,085

5,648

4,733

Bankcard expense

2,748

2,940

8,404

8,859

Amortization of intangibles

2,494

1,891

7,496

5,687

Supplies, printing and postage expense

1,491

1,345

4,715

4,910

Professional fees

1,265

1,758

4,637

4,663

FDIC assessment and other regulatory charges

918

1,001

3,029

3,162

Advertising and marketing

852

790

2,400

2,293

Merger and branch consolidation related expense

1,551

709

26,882

3,240

Other

5,289

4,765

17,066

16,712

Total noninterest expense

81,574

73,191

272,836

219,074

Earnings:

Income before provision for income taxes

52,723

42,482

125,843

116,473

Provision for income taxes

17,677

14,387

40,710

39,368

Net income

$
35,046

$
28,095

$
85,133

$
77,105

Earnings per common share:

Basic

$
1.20

$
1.17

$
2.92

$
3.21

Diluted

$
1.19

$
1.16

$
2.90

$
3.18

Dividends per common share

$
0.33

$
0.31

$
0.99

$
0.89

Weighted average common shares outstanding:

Basic

29,115

24,016

29,023

23,989

Diluted

29,385

24,278

29,291

24,229


	Three Months Ended
	March 31,
	2024		2023
Net income	$	115,056	$	139,926
Other comprehensive income:
Unrealized holding (losses) gains on available for sale securities:
Unrealized holding (losses) gains arising during period		(53,576)		72,772
Tax effect		13,118		(9,501)
Reclassification adjustment for gains included in net income		—		45
Tax effect		—		(12)
Net of tax amount		(40,458)		63,304
Other comprehensive (loss) income, net of tax		(40,458)		63,304
Comprehensive income	$	74,598	$	203,230

The Accompanying Notes are an Integral Part of the Financial Statements.

Table of Contents

~~South State~~SouthState Corporation and ~~Subsidiary~~Subsidiaries

~~Condensed~~ Consolidated Statements of ~~Comprehensive Income~~Changes in Shareholders’ Equity (unaudited)

Three months ended March 31, 2024 and 2023

(Dollars in ~~thousands)~~thousands, except for share data)


								Accumulated Other
	Common Stock					Retained		Comprehensive
	Shares	Amount		Surplus		Earnings		Loss		Total
Balance, December 31, 2022	75,704,563	$	189,261	$	4,215,712	$	1,347,042	$	(677,088)	$	5,074,927
Comprehensive income:
Net income	—		—		—		139,926		—		139,926
Other comprehensive income, net of tax effects	—		—		—		—		63,304		63,304
Total comprehensive income											203,230
Cash dividends declared on common stock at $0.50 per share	—		—		—		(37,912)		—		(37,912)
Cash dividend equivalents paid on restricted stock units	—		—		—		(420)		—		(420)
Stock options exercised	23,516		59		1,114		—		—		1,173
Restricted stock awards (forfeits)	(2,233)		(5)		5		—		—		—
Stock issued pursuant to restricted stock units	177,708		444		(444)		—		—		—
Common stock repurchased	(43,889)		(110)		(3,306)		—		—		(3,416)
Share-based compensation expense	—		—		11,422		—		—		11,422
Balance, March 31, 2023	75,859,665	$	189,649	$	4,224,503	$	1,448,636	$	(613,784)	$	5,249,004
Balance, December 31, 2023	76,022,039	$	190,055	$	4,240,413	$	1,685,166	$	(582,536)	$	5,533,098
Comprehensive income:
Net income	—		—		—		115,056		—		115,056
Other comprehensive loss, net of tax effects	—		—		—		—		(40,458)		(40,458)
Total comprehensive income											74,598
Cash dividends declared on common stock at $0.52 per share	—		—		—		(39,598)		—		(39,598)
Cash dividend equivalents paid on restricted stock units	—		—		—		(1,163)		—		(1,163)
Stock options exercised	6,349		16		375		—		—		391
Restricted stock awards (forfeits)	(64)		(1)		1		—		—		—
Stock issued pursuant to restricted stock units	344,376		861		(861)		—		—		—
Common stock repurchased - buyback plan	(100,000)		(250)		(7,735)		—		—		(7,985)
Common stock repurchased	(95,537)		(238)		(7,715)		—		—		(7,953)
Share-based compensation expense	—		—		5,867		—		—		5,867
Cumulative change in accounting principle due to the adoption of ASU 2023-02	—		—		—		(10,246)		—		(10,246)
Balance, March 31, 2024	76,177,163	$	190,443	$	4,230,345	$	1,749,215	$	(622,994)	$	5,547,009

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Net income

$
35,046

$
28,095

$
85,133

$
77,105
Other comprehensive income:

Unrealized gains (losses) on securities:

Unrealized holding gains (losses) arising during period

130

(4,388)

7,049

12,162
Tax effect

(50)

1,673

(2,687)

(4,638)
Reclassification adjustment for gains included in net income

(525)

—

(635)

(122)
Tax effect

200

—

242

47
Net of tax amount

(245)

(2,715)

3,969

7,449
Unrealized gains (losses) on derivative financial instruments qualifying as cash flow hedges:

Unrealized holding gains (losses) arising during period

4

51

(56)

(147)
Tax effect

(1)

(19)

21

56
Reclassification adjustment for losses included in interest expense

57

69

226

209
Tax effect

(22)

(27)

(86)

(80)
Net of tax amount

38

74

105

38
Change in pension plan obligation:

Reclassification adjustment for changes included in net income

188

204

564

612
Tax effect

(72)

(78)

(215)

(233)
Net of tax amount

116

126

349

379
Other comprehensive income (loss), net of tax

(91)

(2,515)

4,423

7,866
Comprehensive income

$
34,955

$
25,580

$
89,556

$
84,971

The Accompanying Notes are an Integral Part of the Financial Statements.

Table of Contents

~~South State~~SouthState Corporation and ~~Subsidiary~~Subsidiaries

~~Condensed~~

Consolidated Statements of ~~Changes in Shareholders’ Equity (unaudited)~~Cash Flows (unaudited)

~~Nine months ended September 30, 2017 and 2016~~

(Dollars in ~~thousands, except for share data)~~thousands)

Accumulated Other

Preferred Stock

Common Stock

Retained

Comprehensive


Shares

Amount

Shares

Amount

Surplus

Earnings

Income (Loss)

Total

Balance, December 31, 2015

—

$
—

24,162,657

$
60,407

$
703,929

$
298,919

$
(3,871)

$
1,059,384

Comprehensive income

—

—

—

—

—

77,105

7,866

84,971

Cash dividends declared on common stock at $0.89 per share

—

—

—

—

—

(21,534)

—

(21,534)

Employee stock purchases

—

—

7,793

19

455

—

—

474

Stock options exercised

—

—

44,491

111

1,402

—

—

1,513

Restricted stock awards

—

—

39,431

99

(99)

—

—

—

Stock issued pursuant to restricted stock units

—

—

35,903

90

(90)

—

—

—

Common stock repurchased - buyback plan

—

—

(32,900)

(82)

(2,048)

—

—

(2,130)

Common stock repurchased

—

—

(48,253)

(121)

(3,129)

—

—

(3,250)

Share-based compensation expense

—

—

—

—

4,704

—

—

4,704

Balance, September 30, 2016

—

$
—

24,209,122

$
60,523

$
705,124

$
354,490

$
3,995

$
1,124,132

Balance, December 31, 2016

—

$
—

24,230,392

$
60,576

$
711,307

$
370,916

$
(8,211)

$
1,134,588

Comprehensive income

—

—

—

—

—

85,133

4,423

89,556

Cash dividends declared on common stock at $0.99 per share

—

—

—

—

—

(28,956)

—

(28,956)

Employee stock purchases

—

—

6,742

17

536

—

—

553

Stock options exercised

—

—

33,896

84

1,050

—

—

1,134

Common stock issued for Southeastern Bank Financial Corp. acquisition

—

—

4,978,338

12,446

422,163

—

—

434,609

Restricted stock awards

—

—

20,683

51

(51)

—

—

—

Common stock repurchased

—

—

(40,484)

(101)

(3,525)

—

—

(3,626)

Stock issued pursuant to restricted stock units

—

—

37,802

95

(95)

—

—

—

Share-based compensation expense

—

—

—

—

4,967

—

—

4,967

Balance, September 30, 2017

—

$
—

29,267,369

$
73,168

$
1,136,352

$
427,093

$
(3,788)

$
1,632,825


	Three Months Ended
	March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	115,056	$	139,926
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,079		15,015
Provision for credit losses		12,686		33,091
Deferred income taxes		2,137		3,127
Gains on sale of securities, net		—		(45)
Share-based compensation expense		5,867		11,422
Accretion of discount related to acquired loans		(4,287)		(7,398)
Gains on disposal of premises and equipment		(8)		(65)
Gains on sale of bank properties held for sale and repossessed real estate		(155)		(514)
Net amortization of premiums and discounts on investment securities		4,816		5,358
Bank properties held for sale and repossessed real estate write downs		18		410
Fair value adjustment for loans held for sale		144		9
Originations and purchases of loans held for sale		(228,440)		(157,683)
Proceeds from sales of loans held for sale		225,355		160,808
Gains on sales of loans held for sale		(2,724)		(1,456)
Increase in cash surrender value of BOLI		(6,700)		(5,906)
Net change in:
Accrued interest receivable		(6,120)		(3,921)
Prepaid assets		(115)		2,406
Operating leases		80		72
Bank owned life insurance		(200)		(930)
Trading securities		(34,868)		15,225
Derivative assets		(3,844)		51,729
Miscellaneous other assets		14,427		(115,557)
Accrued interest payable		(11,935)		14,193
Accrued income taxes		32,734		36,423
Derivative liabilities		150,302		(227,559)
Miscellaneous other liabilities		(646)		91,201
Net cash provided by operating activities		277,659		59,381
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		—		125,298
Proceeds from maturities and calls of investment securities held to maturity		39,811		45,308
Proceeds from maturities and calls of investment securities available for sale		128,636		110,287
Proceeds from sales and redemptions of other investment securities		59,375		25,500
Purchases of other investment securities		(54,616)		(63,773)
Net increase in loans		(283,413)		(518,335)
Recoveries of loans previously charged off		5,261		3,589
Purchases of premises and equipment		(5,511)		(7,642)
Proceeds from redemption and payout of bank owned life insurance policies		792		3,794
Proceeds from sale of bank properties held for sale and repossessed real estate		3,698		1,511
Proceeds from sale of premises and equipment		12		616
Net cash used in investing activities		(105,955)		(273,847)
Cash flows from financing activities:
Net increase in deposits		129,678		51,450
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings		65,506		(12,309)
Proceeds from borrowings		1,150,000		2,150,000
Repayment of borrowings		(1,250,000)		(1,250,000)
Common stock repurchases		(15,938)		(3,416)
Dividends paid		(40,761)		(38,333)
Stock options exercised		391		1,173
Net cash provided by financing activities		38,876		898,565
Net increase in cash and cash equivalents		210,580		684,099
Cash and cash equivalents at beginning of period		998,877		1,312,563
Cash and cash equivalents at end of period	$	1,209,457	$	1,996,662
Supplemental Disclosures:
Cash Flow Information:
Cash paid for:
Interest	$	185,254	$	54,953
Income taxes	$	147	$	2,400
Recognition of operating lease assets in exchange for lease liabilities	$	2,544	$	—
Schedule of Noncash Investing Transactions:
Real estate acquired in full or in partial settlement of loans	$	940	$	2,826

The Accompanying Notes are an Integral Part of the Financial Statements.

~~Table of Contents~~

~~South State Corporation and Subsidiary~~

~~Condensed Consolidated Statements of Cash Flows (unaudited)~~

~~(Dollars in thousands)~~

Nine Months Ended

September 30,


2017

2016

Cash flows from operating activities:

Net income

$
85,133

$
77,105

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

21,030

16,016

Provision for loan losses

8,082

6,198

Deferred income taxes

3,144

7,622

Other-than-temporary impairment on securities

753

—

Gain on sale of securities, net

(1,388)

(122)

Share-based compensation expense

4,967

4,704

Amortization of FDIC indemnification asset

—

3,566

Accretion of discount related to performing acquired loans

(9,779)

(4,183)

(Gain) loss on disposal of premises and equipment

171

(52)

Gain on sale of OREO

(2)

(1,672)

Net amortization of premiums on investment securities

5,068

4,095

OREO write downs

2,220

4,070

Fair value adjustment for loans held for sale

867

(732)

Originations and purchases of mortgage loans for sale

(558,459)

(557,388)

Proceeds from mortgage loans sales

575,495

542,717

Net change in:

Accrued interest receivable

(475)

(419)

Prepaid assets

1,865

(563)

FDIC indemnification asset

—

3,177

Miscellaneous other assets

(5,844)

(7,983)

Accrued interest payable

(160)

(806)

Accrued income taxes

10,763

6,775

Miscellaneous other  liabilities

4,482

10,393

Net cash provided by operating activities

147,933

112,518

Cash flows from investing activities:

Proceeds from sales of investment securities available for sale

265,965

137

Proceeds from maturities and calls of investment securities held to maturity

2,420

2,466

Proceeds from maturities and calls of investment securities available for sale

182,299

324,110

Proceeds from sales of other investment securities

3,444

71

Purchases of investment securities available for sale

(183,581)

(232,016)

Purchases of other investment securities

(303)

(660)

Net increase in loans

(533,647)

(533,393)

Payment to terminate FDIC Loss Share Agreements

—

(2,342)

Recoveries of loans previously charged off

2,455

2,620

Net cash received from acquisitions

70,188

—

Purchases of premises and equipment

(9,095)

(18,320)

Proceeds from sale of OREO

11,331

17,392

Proceeds from sale of premises and equipment

15

52

Net cash used in investing activities

(188,509)

(439,883)

Cash flows from financing activities:

Net increase in deposits

206,678

146,990

Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings

(23,688)

17,037

Repayment of other borrowings

(82,033)

(12)

Common stock issuance

553

474

Common stock repurchase

(3,626)

(5,380)

Dividends paid on common stock

(28,956)

(21,534)

Stock options exercised

1,134

1,513

Net cash provided by financing activities

70,062

139,088

Net increase (decrease) in cash and cash equivalents

29,486

(188,277)

Cash and cash equivalents at beginning of period

374,448

695,794

Cash and cash equivalents at end of period

$
403,934

$
507,517

Supplemental Disclosures:

Cash Flow Information:

Cash paid for:

Interest

$
11,625

$
7,036

Income taxes

$
25,534

$
25,364

Schedule of Noncash Investing Transactions:

Real estate acquired in full or in partial settlement of loans

$
8,375

$
11,447

~~The Accompanying Notes are an Integral Part of the Financial Statements.~~

Table of Contents

~~South State~~SouthState Corporation and ~~Subsidiary~~Subsidiaries

Notes to ~~Condensed~~ Consolidated Financial Statements (unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited ~~condensed~~ consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, otherwise referred to as GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required ~~by accounting principles generally accepted in the United States (“GAAP”)~~ for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period information has been reclassified to conform to the current period presentation, and these reclassifications had no impact on net income or equity as previously reported. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2024.

The ~~condensed~~ consolidated balance sheet at December 31, ~~2016~~2023 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for complete financial statements.

Note 2 — Summary of Significant Accounting Policies

The information contained in the consolidated financial statements and accompanying notes included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2023, as filed with the Securities and Exchange Commission (the “SEC”) on ~~February 24, 2017,~~March 4, 2024, should be referenced when reading these unaudited ~~condensed~~ consolidated financial statements. Unless otherwise mentioned or unless the context requires otherwise, references herein to ~~"South State,"~~“SouthState,” the ~~"Company" "we," "us," "our"~~“Company,” “we,” “us,” “our” or similar references mean ~~South State~~SouthState Corporation and its consolidated subsidiaries. References to the “Bank” or “SouthState Bank” means ~~South State~~SouthState Corporation’s wholly owned subsidiary, South State Bank, National Association, a ~~South Carolina~~national banking ~~corporation.~~association.

Loans

Loans that management has originated and has the intent and ability to hold for the foreseeable future or until maturity or pay off generally are reported at their unpaid principal balances, less unearned income and net of any deferred loan fees and costs, including unamortized fair value discount or premium. Unearned income on installment loans is recognized as income over the terms of the loans by methods that generally approximate the interest method. Interest on other loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. If the loan is prepaid, the remaining unamortized fees and costs are charged or credited to interest income. Amortization ceases for non-accrual loans.

~~Note 3 — Recent Accounting~~

We place loans on nonaccrual once reasonable doubt exists about the collectability of all principal and ~~Regulatory Pronouncements~~

~~In August 2017,~~interest due. Generally, this occurs when principal or interest is 90 days or more past due, unless the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-12, Derivatives~~loan is well secured and ~~Hedging (Topic 815): Targeted Improvements~~in the process of collection and excludes factored receivables. For factored receivables, which are commercial trade credits rather than promissory notes, the Company’s practice, in most cases, is to Accounting for Hedging Activities; (“ASU 2017-12”). ASU 2017-12 amends Accounting Standards Codification (“ASC”) Topic 815 to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to bothcharge-off unpaid recourse receivables when they become 90 days past due from the ~~designation and measurement guidance for qualifying hedging relationships~~invoice due date and the ~~presentation of hedge results. These amendments will improve~~non-recourse receivables when they become 120 days past due from the ~~transparency of information about an entity’s risk management activities and simplify the application of hedge accounting. The guidance~~statement due date. Past due status is effective for public companies for annual periods beginning on or after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. All transition requirements and elections should be applied to hedging relationships existingbased on the ~~date of adoption.~~ ~~The Company is still assessing the impact of this new guidance, but does not think it~~ ~~will have a material impact on the Company’s consolidated financial statements.~~

~~In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~; ~~(“ASU 2017-09”). ASU 2017-09 provides clarity by offering guidance on the scope of modification accounting for share-based payment awards and gives direction on which changes to the~~contractual terms or conditions of these awards require an entity to apply modification accounting. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the ~~award (as equity~~loan. In all cases, loans are placed on non-accrual or ~~liability) changes~~charged-off at an earlier date if collection of principal or interest is considered doubtful.

A loan is evaluated individually for loss when it is on nonaccrual and has a net book balance over $1 million. Large pools of homogeneous loans are collectively evaluated for loss and reserved at the pool level. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as ~~a result of~~nonaccrual, provided that management expects to collect all amounts due, including interest accrued at the ~~change in terms or conditions. The guidance is effective prospectively~~contractual interest rate for ~~all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. The Company has determined that this guidance will not have a material impact on~~ the ~~Company’s consolidated financial statements.~~

~~In March 2017, the FASB issued ASU No. 2017-08,~~ ~~Receivables-Nonrefundable Fees and Other Cost (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities;~~ ~~(“ASU 2017-08”). ASU 2017-08 shortens the amortization~~ period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. The amendments do not require an accounting change for securities held at a discount; an entitydelay.

Table of Contents

~~will continue~~Allowance for Credit Losses (“ACL”) – Investment Securities

Management monitors the held to ~~amortize~~maturity securities portfolio to the contractual maturity date the discount related to callable debt securities. The amendments apply to the amortization of premiums on callable debt securities with explicit, noncontingent call features that are callable at fixed prices on preset dates. For public business entities, ASU 2017-08 is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For entities other than public business entities, the amendments are effective in fiscal years beginning after December 15, 2019 and in interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including in an interim period. The amendmentsdetermine whether a valuation account should be ~~applied~~recorded. Management evaluates impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value at least quarterly, and more frequently when economic or market concerns warrant such evaluation. The Company’s methodology on ~~a modified retrospective basis, with a cumulative-effect adjustment~~how the ACL is calculated is disclosed in Note 1 — Summary of Significant Accounting Policies, under the “ACL – Investment Securities” section, of our Annual Report on Form 10-K for the year ended December 31, 2023. As of March 31, 2024 and December 31, 2023, the Company had $2.4 billion and $2.5 billion, respectively, of held to ~~retained earnings as of the beginning of the first reporting period in which the amendments are adopted.~~ maturity securities and no related valuation account.

The Company ~~has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.~~

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost;~~ (“ASU 2017-07”). ASU 2017-07 applies to any employer that sponsors a defined benefit pension plan, other postretirement benefit plan, or other types of benefits accounted for under Topic 715. The amendments require that an employer disaggregate the service cost component from the other components of net benefit cost, as follows ~~(1) service cost must be presented in the same line item(s) as other employee compensation costs. These costs are generally included within~~its nonaccrual policy by reversing interest income ~~from continuing operations, but in some cases may be eligible for capitalization, (2) all other components of net benefit cost must be presented~~ in the income statement ~~separately~~when the Company determines the interest for held to maturity securities is uncollectible. Therefore, management excludes the accrued interest receivable balance from the ~~service~~amortized cost component and outside a subtotal of income from operations, if one is presented, (3) the amendments permit capitalizing only the service cost component of net benefit cost, assuming such costs meet the criteria required for capitalization by other GAAP , rather than total net benefit cost which has been permitted under prior GAAP. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. The amendments should be adopted prospectively and allows a practical expedient that permits an employer to use the amounts disclosedbasis in its pension and other postretirement benefit plan note for the prior periods to apply the retrospective presentation requirements. The Company has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangible-Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment;~~ (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC Topic 350 and eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those years. The amendments should be adopted prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. At this point in time, the Company does not expect that this guidance will have a material impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-03,~~ ~~Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323)~~ (“ASU 2017-03”). ASU 2017-03 amends the Codification for SEC staff announcements made at two Emerging Issues Task Force (EITF) meetings. At the September 2016 meeting, the SEC staff expressed its expectations about the extent of disclosures registrants should make about the effects of the new FASB guidance (including any amendments issued prior to adoption) on revenue (ASU 2014-09), leases (ASU 2016-02) andmeasuring expected credit losses on ~~financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M. That Topic requires registrants to disclose~~ the ~~effect that recently issued accounting standards will have on their financial statements when adopted in a future period. ASU 2017-03 incorporates these SEC staff views into ASC Topic 250~~investment securities and adds references to that guidance in the transition paragraphs of each of the three new standards. The ASU also conforms ASC 323-740-S99-2, which describes the SEC staff’s views on accounting for investments in qualified affordable housing projects, to the guidance issued in ASU 2014-01. The Company adopted this standard in the fourth quarter of 2016 and will continue to refine its disclosures around the standard. The Company determined that this guidance did not have a material impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business;~~ (“ASU 2017-01”). ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described

~~Table of Contents~~

in ASC Topic 606. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.

~~In December 2016, the FASB issued ASU No. 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~; ~~(“ASU 2016-20”). ASU 2016-20 updates the new revenue standard by clarifying issues that had arisen from ASU 2014-09, but~~ does not change the core principle of the new standard. The issues addressed in this ASU include: 1) Loan guarantee fees, 2) Impairment testing of contract costs, 3) Interaction of impairment testing with guidance in other topics, 4) Provisions for losses on construction-type and production-type contracts, 5) Scope of topic 606, 6) Disclosure of remaining performance obligations, 7) Disclosure of prior-period performance obligations, 8) Contract modifications, 9) Contract asset vs. receivable, 10) Refund liability, 11) Advertising costs, 12) Fixed-odds wagering contracts in the casino industry, 13) Cost capitalization for advisors to private funds and public funds. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this new guidance recognized at the date of initial application. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. ASU 2016-20 and 2014-09 could require us to change how we recognize certain revenue streams within non-interest income, however, we do not expect these changes to have a significant impact on our financial statements. We continue to evaluate the impact of ASU 2016-20 and 2014-09 on our Company and expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

~~In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASU 2016-15”). ASU 2016-15 addresses eight classification issues related to the statement of cash flows: Debt prepayment or debt extinguishment costs; Settlement of zero-coupon bonds; Contingent consideration payments made after a business combination; Proceeds from the settlement of insurance claims; Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; Distributions received from equity method investees; Beneficial interests in securitization transactions; and Separately identifiable cash flows and application of the predominance principle. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard's provisions using a retrospective transition method to each period presented. The Company does not believe that this guidance will have a material impact on the Company’s consolidated financial statements.

~~In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(“ASU 2016-13”). ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and~~ record an allowance for credit losses on accrued interest receivable. As of March 31, 2024 and December 31, 2023, the accrued interest receivables for all investment securities recorded in Other Assets were $25.8 million and $26.5 million, respectively.

ACL – Loans and Certain Off-Balance-Sheet Credit Exposures

The ACL for loans held for investment reflects management’s estimate of credit losses that will result from the inability of our borrowers to make required loan payments. The Company makes adjustments to the ACL by recording a provision for or recovery of credit losses through earnings. Loans charged off are recorded as reductions to the ACL on the balance sheet and subsequent recoveries of loan charge-offs are recorded as increases to the ACL when they are received.

Management uses systematic methodologies to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis ~~of the financial asset, presents~~to present the net amount expected to be collected on the ~~financial asset.~~loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The ~~CECL model is~~Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected tocredit losses may result in ~~earlier recognition~~a range of expected credit losses. ~~ASU 2016-13 also requires new disclosures~~The Company’s ACL recorded in the balance sheet reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses.

The Company’s ACL is calculated using collectively evaluated and individually evaluated loans. The Company’s methodology on how the ACL is calculated is disclosed in Note 1 — Summary of Significant Accounting Policies, under the “ACL – Loans” section, of our Annual Report on Form 10-K for the year ended December 31, 2023.

Management measures expected credit losses over the contractual term of a loan. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications. Loans modified to a borrower experiencing financial difficulty are reviewed by the Bank to determine if an interest rate reduction, a term extension, an other-than-insignificant payment delay, a principal forgiveness, or any combination of these has occurred.

The ACL includes expected losses from modifications of receivables to borrowers experiencing financial difficulty. Losses on modifications of non-accrual loans over $1 million to borrowers experiencing financial difficulty are estimated on an individual basis. Because the effect of the remainder of modifications made to borrowers experiencing financial difficulty is already incorporated into the measurement methodologies used to estimate the allowance, they are accounted for as pooled loans.

Table of Contents

For purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets measured at amortized cost, loans and available-for-sale debt securities. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings(or acquired groups of financial assets with similar risk characteristics) that, as of the ~~beginning~~date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e., allowance for credit losses) to the purchase price of the ~~first reporting period in which~~financial assets rather than recording through the ~~guidance is adopted. We have dedicated staff and resources in place evaluating the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data~~provision for ~~use in these models. The Company is currently still assessing the impact that this new guidance will have on its consolidated financial statements.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share – Based Payment Accounting~~ (“ASU 2016-09”). ASU 2016-09 introduces targeted amendments intended to simplify the accounting for stock compensation. Specifically, ASU 2016-09 requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefitcredit losses in the income statement. The ~~tax effects~~expected credit loss, as of ~~exercised~~the acquisition day, of a PCD loan is added to the allowance for credit losses. The non-credit discount or ~~vested awards should be treated~~premium is the difference between the unpaid principal balance and the amortized cost basis as ~~discrete items~~of the acquisition date. Subsequent to the acquisition date, the change in the ~~reporting period in which they occur. An entity also should recognize excess tax benefits, and assess~~ACL on PCD loans is recognized through the ~~need~~Provision for ~~a valuation allowance, regardless of whether the benefit reduces taxes payable~~Credit Losses in the ~~current period. That~~Consolidated Statements of Income. The non-credit discount or premium is off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized when they arise. Existing net operating losses that

~~Table~~accreted or amortized, respectively, into interest income over the remaining life of ~~Contents~~

~~are currently tracked off balance sheet would be recognized, net of~~the PCD loan on a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption. Entities will no longer need to maintain and track an “APIC pool.” For public business entities, ASU 2016-09 became effective for interim and annual periods beginning after December 15, 2016 which made this ASU effective for thelevel-yield basis.

The Company ~~starting On January 1, 2017. For the three and nine months ended September 30, 2017, excess tax benefits of $104,000 and $839,000, respectively, were recorded against~~follows its nonaccrual policy by reversing contractual interest income ~~tax expense~~ in the income statement ~~which previously would~~when the Company places a loan on nonaccrual status. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an allowance for credit losses on accrued interest receivable. As of March 31, 2024 and December 31, 2023, the accrued interest receivables for loans recorded in Other Assets were $131.0 million and $127.0 million, respectively.

The Company has a variety of assets that have ~~been~~a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the expected credit loss are recorded ~~against surplus~~as a liability on the balance sheet. Management has determined that a majority of the Company’s off-balance sheet credit exposures are not unconditionally cancellable. Management completes funding studies based on historical data to estimate the percentage of unfunded loan commitments that will ultimately be funded to calculate the reserve for unfunded commitments. Management applies this funding rate, along with the loss factor rate determined for each pooled loan segment, to unfunded loan commitments, excluding unconditionally cancellable exposures and letters of credit, to arrive at the reserve for unfunded loan commitments. As of March 31, 2024 and December 31, 2023, the liabilities recorded for expected credit losses on unfunded commitments were $53.2 million and $56.3 million, respectively. The current adjustment to the reserve for unfunded commitments is recognized through the Provision for Credit Losses in the Consolidated Statements of Income.

Reclassification and Correction

Certain amounts previously reported have been reclassified to conform to the current quarter’s presentation. Such reclassifications had no effect on net income and shareholders’ equity.

Note 3 — Recent Accounting and Regulatory Pronouncements

Accounting Standards Adopted

In March ~~2016,~~2023, the FASB issued ASU ~~No. 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent considerations (Reporting Revenue Gross versus Net);~~ (“ASU 2016-08”). ASU 2016-08 updates the new revenue standard by clarifying the principal versus agent implementation guidance, but does not change the core principle of the new standard. The updates to the principal versus agent guidance: (i) require an entity to determine whether it is a principal or an agent for each distinct good or service (or a distinct bundle of goods or services) to be provided to the customer; (ii) illustrate how an entity that is a principal might apply the control principle to goods, services, or rights to services, when another party is involved in providing goods or services to a customer and (iii) Clarify that the purpose of certain specific control indicators is to support or assist in the assessment of whether an entity controls a good or service before it is transferred to the customer, provide more specific guidance on how the indicators should be considered, and clarify that their relevance will vary depending on the facts and circumstances. For public business entities, the effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09 which is effective for interim and annual periods beginning after December 15, 2017. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this new guidance recognized at the date of initial application. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. ASU 2016-08 and 2014-09 could require us to change how we recognize certain revenue streams within non-interest income, however, we do not expect these changes to have a significant impact on our financial statements. We continue to evaluate the impact of ASU 2016-08 and 2014-09 on our Company and expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

~~In March 2016, the FASB issued ASU No. 2016-07,~~ 2023-02, Investments –- Equity Method and Joint Ventures (Topic 323): ~~Simplifying~~Accounting for Investments in Tax Credit Structures Using the ~~Transition~~Proportional Amortization Method. The amendments in this update allow the option for an entity to apply the proportional amortization method of accounting to other equity investments, in addition to the ~~Equity Method~~previously permitted low-income housing tax credit (“LIHTC”) structured investments, that are made for the primary purpose of ~~Accounting~~ (“receiving tax credits or other income tax benefits, if certain conditions are met. The proportional amortization method of accounting results in the amortization of applicable investments, as well as the related income tax credits or other income tax benefits received, being presented on a single line within income tax expense on the consolidated statements of income. Prior to this update, the application of the proportional amortization method of accounting was limited to LIHTC structured investments. Under this update, an entity has the option to apply the proportional amortization method of accounting to applicable investments on a tax-credit-program-by-tax-credit-program basis. Also under this update, LIHTC structured investments for which the proportional amortization method is not applied can no longer be accounted for using the delayed equity contribution guidance. The amendments in this update also require additional disclosures in interim and annual periods concerning investments for which the proportional amortization method is applied, including the nature of tax equity investments, the effect of tax equity investments and related income tax credits and other income tax benefits on the financial position and results of operations.

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The Company adopted ASU ~~2016-07”). ASU 2016-07 requires an investor to initially apply~~2023-02 effective January 1, 2024, and changed the accounting method of its LIHTC structured investments from the equity method ~~of accounting from~~to the ~~date it qualifies~~proportional amortization method. The Company adopted ASU 2023-02 using the modified retrospective approach. Under this adoption approach, management was required to verify the LIHTCs met the conditions for ~~that~~proportional amortization method ~~i.e.,~~as of the date the ~~investor obtains significant influence over~~investments were originally made by the ~~operating~~Bank. In addition, management evaluated the actual tax credits and ~~financial policies~~other income tax benefits received, as well as the remaining benefits expected to be received, as of ~~an investee.~~the adoption date. The ~~ASU eliminates the previous requirement to retroactively adjust the investment and record a~~ cumulative ~~catch up for the periods that the investment had been held, but did not qualify for~~difference between the equity method and proportional amortization method resulted in a one-time cumulative effect adjustment recorded through retained earnings as of ~~accounting. For~~January 1, 2024. The cumulative effect resulting from the adoption of proportional amortization method was a net reduction to retained earnings of $9.4 million, which reflects the amortization expense in proportion to the tax credits and benefits realized on a life-to-date basis of all LIHTCs as of December 31, 2023. Additionally, the proportional amortization method does not require deferred taxes be tracked as was the case with the equity method; therefore, deferred taxes of $836,000 were written-off as an additional reduction to retained earnings effective January 1, 2024.

Issued But Not Yet Adopted Accounting Standards

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve disclosures about a public ~~business entities,~~entity’s reportable segments and address requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses. Segment information gives investors an understanding of overall performance and is key to assessing potential future cash flows. In addition, although information about a segment’s revenue and measure of profit or loss is disclosed in an entity’s financial statements, there is limited information disclosed about a segment’s expenses. The key amendments include annual and interim disclosures of significant expenses and other segment items that are regularly provided to the chief operating decision maker and included within each reported measure of profit or loss, as well as any other key measure of performance used for segment management decisions. This ASU also requires disclosure of key profitability measures used in assessing performance and how to allocate resources. The amendments in this ASU ~~2016-05~~ are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not anticipate this ASU will have a material impact on its financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which aims to address requests for improved income tax disclosures from investors, lenders, creditors and other allocators of capital (collectively, “investors”) that use the financial statements to make capital allocation decisions. The amendments in this ASU address investor requests for more transparency about income tax information, including jurisdictional information, by requiring consistent categories and greater disaggregation of information in both the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after December 15, ~~2016.~~2024. The ~~amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.~~Company does not anticipate this ASU ~~2016-07 became effective for the Company on January 1, 2017 and did not~~will have a ~~significant~~material impact on ~~the Company’s consolidated~~its financial statements.

~~In March 2016, the FASB issued ASU No. 2016-05,~~ ~~Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships~~ (“ASU 2016-05”). ASU 2016-05 requires an entity to discontinue a designated hedging relationship in certain circumstances, including termination of the derivative hedging instrument or if the entity wishes to change any of the critical terms of the hedging relationship. ASU 2016-05 amends Topic 815 to clarify that novation of a derivative (replacing one of the parties to a derivative instrument with a new party) designated as the hedging instrument would not, in and of itself, be considered a termination of the derivative instrument or a change in critical terms requiring discontinuation of the designated hedging relationship. For public business entities, the amendments in ASU 2016-05 are effective for interim and annual periods beginning after December 15, 2016. An entity has an option to apply the amendments in ASU 2016-05 on either a prospective basis or a modified retrospective basis. ASU 2016-05 became effective for the Company on January 1, 2017 and did not have a significant impact on the Company’s consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 2016-02”). ASU 2016-02 applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or

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operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. The Company has reviewed its outstanding lease agreements and has centrally documented the terms of its leases. The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s consolidated financial statements.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments – Overall (Subtopic 825-10); Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“ASU 2016-01”). This update is intended to improve the recognition and measurement of financial instruments and it requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available for sale debt securities in combination with other deferred tax assets. ASU 2016-01 also provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes and requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. For public business entities, the amendments in ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the ASU 2016-01. The Company is currently evaluating the provisions of ASU 2016-01 to determine the potential impact the new standard will have to the Company’s consolidated financial statements.

~~In September 2015, FASB issued ASU No. 2015-16,~~ ~~Business Combinations (Topic 805): Simplifying the Accounting for Measurement Period Adjustments~~ (“ASU 2015-16”). The update simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. For public companies, this update became effective for interim and annual periods beginning after December 15, 2015, and is to be applied prospectively. ASU 2015-16 became effective for the Company on January 1, 2016 and did not have a significant impact on the Company’s consolidated financial statements.

~~In August 2014, the FASB issued ASU No. 2014-15,~~ ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.~~ ~~ASU 2014-15~~requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all companies and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. ASU 2014-15 became effective for the Company on December 31, 2016 and did not have an impact on the consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers, Topic 606~~ (“ASU 2014-09”). The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under existing guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August of 2015, the FASB issued ASU 2015-14, ~~Revenue from Contracts with Customers, Topic 606: Deferral of the Effective Date,~~ ~~deferring the effective date of~~ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this new guidance recognized at the date of initial application. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. ASU 2014-09 could require us to change how we recognize certain revenue streams within non-interest

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income, however, we do not expect these changes to have a significant impact on our financial statements. We continue to evaluate the impact of ASU 2014-09 on our Company and expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

Note 4 — ~~Mergers and Acquisitions~~Securities

~~The following are business combinations which are currently proposed or have occurred over the past two years:~~

~~Southeastern Bank Financial Corporation (“SBFC”) – January 3, 2017~~

~~Park Sterling Corporation - Proposed~~

~~Park Sterling Corporation Proposed Acquisition~~

~~On April 26, 2017, South State Corporation, (“SSB”) entered into an Agreement and Plan of Merger with~~ ~~Park Sterling Corporation, a North Carolina corporation ("PSTB), and a bank holding company headquartered in Charlotte, North Carolina.~~ The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, PSTB will merge with and into SSB, with SSB as the surviving corporation in the Merger. Immediately following the Merger, PSTB's wholly owned bank subsidiary, Park Sterling Bank ("PSB"), will merge with and into the Bank, with the Bank as the surviving entity in the bank merger. At September 30, 2017, PSTB reported $3.3 billion in total assets, $2.4 billion in loans and $2.5 billion in deposits. PSTB has over 50 full service branches in North Carolina, South Carolina, Georgia and Virginia that serve individuals and businesses. With the closing of the merger with PSTB, the Company plans to close 12 PSB branches and 2 legacy SSB branches by the end of 2018.

~~Under the terms of the merger agreement, PSTB common shareholders will receive aggregate consideration of approximately 7,471,072~~ shares of SSB common stock, plus cash for the value of “in the money” outstanding stock options. The common stock consideration is based upon a fixed exchange ratio of 0.14 shares of SSB common stock for each outstanding share of PSTB common stock.

~~Special shareholder meetings of PSTB and SSB to ratify the merger proposal were held on October 25, 2017 and the merger proposal was approved.~~ ~~The proposed merger is still subject to regulatory approvals and other customary closing conditions. The transaction is expected to close during the fourth quarter of 2017.~~

~~Southeastern Bank Financial Corporation Acquisition~~

On January 3, 2017, SSB acquired all of the outstanding common stock of Southeastern Bank financial Corporation (“SBFC”), of Augusta, Georgia, the bank holding company for Georgia Bank & Trust Company of Augusta (“GB&T”), in a stock transaction. SBFC common shareholders received 0.7307 shares of the Company’s common stock in exchange for each share of SBFC stock resulting in the Company issuing 4,978,338 shares of its common stock. In total, the purchase price for SBFC was $435.1 million including the value of “in the money” outstanding stock options totaling $490,000.

The SBFC transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date.

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The following table presents the assets acquired and liabilities assumed as of January 3, 2017 and their initial and subsequent fair value estimates, as recorded by the Company. The Company has up to one year after the acquisition date to make subsequent fair value adjustments.

Intial

Subsequent

As Recorded

Fair Value

Fair Value

As Recorded by
(Dollars in thousands)

by SBFC

Adjustments

Adjustments

the Company
Assets








Cash and cash equivalents

$
72,043

$
—

$
—

$
72,043
Investment securities

591,824

(1,770)
(a)

—

590,054
Loans held for sale

13,652

—

—

13,652
Loans, net of allowance and mark

1,060,618

(10,668)
(b)

—

1,049,950
Premises and equipment

25,419

(2,212)
(c)

—

23,207
Intangible assets

140

17,980
(d)

—

18,120
OREO and repossessed assets

580

(30)
(e)

(165)
(e)

385
Bank owned life insurance

44,513

—

—

44,513
Deferred tax asset

16,247

(687)
(f)

850
(f)

16,410
Other assets

7,545

(482)
(g)

—

7,063
Total assets

$
1,832,581

$
2,131

$
685

$
1,835,397

Liabilities

Deposits:

Noninterest-bearing

$
262,967

$
—

$
—

$
262,967
Interest-bearing

1,257,953

—

—

1,257,953
Total deposits

1,520,920

—

—

1,520,920
Federal funds purchased and securities sold under agreements to repurchase

1,014

—

—

1,014
Other borrowings

110,620

(1,120)
(h)

—

109,500
Other liabilities

19,980

5,553
(i)

2,210
(i)

27,743
Total liabilities

1,652,534

4,433

2,210

1,659,177
Net identifiable assets acquired over (under) liabilities assumed

180,047

(2,302)

(1,525)

176,220
Goodwill

—

257,370

1,525

258,895
Net assets acquired over liabilities assumed

$
180,047

$
255,068

$
—

$
435,115

Consideration:

South State Corporation common shares issued

4,978,338
Purchase price per share of the Company's common stock

$
87.30

Company common stock issued ($434,609) and cash exchanged for fractional shares ($16)

$
434,625
Cash paid for stock option redemptions

490
Fair value of total consideration transferred

$
435,115

~~Explanation of fair value adjustments~~

~~(a)—Adjustment reflects marking the securities portfolio to fair value as of the acquisition date.~~

(b)—Adjustment reflects the fair value adjustments of $30,749 based on the Company’s evaluation of the acquired loan portfolio and excludes the allowance for loan losses (“ALLL”) of $20,081 recorded by SBFC.

~~(c)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.~~

~~(d)—Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts that totaled $18,120.~~

(e)—Adjustment reflects the fair value adjustments to other real estate owned (“OREO”) and repossessed assets based on the Company’s evaluation of the acquired OREO and repossessed assets portfolio.

~~(f)—Adjustment to record deferred tax asset related to the fair value adjustments.~~

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~~(g)—Adjustment reflects uncollectible portion of accrued interest receivable and loan fees receivable along with the write-off of certain prepaid expenses.~~

(h)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of other borrowings of Trust Preferred Securities with a discount of $2,149, netted with premium on certain Federal Home Loan Bank (“FHLB “) advances of $1,029.

~~(i)—Adjustment reflects the fair value adjustments to employee benefit plans of $8,259 netted against an adjustment of other miscellaneous liabilities of $496.~~

~~Note 5 —~~ Investment Securities

The following is the amortized cost and fair value of investment securities held to maturity:

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(Dollars in thousands)

Cost

Gains

Losses

Value

September 30, 2017:

State and municipal obligations

$
3,678

$
54

$
—

$
3,732

December 31, 2016:

State and municipal obligations

$
6,094

$
156

$
—

$
6,250

September 30, 2016:

State and municipal obligations

$
6,851

$
225

$
—

$
7,076


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
March 31, 2024:
U.S. Government agencies	$	197,269	$	—	$	(25,821)	$	171,448
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,406,440		—		(246,764)		1,159,676
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		437,718		—		(72,593)		365,125
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		352,399		—		(73,294)		279,105
Small Business Administration loan-backed securities		52,763		—		(11,550)		41,213
	$	2,446,589	$	—	$	(430,022)	$	2,016,567
December 31, 2023:
U.S. Government agencies	$	197,267	$	—	$	(24,607)	$	172,660
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,438,102		—		(227,312)		1,210,790
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		444,883		—		(68,139)		376,744
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		354,055		—		(71,327)		282,728
Small Business Administration loan-backed securities		53,133		—		(11,319)		41,814
	$	2,487,440	$	—	$	(402,704)	$	2,084,736

The following is the amortized cost and fair value of investment securities available for sale:

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

(Dollars in thousands)

Cost

Gains

Losses

Value

September 30, 2017:

Government-sponsored entities debt*

$
86,521

$
72

$
(642)

$
85,951

State and municipal obligations

199,898

4,584

(188)

204,294

Mortgage-backed securities**

1,027,827

4,673

(5,023)

1,027,477

Corporate stocks

2,781

176

—

2,957

$
1,317,027

$
9,505

$
(5,853)

$
1,320,679

December 31, 2016:

Government-sponsored entities debt*

$
85,488

$
—

$
(846)

$
84,642

State and municipal obligations

105,303

2,289

(190)

107,402

Mortgage-backed securities**

807,717

3,085

(7,225)

803,577

Corporate stocks

3,658

473

(347)

3,784

$
1,002,166

$
5,847

$
(8,608)

$
999,405

September 30, 2016:

Government-sponsored entities debt*

$
62,996

$
20

$
(36)

$
62,980

State and municipal obligations

112,797

4,542

(15)

117,324

Mortgage-backed securities**

729,699

11,721

(143)

741,277

Corporate stocks

3,658

380

(245)

3,793

$
909,150

$
16,663

$
(439)

$
925,374


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
March 31, 2024:
U.S. Treasuries	$	24,920	$	—	$	(333)	$	24,587
U.S. Government agencies		246,118		—		(22,313)		223,805
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,780,838		161		(288,576)		1,492,423
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		611,044		4		(102,936)		508,112
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,213,549		767		(202,099)		1,012,217
State and municipal obligations		1,127,834		2		(167,477)		960,359
Small Business Administration loan-backed securities		393,770		52		(43,779)		350,043
Corporate securities		30,521		—		(3,667)		26,854
	$	5,428,594	$	986	$	(831,180)	$	4,598,400
December 31, 2023:
U.S. Treasuries	$	74,720	$	—	$	(830)	$	73,890
U.S. Government agencies		246,089		—		(21,383)		224,706
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,822,104		294		(264,092)		1,558,306
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		626,735		—		(99,313)		527,422
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,217,125		1,516		(194,471)		1,024,170
State and municipal obligations		1,129,750		2		(152,291)		977,461
Small Business Administration loan-backed securities		413,950		86		(42,350)		371,686
Corporate securities		30,533		—		(3,786)		26,747
	$	5,561,006	$	1,898	$	(778,516)	$	4,784,388

* - The Company’s government-sponsored entities holdings are comprised of debt securities offered by Federal Home Loan Mortgage Corporation (“FHLMC”) or Freddie Mac, Federal National Mortgage Association (“FNMA”) or Fannie Mae, FHLB, and Federal Farm Credit Banks (“FFCB”). Also included in the Company’s government-sponsored entities are debt securities offered by the Small Business Administration (“SBA”), which have the full faith and credit backing of the United States Government.

** - All of the mortgage-backed securities are issued by government-sponsored entities; there are no private-label holdings.

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The following is the amortized cost and ~~fair~~carrying value of other investment securities:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair

									Carrying
(Dollars in thousands)	Cost		Gains		Losses		Value		Value
September 30, 2017:
March 31, 2024:
Federal Home Loan Bank stock	$	10,177	$	—	$	—	$	10,177	$	18,086
Federal Reserve Bank stock										150,261
Investment in unconsolidated subsidiaries		2,262		—		—		2,262		3,563
	$	12,439	$	—	$	—	$	12,439
December 31, 2016:
Other nonmarketable investment securities										15,375
									$	187,285
December 31, 2023:
Federal Home Loan Bank stock	$	7,840	$	—	$	—	$	7,840	$	22,836
Federal Reserve Bank stock										150,261
Investment in unconsolidated subsidiaries		1,642		—		—		1,642		3,563
	$	9,482	$	—	$	—	$	9,482
September 30, 2016:
Federal Home Loan Bank stock	$	7,840	$	—	$	—	$	7,840
Investment in unconsolidated subsidiaries		1,642		—		—		1,642
	$	9,482	$	—	$	—	$	9,482
Other nonmarketable investment securities										15,383
									$	192,043

The Company’s other investment securities consist of non-marketable equity securities that have no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of March 31, 2024, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at ~~September 30, 2017~~March 31, 2024 by contractual maturity are detailed below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. ~~Corporate Stocks including equity~~

Securities

Held to Maturity

Available for Sale

Amortized

Fair

Amortized

Fair

(Dollars in thousands)

Cost

Value

Cost

Value

Due in one year or less

64,365

63,576

157,891

155,556

Due after one year through five years

36,550

32,413

262,765

246,685

Due after five years through ten years

468,529

399,174

1,295,555

1,111,329

Due after ten years

1,877,145

1,521,404

3,712,383

3,084,830

2,446,589

2,016,567

5,428,594

4,598,400

During the three months ended March 31, 2024, there were no sales of securities available for sale and ~~preferred stocks with~~therefore, there were no ~~stated~~ gains or losses on sale securities available for sale. During the three months ended March 31, 2023, there were gross gains of $1.3 million and gross losses of $1.3 million realized from the sale of available for sale securities.

There were no sales of held to maturity ~~are included in~~securities during the ~~due after ten years category.~~three months ended March 31, 2024 or March 31, 2023.

Securities

Securities

Held to Maturity

Available for Sale

Amortized

Fair

Amortized

Fair

(Dollars in thousands)

Cost

Value

Cost

Value

Due in one year or less

$
2,225

$
2,253

$
12,023

$
12,090

Due after one year through five years

1,153

1,179

109,509

110,127

Due after five years through ten years

300

300

275,960

278,021

Due after ten years

—

—

919,535

920,441

$
3,678

$
3,732

$
1,317,027

$
1,320,679

Table of Contents

Information pertaining to ~~the Company’s~~our securities with gross unrealized losses at ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016,~~2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position is as follows:

Less Than

Twelve Months

Twelve Months

or More

Gross

Gross

Unrealized

Fair

Unrealized

Fair

(Dollars in thousands)

Losses

Value

Losses

Value

September 30, 2017:

Securities Available for Sale

Government-sponsored entities debt

$
473

$
68,366

$
169

$
11,830

State and municipal obligations

188

21,851

—

—

Mortgage-backed securities

4,457

455,145

566

35,917

Corporate stocks

—

—

—

—

$
5,118

$
545,362

$
735

$
47,747

December 31, 2016:

Securities Available for Sale

Government-sponsored entities debt

$
846

$
84,642

$
—

$
—

State and municipal obligations

190

11,506

—

—

Mortgage-backed securities

7,148

592,228

77

2,058

Corporate stocks

—

—

347

1,395

$
8,184

$
688,376

$
424

$
3,453

September 30, 2016:

Securities Available for Sale

Government-sponsored entities debt

$
36

$
11,962

$
—

$
—

State and municipal obligations

15

1,947

—

—

Mortgage-backed securities

106

56,023

37

2,325

Corporate stocks

—

—

245

1,496

$
157

$
69,932

$
282

$
3,821


	Less Than				Twelve Months
	Twelve Months				or More
	Gross Unrealized		Fair		Gross Unrealized		Fair
(Dollars in thousands)	Losses		Value		Losses		Value
March 31, 2024:
Securities Held to Maturity
U.S. Government agencies	$	—	$	—	$	25,821	$	171,448
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—		246,764		1,159,676
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—		72,593		365,125
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—		73,294		279,105
Small Business Administration loan-backed securities		—		—		11,550		41,213
	$	—	$	—	$	430,022	$	2,016,567
Securities Available for Sale
U.S. Treasuries	$	—	$	—	$	333	$	24,597
U.S. Government agencies		—		—		22,313		223,805
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		135		8,878		288,441		1,473,944
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—		102,936		506,900
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		63		14,929		202,036		932,902
State and municipal obligations		1,981		19,989		165,496		936,573
Small Business Administration loan-backed securities		62		16,734		43,717		317,469
Corporate securities		10		489		3,657		26,366
	$	2,251	$	61,019	$	828,929	$	4,442,556
December 31, 2023:
Securities Held to Maturity
U.S. Government agencies	$	—	$	—	$	24,607	$	172,660
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—		227,312		1,210,790
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—		68,139		376,745
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—		71,327		282,728
Small Business Administration loan-backed securities		—		—		11,319		41,814
	$	—	$	—	$	402,704	$	2,084,737
Securities Available for Sale
U.S. Treasuries	$	—	$	—	$	830	$	73,890
U.S. Government agencies		—		—		21,383		224,706
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		122		9,358		263,970		1,539,208
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—		99,313		527,422
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		91		7,959		194,380		955,059
State and municipal obligations		177		6,340		152,114		967,305
Small Business Administration loan-backed securities		128		42,447		42,222		304,770
Corporate securities		18		480		3,768		26,267
	$	536	$	66,584	$	777,980	$	4,618,627

~~Management evaluates~~The Company’s valuation methodology for securities impairment is disclosed in Note 1—Summary of Significant Accounting Policies, under “Investment Securities” section, of our Annual Report on Form 10-K for ~~other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1)~~ the financial condition and near-term prospects of the issuer, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value, and (5) the anticipated outlook for changes in the general level of interest rates.year ended December 31, 2023. All debt securities ~~available for sale~~ in an unrealized loss position as of ~~September 30, 2017~~March 31, 2024 continue to perform as ~~scheduled. As part of the Company’s evaluation of its intent~~scheduled and ~~ability to hold investments~~management does not believe there is a credit loss or a provision for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. The Companycredit losses is necessary. Management does not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that the Company will be required to sell the debt securities; therefore, management does not consider these investments to be other-than-temporarily impaired at September 30, 2017. With respect to equity securities held by the Company, the Company recorded an OTTI charge of $753,000 related to two equity securities during the third quarter of 2017. This charge was recorded due to the fact that management made the decision to sell the two securities in the fourth quarter of 2017 and therefore, no longer had the intent to hold the investments for a period of time sufficient to allow for any anticipated recovery.

securities. Management continues to monitor all of the ~~Company’s~~ securities with a high degree of scrutiny. ~~There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all~~See Note 2 — Summary of ~~its securities may be sold or are other than temporarily impaired, which would require a charge to earnings in such periods.~~Significant Accounting Policies for further discussion.

Table of Contents

At March 31, 2024, investment securities with a market value of $2.2 billion and a carrying value of $2.4 billion were pledged to secure public funds deposits and for other purposes required and permitted by law (excluding securities pledged to secure repurchase agreement disclosed in Note 19 — Short-Term Borrowings, under the “Securities Sold Under Agreements to Repurchase (“Repurchase agreements”)” section). Of the $2.4 billion carrying value of investment securities pledged, $2.2 billion were pledged to secure public funds deposits, $145.4 million were pledged to secure FHLB advances and $111.2 million were pledged to secure interest rate swap positions with correspondent banks. At December 31, 2023, investment securities with a market value of $3.0 billion and a carrying value of $3.2 billion were pledged to secure public funds deposits and for other purposes required and permitted by law. Of the $3.2 billion carrying value of investment securities pledged, $2.4 billion were pledged to secure public funds deposits, $729.4 million were pledged to secure FHLB advances and $115.0 million were pledged to secure interest rate swap positions with correspondent banks.

Trading Securities

At March 31, 2024 and December 31, 2023, trading securities, at estimated fair value, were as follows:


	March 31,		December 31,
(Dollars in thousands)	2024		2023
U.S. Government agencies	$	10,352	$	1,537
Residential mortgage pass-through securities issued or guaranteed by U.S.
government agencies or sponsored enterprises		11,383		14,461
Other residential mortgage issued or guaranteed by U.S. government
agencies or sponsored enterprises		1,148		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		8,467		—
State and municipal obligations		31,263		14,620
Other debt securities		3,575		703
	$	66,188	$	31,321

Net gains (losses) on trading securities for the three months ended March 31, 2024 and 2023 were as follows:


	Three Months Ended
	March 31,
(Dollars in thousands)	2024		2023
Net gains (losses) on sales transaction	$	54	$	(139)
Net mark to mark gains (losses)		12		(6)
Net gains (losses) on trading securities	$	66	$	(145)

Table of Contents

Note 65 — Loans ~~and Allowance for Loan Losses~~

The following is a summary of ~~non-acquired~~total loans:


	March 31,		December 31,
(Dollars in thousands)	2024		2023
Loans:
Construction and land development ⁽¹⁾	$	2,437,343	$	2,923,514
Commercial non-owner occupied		9,112,474		8,571,634
Commercial owner occupied real estate		5,511,855		5,497,671
Consumer owner occupied ⁽²⁾		6,814,472		6,595,005
Home equity loans		1,408,594		1,398,445
Commercial and industrial		5,544,131		5,504,539
Other income producing property		640,055		656,334
Consumer		1,196,895		1,233,650
Other loans		1,491		7,697
Total loans		32,667,310		32,388,489
Less allowance for credit losses		(469,654)		(456,573)
Loans, net	$	32,197,656	$	31,931,916

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Non-acquired loans:







Commercial non-owner occupied real estate:

Construction and land development

$
766,957

$
580,464

$
562,336

Commercial non-owner occupied

949,870

714,715

630,437

Total commercial non-owner occupied real estate

1,716,827

1,295,179

1,192,773

Consumer real estate:

Consumer owner occupied

1,454,758

1,197,621

1,183,441

Home equity loans

419,760

383,218

363,825

Total consumer real estate

1,874,518

1,580,839

1,547,266

Commercial owner occupied real estate

1,278,487

1,177,745

1,153,480

Commercial and industrial

781,757

671,398

617,525

Other income producing property

194,335

178,238

179,595

Consumer

371,758

324,238

305,687

Other loans

12,645

13,404

11,787

Total non-acquired loans

6,230,327

5,241,041

5,008,113

Less allowance for loan losses

(41,541)

(36,960)

(37,319)

Non-acquired loans, net

$
6,188,786

$
5,204,081

$
4,970,794

(1)

Construction and land development includes loans for both commercial construction and development, as well as loans for 1-4 family residential construction and lot loans.

(2)

Consumer owner occupied real estate includes loans on both 1-4 family owner occupied property, as well as loans collateralized by 1-4 family owner occupied properties with a business intent.

The ~~following is a summary of acquired non-credit impaired loans accounted for under FASB ASC Topic 310-20, net of related discount:~~

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

FASB ASC Topic 310-20 acquired loans:










Commercial non-owner occupied real estate:

Construction and land development

$
76,886

$
10,090

$
10,683

Commercial non-owner occupied

199,704

34,628

35,775

Total commercial non-owner occupied real estate

276,590

44,718

46,458

Consumer real estate:

Consumer owner occupied

492,615

408,270

435,132

Home equity loans

164,291

160,879

168,758

Total consumer real estate

656,906

569,149

603,890

Commercial owner occupied real estate

207,572

27,195

29,444

Commercial and industrial

101,427

13,641

14,201

Other income producing property

76,924

39,342

43,152

Consumer

136,136

142,654

148,512

Total FASB ASC Topic 310-20 acquired loans

$
1,455,555

$
836,699

$
885,657

The unamortized discount related to the acquired non-credit impaired loans totaled $20.7 million, $11.6 million, and $12.6 million at September 30, 2017, December 31, 2016, and September 30, 2016, respectively.

~~Table of Contents~~

~~In accordance with FASB ASC Topic 310-30, the Company aggregated acquired loans that have common risk characteristics into pools of loan categories as described in the~~above table ~~below. The following is a summary of acquired credit impaired loans accounted for under FASB ASC Topic 310-30 (identified as credit impaired at the time of acquisition), net of related discount:~~

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

FASB ASC Topic 310-30 acquired loans:







Commercial loans greater than or equal to $1 million-Community Bank & Trust ("CBT")

$
8,439

$
8,617

$
10,958

Commercial real estate

199,082

210,204

220,489

Commercial real estate—construction and development

46,248

44,373

47,081

Residential real estate

249,666

258,100

268,968

Consumer

53,302

59,300

61,866

Commercial and industrial

25,796

25,347

26,658

Total FASB ASC Topic 310-30 acquired loans

582,533

605,941

636,020

Less allowance for loan losses

(3,670)

(3,395)

(3,403)

FASB ASC Topic 310-30 acquired loans, net

$
578,863

$
602,546

$
632,617

Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting fair values of FASB ASC Topic 310-30 acquired loans impaired and non-impaired at the acquisition date for SBFC (January 3, 2017) are as follows:

January 3, 2017

Loans Impaired
(Dollars in thousands)

at Acquisition
Contractual principal and interest

$
73,365
Non-accretable difference

(12,912)
Cash flows expected to be collected

60,453
Accretable difference

(4,603)
Carrying value

$
55,850

The table above excludes $991.5 million ($1.01 billion in contractual principal less a $18.8 million fair value adjustment) in acquired loans at fair value that were identified as either performing with no discount related to the credit or as revolving lines of credit (commercial or consumer) as of the acquisition date and will be accounted for under FASB ASC Topic 310-20.

Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting carrying values of acquired credit impaired loans as of September 30, 2017, December 31, 2016 and September 30, 2016 are as follows:

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Contractual principal and interest

$
741,268

$
778,822

$
822,340

Non-accretable difference

(26,160)

(17,502)

(22,222)

Cash flows expected to be collected

715,108

761,320

800,118

Accretable yield

(132,575)

(155,379)

(164,098)

Carrying value

$
582,533

$
605,941

$
636,020

Allowance for acquired loan losses

$
(3,670)

$
(3,395)

$
(3,403)

Income on acquired credit impaired loans that are not impaired at the acquisition date is recognized in the same manner as loans impaired at the acquisition date. A portion of the fair value discount on acquired non-impaired loans has been ascribed as an accretable difference that is accreted into interest income over the estimated remaining life of the loans. The remaining nonaccretable difference represents cash flows not expected to be collected.

~~Table of Contents~~

~~The following are changes in the carrying value of acquired credit impaired loans:~~

Nine Months Ended September 30,
(Dollars in thousands)

2017

2016

Balance at beginning of period

$
602,546

$
733,870

Fair value of acquired loans

55,850

—

Net reductions for payments, foreclosures, and accretion

(79,258)

(101,556)

Change in the allowance for loan losses on acquired loans

(275)

303

Balance at end of period, net of allowance for loan losses on acquired loans

$
578,863

$
632,617

~~The table below~~ reflects ~~refined accretable yield balance for acquired credit impaired loans:~~

Nine Months Ended September 30,
(Dollars in thousands)

2017

2016
Balance at beginning of period

$
155,379

$
201,538
Addition from the SBFC acquisition

4,603

—
Accretion

(43,873)

(56,850)
Reclass of nonaccretable difference due to improvement in expected cash flows

16,772

18,631
Other changes, net

(306)

779
Balance at end of period

$
132,575

$
164,098

In the third quarter of 2017, the accretable yield balance declined by $14.3 million as loan accretion (income) was recognized. This was partially offset by improved expected cash flows of $7.8 million during the third quarter of 2017.

Our loan loss policy adheres to GAAP as well as interagency guidance. The ALLL is based upon estimates made by management. We maintain an ALLL at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on, among other factors, changes in economic conditions in our markets. In addition, as noted above, regulatory agencies, as an integral part of their examination process, periodically review our allowances for losses on loans. These agencies may require management to recognize additions to the allowances based on their judgments about information available to them at the ~~time~~amortized cost basis for the periods March 31, 2024 and December 31, 2023, to include net deferred costs of ~~their examination. Because~~$73.5 million and $68.0 million, respectively, and unamortized discount total related to loans acquired of ~~these~~$47.0 million and other factors, it is possible that the allowances for losses on loans may change. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

~~The ALLL on non‑acquired loans consists~~$51.3 million, respectively. Accrued interest receivables of ~~general~~$131.0 million and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience for each class of loans and management’s evaluation and “risk grading” of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. Currently, these adjustments are applied to the non‑acquired loan portfolio when estimating the level of reserve required. The specific reserves are determined on a loan‑by‑loan basis based on management’s evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as doubtful or substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for specific reserve is evaluated on impaired loans, and once a specific reserve is established for a loan, a charge off of that amount occurs in the quarter subsequent to the establishment of the specific reserve. Loans that are determined to be impaired are provided a specific reserve, if necessary, and are excluded from the calculation of the general reserves.

~~Table of Contents~~

Beginning with the First Financial Holdings, Inc. (“FFHI”) acquisition in 2013, the Company segregates the acquired loan portfolio into performing loans (“non‑credit impaired) and purchased credit impaired loans. The performing loans and revolving type loans$127.0 million, respectively, are accounted for ~~under FASB ASC 310‑20, with each loan being accounted~~separately and reported in other assets for ~~individually. The ALLL on these loans will be measured~~the periods March 31, 2024 and ~~recorded consistent with non‑acquired loans. The acquired credit impaired loans will follow the description in the next paragraph.~~

In determining the acquisition date fair value of purchased loans, and in subsequent accounting, the Company generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are reclassified from the non‑accretable difference to accretable yield and recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an ALLL. Management analyzes the acquired loan pools using various assessments of risk to determine an expected loss. The expected loss is derived based upon a loss given default based upon the collateral type and/or detailed review by loan officers and the probability of default that is determined based upon historical data at the loan level. All acquired loans managed by Special Asset Management are reviewed quarterly and assigned a loss given default. Acquired loans not managed by Special Asset Management are reviewed twice a year in a similar method to the Company’s originated portfolio of loans which follow review thresholds based on risk rating categories. In the fourth quarter of 2015, the Company modified its methodology to a more granular approach in determining loss given default on substandard loans with a net book balance between $100,000 and $500,000 by adjusting the loss given default to 90% of the most current collateral valuation based on appraised value. Substandard loans greater than $500,000 were individually assigned loss given defaults each quarter. Trends are reviewed in terms of accrual status, past due status, and weighted‑average grade of the loans within each of the accounting pools. In addition, the relationship between the change in the unpaid principal balance and change in the mark is assessed to correlate the directional consistency of the expected loss for each pool. Prior to the termination of our loss share agreements in June 2016, as discussed below, which offset the impact of the provision established for acquired loans covered under FDIC loss share agreements, the receivable from the FDIC was adjusted to reflect the indemnified portion of the post‑acquisition exposure with a corresponding credit to the provision for loan losses.

~~On June 23, 2016, the~~ Bank entered into an early termination agreement with the FDIC with respect to all of its outstanding loss share agreements. The loss share agreements were entered into with the FDIC in 2009, 2010, 2011 and 2012 either by the Bank or by First Federal Bank, which was acquired by the Bank in July of 2013. As a result of the termination agreement, all assets previously classified as covered became uncovered effective June 23, 2016, and as a result the Bank will now recognize the full amount of future charge-offs, recoveries, gains, losses, and expenses related to these previously covered assets, as the FDIC will no longer share in these amounts.

~~Table of Contents~~

~~An aggregated analysis of the changes in allowance for loan losses is as follows:~~

Non-acquired

Acquired Non-Credit

Acquired Credit


(Dollars in thousands)

Loans

Impaired Loans

Impaired Loans

Total

Three Months Ended September 30, 2017:

Balance at beginning of period

$
40,149

$
—

$
3,741

$
43,890

Loans charged-off

(1,383)

(275)

—

(1,658)

Recoveries of loans previously charged off  (1)

836

279

—

1,115

Net charge-offs

(547)

4

—

(543)

Provision for loan losses charged to operations

1,939

(4)

127

2,062

Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

Reduction due to loan removals

—

—

(198)

(198)

Balance at end of period

$
41,541

$
—

$
3,670

$
45,211

Three Months Ended September 30, 2016:

Balance at beginning of period

$
36,939

$
—

$
3,752

$
40,691

Loans charged-off

(1,108)

(280)

—

(1,388)

Recoveries of loans previously charged off  (1)

713

120

—

833

Net charge-offs

(395)

(160)

—

(555)

Provision

775

160

(23)

912

Benefit attributable to FDIC loss share agreements

—

—

—

—

Provision for loan losses charged to operations

775

160

(23)

912

Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

Reduction due to loan removals

—

—

(326)

(326)

Balance at end of period

$
37,319

$
—

$
3,403

$
40,722

Non-acquired

Acquired Non-Credit

Acquired Credit


(Dollars in thousands)

Loans

Impaired Loans

Impaired Loans

Total

Nine Months Ended September 30, 2017:

Balance at beginning of period

$
36,960

$
—

$
3,395

$
40,355

Loans charged-off

(3,972)

(1,165)

—

(5,137)

Recoveries of loans previously charged off  (1)

2,041

414

—

2,455

Net charge-offs

(1,931)

(751)

—

(2,682)

Provision

6,512

751

819

8,082

Benefit attributable to FDIC loss share agreements

—

—

—

—

Total provision for loan losses charged to operations

6,512

751

819

8,082

Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

Reduction due to loan removals

—

—

(544)

(544)

Balance at end of period

$
41,541

$
—

$
3,670

$
45,211

Nine Months Ended September 30, 2016:

Balance at beginning of period

$
34,090

$
—

$
3,706

$
37,796

Loans charged-off

(4,384)

(810)

—

(5,194)

Recoveries of loans previously charged off  (1)

2,358

262

—

2,620

Net charge-offs

(2,026)

(548)

—

(2,574)

Provision

5,255

548

372

6,175

Benefit attributable to FDIC loss share agreements

—

—

23

23

Total provision for loan losses charged to operations

5,255

548

395

6,198

Provision for loan losses recorded through the FDIC loss share receivable

—

—

(23)

(23)

Reduction due to loan removals

—

—

(675)

(675)

Balance at end of period

$
37,319

$
—

$
3,403

$
40,722

~~(1)~~

~~– Recoveries related to acquired credit impaired loans are recorded through other noninterest income on the consolidated statement of income and do not run through the ALLL.~~

~~Table of Contents~~

~~The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for non-acquired loans:~~

Construction

Commercial

Commercial

Consumer





Other Income






& Land

Non-owner

Owner

Owner

Home

Commercial

Producing

Other

(Dollars in thousands)

Development

Occupied

Occupied

Occupied

Equity

& Industrial

Property

Consumer

Loans

Total
Three Months Ended September 30, 2017

Allowance for loan losses:

Balance, June 30, 2017

$
5,746

$
6,164

$
7,539

$
8,569

$
3,247

$
5,143

$
1,379

$
2,532

$
(170)

$
40,149
Charge-offs

(19)

—

—

—

(17)

(440)

(10)

(897)

—

(1,383)
Recoveries

333

80

92

65

38

31

29

168

—

836
Provision (benefit)

(88)

(7)

479

492

(171)

469

(10)

889

(114)

1,939
Balance, September 30, 2017

$
5,972

$
6,237

$
8,110

$
9,126

$
3,097

$
5,203

$
1,388

$
2,692

$
(284)

$
41,541
Loans individually evaluated for impairment

$
1,266

$
133

$
64

$
47

$
116

$
18

$
211

$
7

$
—

$
1,862
Loans collectively evaluated for impairment

$
4,706

$
6,104

$
8,046

$
9,079

$
2,981

$
5,185

$
1,177

$
2,685

$
(284)

$
39,679
Loans:

Loans individually evaluated for impairment

$
42,638

$
716

$
5,874

$
4,455

$
2,623

$
627

$
3,605

$
254

$
—

$
60,792
Loans collectively evaluated for impairment

724,319

949,154

1,272,613

1,450,303

417,137

781,130

190,730

371,504

12,645

6,169,535
Total non-acquired loans

$
766,957

$
949,870

$
1,278,487

$
1,454,758

$
419,760

$
781,757

$
194,335

$
371,758

$
12,645

$
6,230,327
Three Months Ended September 30, 2016

Allowance for loan losses:

Balance , June 30, 2016

$
4,665

$
4,656

$
8,003

$
7,530

$
3,148

$
4,269

$
1,812

$
2,014

$
842

$
36,939
Charge-offs

—

—

(16)

(45)

—

(31)

—

(1,016)

—

(1,108)
Recoveries

241

28

25

27

64

104

8

216

—

713
Provision (benefit)

(795)

(93)

516

338

69

368

(201)

1,094

(521)

775
Balance, September 30, 2016

$
4,111

$
4,591

$
8,528

$
7,850

$
3,281

$
4,710

$
1,619

$
2,308

$
321

$
37,319
Loans individually evaluated for impairment

$
359

$
181

$
65

$
58

$
38

$
385

$
289

$
4

$
—

$
1,379
Loans collectively evaluated for impairment

$
3,752

$
4,410

$
8,463

$
7,792

$
3,243

$
4,325

$
1,330

$
2,304

$
321

$
35,940
Loans:

Loans individually evaluated for impairment

$
3,431

$
764

$
6,352

$
3,127

$
1,599

$
1,453

$
4,319

$
142

$
—

$
21,187
Loans collectively evaluated for impairment

558,905

629,673

1,147,128

1,180,314

362,226

616,072

175,276

305,545

11,787

4,986,926
Total non-acquired loans

$
562,336

$
630,437

$
1,153,480

$
1,183,441

$
363,825

$
617,525

$
179,595

$
305,687

$
11,787

$
5,008,113

~~Table of Contents~~

~~The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired non-credit impaired loans:~~

Construction

Commercial

Commercial

Consumer





Other Income




& Land

Non-owner

Owner

Owner

Home

Commercial

Producing

(Dollars in thousands)

Development

Occupied

Occupied

Occupied

Equity

& Industrial

Property

Consumer

Total

Three Months Ended September 30, 2017

Allowance for loan losses:

Balance at beginning of period

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Charge-offs

—

—

—

(80)

(71)

(1)

—

(123)

(275)

Recoveries

1

—

1

—

274

1

—

2

279

Provision (benefit)

(1)

—

(1)

80

(203)

—

—

121

(4)

Balance, September 30, 2017

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans collectively evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans:

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans collectively evaluated for impairment

76,886

199,704

207,572

492,615

164,291

101,427

76,924

136,136

1,455,555

Total  acquired non-credit impaired loans

$
76,886

$
199,704

$
207,572

$
492,615

$
164,291

$
101,427

$
76,924

$
136,136

$
1,455,555

Three Months Ended September 30, 2016

Allowance for loan losses:

Balance at beginning of period

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Charge-offs

—

—

(3)

—

(105)

(23)

—

(149)

(280)

Recoveries

1

—

—

3

89

1

—

26

120

Provision (benefit)

(1)

—

3

(3)

16

22

—

123

160

Balance, September 30, 2016

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans collectively evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans:

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Loans collectively evaluated for impairment

10,683

35,775

29,444

435,132

168,758

14,201

43,152

148,512

885,657

Total  acquired non-credit impaired loans

$
10,683

$
35,775

$
29,444

$
435,132

$
168,758

$
14,201

$
43,152

$
148,512

$
885,657

~~Table of Contents~~

~~The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired credit impaired loans:~~

Commercial



Commercial










Loans Greater

Real Estate-

Than or Equal

Commercial

Construction and

Residential

Commercial

(Dollars in thousands)

to $1 Million-CBT

Real Estate

Development

Real Estate

Consumer

and Industrial

Single Pay

Total
Three Months Ended September 30, 2017

Allowance for loan losses:

Balance, June 30, 2017

$
—

$
40

$
92

$
2,741

$
548

$
320

$
—

$
3,741
Provision (benefit) for loan losses before benefit attributable to FDIC loss share agreements

—

(40)

133

184

(85)

(65)

—

127
Benefit attributable to FDIC loss share agreements

—

—

—

—

—

—

—

—
Total provision (benefit) for loan losses charged to operations

—

(40)

133

184

(85)

(65)

—

127
Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

—

—

—

—
Reduction due to loan removals

—

—

(36)

(149)

(1)

(12)

—

(198)
Balance, September 30, 2017

$
—

$
—

$
189

$
2,776

$
462

$
243

$
—

$
3,670
Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Loans collectively evaluated for impairment

$
—

$
—

$
189

$
2,776

$
462

$
243

$
—

$
3,670
Loans:*

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Loans collectively evaluated for impairment

8,439

199,082

46,248

249,666

53,302

25,796

—

582,533
Total acquired credit impaired loans

$
8,439

$
199,082

$
46,248

$
249,666

$
53,302

$
25,796

$
—

$
582,533

Three Months Ended September 30, 2016

Allowance for loan losses:

Balance , June 30, 2016

$
—

$
35

$
151

$
2,592

$
778

$
196

$
—

$
3,752
Provision (benefit) for loan losses before benefit attributable to FDIC loss share agreements

—

—

—

2

(23)

(2)

—

(23)
Benefit attributable to FDIC loss share agreements

—

—

—

—

—

—

—

—
Total provision (benefit) for loan losses charged to operations

—

—

—

2

(23)

(2)

—

(23)
Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

—

—

—

—
Reduction due to loan removals

—

5

(6)

(102)

(211)

(12)

—

(326)
Balance, September 30, 2016

$
—

$
40

$
145

$
2,492

$
544

$
182

$
—

$
3,403
Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Loans collectively evaluated for impairment

$
—

$
40

$
145

$
2,492

$
544

$
182

$
—

$
3,403
Loans:*

Loans individually evaluated for impairment

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—
Loans collectively evaluated for impairment

10,958

220,489

47,081

268,968

61,866

26,658

—

636,020
Total acquired credit impaired loans

$
10,958

$
220,489

$
47,081

$
268,968

$
61,866

$
26,658

$
—

$
636,020

*— The carrying value of acquired credit impaired loans includes a non accretable difference which is primarily associated with the assessment of credit quality of acquired loans.

December 31, 2023.

As part of the ongoing monitoring of the credit quality of ~~the Company’s~~our loan portfolio, management tracks certain credit quality indicators, including trends related to (i) the level of classified loans, (ii) net charge-offs, (iii) non-performing loans (see details below), and (iv) the general economic conditions of the markets that we serve.

~~Table of Contents~~

The Company utilizes a risk grading matrix to assign a risk grade to each commercial loan. Classified loans are assessed at a minimum of ~~its loans.~~every six months. A description of the general characteristics of the risk grades is as follows:

●

~~Pass—~~Pass—These loans range from minimal credit risk to average, however, are still an acceptable credit risk.

●

Special ~~mention—~~mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the ~~institution’s~~Bank’s credit position at some future date.

●

~~Substandard—~~Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

●

~~Doubtful—~~Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

Construction and land development loans in the following table are on commercial and speculative real estate. Consumer owner occupied loans are collateralized by 1-4 family owner occupied properties with a business intent.

Table of Contents

The following table presents the credit risk profile by risk grade of commercial loans by origination year as of and for ~~non-acquired loans:~~

Construction & Development

Commercial Non-owner Occupied

Commercial Owner Occupied

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
755,633

$
567,398

$
548,984

$
939,125

$
701,150

$
615,521

$
1,247,881

$
1,149,417

$
1,118,421

Special mention

7,445

8,421

8,492

8,475

11,434

11,499

24,277

22,133

26,429

Substandard

3,879

4,645

4,860

2,270

2,131

3,417

6,329

6,195

8,630

Doubtful

—

—

—

—

—

—

—

—

—

$
766,957

$
580,464

$
562,336

$
949,870

$
714,715

$
630,437

$
1,278,487

$
1,177,745

$
1,153,480

Commercial & Industrial

Other Income Producing Property

Commercial Total

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,


2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
770,975

$
655,157

$
604,058

$
186,639

$
167,025

$
165,451

$
3,900,253

$
3,240,147

$
3,052,435

Special mention

8,894

14,325

11,246

6,090

9,280

12,099

55,181

65,593

69,765

Substandard

1,888

1,916

2,221

1,606

1,933

2,045

15,972

16,820

21,173

Doubtful

—

—

—

—

—

—

—

—

—

$
781,757

$
671,398

$
617,525

$
194,335

$
178,238

$
179,595

$
3,971,406

$
3,322,560

$
3,143,373

~~The following table presents~~ the ~~credit risk profile by risk grade of consumer loans for non-acquired loans:~~period ending March 31, 2024:


		Term Loans
(Dollars in thousands)		Amortized Cost Basis by Origination Year
As of March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving		Total
Construction and land development
Risk rating:
Pass	$	35,066	$	473,874	$	1,000,523	$	180,743	$	10,816	$	19,062	$	50,450	$	1,770,534
Special mention		745		1,682		9,808		16,397		—		444		—		29,076
Substandard		—		140		12,825		252		—		625		—		13,842
Doubtful		—		—		—		—		1		5		—		6
Total Construction and land development	$	35,811	$	475,696	$	1,023,156	$	197,392	$	10,817	$	20,136	$	50,450	$	1,813,458
Construction and land development
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	1,475	$	—	$	1,475

Commercial non-owner occupied
Risk rating:
Pass	$	107,887	$	868,623	$	2,517,853	$	2,096,226	$	638,979	$	2,146,534	$	88,091	$	8,464,193
Special mention		251		18,178		113,268		51,150		11,975		24,327		92		219,241
Substandard		9,421		68,144		94,125		46,638		75,312		132,713		—		426,353
Doubtful		—		—		—		1		—		2,686		—		2,687
Total Commercial non-owner occupied	$	117,559	$	954,945	$	2,725,246	$	2,194,015	$	726,266	$	2,306,260	$	88,183	$	9,112,474
Commercial non-owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	71	$	—	$	71

Commercial Owner Occupied
Risk rating:
Pass	$	109,773	$	567,722	$	1,014,720	$	1,064,707	$	625,627	$	1,736,191	$	80,895	$	5,199,635
Special mention		546		1,916		50,708		18,272		1,124		16,233		6,530		95,329
Substandard		6,055		27,372		36,626		31,846		27,093		80,001		7,890		216,883
Doubtful		—		3		—		—		1		4		—		8
Total commercial owner occupied	$	116,374	$	597,013	$	1,102,054	$	1,114,825	$	653,845	$	1,832,429	$	95,315	$	5,511,855
Commercial owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Risk rating:
Pass	$	724,949	$	877,565	$	1,069,116	$	618,382	$	345,615	$	553,640	$	1,104,937	$	5,294,204
Special mention		590		2,281		9,120		3,476		626		4,397		17,388		37,878
Substandard		13,723		35,119		28,743		24,535		4,334		20,473		85,001		211,928
Doubtful		—		2		19		65		1		28		6		121
Total commercial and industrial	$	739,262	$	914,967	$	1,106,998	$	646,458	$	350,576	$	578,538	$	1,207,332	$	5,544,131
Commercial and industrial
Current-period gross charge-offs	$	—	$	515	$	966	$	126	$	7	$	1,106	$	420	$	3,140

Other income producing property
Risk rating:
Pass	$	12,698	$	55,905	$	125,282	$	93,363	$	49,758	$	132,751	$	41,024	$	510,781
Special mention		91		512		257		161		825		2,408		266		4,520
Substandard		615		686		3,818		2,370		401		5,511		1,570		14,971
Doubtful		—		—		—		—		—		—		—		—
Total other income producing property	$	13,404	$	57,103	$	129,357	$	95,894	$	50,984	$	140,670	$	42,860	$	530,272
Other income producing property
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer owner occupied
Risk rating:
Pass	$	1,274	$	18,235	$	4,270	$	3,798	$	556	$	267	$	26,917	$	55,317
Special mention		21		232		332		—		15		268		—		868
Substandard		923		24		—		—		6		1,724		150		2,827
Doubtful		—		—		—		—		—		1		—		1
Total Consumer owner occupied	$	2,218	$	18,491	$	4,602	$	3,798	$	577	$	2,260	$	27,067	$	59,013
Consumer owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other loans
Risk rating:
Pass	$	1,491	$	—	$	—	$	—	$	—	$	—	$	—	$	1,491
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total other loans	$	1,491	$	—	$	—	$	—	$	—	$	—	$	—	$	1,491
Other loans
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total Commercial Loans
Risk rating:
Pass	$	993,138	$	2,861,924	$	5,731,764	$	4,057,219	$	1,671,351	$	4,588,445	$	1,392,314	$	21,296,155
Special mention		2,244		24,801		183,493		89,456		14,565		48,077		24,276		386,912
Substandard		30,737		131,485		176,137		105,641		107,146		241,047		94,611		886,804
Doubtful		—		5		19		66		3		2,724		6		2,823
Total Commercial Loans	$	1,026,119	$	3,018,215	$	6,091,413	$	4,252,382	$	1,793,065	$	4,880,293	$	1,511,207	$	22,572,694
Commercial Loans
Current-period gross charge-offs	$	—	$	515	$	966	$	126	$	7	$	2,652	$	420	$	4,686

Consumer Owner Occupied

Home Equity

Consumer

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
1,427,278

$
1,167,768

$
1,155,481

$
405,945

$
368,655

$
349,382

$
370,258

$
322,654

$
304,117

Special mention

14,914

15,283

14,370

7,346

8,145

8,493

316

468

611

Substandard

12,566

14,570

13,590

6,469

6,418

5,950

1,184

1,116

959

Doubtful

—

—

—

—

—

—

—

—

—

$
1,454,758

$
1,197,621

$
1,183,441

$
419,760

$
383,218

$
363,825

$
371,758

$
324,238

$
305,687

Other

Consumer Total


September 30, 2017

December 31, 2016

September 30, 2016

September 30, 2017

December 31, 2016

September 30, 2016

Pass

$
12,645

$
13,404

$
11,787

$
2,216,126

$
1,872,481

$
1,820,767

Special mention

—

—

—

22,576

23,896

23,474

Substandard

—

—

—

20,219

22,104

20,499

Doubtful

—

—

—

—

—

—

$
12,645

$
13,404

$
11,787

$
2,258,921

$
1,918,481

$
1,864,740

Table of Contents

~~The following table presents the credit risk profile by risk grade of total non-acquired loans:~~

Total Non-acquired Loans

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Pass

$
6,116,379

$
5,112,628

$
4,873,202

Special mention

77,757

89,489

93,239

Substandard

36,191

38,924

41,672

Doubtful

—

—

—

$
6,230,327

$
5,241,041

$
5,008,113

The following table presents the credit risk profile by risk grade of commercial loans by origination year as of and for ~~acquired non-credit impaired loans:~~the period ending December 31, 2023:


		Term Loans
(Dollars in thousands)		Amortized Cost Basis by Origination Year
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving		Total
Construction and land development
Risk rating:
Pass	$	480,860	$	1,036,691	$	503,433	$	19,626	$	5,585	$	19,200	$	49,191	$	2,114,586
Special mention		1,683		35,790		2,922		—		—		458		—		40,853
Substandard		390		46,311		765		—		4,285		767		—		52,518
Doubtful		—		—		—		3		—		5		—		8
Total Construction and land development	$	482,933	$	1,118,792	$	507,120	$	19,629	$	9,870	$	20,430	$	49,191	$	2,207,965
Construction and land development
Current-period gross charge-offs	$	—	$	—	$	—	$	204	$	—	$	2	$	—	$	206

Commercial non-owner occupied
Risk rating:
Pass	$	759,501	$	2,501,611	$	1,878,889	$	674,470	$	706,794	$	1,535,248	$	104,698	$	8,161,211
Special mention		3,376		38,854		19,899		10,044		9,872		12,976		93		95,114
Substandard		73,282		11,928		35,692		61,893		78,976		53,388		149		315,308
Doubtful		—		—		1		—		—		—		—		1
Total Commercial non-owner occupied	$	836,159	$	2,552,393	$	1,934,481	$	746,407	$	795,642	$	1,601,612	$	104,940	$	8,571,634
Commercial non-owner occupied
Current-period gross charge-offs	$	—	$	—	$	51	$	—	$	—	$	253	$	—	$	304

Commercial Owner Occupied
Risk rating:
Pass	$	556,192	$	1,015,236	$	1,088,976	$	635,694	$	648,082	$	1,176,796	$	88,298	$	5,209,274
Special mention		1,976		31,484		15,777		1,435		7,776		22,551		690		81,689
Substandard		24,240		37,922		26,810		26,308		20,310		63,220		7,890		206,700
Doubtful		3		—		—		1		—		4		—		8
Total commercial owner occupied	$	582,411	$	1,084,642	$	1,131,563	$	663,438	$	676,168	$	1,262,571	$	96,878	$	5,497,671
Commercial owner occupied
Current-period gross charge-offs	$	—	$	126	$	—	$	—	$	—	$	—	$	—	$	126

Commercial and industrial
Risk rating:
Pass	$	1,187,836	$	1,140,702	$	669,188	$	367,668	$	182,519	$	413,271	$	1,313,978	$	5,275,162
Special mention		2,395		7,624		3,604		2,762		3,870		898		18,300		39,453
Substandard		26,780		29,515		23,423		4,001		5,472		15,226		85,409		189,826
Doubtful		2		11		68		1		—		13		3		98
Total commercial and industrial	$	1,217,013	$	1,177,852	$	696,283	$	374,432	$	191,861	$	429,408	$	1,417,690	$	5,504,539
Commercial and industrial
Current-period gross charge-offs	$	7,272	$	3,171	$	13,169	$	429	$	765	$	1,637	$	1,144	$	27,587

Other income producing property
Risk rating:
Pass	$	58,012	$	129,858	$	96,743	$	51,615	$	40,988	$	105,810	$	39,701	$	522,727
Special mention		517		266		347		69		288		2,296		203		3,986
Substandard		693		5,062		2,634		588		630		5,772		2,121		17,500
Doubtful		—		—		—		—		—		—		—		—
Total other income producing property	$	59,222	$	135,186	$	99,724	$	52,272	$	41,906	$	113,878	$	42,025	$	544,213
Other income producing property
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer owner occupied
Risk rating:
Pass	$	18,908	$	4,509	$	2,746	$	1,293	$	287	$	315	$	25,635	$	53,693
Special mention		236		339		18		41		271		—		—		905
Substandard		24		—		—		927		1,560		182		150		2,843
Doubtful		—		—		—		—		—		1		1		2
Total Consumer owner occupied	$	19,168	$	4,848	$	2,764	$	2,261	$	2,118	$	498	$	25,786	$	57,443
Consumer owner occupied
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other loans
Risk rating:
Pass	$	7,697	$	—	$	—	$	—	$	—	$	—	$	—	$	7,697
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total other loans	$	7,697	$	—	$	—	$	—	$	—	$	—	$	—	$	7,697
Other loans
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total Commercial Loans
Risk rating:
Pass	$	3,069,006	$	5,828,607	$	4,239,975	$	1,750,366	$	1,584,255	$	3,250,640	$	1,621,501	$	21,344,350
Special mention		10,183		114,357		42,567		14,351		22,077		39,179		19,286		262,000
Substandard		125,409		130,738		89,324		93,717		111,233		138,555		95,719		784,695
Doubtful		5		11		69		5		—		23		4		117
Total Commercial Loans	$	3,204,603	$	6,073,713	$	4,371,935	$	1,858,439	$	1,717,565	$	3,428,397	$	1,736,510	$	22,391,162
Commercial Loans
Current-period gross charge-offs	$	7,272	$	3,297	$	13,220	$	633	$	765	$	1,892	$	1,144	$	28,223

Commercial Non-owner

Construction & Development

Occupied

Commercial Owner Occupied

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
74,665

$
8,997

$
9,562

$
195,808

$
28,368

$
29,509

$
201,498

$
26,920

$
28,926

Special mention

1,403

253

278

3,806

6,171

6,173

4,048

—

—

Substandard

818

840

843

90

89

93

2,026

275

518

Doubtful

—

—

—

—

—

—

—

—

—

$
76,886

$
10,090

$
10,683

$
199,704

$
34,628

$
35,775

$
207,572

$
27,195

$
29,444

Table of Contents

Other Income Producing

Commercial & Industrial

Property

Commercial Total

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,


2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
95,523

$
13,475

$
14,016

$
74,994

$
38,361

$
42,159

$
642,488

$
116,121

$
124,172

Special mention

5,385

117

122

1,208

273

276

15,850

6,814

6,849

Substandard

519

49

63

722

708

717

4,175

1,961

2,234

Doubtful

—

—

—

—

—

—

—

—

—

$
101,427

$
13,641

$
14,201

$
76,924

$
39,342

$
43,152

$
662,513

$
124,896

$
133,255

For the consumer segment, delinquency of a loan is determined by past due status. Consumer loans are automatically placed on nonaccrual status once the loan is 90 days past due. Construction and land development loans are on 1-4 family residential properties and lots.

The following table presents the credit risk profile by past due status of consumer loans by origination year as of and for the period ending March 31, 2024:


	Term Loans
(Dollars in thousands)	Amortized Cost Basis by Origination Year
As of March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving		Total
Consumer owner occupied
Days past due:
Current	$	179,144	$	1,025,871	$	2,226,767	$	1,626,546	$	616,378	$	1,059,905	$	—	$	6,734,611
30 days past due		—		1,471		3,070		1,617		402		3,234		—		9,794
60 days past due		—		195		160		328		224		339		—		1,246
90 days past due		—		1,156		2,916		975		1,495		3,266		—		9,808
Total Consumer owner occupied	$	179,144	$	1,028,693	$	2,232,913	$	1,629,466	$	618,499	$	1,066,744	$	—	$	6,755,459
Consumer owner occupied
Current-period gross charge-offs	$	—	$	108	$	182	$	—	$	12	$	41	$	—	$	343

Home equity loans
Days past due:
Current	$	2,263	$	6,032	$	5,453	$	2,604	$	1,420	$	12,653	$	1,371,195	$	1,401,620
30 days past due		—		147		11		174		—		983		1,481		2,796
60 days past due		—		69		—		53		—		216		1,482		1,820
90 days past due		—		71		302		283		427		709		566		2,358
Total Home equity loans	$	2,263	$	6,319	$	5,766	$	3,114	$	1,847	$	14,561	$	1,374,724	$	1,408,594
Home equity loans
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	110	$	—	$	110

Consumer
Days past due:
Current	$	46,549	$	277,649	$	279,610	$	128,520	$	68,194	$	191,345	$	186,563	$	1,178,430
30 days past due		6		523		447		30		157		1,568		6,751		9,482
60 days past due		—		188		159		74		8		512		4,138		5,079
90 days past due		—		323		164		45		161		1,057		2,154		3,904
Total consumer	$	46,555	$	278,683	$	280,380	$	128,669	$	68,520	$	194,482	$	199,606	$	1,196,895
Consumer
Current-period gross charge-offs	$	—	$	279	$	547	$	86	$	10	$	210	$	1,365	$	2,497

Construction and land development
Days past due:
Current	$	8,360	$	150,103	$	338,834	$	89,736	$	16,412	$	20,306	$	—	$	623,751
30 days past due		—		—		—		—		—		—		—		—
60 days past due		—		—		47		—		—		63		—		110
90 days past due		—		—		—		—		1		23		—		24
Total Construction and land development	$	8,360	$	150,103	$	338,881	$	89,736	$	16,413	$	20,392	$	—	$	623,885
Construction and land development
Current-period gross charge-offs	$	—	$	—	$	304	$	—	$	—	$	—	$	—	$	304

Other income producing property
Days past due:
Current	$	1,119	$	6,292	$	42,762	$	17,490	$	4,119	$	37,399	$	197	$	109,378
30 days past due		—		—		—		—		—		271		—		271
60 days past due		—		—		—		—		—		13		—		13
90 days past due		—		—		—		—		—		121		—		121
Total other income producing property	$	1,119	$	6,292	$	42,762	$	17,490	$	4,119	$	37,804	$	197	$	109,783
Other income producing property
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total Consumer Loans
Days past due:
Current	$	237,435	$	1,465,947	$	2,893,426	$	1,864,896	$	706,523	$	1,321,608	$	1,557,955	$	10,047,790
30 days past due		6		2,141		3,528		1,821		559		6,056		8,232		22,343
60 days past due		—		452		366		455		232		1,143		5,620		8,268
90 days past due		—		1,550		3,382		1,303		2,084		5,176		2,720		16,215
Total Consumer Loans	$	237,441	$	1,470,090	$	2,900,702	$	1,868,475	$	709,398	$	1,333,983	$	1,574,527	$	10,094,616
Consumer Loans
Current-period gross charge-offs	$	—	$	387	$	1,033	$	86	$	22	$	361	$	1,365	$	3,254

The following table presents the credit risk profile by past due status of total loans by origination year as of and for the period ending March 31, 2024:

Term Loans

(Dollars in thousands)

Amortized Cost Basis by Origination Year

As of March 31, 2024

2024

2023

2022

2021

2020

Prior

Revolving

Total

Total Loans

1,263,560

4,488,305

8,992,115

6,120,857

2,502,463

6,214,276

3,085,734

32,667,310

Current-period gross charge-offs

—

902

1,999

212

3,013

1,785

7,940

Table of Contents

The following table presents the credit risk profile by ~~risk grade~~past due status of consumer loans by origination year as of and for ~~acquired non-credit impaired loans:~~the period ending December 31, 2023:

Consumer Owner Occupied

Home Equity

Consumer

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
487,393

$
404,761

$
431,712

$
154,461

$
151,752

$
158,672

$
132,962

$
139,686

$
145,594

Special mention

2,502

1,326

759

5,077

4,113

5,340

1,141

1,102

1,118

Substandard

2,720

2,183

2,661

4,753

5,014

4,746

2,033

1,866

1,800

Doubtful

—

—

—

—

—

—

—

—

—

$
492,615

$
408,270

$
435,132

$
164,291

$
160,879

$
168,758

$
136,136

$
142,654

$
148,512


	Term Loans
(Dollars in thousands)	Amortized Cost Basis by Origination Year
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving		Total
Consumer owner occupied
Days past due:
Current	$	1,019,956	$	2,125,156	$	1,641,518	$	628,107	$	288,304	$	809,419	$	—	$	6,512,460
30 days past due		1,589		2,268		1,524		654		707		4,012		—		10,754
60 days past due		—		766		528		680		—		813		—		2,787
90 days past due		1,280		2,538		1,089		1,689		315		4,650		—		11,561
Total Consumer owner occupied	$	1,022,825	$	2,130,728	$	1,644,659	$	631,130	$	289,326	$	818,894	$	—	$	6,537,562
Consumer owner occupied
Current-period gross charge-offs	$	68	$	90	$	27	$	—	$	—	$	2	$	—	$	187

Home equity loans
Days past due:
Current	$	6,551	$	6,454	$	2,887	$	1,396	$	1,003	$	11,518	$	1,358,829	$	1,388,638
30 days past due		60		—		132		21		44		539		5,860		6,656
60 days past due		—		—		12		104		—		458		1,268		1,842
90 days past due		117		—		27		194		1		672		298		1,309
Total Home equity loans	$	6,728	$	6,454	$	3,058	$	1,715	$	1,048	$	13,187	$	1,366,255	$	1,398,445
Home equity loans
Current-period gross charge-offs	$	—	$	—	$	—	$	64	$	—	$	29	$	84	$	177

Consumer
Days past due:
Current	$	299,871	$	305,283	$	141,369	$	75,213	$	60,265	$	143,725	$	182,608	$	1,208,334
30 days past due		443		321		247		142		137		1,384		10,757		13,431
60 days past due		64		254		152		4		4		973		6,420		7,871
90 days past due		93		395		174		196		110		1,108		1,938		4,014
Total consumer	$	300,471	$	306,253	$	141,942	$	75,555	$	60,516	$	147,190	$	201,723	$	1,233,650
Consumer
Current-period gross charge-offs	$	373	$	1,586	$	571	$	280	$	217	$	537	$	8,478	$	12,042

Construction and land development
Days past due:
Current	$	135,739	$	425,276	$	111,205	$	20,322	$	8,555	$	14,265	$	—	$	715,362
30 days past due		—		—		—		111		—		—		—		111
60 days past due		—		—		—		—		—		—		—		—
90 days past due		—		—		—		1		—		75		—		76
Total Construction and land development	$	135,739	$	425,276	$	111,205	$	20,434	$	8,555	$	14,340	$	—	$	715,549
Construction and land development
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	19	$	—	$	19

Other income producing property
Days past due:
Current	$	6,310	$	43,022	$	18,536	$	4,331	$	2,537	$	36,911	$	280	$	111,927
30 days past due		—		—		—		—		—		67		—		67
60 days past due		—		—		—		—		—		—		—		—
90 days past due		—		—		—		—		—		127		—		127
Total other income producing property	$	6,310	$	43,022	$	18,536	$	4,331	$	2,537	$	37,105	$	280	$	112,121
Other income producing property
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total Consumer Loans
Days past due:
Current	$	1,468,427	$	2,905,191	$	1,915,515	$	729,369	$	360,664	$	1,015,838	$	1,541,717	$	9,936,721
30 days past due		2,092		2,589		1,903		928		888		6,002		16,617		31,019
60 days past due		64		1,020		692		788		4		2,244		7,688		12,500
90 days past due		1,490		2,933		1,290		2,080		426		6,632		2,236		17,087
Total Consumer Loans	$	1,472,073	$	2,911,733	$	1,919,400	$	733,165	$	361,982	$	1,030,716	$	1,568,258	$	9,997,327
Consumer Loans
Current-period gross charge-offs	$	441	$	1,676	$	598	$	344	$	217	$	587	$	8,562	$	12,425

Consumer Total

September 30,

December 31,

September 30,


2017

2016

2016

Pass

$
774,816

$
696,199

$
735,978

Special mention

8,720

6,541

7,217

Substandard

9,506

9,063

9,207

Doubtful

—

—

—

$
793,042

$
711,803

$
752,402

~~Table of Contents~~

The following table presents the credit risk profile by ~~risk grade~~past due status of total ~~acquired non-credit impaired loans:~~

Total Acquired

Non-credit Impaired Loans

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Pass

$
1,417,304

$
812,320

$
860,150

Special mention

24,570

13,355

14,066

Substandard

13,681

11,024

11,441

Doubtful

—

—

—

$
1,455,555

$
836,699

$
885,657

~~The following table presents~~loans by origination year as of and for the credit risk profile by risk grade of acquired credit impaired loans (identified as credit-impaired at the time of acquisition), net of the related discount (this table should be read in conjunction with the allowance for acquired credit impaired loan losses table found on page 25):period ending December 31, 2023:


	Term Loans
(Dollars in thousands)	Amortized Cost Basis by Origination Year
As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving		Total
Total Loans	$	4,676,676	$	8,985,446	$	6,291,335	$	2,591,604	$	2,079,547	$	4,459,113	$	3,304,768	$	32,388,489

Current-period gross charge-offs	$	7,713	$	4,973	$	13,818	$	977	$	982	$	2,479	$	9,706	$	40,648

Commercial Loans Greater

Commercial Real Estate—

Than or Equal to

Construction and

$1 million-CBT

Commercial Real Estate

Development


September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
8,120

$
8,297

$
9,616

$
152,305

$
162,870

$
164,737

$
26,666

$
21,150

$
20,889

Special mention

—

—

1,000

22,638

26,238

32,081

6,455

12,643

14,092

Substandard

319

320

342

24,139

21,096

23,671

13,127

10,580

12,100

Doubtful

—

—

—

—

—

—

—

—

—

$
8,439

$
8,617

$
10,958

$
199,082

$
210,204

$
220,489

$
46,248

$
44,373

$
47,081

Residential Real Estate

Consumer

Commercial & Industrial

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,

September 30,

December 31,

September 30,


2017

2016

2016

2017

2016

2016

2017

2016

2016

Pass

$
133,969

$
138,343

$
143,946

$
8,261

$
8,513

$
9,072

$
15,755

$
17,371

$
18,715

Special mention

50,488

52,546

54,597

17,733

19,685

20,635

1,397

4,614

4,476

Substandard

65,209

67,211

70,425

27,308

31,102

32,159

8,644

3,362

3,467

Doubtful

—

—

—

—

—

—

—

—

—

$
249,666

$
258,100

$
268,968

$
53,302

$
59,300

$
61,866

$
25,796

$
25,347

$
26,658

Total Acquired

Credit Impaired Loans

September 30,

December 31,

September 30,


2017

2016

2016

Pass

$
345,076

$
356,544

$
366,975

Special mention

98,711

115,726

126,881

Substandard

138,746

133,671

142,164

Doubtful

—

—

—

$
582,533

$
605,941

$
636,020

The risk grading of acquired credit impaired loans is determined utilizing a loan’s contractual balance, while the amount recorded in the financial statements and reflected above is the carrying value. In an FDIC-assisted acquisition, covered acquired loans are initially recorded at their fair value, including a credit discount due to the high concentration of substandard and doubtful loans. Note that all covered acquired loans are now uncovered due to the early termination agreement with the FDIC on June 23, 2016.

Table of Contents

The following table presents an aging analysis of past due accruing loans, segregated by ~~class for non-acquired loans:~~class.


	30 - 59 Days		60 - 89 Days		90+ Days		Total				Non-		Total
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Accruing		Loans
March 31, 2024
Construction and land development	$	45	$	63	$	—	$	108	$	2,435,673	$	1,562	$	2,437,343
Commercial non-owner occupied		4,175		7,895		70		12,140		9,092,461		7,873		9,112,474
Commercial owner occupied		9,183		1,252		80		10,515		5,446,445		54,895		5,511,855
Consumer owner occupied		6,682		80		—		6,762		6,782,182		25,528		6,814,472
Home equity loans		2,106		1,226		—		3,332		1,398,638		6,624		1,408,594
Commercial and industrial		22,510		7,243		2,482		32,235		5,447,024		64,872		5,544,131
Other income producing property		313		52		—		365		636,958		2,732		640,055
Consumer		9,253		4,776		—		14,029		1,177,312		5,554		1,196,895
Other loans		—		—		—		—		1,491		—		1,491
	$	54,267	$	22,587	$	2,632	$	79,486	$	32,418,184	$	169,640	$	32,667,310
December 31, 2023
Construction and land development	$	624	$	—	$	—	$	624	$	2,921,457	$	1,433	$	2,923,514
Commercial non-owner occupied		2,194		123		1,378		3,695		8,546,630		21,309		8,571,634
Commercial owner occupied		3,852		1,141		988		5,981		5,446,803		44,887		5,497,671
Consumer owner occupied		7,903		552		920		9,375		6,560,359		25,271		6,595,005
Home equity loans		6,500		1,326		—		7,826		1,385,687		4,932		1,398,445
Commercial and industrial		25,231		7,194		9,193		41,618		5,399,390		63,531		5,504,539
Other income producing property		569		570		—		1,139		651,993		3,202		656,334
Consumer		13,212		7,370		—		20,582		1,207,411		5,657		1,233,650
Other loans		—		—		—		—		7,697		—		7,697
	$	60,085	$	18,276	$	12,479	$	90,840	$	32,127,427	$	170,222	$	32,388,489

30 - 59 Days

60 - 89 Days

90+ Days

Total



Total
(Dollars in thousands)

Past Due

Past Due

Past Due

Past Due

Current

Loans
September 30, 2017

Commercial real estate:

Construction and land development

$
728

$
76

$
483

$
1,287

$
765,670

$
766,957
Commercial non-owner occupied

26

567

85

678

949,192

949,870
Commercial owner occupied

2,382

300

1,824

4,506

1,273,981

1,278,487
Consumer real estate:

Consumer owner occupied

2,587

1,514

1,073

5,174

1,449,584

1,454,758
Home equity loans

841

416

1,361

2,618

417,142

419,760
Commercial and industrial

772

1,162

92

2,026

779,731

781,757
Other income producing property

76

100

252

428

193,907

194,335
Consumer

541

110

441

1,092

370,666

371,758
Other loans

—

—

—

—

12,645

12,645

$
7,953

$
4,245

$
5,611

$
17,809

$
6,212,518

$
6,230,327
December 31, 2016

Commercial real estate:

Construction and land development

$
256

$
313

$
1,026

$
1,595

$
578,869

$
580,464
Commercial non-owner occupied

647

232

137

1,016

713,699

714,715
Commercial owner occupied

1,272

957

1,478

3,707

1,174,038

1,177,745
Consumer real estate:

Consumer owner occupied

1,473

246

1,454

3,173

1,194,448

1,197,621
Home equity loans

566

889

838

2,293

380,925

383,218
Commercial and industrial

1,033

216

345

1,594

669,804

671,398
Other income producing property

310

94

147

551

177,687

178,238
Consumer

666

355

395

1,416

322,822

324,238
Other loans

—

—

—

—

13,404

13,404

$
6,223

$
3,302

$
5,820

$
15,345

$
5,225,696

$
5,241,041
September 30, 2016

Commercial real estate:

Construction and land development

$
548

$
249

$
1,079

$
1,876

$
560,460

$
562,336
Commercial non-owner occupied

655

768

207

1,630

628,807

630,437
Commercial owner occupied

1,795

71

1,267

3,133

1,150,347

1,153,480
Consumer real estate:

Consumer owner occupied

1,549

894

1,682

4,125

1,179,316

1,183,441
Home equity loans

1,000

186

832

2,018

361,807

363,825
Commercial and industrial

229

739

674

1,642

615,883

617,525
Other income producing property

318

187

413

918

178,677

179,595
Consumer

286

430

302

1,018

304,669

305,687
Other loans

—

—

—

—

11,787

11,787

$
6,380

$
3,524

$
6,456

$
16,360

$
4,991,753

$
5,008,113

~~Table of Contents~~

The following table ~~presents an aging analysis~~is a summary of ~~past due~~information pertaining to nonaccrual loans ~~segregated~~ by class, including loans modified for ~~acquired non-credit impaired loans:~~borrowers with financial difficulty as of March 31, 2024 and December 31, 2023:


	March 31,		Greater than		Non-accrual		December 31,
(Dollars in thousands)	2024		90 Days Accruing⁽¹⁾		with no allowance⁽¹⁾		2023
Construction and land development	$	1,562	$	—	$	—	$	1,433
Commercial non-owner occupied		7,873		70		2,799		21,309
Commercial owner occupied real estate		54,895		80		20,675		44,887
Consumer owner occupied		25,528		—		—		25,271
Home equity loans		6,624		—		—		4,932
Commercial and industrial		64,872		2,482		27,065		63,531
Other income producing property		2,732		—		—		3,202
Consumer		5,554		—		—		5,657
Total loans on nonaccrual status	$	169,640	$	2,632	$	50,539	$	170,222

30 - 59 Days

60 - 89 Days

90+ Days

Total



Total
(Dollars in thousands)

Past Due

Past Due

Past Due

Past Due

Current

Loans
September 30, 2017

Commercial real estate:

Construction and land development

$
117

$
199

$
225

$
541

$
76,345

$
76,886
Commercial non-owner occupied

618

—

—

618

199,086

199,704
Commercial owner occupied

330

97

893

1,320

206,252

207,572
Consumer real estate:

Consumer owner occupied

1,404

535

761

2,700

489,915

492,615
Home equity loans

1,240

455

999

2,694

161,597

164,291
Commercial and industrial

749

464

98

1,311

100,116

101,427
Other income producing property

164

64

37

265

76,659

76,924
Consumer

364

814

620

1,798

134,338

136,136

$
4,986

$
2,628

$
3,633

$
11,247

$
1,444,308

$
1,455,555
December 31, 2016

Commercial real estate:

Construction and land development

$
4

$
—

$
160

$
164

$
9,926

$
10,090
Commercial non-owner occupied

—

—

—

—

34,628

34,628
Commercial owner occupied

—

—

106

106

27,089

27,195
Consumer real estate:

Consumer owner occupied

330

113

256

699

407,571

408,270
Home equity loans

476

941

741

2,158

158,721

160,879
Commercial and industrial

2

—

—

2

13,639

13,641
Other income producing property

131

1

—

132

39,210

39,342
Consumer

437

210

576

1,223

141,431

142,654

$
1,380

$
1,265

$
1,839

$
4,484

$
832,215

$
836,699
September 30, 2016

Commercial real estate:

Construction and land development

$
5

$
—

$
160

$
165

$
10,518

$
10,683
Commercial non-owner occupied

—

28

—

28

35,747

35,775
Commercial owner occupied

326

110

302

738

28,706

29,444
Consumer real estate:

Consumer owner occupied

140

417

221

778

434,354

435,132
Home equity loans

719

207

921

1,847

166,911

168,758
Commercial and industrial

38

—

—

38

14,163

14,201
Other income producing property

26

—

—

26

43,126

43,152
Consumer

409

97

549

1,055

147,457

148,512

$
1,663

$
859

$
2,153

$
4,675

$
880,982

$
885,657

(1)

Greater than 90 days accruing and non-accrual with no allowance loans at March 31, 2024.

There is no interest income recognized during the period on nonaccrual loans. The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Loans on nonaccrual status in which there is no allowance assigned are individually evaluated loans that do not carry a specific reserve. See Note 2 — Summary of Significant Accounting Policies for further detailed descriptions on individually evaluated loans.

~~Table of Contents~~

~~The following table presents an aging analysis of past due loans, segregated by class for acquired credit impaired loans:~~

30 - 59 Days

60 - 89 Days

90+ Days

Total



Total
(Dollars in thousands)

Past Due

Past Due

Past Due

Past Due

Current

Loans
September 30, 2017

Commercial loans greater than or equal to $1 million-CBT

$
—

$
—

$
—

$
—

$
8,439

$
8,439
Commercial real estate

2,018

404

1,427

3,849

195,233

199,082
Commercial real estate—construction and development

22

234

3,239

3,495

42,753

46,248
Residential real estate

3,608

2,750

7,148

13,506

236,160

249,666
Consumer

670

259

943

1,872

51,430

53,302
Commercial and industrial

314

571

361

1,246

24,550

25,796

$
6,632

$
4,218

$
13,118

$
23,968

$
558,565

$
582,533
December 31, 2016

Commercial loans greater than or equal to $1 million-CBT

$
—

$
—

$
—

$
—

$
8,617

$
8,617
Commercial real estate

573

357

2,667

3,597

206,607

210,204
Commercial real estate—construction and development

168

489

3,612

4,269

40,104

44,373
Residential real estate

4,688

1,105

6,777

12,570

245,530

258,100
Consumer

1,412

381

1,231

3,024

56,276

59,300
Commercial and industrial

46

24

536

606

24,741

25,347

$
6,887

$
2,356

$
14,823

$
24,066

$
581,875

$
605,941
September 30, 2016

Commercial loans greater than or equal to $1 million-CBT

$
—

$
—

$
—

$
—

$
10,958

$
10,958
Commercial real estate

896

238

2,813

3,947

216,542

220,489
Commercial real estate—construction and development

266

1,971

1,137

3,374

43,707

47,081
Residential real estate

4,260

2,015

5,717

11,992

256,976

268,968
Consumer

1,124

332

1,233

2,689

59,177

61,866
Commercial and industrial

10

30

637

677

25,981

26,658

$
6,556

$
4,586

$
11,537

$
22,679

$
613,341

$
636,020

~~Table of Contents~~

The following is a summary of ~~certain information pertaining~~collateral dependent loans, by type of collateral, and the extent to ~~impaired non-acquired loans:~~

Unpaid

Recorded

Gross




Contractual

Investment

Recorded

Total

Principal

With No

Investment

Recorded

Related
(Dollars in thousands)

Balance

Allowance

With Allowance

Investment

Allowance
September 30, 2017

Commercial real estate:

Construction and land development

$
46,664

$
954

$
41,684

$
42,638

$
1,266
Commercial non-owner occupied

2,361

207

509

716

133
Commercial owner occupied

9,504

3,936

1,938

5,874

64
Consumer real estate:

Consumer owner occupied

5,986

1,369

3,086

4,455

47
Home equity loans

3,184

716

1,907

2,623

116
Commercial and industrial

1,753

—

627

627

18
Other income producing property

4,334

—

3,605

3,605

211
Consumer

623

—

254

254

7
Other loans

—

—

—

—

—
Total

$
74,409

$
7,182

$
53,610

$
60,792

$
1,862
December 31, 2016

Commercial real estate:

Construction and land development

$
7,394

$
1,074

$
1,959

$
3,033

$
348
Commercial non-owner occupied

2,417

223

583

806

170
Commercial owner occupied

10,118

3,976

2,269

6,245

67
Consumer real estate:

Consumer owner occupied

7,090

2,120

3,553

5,673

80
Home equity loans

2,165

244

1,430

1,674

40
Commercial and industrial

2,335

—

1,263

1,263

386
Other income producing property

3,166

99

2,273

2,372

242
Consumer

394

—

145

145

4
Other loans

—

—

—

—

—
Total

$
35,079

$
7,736

$
13,475

$
21,211

$
1,337
September 30, 2016

Commercial real estate:

Construction and land development

$
7,744

$
1,331

$
2,100

$
3,431

$
359
Commercial non-owner occupied

2,372

228

536

764

181
Commercial owner occupied

10,204

4,301

2,051

6,352

65
Consumer real estate:

Consumer owner occupied

4,390

1,284

1,843

3,127

58
Home equity loans

2,054

251

1,348

1,599

38
Commercial and industrial

2,738

259

1,194

1,453

385
Other income producing property

5,167

101

4,218

4,319

289
Consumer

342

—

142

142

4
Other

—

—

—

—

—
Total

$
35,011

$
7,755

$
13,432

$
21,187

$
1,379

~~Acquired credit impaired loans~~which they are ~~accounted for in pools as shown on page 19 rather than being individually evaluated for impairment; therefore,~~collateralized during the ~~table above excludes acquired credit impaired loans.~~period:


	March 31,		Collateral			December 31,		Collateral
(Dollars in thousands)	2024		Coverage		%	2023		Coverage		%
Commercial owner occupied real estate
Church	$	4,671	$	8,391	180%	$	3,537	$	6,705	190%
Industrial		7,049		13,950	198%		7,172		15,273	213%
Other		16,032		29,202	182%		12,231		23,747	194%
Commercial non-owner occupied real estate
Retail		—		—			3,216		4,208	131%
Other		—		—			12,607		29,182	231%
Office		2,799		2,799	100%		—		—
Commercial and industrial
Other		43,289		54,810	127%		44,116		46,114	105%
Total collateral dependent loans	$	73,840	$	109,152		$	82,879	$	125,229

Table of Contents

~~The following summarizes the average investment in impaired non-acquired loans, and interest income recognized on these loans:~~

Three Months Ended September 30,

2017

2016

Average

Average

Investment in

Interest Income

Investment in

Interest Income

(Dollars in thousands)

Impaired Loans

Recognized

Impaired Loans

Recognized

Commercial real estate:









Construction and land development

$
36,337

$
486

$
3,762

$
31

Commercial non-owner occupied

735

3

992

—

Commercial owner occupied

5,964

63

6,662

150

Consumer real estate:

Consumer owner occupied

4,515

36

3,547

31

Home equity loans

2,624

29

1,888

13

Commercial and industrial

912

8

1,110

16

Other income producing property

3,623

50

4,659

71

Consumer

245

2

135

—

Other loans

—

—

—

—

Total Impaired Loans

$
54,955

$
677

$
22,755

$
312

Nine Months Ended September 30,

2017

2016

Average

Average

Investment in

Interest Income

Investment in

Interest Income

(Dollars in thousands)

Impaired Loans

Recognized

Impaired Loans

Recognized

Commercial real estate:









Construction and land development

$
22,835

$
800

$
4,856

$
88

Commercial non-owner occupied

761

15

1,108

23

Commercial owner occupied

6,060

208

7,038

233

Consumer real estate:

Consumer owner occupied

5,064

110

5,338

78

Home equity loans

2,148

75

954

43

Commercial and industrial

945

30

1,470

28

Other income producing property

2,989

153

4,605

157

Consumer

200

5

122

3

Other loans

—

—

211

—

Total Impaired Loans

$
41,002

$
1,396

$
25,702

$
653

~~Table of Contents~~

~~The following is a summary of information pertaining to non-acquired nonaccrual loans by class, including restructured loans:~~

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Commercial non-owner occupied real estate:







Construction and land development

$
57

$
672

$
1,156

Commercial non-owner occupied

2,755

578

601

Total commercial non-owner occupied real estate

2,812

1,250

1,757

Consumer real estate:

Consumer owner occupied

3,674

5,711

5,048

Home equity loans

308

1,629

1,564

Total consumer real estate

3,982

7,340

6,612

Commercial owner occupied real estate

557

2,189

2,049

Commercial and industrial

1,952

420

587

Other income producing property

1,083

356

584

Consumer

1,123

930

796

Restructured loans

858

1,979

2,499

Total loans on nonaccrual status

$
12,367

$
14,464

$
14,884

~~The following is a summary of information pertaining to acquired non-credit impaired nonaccrual loans by class, including restructured loans:~~

September 30,

December 31,

September 30,
(Dollars in thousands)

2017

2016

2016
Commercial non-owner occupied real estate:

Construction and land development

$
233

$
232

$
235
Commercial non-owner occupied

—

—

—
Total commercial non-owner occupied real estate

233

232

235
Consumer real estate:

Consumer owner occupied

1,891

1,405

1,112
Home equity loans

1,813

1,643

1,588
Total consumer real estate

3,704

3,048

2,700
Commercial owner occupied real estate

—

61

302
Commercial and industrial

114

1

1
Other income producing property

107

145

149
Consumer

1,299

1,241

1,246
Total loans on nonaccrual status

$
5,457

$
4,728

$
4,633

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. Any loans that are modified are reviewed by the Bank to determine if a troubled debt restructuring (“TDR” or “restructured loan”) has occurred. The Bank designates individually evaluated loans on non-accrual with a net book balance exceeding the designated threshold as collateral dependent loans. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL. Under ASC 326-20-35-6, the Bank has adopted the collateral maintenance practical expedient to measure the ACL based on the fair value of collateral. The ACL is calculated on an individual loan ~~modifications as TDRs when it grants a concession to a borrower that it would not otherwise consider~~basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for selling costs, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The Bank’s threshold for individually evaluated loans is $1.0 million. The changes above in collateral percentage are due to appraisal value updates or changes in the ~~borrower experiencing financial difficulty (FASB ASC Topic 310-40). The concessions granted on TDRs generally include terms to reduce~~number of loans within the ~~interest rate, extend~~asset class and collateral type. Overall collateral dependent loans decreased $9.0 million during the ~~term of the debt obligation, or modify the payment structure on the debt obligation.~~three months ended March 31, 2024.

Loans on nonaccrual status at the date of modification are initially classified as ~~nonaccrual TDRs.~~nonaccrual. Loans on accruing status at the date of ~~concession~~modification are initially classified as accruing ~~TDRs~~ if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the ~~concession~~modification date if reasonable doubt exists as to the collection of interest or principal under the ~~restructuring~~modification agreement. Nonaccrual ~~TDRs~~loans are returned to accruing status when there is economic substance to the ~~restructuring,~~modification, there is documented credit evaluation of the borrower’s financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six ~~months)~~months). ~~For~~See Note 2 — Summary of Significant Accounting Policies for how such modifications are factored into the ~~nine~~determination of the ACL for the periods presented above.

The following tables present loans designated as modifications made to borrowers experiencing financial difficulty during the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively. The loans are segregated by type of modification and asset class, indicating the ~~Company’s TDRs were not material.~~ financial effect of the modifications. The amortized cost balance for the modified loans presented below exclude accrued interest receivable of approximately $16,000 and $12,000 as of March 31, 2024 and 2023, respectively.

Three Months Ended March 31,

2024

2023

Reduction in Weighted

Amortized

% of Total

Average Contractual

Amortized

% of Total

Average Contractual

(Dollars in thousands)

Cost

Asset Class

Interest Rate

Cost

Asset Class

Interest Rate

Interest rate reduction

Consumer owner occupied

923

0.01%

9.00 to 5.00%

—

Total interest rate reductions

923

—


	Three Months Ended March 31,
	2024					2023
					Increase in					Increase in
	Amortized		% of Total		Weighted Average	Amortized		% of Total		Weighted Average
(Dollars in thousands)	Cost		Asset Class		Life of Loan	Cost		Asset Class		Life of Loan
Term extension
Construction and land development	$	—		—	—	$	260		0.04%	12 months
Commercial non-owner occupied		—		—	—		—		—	—
Commercial owner occupied real estate		—		—	—		2,105		0.02%	8 months
Commercial and industrial		—		—	—		1,145		0.02%	10 months
Consumer		—					282		0.02%	6 months
Total term extensions	$	—				$	3,792

The Bank on occasion will enter into modification agreements which extend the maturity payoff on a loan or reduce the interest rate, for borrowers willing to continue to pay, to minimize losses for the Bank. At March 31, 2024, the Company had no remaining commitments to lend additional funds on loans to borrowers experiencing financial difficulty and modified during the current reporting period.

Table of Contents

The following table presents the changes in status of loans modified within the previous twelve months to borrowers experiencing financial difficulty, as of March 31, 2024 and 2023, by type of modification. There were no subsequent defaults.


	March 31,
	2024						2023
	Paying Under						Paying Under
	Restructured		Converted to		Foreclosures		Restructured		Converted to		Foreclosures
	Terms		Nonaccrual		and Defaults		Terms		Nonaccrual		and Defaults
	Amortized		Amortized		Amortized		Amortized		Amortized		Amortized
(Dollars in thousands)	Cost		Cost		Cost		Cost		Cost		Cost
Interest rate reduction
Commercial owner occupied real estate	$	839	$	—	$	—	$	—	$	—	$	—
Consumer owner occupied		923		—		—		—		—		—
Total interest rate reductions	$	1,762	$	—	$	—	$	—	$	—	$	—

Term extension
Construction and land development	$	—	$	—	$	—	$	260	$	—	$	—
Commercial non-owner occupied		1,241		—		—		—		—		—
Commercial owner occupied real estate		7,075		—		—		2,105		—		—
Consumer owner occupied		—		—		—		282		—		—
Commercial and industrial		1,596		—		—		1,145		—		—
Other income producing property		337		—		—		—		—		—
Total term extensions	$	10,249	$	—	$	—	$	3,792	$	—	$	—


Term Extension and Interest Rate Reduction
Consumer owner occupied	$	258	$	—	$	—	$	—	$	—	$	—
Total combinations	$	258	$	—	$	—	$	—	$	—	$	—
	$	12,269	$	—	$	—	$	3,792	$	—	$	—

~~Note 7—FDIC Indemnification Asset~~

The following table ~~provides changes in FDIC indemnification asset:~~

Nine Months Ended September 30,
(Dollars in thousands)

2017

2016
Balance at beginning of period

$
—

$
4,401
Decrease in expected losses on loans

—

(23)
Additional recoveries on OREO

—

(1,736)
Reimbursable expenses

—

71
Amortization of discounts and premiums, net

—

(1,475)
Payments to (from) FDIC

—

853
Termination of Loss Share Agreements

—

(2,091)
Balance at end of period

$
—

$
—

~~As noted above, on June 23, 2016,~~depicts the ~~Bank entered into an early termination agreement with~~performance of loans modified within the ~~FDIC with respect~~previous twelve months to all of its outstanding loss share agreements. The Bank recorded a pre-tax charge of $4.4 million, which resulted from a $2.3 million payment to the FDIC as consideration for the early termination, plus the amortization of the remaining FDIC indemnification asset of $2.1 million, net of the clawback,borrowers experiencing financial difficulty, as of March 31, ~~2016. The entire pre-tax charge was recorded in noninterest income through “Amortization~~2024 and 2023.


	March 31, 2024						March 31, 2023
	Payment Status (Amortized Cost Basis)						Payment Status (Amortized Cost Basis)
			30-89 Days		90+ Days				30-89 Days		90+ Days
(Dollars in thousands)	Current		Past Due		Past Due		Current		Past Due		Past Due
Construction and land development	$	—	$	—	$	—	$	260	$	—	$	—
Commercial non-owner occupied		1,241		—		—		—		—		—
Commercial owner occupied real estate		7,914		—		—		2,105		—		—
Consumer owner occupied		923		258		—		282		—		—
Commercial and industrial		1,596		—		—		1,145		—		—
Other income producing property		337		—		—		—		—		—
Total	$	12,011	$	258	$	—	$	3,792	$	—	$	—

Table of ~~the FDIC indemnification asset” on the consolidated statements~~Contents

Note 6 — Allowance for Credit Losses (ACL)

See Note 2 — Summary of ~~income.~~

~~During 2016, the Bank paid a net $853,000~~Significant Accounting Policies for further detailed descriptions of our estimation process and methodology related to the FDIC, prior to the termination of the agreements. The indemnification asset was amortized through March 31, 2016. All assets previously classified as covered became uncovered effective June 23, 2016, and as a result the Bank recognizes the full amount of future charge-offs, recoveries, gains, losses, and expenses related to these previously covered assets, as the FDIC will no longer share in these amounts. As of the termination date, covered loans totaled ~~$87.4 million and~~ ~~covered OREO~~ ~~totaled $3.0 million.~~allowance for credit losses.

~~Note 8—Other Real Estate Owned~~

The following table presents a disaggregated analysis of activity in the allowance for credit losses for the three months ended March 31, 2024 and 2023, as follows:


	Residential		Residential				Residential		Comm Constr.								CRE Owner		Non-Owner
(Dollars in thousands)	Mortgage Sr.		Mortgage Jr.		HELOC		Construction		& Dev.		Consumer		Multifamily		Municipal		Occupied		Occupied CRE		C & I		Total
Three Months Ended March 31, 2024
Allowance for credit losses:
Balance at end of period December 31, 2023	$	78,052	$	745	$	10,942	$	5,024	$	65,772	$	23,331	$	13,766	$	900	$	71,580	$	137,055	$	49,406	$	456,573
Charge-offs		(343)		—		(110)		(304)		(1,475)		(2,497)		—		—		—		(71)		(3,140)		(7,940)
Recoveries		123		39		292		7		1,007		1,125		25		—		103		10		2,530		5,261
Net (charge offs) recoveries		(220)		39		182		(297)		(468)		(1,372)		25		—		103		(61)		(610)		(2,679)
Provision (recovery) ⁽¹⁾		9,652		446		600		(175)		(4,444)		1,394		3,221		(24)		914		(2,296)		6,472		15,760
Balance at end of period March 31, 2024	$	87,484	$	1,230	$	11,724	$	4,552	$	60,860	$	23,353	$	17,012	$	876	$	72,597	$	134,698	$	55,268	$	469,654

Three Months Ended March 31, 2023
Allowance for credit losses:
Balance at end of period December 31, 2023	$	72,188	$	405	$	14,886	$	8,974	$	45,410	$	22,767	$	3,684	$	849	$	58,083	$	78,485	$	50,713	$	356,444
Charge-offs		(2)		—		(39)		—		—		(2,729)		—		—		—		(51)		(1,806)		(4,627)
Recoveries		294		5		245		72		258		584		—		—		293		106		1,732		3,589
Net (charge offs) recoveries		292		5		206		72		258		(2,145)		—		—		293		55		(74)		(1,038)
Provision (recovery) ⁽¹⁾		4,871		(61)		(774)		130		9,401		2,697		1,823		30		(835)		3,933		(5,976)		15,239
Balance at end of period March 31, 2023	$	77,351	$	349	$	14,318	$	9,176	$	55,069	$	23,319	$	5,507	$	879	$	57,541	$	82,473	$	44,663	$	370,645

(1)

A negative provision (recovery) for credit losses for unfunded commitments of ($3.1) million was recorded during the first quarter of 2024, compared to $17.9 million recorded during the first quarter of 2023, that is not included in the above table.

Table of Contents

Note 7 — Leases

As of March 31, 2024 and December 31, 2023, we had operating right-of-use (“ROU”) assets of $99.7 million and $100.3 million, respectively, and operating lease liabilities of $107.7 million and $108.3 million, respectively. We maintain operating leases on land and buildings for some of our operating centers, branch facilities and ATM locations. Most leases include one or more options to renew, with renewal terms extending up to 20 years. The exercise of renewal options is based on the sole judgment of management and what they consider to be reasonably certain given the environment today. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to us if the option is not exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.


	Three Months Ended
	March 31,
(Dollars in thousands)	2024		2023
Lease Cost Components:
Amortization of ROU assets – finance leases	$	117	$	117
Interest on lease liabilities – finance leases		9		11
Operating lease cost (cost resulting from lease payments)		4,277		4,240
Short-term lease cost		139		109
Variable lease cost (cost excluded from lease payments)		797		634
Total lease cost	$	5,339	$	5,111
Supplemental Cash Flow and Other Information Related to Leases:
Finance lease – operating cash flows	$	9	$	11
Finance lease – financing cash flows		119		110
Operating lease – operating cash flows (fixed payments)		4,193		4,097
Operating lease – operating cash flows (net change asset/liability)		(3,367)		(3,287)
New ROU assets – operating leases		2,544		—
New ROU assets – finance leases		—		—
Weighted – average remaining lease term (years) – finance leases		4.18		5.18
Weighted – average remaining lease term (years) – operating leases		9.09		9.88
Weighted – average discount rate - finance leases		1.7%		1.7%
Weighted – average discount rate - operating leases		3.2%		3.0%

Operating lease payments due:
2024 (excluding 3 months ended March 31, 2024)	$	12,323
2025		15,057
2026		14,594
2027		13,532
2028		12,891
Thereafter		57,389
Total undiscounted cash flows		125,786
Discount on cash flows		(18,051)
Total operating lease liabilities	$	107,735

As of March 31, 2024, the Company held a small number of finance leases assumed in connection to the CenterState merger completed in 2020. These leases are all real estate leases. Terms and conditions are similar to those real estate operating leases described above. Lease classifications from the acquired institutions were retained. At March 31, 2024, we did not maintain any leases with related parties, and determined that the number and dollar amount of our equipment leases was immaterial. As of March 31, 2024, we had no additional operating leases that have not yet commenced.

Table of Contents

Equipment Lessor

SouthState has an Equipment Finance Group which goes to market through intermediaries. The Equipment Finance Group is primarily focused on serving the construction and utility segments. Leaseterms typically range from 24 months to 120 months. At the end of the lease term, the lessee has the option to renew the lease, return the equipment, or purchase the equipment. In the event the equipment is returned, there is a ~~summary~~remarketing agreement with the intermediary to sell the equipment. The Equipment Finance Group offers the following lease products: TRAC Leases, Split-TRAC Leases, and FMV Leases. Direct finance equipment leases are included in commercial and industrial loans on the Consolidated Balance Sheets.

The estimated residual values for direct finance leases are established by approved intermediary who utilizes internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. FMV and Split-TRAC leases have residual risk due to their unguaranteed residual value whereas TRAC leases have a guaranteed residual value. Expected credit losses on direct financing leases and the related estimated residual values are included in the Commercial and Industrial loan segment for the ACL.

The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at March 31, 2024:


	March 31,
(Dollars in thousands)	2024
Direct financing leases:
Lease receivables	$	14,161
Guaranteed residual values		1,057
Unguaranteed residual values		1,997
Initial direct costs		544
Unearned income		3,087
Total net investment in direct financing leases	$	20,846
Direct financing lease income
Interest income	$	163

Remaining lease payments receivable:
2024 (excluding 3 months ended March 31, 2024)	$	2,321
2025		3,094
2026		3,094
2027		3,107
2028		3,579
Thereafter		2,053
Total undiscounted cash flows		17,248
Less: unearned interest income		(3,087)
Total operating lease liabilities	$	14,161

See Note 1 — Summary of ~~information pertaining to OREO:~~Significant Accounting Policies, under the “Leases” section, of our Annual Report on Form 10-K for the year ended December 31, 2023 on accounting for leases.

Note 8 — Deposits

Nine Months Ended September 30,

2017

2016




Covered





Covered


(Dollars in thousands)

OREO

OREO

Total

OREO

OREO

Total
Beginning balance

$
18,316

$
—

$
18,316

$
24,803

$
5,751

$
30,554
Acquired in SBFC acquisition

385

—

385

—

—

—
Additions

8,375

—

8,375

9,296

2,151

11,447
Transfers

—

—

—

4,222

(4,222)

—
Writedowns

(2,220)

—

(2,220)

(1,939)

(2,131)

(4,070)
Sold

(11,329)

—

(11,329)

(14,171)

(1,549)

(15,720)
Ending Balance

$
13,527

$
—

$
13,527

$
22,211

$
—

$
22,211

~~OREO previously classified as covered, which consisted of 17 properties with a carrying value of $4.2 million~~Our total deposits as of March 31, ~~2016, became uncovered during the second quarter of 2016 in connection with the Bank’s~~ ~~early termination agreement with the FDIC with respect to all of its outstanding loss share agreements~~

At September 30, 2017, there were a total of 67 properties included in OREO. This compares to 108 properties included in OREO, at September 30, 2016. At September 30, 2017, the Company had $1.4 million in residential real estate included in OREO2024 and ~~$7.0 million in residential real estate consumer mortgage loans in the process of foreclosure. At~~ December 31, 2016 and September 30, 2016, the Company had $3.6 million and $3.7 million, respectively, in residential real estate included in OREO and $5.1 million and $4.7 million, respectively, in residential real estate consumer mortgage loans in the process of foreclosure.

~~Table of Contents~~

~~Note 9 — Deposits~~

~~The Company’s total deposits~~2023, are comprised of the following:

September 30,

December 31,

September 30,

(Dollars in thousands)

2017

2016

2016

Certificates of deposit

$
1,083,814

$
872,773

$
911,453

Interest-bearing demand deposits

4,102,391

3,461,004

3,358,647

Non-interest bearing demand deposits

2,505,570

2,199,046

2,176,155

Savings deposits

1,363,944

799,615

795,754

Other time deposits

6,302

1,985

5,397

Total deposits

$
9,062,021

$
7,334,423

$
7,247,406


	March 31,		December 31,
(Dollars in thousands)	2024		2023
Noninterest-bearing checking	$	10,546,410	$	10,649,274
Interest-bearing checking		7,898,835		7,978,799
Savings		2,557,203		2,632,212
Money market		11,895,385		11,538,671
Time deposits		4,280,601		4,249,953
Total deposits	$	37,178,434	$	37,048,909

At ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016, and September 30, 2016, the Company~~2023, we had ~~$187.5 million, $83.7~~$946.1 million and ~~$90.8~~$927.2 million in certificates of deposits greater than $250,000, respectively.

Table of $250,000 and greater, respectively. At September 30, 2017, December 31, 2016, and September 30, 2016, the Company had $23.9 million, $2.9 million and $2.9 million, in traditional, out-of-market brokered deposits, respectively. The increase in certificates of deposits of $250,000 and greater and in out-of-market brokered deposits was primarily the result of deposits acquired through the merger with SBFC. Contents

Note 109 — Retirement Plans

The Company ~~and the Bank provide certain retirement benefits to their employees in the form of a non-contributory defined benefit pension plan and~~sponsors an employees’ savings ~~plan. The non-contributory defined benefit pension~~ plan covers all employees hired on or before December 31, 2005, who have attained age 21, and who have completed a year of eligible service. Employees hired on or after January 1, 2006 are not eligible to participate in the non-contributory defined benefit pension plan, but are eligible to participate in the employees’ savings plan. On this date, a new benefit formula applies only to participants who have not attained age 45 or who do not have five years of service.

~~Effective July 1, 2009, the Company suspended the accrual of benefits for pension plan participants~~ under the ~~non-contributory defined benefit plan. The pension plan remained suspended as~~provisions of ~~September 30, 2017.~~

~~The components of net periodic pension expense recognized are as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Interest cost

$
(281)

$
(283)

$
(843)

$
(849)

Expected return on plan assets

553

534

1,660

1,602

Recognized net actuarial loss

(188)

(204)

(564)

(612)

Net periodic pension benefit

$
84

$
47

$
253

$
141

~~The Company did not contribute to~~ the pension plan for the three and nine months ended September 30, 2017, and does not expect to make any additional contributions during the remainder of 2017. The Company reserves the right to contribute between the minimum required and maximum deductible amounts as determined under applicable federal laws.

~~Under the provisions of~~ Internal Revenue Code Section 401(k)~~, electing~~. Electing employees are eligible to participate in the employees’ savings plan after attaining age ~~21.~~18. Plan participants elect to contribute portions of their annual base compensation as a before tax contribution. Employer contributions may be made from current or accumulated net profits. Participants may elect to contribute 1% to 50% of annual base compensation as a before tax contribution. Employees participating in the plan receive a 100% ~~matching~~match of their 401(k) plan contribution from the Company, up to 5%4% of their salary. Employees are eligible for an additional 1% discretionary matching contribution contingent upon achievement of the Company’s annual financial goals and paid in the first quarter of the following year. The Company is offering the additional 1% discretionary matching contribution again in 2017 upon achievement of the Company’s 2017 financial goals. The CompanyWe expensed ~~$2.1 million and $1.7~~$4.6 million for ~~the 401(k) plan during~~ the three months ended ~~September 30, 2017 and 2016, respectively. The Company expensed $5.5 million~~March 31, 2024 and $4.5 million for the ~~401(k) plan during the nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2023 related to the Company’s employees’ savings plan.

~~Table of Contents~~

Employees can enter the savings plan on or after the first day of each month. The employee may enter into a salary deferral agreement at any time to select an alternative deferral amount or to elect not to defer in the plan. If the employee does not elect an investment allocation, the plan administrator will select a retirement-based portfolio according to the employee’s number of years until normal retirement age. The plan’s investment valuations are generally provided on a daily basis.

Note 1110 — Earnings Per Share

Basic earnings per share ~~are~~is calculated by dividing net income by the weighted-average shares of common stock outstanding during each period, excluding non-vested restricted shares. ~~The Company’s~~Our diluted earnings per share ~~are~~is based on the weighted-average shares of common stock outstanding during each period plus the maximum dilutive effect of common stock issuable upon exercise of stock options or vesting of restricted ~~shares. The weighted-average number~~stock units. Stock options and unvested restricted stock units are considered common stock equivalents and are only included in the calculation of ~~shares and equivalents are determined after giving retroactive~~diluted earnings per common share when their effect ~~to stock dividends and stock splits.~~is dilutive.

The following table sets forth the computation of basic and diluted earnings per common share:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

									Three Months Ended
									March 31,
(Dollars and shares in thousands, except for per share amounts)	2017		2016		2017		2016		2024		2023
Basic earnings per common share:
Net income	$	35,046	$	28,095	$	85,133	$	77,105	$	115,056	$	139,926
Weighted-average basic common shares		29,115		24,016		29,023		23,989		76,301		75,902
Basic earnings per common share	$	1.20	$	1.17	$	2.92	$	3.21	$	1.51	$	1.84
Diluted earnings per share:
Diluted earnings per common share:
Net income	$	35,046	$	28,095	$	85,133	$	77,105	$	115,056	$	139,926
Weighted-average basic common shares		29,115		24,016		29,023		23,989		76,301		75,902
Effect of dilutive securities		270		262		268		240		359		487
Weighted-average dilutive shares		29,385		24,278		29,291		24,229		76,660		76,389
Diluted earnings per common share	$	1.19	$	1.16	$	2.90	$	3.18	$	1.50	$	1.83

The calculation of diluted earnings per ~~common~~ share excludes outstanding stock options for which the results would have been anti-dilutive under the treasury stock method, as follows:


	Three Months Ended September 30,										Nine Months Ended September 30,
(Dollars in thousands)	2017					2016					2017					2016

																					Three Months Ended March 31,
																					2024					2023
Number of shares					34,712					52,064					34,712					72,480					57,169					57,169
Range of exercise prices	$	69.48	to	$	91.35	$	61.42	to	$	69.48	$	69.48	to	$	91.35	$	61.42	to	$	69.48	$	87.30	to	$	91.35	$	87.30	to	$	91.35

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Note 1211 — Share-Based Compensation

~~The Company’s~~Our 2004, 2012, 2019 and ~~2012~~2020 share-based compensation plans are long-term retention plans intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options, restricted stock, and restricted stock units (“RSUs”). Our 2020 plan was adopted by our shareholders at our annual meeting on October 29, 2020. The Company also assumed the obligations of Atlantic Capital Bancshares, Inc. (“ACBI”) under various equity incentive plans pursuant to the acquisition of ACBI on March 1, 2022 and the obligations of CenterState under various equity incentive plans pursuant to the merger with CenterState on June 7, 2020.

Stock Options

With the exception of non-qualified stock options granted to directors under the 2004 and 2012 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than a year following the grant date, incentive stock options granted under ~~the~~our 2004, 2012, 2019 and 2020 plans may not be exercised in whole or in part within a year following the date of the grant, as these incentive stock options become exercisable in 25% increments pro ratably over the four-year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and expire ten years from the date of grant. No options were granted under the 2004, ~~plan~~2012 or 2019 plans after January 26, 2012, February 1, 2019, and October 29, 2020, respectively, and the ~~2004 plan is~~plans are closed other than for any options still unexercised and outstanding. The ~~2012~~2020 plan is the only plan from which new share-based compensation grants may be issued. It is the Company’s policy to grant options out of the ~~1,684,000~~2,072,245 shares registered under the ~~2012 plan, of which no more than 817,476 shares can be granted as restricted stock or RSUs.~~2020 plan.

~~Table of Contents~~

Activity in the Company’s stock option plans is summarized in the following table. ~~All information has been retroactively adjusted for stock dividends and stock splits.~~

Weighted

Weighted

Average

Aggregate

Average

Remaining

Intrinsic


Shares

Price

(Yrs.)

(000's)

Outstanding at January 1, 2017

246,535

$
42.53

Granted

33,634

91.23

Exercised

(29,030)

34.09

Outstanding at September 30, 2017

251,139

50.02

5.15

$
10,094

Exercisable at September 30, 2017

181,152

39.84

3.87

$
9,096

Weighted-average fair value of options granted during the year

$
35.42




				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Price		(Yrs.)	(000’s)
Outstanding at January 1, 2024	107,592	$	72.60
Exercised	(6,320)		6,171
Expired	(29)		39.12
Outstanding at March 31, 2024	101,243		73.29	2.56	$	1,536
Exercisable at March 31, 2024	101,243		73.29	2.56	$	1,536

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options’ vesting periods. ~~The following weighted-average assumptions were used in valuing~~There have been no stock options ~~issued:~~

Nine months ended September 30,


2017


2016

Dividend yield

1.40
%

1.60
%

Expected life

8.5
years

8.5
years

Expected volatility

37.2
%

40.6
%

Risk-free interest rate

2.43
%

1.90
%

Asissued during the first three months of ~~September 30, 2017,~~2024. Because all outstanding stock options had vested as of December 31, 2023, there was ~~$1.5 million of total~~no unrecognized compensation cost related to nonvested stock option grants under the ~~plans. The cost is expected to be recognized over a weighted-average period of 1.38 years as of September 30, 2017. The total~~plans or fair value of shares vested ~~during~~for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024. The intrinsic value of stock option shares exercised for the three months ended March 31, 2024 was ~~$578,000.~~$107,000.

Restricted Stock

~~The Company from~~From time-to-time, ~~also grants~~we grant shares of restricted stock to key ~~employees and non-employee directors.~~employees. These awards help align the interests of these employees ~~and directors~~ with the interests of ~~the~~our shareholders ~~of the Company~~ by providing economic value directly related to increases in the value of ~~the Company’s~~our stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. ~~The Company recognizes~~We recognize expenses equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock grants to employees ~~typically “cliff vest” after four years. Grants~~generally vest ratably over a two to ~~non-employee directors typically vest within a 12-month~~four-year vesting period.

All restricted stock agreements are conditioned upon continued employment. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. Prior to vesting of the shares, as long as employed by the Company, the ~~key~~ employees ~~and non-employee directors~~ will have the right to vote such shares and to receive dividends paid with respect to such shares. All restricted shares will fully vest in the event of change in control of the Company or upon the death of the recipient.

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Nonvested restricted stock for ~~the nine months ended September 30, 2017~~2024 is summarized in the following table. ~~All information has been retroactively adjusted for stock dividends and stock splits.~~

Weighted-

Average

Grant-Date

Weighted-

Average

Grant-Date

Restricted Stock

Fair Value

Shares

Fair Value

Nonvested at January 1, 2017

183,014

51.88

Granted

21,683

88.63

Nonvested at January 1, 2024

16,248

88.63

Vested

(52,153)

47.82

(10,115)

90.00

Forfeited

(1,000)

91.35

(64)

90.00

Nonvested at September 30, 2017

151,544

58.28

Nonvested at March 31, 2024

6,069

86.32

As of ~~September 30, 2017,~~March 31, 2024, there was ~~$4.9 million~~$409,000 of total unrecognized compensation cost related to nonvested restricted stock granted under the plans. This cost is expected to be recognized over a weighted-average period of ~~2.23~~0.78 years as of ~~September 30, 2017.~~March 31, 2024. The total fair value of shares vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 was ~~$2.6 million.~~$852,000.

Restricted Stock Units (“RSUs”)

~~The Company from~~From time-to-time, we also ~~grants~~grant performance RSUs and ~~discretionary~~time-vested RSUs to key ~~employees.~~employees, and time-vested RSUs to non-employee directors. These awards help align the interests of these employees with the interests of ~~the~~our shareholders ~~of the Company~~ by providing economic value directly related to ~~the performance of the Company.~~our performance. Some performance RSU grants contain a three-year performance period while others contain a ~~one-year~~one to two-year performance period and a ~~time vested~~time-vested requirement (generally two to four years from the grant date). The ~~Company communicates~~performance-based awards for our long-term incentive plans are dependent on the achievement of tangible book value growth and return on average tangible common equity relative to the Company’s peer group during each three-year performance period. Grants to non-employee directors typically vest within a 12-month period. We communicate threshold, target, and maximum performance RSU awards and performance targets to the applicable key employees at the beginning of a performance period. ~~Discretionary RSUs are based upon prior performance~~Due to the merger with CenterState on June 7, 2020, all legacy and ~~typically cliff-vest over four years from the grant date. Dividends are not paid in~~assumed performance-based restricted stock units converted to a time-vesting requirement. With respect to some long-term incentive awards, dividend equivalents are accrued at the ~~awards~~same rate as cash dividends paid for each share of the Company’s common stock during the performance or time-vested period, and subsequently paid when the shares are issued on the vesting ~~period.~~or settlement date. The value of the RSUs awarded is established as the fair market value of the stock at the time of the grant. ~~The Company recognizes expenses~~We recognize expense on a straight-line basis typically over the performance ~~and vesting~~or time-vesting periods based upon the probable performance target, as applicable, that will be met. ~~For the nine months ended September 30, 2017, the Company accrued for 90% of the RSUs granted, based on Management’s expectations of performance.~~

~~Nonvested~~Outstanding RSUs for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 is summarized in the following table.

Weighted-

Average

Grant-Date

Restricted Stock Units

Shares

Fair Value

Nonvested at January 1, 2017

107,876

$
66.37

Granted

66,655

89.01

LTIP Adjustment

(3,951)

63.93

Nonvested at September 30, 2017

170,580

75.27


		Weighted-
		Average
		Grant-Date
Restricted Stock Units	Shares	Fair Value
Outstanding at January 1, 2024	873,048	$	75.22
Granted	353,490		80.87
Vested	(344,376)		77.67
Forfeited	(5,210)		75.44
Outstanding at March 31, 2024	876,952	$	76.53

The nonvested shares of 876,952 at March 31, 2024 includes 65,307 shares that have fully vested but are subject to a two-year holding period, which commenced at the end of their respective vesting period. These vested shares will be released and issued into shares of common stock at the end of their respective two-year holding period, the last of which will end by March 31, 2025. If maximum performance is achieved pursuant to the 2022, 2023 and 2024 Long Term Incentive performance-based RSU grants, an additional 134,079 shares in total may be issued by the Company at the end of the three-year performance periods.

As of ~~September 30, 2017,~~March 31, 2024, there was ~~$5.9~~$41.7 million of total unrecognized compensation cost related to nonvested RSUs granted under the plan. This cost is expected to be recognized over a weighted-average period of ~~1.8~~1.54 years as of ~~September 30, 2017.~~March 31, 2024. The total fair value of RSUs vested and released during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 was ~~$2.3~~$28.5 million. ~~During the nine months ended September 30, 2017, 57,455 vested restricted stock units were issued to the participants in the 2014 Long-Term Incentive Plan.~~

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Note 1312 — Commitments and Contingent Liabilities

In the normal course of business, ~~the Company makes~~we make various commitments and ~~incurs~~incur certain contingent liabilities, which are not reflected in the accompanying financial statements. The commitments and contingent liabilities include guarantees, commitments to extend credit, and standby letters of credit. At ~~September 30, 2017,~~March 31, 2024, commitments to extend credit and standby letters of credit totaled ~~$2.2~~$9.5 billion. ~~The Company does not anticipate any material~~As of March 31, 2024, the liability recorded for expected credit losses ~~as a result~~on unfunded commitments, excluding unconditionally cancellable exposures and letters of ~~these transactions.~~credit, was $53.2 million and recorded on the Balance Sheet. See Note 2 — Summary of Significant Accounting Policies for discussion of liability recorded for expected credit losses on unfunded commitments.

~~Table of Contents~~

~~The Company has~~We have been named as defendant in various legal actions, arising from its normal business activities, in which damages in various amounts are claimed. ~~The Company is~~We are also exposed to litigation risk related to the prior business activities of banks acquired through whole bank ~~acquisitions as well as banks from which assets were acquired and liabilities assumed in FDIC-assisted transactions.~~acquisitions. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, as of March 31, 2024, any such liability ~~will~~is not expected to have a material effect on ~~the Company’s~~our consolidated financial statements.

In response to the bank failures in early 2023, the FDIC implemented a special assessment to recover the losses to the FDIC’s Deposit Insurance Fund at an annual rate of approximately 13.4 basis points over eight quarterly assessment periods beginning with the first quarterly assessment period of 2024. The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. As a result, approximately $25.7 million was recognized by the Bank as of December 31, 2023 for the two-year special assessment period. Due to additional losses to the Deposit Insurance Fund resulting from the 2023 bank failures reported by the FDIC in February 2024, an additional $3.9 million was accrued by the Bank during the first quarter of 2024, bringing the total estimated FDIC special assessment allocable to the Bank to approximately $29.5 million. The FDIC may impose additional special assessments from time to time based on the actual losses incurred by the FDIC as a result of the March 2023 bank failures or future failures.

Cyber Incident Litigation. On April 3, 2024, a putative class action lawsuit was filed against the Bank in the U.S. District Court for the Middle District of Florida, Tampa Division (the “Original Suit”). The plaintiff, who purports to represent the class of individuals harmed by alleged actions and/or omissions by the Bank in connection with the cybersecurity incident that was detected on February 6, 2024 (the “Cyber Incident”), asserts a variety of common law and statutory claims seeking monetary damages, injunctive relief and other related relief related to the potential unauthorized access by third parties to personal identifiable information. Since April 3, 2024, additional putative class action lawsuits have been filed and are currently pending against the Bank, including nine additional cases pending in the U.S. District Court for the Middle District of Florida, one case pending in the U.S. District Court for the District of South Carolina, two cases pending in the U.S. District Court for the Northern District of Georgia, and one case pending in the Circuit Court for Polk County, Florida. (each, a “Cyber Incident Suit”).

At this time, neither the Bank nor the Company is able to reasonably estimate the amount or range of reasonably possible loss, if any, that might result from the Cyber Incident Suits. However, the Bank believes that it has defenses to the claims and intends to vigorously defend against the Cyber Incident Suits. Accordingly, no amounts have been recorded in the unaudited condensed consolidated financial statements for the Cyber Incident Suits. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Additional lawsuits and claims related to the Cyber Incident may be asserted by or on behalf of customers, stockholders, or others seeking damages or other related relief and additional inquiries from governmental agencies may be received or investigations by governmental agencies commenced.

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Note 1413 — Fair Value

~~FASB ASC Topic 820,~~ ~~Fair Value Measurements and Disclosures~~,GAAP defines fair value and establishes a framework for measuring and disclosing fair ~~value under accounting principles generally accepted in the United States, and enhances disclosures about fair value measurements. FASB ASC Topic 820 clarifies that fair~~value. Fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.

The Company ~~utilizes~~uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale and trading securities, derivative contracts, mortgage loans held for sale, SBA servicing rights, and mortgage servicing rights (“MSRs”) are recorded at fair value on a recurring basis. Additionally, from time to time, ~~the Company~~we may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, OREO, bank properties held for sale, and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

FASB ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1	Observable inputs such as quoted prices in active markets;
Level 2	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

~~The following is a~~A description of valuation methodologies used for assets recorded at fair ~~value.~~value is disclosed in Note 25 — Fair Value of our Annual Report on Form 10-K for the year ended December 31, 2023.

~~Investment Securities~~

Securities available for sale are valued on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and The NASDAQ Stock Market, or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities and debentures issued by government sponsored entities, municipal bonds and corporate debt securities. Securities held to maturity are valued at quoted market prices or dealer quotes similar to securities available for sale. The carrying value of FHLB stock approximates fair value based on the redemption provisions.

~~Mortgage Loans Held for Sale~~

Mortgage loans held for sale are carried at fair value. The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary market for loans with similar characteristics. As such, the fair value adjustments for mortgage loans held for sale are recurring Level 2.

~~Loans~~

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan may be considered impaired and an ALLL may be established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using estimated fair value methodologies. The fair value of impaired loans is estimated using one of several methods, including collateral value,

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market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2017, substantially all of the impaired loans were evaluated based on the fair value of the collateral because such loans were considered collateral dependent. Impaired loans, where an allowance is established based on the fair value of collateral; require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company considers the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the impaired loan as nonrecurring Level 3.

~~Other Real Estate Owned~~

Typically OREO, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 2). However, OREO is considered Level 3 in the fair value hierarchy because management has qualitatively applied a discount due to the size, supply of inventory, and the incremental discounts applied to the appraisals. Management also considers other factors, including changes in absorption rates, length of time the property has been on the market and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the ALLL. Gains or losses on sale and generally any subsequent adjustments to the value are recorded as a component of OREO expense.

~~Derivative Financial Instruments~~

Fair value is estimated using pricing models of derivatives with similar characteristics; accordingly, the derivatives are classified within Level 2 of the fair value hierarchy (see Note 16—Derivative Financial Instruments for additional information).

~~Mortgage servicing rights~~

The estimated fair value of MSRs is obtained through an independent derivatives dealer analysis of future cash flows. The evaluation utilizes assumptions market participants would use in determining fair value including market discount rates, prepayment speeds, servicing income, servicing costs, default rates and other market driven data, as well as the market’s perception of future interest rate movements. MSRs are classified as Level 3.

~~Table of Contents~~

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The ~~tables~~table below ~~present~~presents the recorded amount of assets and liabilities measured at fair value on a recurring ~~basis.~~basis:


											Quoted Prices
			Quoted Prices
			In Active		Significant
			Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
											In Active		Significant
											Markets		Other		Significant
											for Identical		Observable		Unobservable
											Assets		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017:
March 31, 2024:
Assets
Derivative financial instruments	$	1,492	$	—	$	1,492	$	—	$	176,784	$	—	$	176,784	$	—
Loans held for sale		46,321		—		46,321		—		56,553		—		56,553		—
Trading securities										66,188		—		66,188		—
Securities available for sale:
Government-sponsored entities debt		85,951		—		85,951		—
U.S. Treasuries										24,587		—		24,587		—
U.S. Government agencies										223,805		—		223,805		—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises										1,492,423		—		1,492,423		—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises										508,112		—		508,112		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises										1,012,217		—		1,012,217		—
State and municipal obligations		204,294		—		204,294		—		960,359		—		960,359		—
Mortgage-backed securities		1,027,477		—		1,027,477		—
Corporate stocks		2,957		1,732		1,225		—
Small Business Administration loan-backed securities										350,043		—		350,043		—
Corporate securities										26,854		—		26,854		—
Total securities available for sale		1,320,679		1,732		1,318,947		—		4,598,400		—		4,598,400		—
Mortgage servicing rights		29,937		—		—		29,937		87,970		—		—		87,970
	$	1,398,429	$	1,732	$	1,366,760	$	29,937
SBA servicing asset										6,367		—		—		6,367
									$	4,992,262	$	—	$	4,897,925	$	94,337
Liabilities
Derivative financial instruments	$	1,301	$	—	$	1,301	$	—	$	954,788	$	—	$	954,788	$	—

December 31, 2016:

December 31, 2023:
Assets
Derivative financial instruments	$	2,606	$	—	$	2,606	$	—	$	172,939	$	—	$	172,939	$	—
Loans held for sale		50,572		—		50,572		—		50,888		—		50,888		—
Trading securities										31,321		—		31,321		—
Securities available for sale:
Government-sponsored entities debt		84,642		—		84,642		—
U.S. Treasuries										73,890		—		73,890		—
U.S. Government agencies										224,706		—		224,706		—
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises										1,558,306		—		1,558,306		—
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises										527,422		—		527,422		—
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises										1,024,170		—		1,024,170		—
State and municipal obligations		107,402		—		107,402		—		977,461		—		977,461		—
Mortgage-backed securities		803,577		—		803,577		—
Corporate stocks		3,784		2,559		1,225		—
Small Business Administration loan-backed securities										371,686		—		371,686		—
Corporate securities										26,747		—		26,747		—
Total securities available for sale		999,405		2,559		996,846		—		4,784,388		—		4,784,388		—
Mortgage servicing rights		29,037		—		—		29,037		85,164		—		—		85,164
	$	1,081,620	$	2,559	$	1,050,024	$	29,037
SBA servicing asset										5,952		—		—		5,952
									$	5,130,652	$	—	$	5,039,536	$	91,116
Liabilities
Derivative financial instruments	$	730	$	—	$	730	$	—	$	804,486	$	—	$	804,486	$	—

September 30, 2016:
Assets
Derivative financial instruments	$	3,091	$	—	$	3,091	$	—
Loans held for sale		57,052		—		57,052		—
Securities available for sale:
Government-sponsored entities debt	$	62,980	$	—	$	62,980	$	—
State and municipal obligations		117,324		—		117,324		—
Mortgage-backed securities		741,277		—		741,277		—
Corporate stocks		3,793		2,568		1,225		—
Total securities available for sale		925,374		2,568		922,806		—
Mortgage servicing rights		23,064		—		—		23,064
	$	1,008,581	$	2,568	$	982,949	$	23,064
Liabilities
Derivative financial instruments	$	1,100	$	—	$	1,100	$	—

Fair Value Option

The Company has elected the fair value option for mortgage loans held for sale primarily to ease the operational burden required to maintain hedge accounting for these loans. The Company also has opted for the fair value option for the SBA servicing asset, as it is the industry-preferred method for valuing such assets.

Table of Contents

The following table summarizes the difference between the fair value and the unpaid principal balance of mortgage loans held for sale and the changes in fair value of these loans.


	March 31,		December 31,
(Dollars in thousands)	2024		2023
Fair value	$	56,553	$	50,888
Unpaid principal balance		54,834		49,025
Fair value less aggregated unpaid principal balance	$	1,719	$	1,863


	Three Months Ended March 31,
(Dollars in thousands)	2024		2023		Income Statement Location
Mortgage loans held for sale	$	(144)	$	(9)	Mortgage banking income

Changes in Level 1, 2 and 3 Fair Value Measurements

When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses below include changes in fair value due in part to observable factors that are part of the valuation methodology.

There were no changes in hierarchy classifications of Level 3 assets or liabilities for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2024. A reconciliation of the beginning and ending balances of the MSR, a Level 3 ~~assets and liabilities~~asset recorded at fair value on a recurring basis, for the ~~nine~~three months ended ~~September 30, 2017 and 2016~~March 31, 2024 is as ~~follows:~~follows. The changes in fair value of the MSRs are recorded in Mortgage Banking Income on the Consolidated Statements of Income.



(Dollars in thousands)	Assets		Liabilities		MSRs
Fair value, January 1, 2017	$	29,037	$	—
Fair value, January 1, 2024					$	85,164
Servicing assets that resulted from transfers of financial assets		4,764		—		1,864
Changes in fair value due to valuation inputs or assumptions		(1,055)		—		2,384
Changes in fair value due to decay		(2,809)		—		(1,442)
Fair value , September 30, 2017	$	29,937	$	—

Fair value, January 1, 2016	$	26,202	$	—
Servicing assets that resulted from transfers of financial assets		4,182		—
Changes in fair value due to valuation inputs or assumptions		(4,305)		—
Changes in fair value due to decay		(3,015)		—
Fair value, September 30, 2016	$	23,064	$	—
Fair value, March 31, 2024					$	87,970

A reconciliation of the beginning and ending balances of the SBA servicing asset, a Level 3, asset recorded at fair value on a recurring basis for the period ending March 31, 2024 is as follows. The changes in fair value of the SBA servicing asset are recorded in in SBA Income on the Consolidated Statements of Income.


(Dollars in thousands)	SBA Servicing Asset
Fair value, January 1, 2024	$	5,952
Servicing assets that resulted from transfers of financial assets		581
Changes in fair value due to decay		(364)
Changes in fair value due to valuation inputs or assumptions		198
Fair value, March 31, 2024	$	6,367

There were no unrealized losses included in accumulated other comprehensive income related to Level 3 financial assets and liabilities at ~~September 30, 2017 or 2016.~~March 31, 2024.

Table of Contents

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis:

Quoted Prices




In Active

Significant

Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

Inputs

(Dollars in thousands)

Fair Value

(Level 1)

(Level 2)

(Level 3)

September 30, 2017:

OREO

$
13,527

$
—

$
—

$
13,527

Non-acquired impaired loans

5,588

—

—

5,588

December 31, 2016:

OREO

$
18,316

$
—

$
—

$
18,316

Non-acquired impaired loans

6,611

—

—

6,611

September 30, 2016:

OREO

$
22,211

$
—

$
—

$
22,211

Non-acquired impaired loans

4,360

—

—

4,360


			Quoted Prices
			In Active		Significant
			Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	Fair Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2024:
OREO	$	1,644	$	—	$	—	$	1,644
Bank properties held for sale		8,973		—		—		8,973
Individually evaluated loans		64,191		—		—		64,191
December 31, 2023:
OREO	$	837	$	—	$	—	$	837
Bank properties held for sale		12,401		—		—		12,401
Individually evaluated loans		73,518		—		—		73,518

~~Table of Contents~~

Quantitative Information about Level 3 Fair Value Measurement

Weighted Average

September 30,

December 31,

September 30,

Valuation Technique

Unobservable Input

2017

2016

2016

Nonrecurring measurements:

Non-acquired impaired loans

Discounted appraisals

Collateral discounts

3
%

6
%

7
%
OREO

Discounted appraisals

Collateral discounts and estimated costs to sell

23
%

18
%

24
%


			Weighted Average Discount
			March 31,		December 31,
	Valuation Technique	Unobservable Input	2024		2023
Nonrecurring measurements:
Individually evaluated loans	Discounted appraisals and discounted cash flows	Collateral discounts	15	%	13	%
OREO and Bank properties held for sale	Discounted appraisals	Collateral discounts and estimated costs to sell	6	%	12	%

Fair Value of Financial Instruments

~~The~~We used the following methods and assumptions ~~were used by the Company~~ in estimating ~~its~~our fair value disclosures for financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those models are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented ~~herein~~in the table below are based on pertinent information available to management as of ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016.~~2023. Such amounts have not been revalued for purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

~~The following methods~~Methods and assumptions ~~were~~ used to estimate the fair value of each class of financial instruments are disclosed in Note 25 — Fair Value of our Annual Report on Form 10-K for ~~which it is practicable to estimate that value:~~the year ended December 31, 2023.

~~Cash and Cash Equivalents~~ ~~— The carrying amount is a reasonable estimate of fair value.~~

~~Investment Securities~~ — Securities held to maturity are valued at quoted market prices or dealer quotes. The carrying value of FHLB stock approximates fair value based on the redemption provisions. The carrying value of the Company’s investment in unconsolidated subsidiaries approximates fair value. See Note 5—Investment Securities for additional information, as well as page 40 regarding fair value.

~~Loans held for sale~~ ~~— The fair values disclosed for loans held for sale are based on commitments from investors for loans with similar characteristics.~~

~~Loans~~ — For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (e.g., one-to-four family residential) and other consumer loans are estimated using discounted cash flow analyses based on the Company’s current rates offered for new loans of the same type, structure and credit quality. Fair values for other loans (e.g., commercial real estate and investment property mortgage loans, commercial and industrial loans) are estimated using discounted cash flow analyses, using interest rates currently being offered by the Company for loans with similar terms to borrowers of similar credit quality. Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

~~Deposit Liabilities~~ — The fair values disclosed for demand deposits (e.g., interest and non-interest bearing checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts, and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

~~Federal Funds Purchased and Securities Sold Under Agreements to Repurchase~~ ~~— The carrying amount of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days approximate their fair values.~~

~~Other Borrowings~~ ~~— The fair value of other borrowings is estimated using discounted cash flow analysis on the Company’s current incremental borrowing rates for similar types of instruments.~~

Table of Contents

~~Accrued Interest~~ ~~— The carrying amounts of accrued interest approximate fair value.~~

~~Derivative Financial Instruments~~ ~~— The fair value of derivative financial instruments (including interest rate swaps) is estimated using pricing models of derivatives with similar characteristics.~~

~~Commitments to Extend Credit, Standby Letters of Credit and Financial Guarantees~~ — The fair values of commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of guarantees and letters of credit are based on fees currently charged for similar agreements or on the estimated costs to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

The estimated fair value, and related carrying amount, of ~~the Company’s~~our financial instruments are as follows:


	Carrying		Fair

											Carrying			Fair
(Dollars in thousands)	Amount		Value		Level 1		Level 2		Level 3		Amount			Value		Level 1		Level 2		Level 3
September 30, 2017
March 31, 2024
Financial assets:
Cash and cash equivalents	$	403,934	$	403,934	$	403,934	$	—	$	—	$	1,209,457		$	1,209,457	$	1,209,457	$	—	$	—
Trading securities												66,188			66,188		—		66,188		—
Investment securities		1,336,796		1,336,850		14,171		1,322,679		—		7,232,274			6,802,252		187,285		6,614,967		—
Loans held for sale		46,321		46,321		—		46,321		—		56,553			56,553		—		56,553		—
Loans, net of allowance for loan losses		8,223,204		8,284,002		—		—		8,284,002
Loans, net of allowance for credit losses												32,197,656			31,124,727		—		—		31,124,727
Accrued interest receivable		25,172		25,172		—		5,373		19,799		160,519			160,519		—		25,665		134,854
Mortgage servicing rights		29,937		29,937		—		—		29,937		87,970			87,970		—		—		87,970
Interest rate swap - non-designated hedge		200		200		—		200		—
SBA servicing asset												6,367			6,367		—		—		6,367
Interest rate swap – non-designated hedge												174,373			174,373		—		174,373		—
Other derivative financial instruments (mortgage banking related)		1,292		1,292		—		1,292		—		2,411			2,411		—		2,411		—
Financial liabilities:													��
Deposits		9,062,021		8,512,681		—		8,512,681		—
Noninterest-bearing												10,546,410			10,546,410		—		10,546,410		—
Interest-bearing other than time deposits												22,351,423			22,351,423		—		22,351,423		—
Time deposits												4,280,601			4,238,055		—		4,238,055		—
Federal funds purchased and securities sold under agreements to repurchase		291,099		291,099		—		291,099		—		554,691			554,691		—		554,691		—
Corporate and subordinated debentures												391,812			385,574		—		385,574		—
Other borrowings		83,307		85,344		—		85,344		—		—			—		—		—		—
Accrued interest payable		1,810		1,810		—		1,810		—		44,873			44,873		—		44,873		—
Interest rate swap - non-designated hedge		197		197		—		197		—
Interest rate swap - cash flow hedge		329		329		—		329		—
Interest rate swap – non-designated hedge												954,297			954,297		—		954,297		—
Other derivative financial instruments (mortgage banking related)		775		775		—		775		—		491			491		—		491		—
Off balance sheet financial instruments:
Commitments to extend credit		—		15,968		—		15,968		—
December 31, 2016
December 31, 2023
Financial assets:
Cash and cash equivalents	$	374,448	$	374,448	$	374,448	$	—	$	—	$	998,877		$	998,877	$	998,877	$	—	$	—
Trading securities												31,321			31,321		—		31,321		—
Investment securities		1,014,981		1,015,137		12,041		1,003,096		—		7,463,871			7,061,167		192,043		6,869,124		—
Loans held for sale		50,572		50,572		—		50,572		—		50,888			50,888		—		50,888		—
Loans, net of allowance for loan losses		6,643,326		6,649,575		—		—		6,649,575
Loans, net of allowance for credit losses												31,931,916			30,709,513		—		—		30,709,513
Accrued interest receivable		18,618		18,618		—		3,642		14,976		154,400			154,400		—		26,706		127,694
Mortgage servicing rights		29,037		29,037		—		—		29,037		85,164			85,164		—		—		85,164
Interest rate swap - non-designated hedge		203		203		—		203		—
SBA servicing asset												5,952			5,952		—		—		5,952
Interest rate swap – non-designated hedge												169,180			169,180		—		169,180		—
Other derivative financial instruments (mortgage banking related)		2,403		2,403		—		2,403		—		3,759			3,759		—		3,759		—
Financial liabilities:
Deposits		7,334,423		6,935,867		—		6,935,867		—
Noninterest-bearing												10,649,274			10,649,274		—		10,649,274		—
Interest-bearing other than time deposits												22,149,682			22,149,682		—		22,149,682		—
Time deposits												4,249,953			4,208,498		—		4,208,498		—
Federal funds purchased and securities sold under agreements to repurchase		313,773		313,773		—		313,773		—		489,185			489,185		—		489,185		—
Corporate and subordinated debentures												391,904			388,909		—		388,909		—
Other borrowings		55,358		54,379		—		54,379		—		100,000			100,000		—		100,000		—
Accrued interest payable		1,359		1,359		—		1,359		—		56,808			56,808		—		56,808		—
Interest rate swap - non-designated hedge		181		181		—		181		—
Interest rate swap - cash flow hedge		498		498		—		498		—
Interest rate swap – non-designated hedge												803,539			803,539		—		803,539		—
Other derivative financial instruments (mortgage banking related)		51		51		—		51		—		947			947		—		947		—
Off balance sheet financial instruments:
Commitments to extend credit		—		1,587		—		1,587		—
September 30, 2016
Financial assets:
Cash and cash equivalents	$	507,517	$	507,517	$	507,517	$	—	$	—
Investment securities		941,707		941,932		12,050		929,882		—
Loans held for sale		57,052		57,052		—		57,052		—
Loans, net of allowance for loan losses		6,489,068		6,667,622		—		—		6,667,622
Accrued interest receivable		17,501		17,501		—		3,528		13,973
Mortgage servicing rights		23,064		23,064		—		—		23,064
Other derivative financial instruments (mortgage banking related)		3,091		3,091		—		3,091		—
Financial liabilities:
Deposits		7,247,406		7,015,012		—		7,015,012		—
Federal funds purchased and securities sold under agreements to repurchase		305,268		305,268		—		305,268		—
Other borrowings		55,306		49,781		—		49,781		—
Accrued interest payable		1,384		1,384		—		1,384		—
Interest rate swap - cash flow hedge		655		655		—		655		—
Other derivative financial instruments (mortgage banking related)		444		444		—		444		—
Off balance sheet financial instruments:
Commitments to extend credit		—		45,285		—		45,285		—

Table of Contents

Note 1514 — Accumulated Other Comprehensive Income (Loss)

The changes in each ~~components~~component of accumulated other comprehensive income ~~(loss)~~(losses), net of tax, for the three months ended March 31, 2024 and 2023, were as follows:

Unrealized Gains




and Losses

Gains and

on Securities

Losses on

Benefit

Available

Cash Flow

(Dollars in thousands)

Plans

for Sale

Hedges

Total
Three Months Ended September 30, 2017

Balance at June 30, 2017

$
(5,962)

$
2,506

$
(241)

$
(3,697)
Other comprehensive income before reclassifications

—

80

3

83
Amounts reclassified from accumulated other comprehensive income (loss)

116

(325)

35

(174)
Net comprehensive income (loss)

116

(245)

38

(91)
Balance at September 30, 2017

$
(5,846)

$
2,261

$
(203)

$
(3,788)

Three Months Ended September 30, 2016

Balance at June 30, 2016

$
(5,762)

$
12,752

$
(480)

$
6,510
Other comprehensive income (loss) before reclassifications

—

(2,715)

32

(2,683)
Amounts reclassified from accumulated other comprehensive income

126

—

42

168
Net comprehensive income (loss)

126

(2,715)

74

(2,515)
Balance at September 30, 2016

$
(5,636)

$
10,037

$
(406)

$
3,995

Nine Months Ended September 30, 2017

Balance at December 31, 2016

$
(6,195)

$
(1,708)

$
(308)

$
(8,211)
Other comprehensive income (loss) before reclassifications

—

4,362

(35)

4,327
Amounts reclassified from accumulated other comprehensive income (loss)

349

(393)

140

96
Net comprehensive income

349

3,969

105

4,423
Balance at September 30, 2017

$
(5,846)

$
2,261

$
(203)

$
(3,788)

Nine Months Ended September 30, 2016

Balance at December 31, 2015

$
(6,015)

$
2,588

$
(444)

$
(3,871)
Other comprehensive income (loss) before reclassifications

—

7,524

(91)

7,433
Amounts reclassified from accumulated other comprehensive income (loss)

379

(75)

129

433
Net comprehensive income

379

7,449

38

7,866
Balance at September 30, 2016

$
(5,636)

$
10,037

$
(406)

$
3,995


			Unrealized Losses
	Benefit		on Securities
(Dollars in thousands)	Plans		Available for Sale		Total
Three Months Ended March 31, 2024
Balance at December 31, 2023	$	627	$	(583,163)	$	(582,536)
Other comprehensive loss before reclassifications		—		(40,458)		(40,458)
Net comprehensive loss		—		(40,458)		(40,458)
Balance at March 31, 2024	$	627	$	(623,621)	$	(622,994)

Three Months Ended March 31, 2023
Balance at December 31, 2022	$	(673)	$	(676,415)	$	(677,088)
Other comprehensive income before reclassifications		—		63,271		63,271
Amounts reclassified from accumulated other comprehensive loss		—		33		33
Net comprehensive income		—		63,304		63,304
Balance at March 31, 2023	$	(673)	$	(613,111)	$	(613,784)

~~Table of Contents~~

The table below presents the reclassifications out of accumulated other comprehensive income (loss), net of tax:

Amount Reclassified from Accumulated Other Comprehensive Income (Loss)

(Dollars in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Accumulated Other Comprehensive Income (Loss) Component

2017

2016

2017

2016

Income Statement Line Item Affected
Loss on cash flow hedges:

Interest rate contracts

$
57

$
69

$
226

$
209

Interest expense

(22)

(27)

(86)

(80)

Provision for income taxes

35

42

140

129

Net income
Gains on sales of available for sale securities:

$
(1,278)

$
—

$
(1,388)

$
(122)

Securities gains, net

487

—

529

47

Provision for income taxes

(791)

—

(859)

(75)

Net income
Other-than-temporary impairment losses on available for sale securities:

$
753

$
—

$
753

$
—

Other-than-temporary impairment losses

(287)

—

(287)

—

Provision for income taxes

466

—

466

—

Net income
Amortization of defined benefit pension:

Actuarial losses

$
188

$
204

$
564

$
612

Salaries and employee benefits

(72)

(78)

(215)

(233)

Provision for income taxes

116

126

349

379

Net income
Total reclassifications for the period

$
(640)

$
168

$
(370)

$
433


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
(Dollars in thousands)	For the Three Months Ended March 31,
Accumulated Other Comprehensive Income (Loss) Component	2024		2023		Income Statement Line Item Affected
Gains on sales of available for sale securities:
	$	—	$	45	Securities gains, net
		—		(12)	Provision for income taxes
		—		33	Net income
Total reclassifications for the period	$	—	$	33

Note 1615 — Derivative Financial Instruments

~~Cash Flow Hedge of Interest Rate Risk~~

The Company ~~utilizes an~~uses certain derivative instruments to meet the needs of customers as well as to manage the interest rate ~~swap agreement to essentiallyconvert a portion~~risk associated with certain transactions. The following table summarizes the derivative financial instruments used by the Company as of ~~its variable-rate debt to a fixed rate (cash flow hedge). For derivatives designated~~March 31, 2024 and December 31, 2023:


				March 31, 2024						December 31, 2023
	Balance Sheet	Notional		Estimated Fair Value				Notional		Estimated Fair Value
(Dollars in thousands)	Location	Amount		Gain		Loss		Amount		Gain		Loss
Fair value hedge of interest rate risk:
Pay fixed rate swap with counterparty	Other Assets	$	9,099	$	373	$	—	$	9,188	$	220	$	—


Not designated hedges of interest rate risk:
Customer related interest rate contracts:
Matched interest rate swaps with borrowers	Other Assets and Other Liabilities		11,513,291		29,960		954,297		11,327,419		60,145		803,539
Matched interest rate swaps with counterparty ⁽¹⁾	Other Assets		11,422,100		144,041		—		11,235,952		108,820		—

Economic hedges of interest rate risk:
Pay floating rate swap with counterparty	Other Assets		1,760,000		(1)		—		1,660,000		(5)		—

Not designated hedges of interest rate risk – mortgage banking activities:
Contracts used to hedge mortgage servicing rights	Other Assets		107,000		381		—		142,000		2,605		—
Contracts used to hedge mortgage pipeline	Other Assets and Other Liabilities		123,000		2,030		491		77,500		1,154		947
Total derivatives		$	24,934,490	$	176,784	$	954,788	$	24,452,059	$	172,939	$	804,486

(1)

The fair value of the interest rate swap derivative assets was reduced by $781.1 million in variation margin payments applicable to swaps centrally cleared through LCH and CME.

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Balance Sheet Fair Value Hedge

As of March 31, 2024 and December 31, 2023, the Company maintained loan swaps, with an aggregate notional amount of $9.1 million and $9.2 million, respectively, accounted for as ~~hedging exposure to variable cash flows of a forecasted transaction (cash flow hedge), the effective portion~~fair value hedges. The amortized cost basis of the ~~derivative’s gain or loss is initially reported~~loans being hedged were $9.6 million and $9.7 million, respectively, as ~~a component~~ of ~~other comprehensive income~~March 31, 2024 and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. For derivatives that are not designated as hedging instruments,December 31, 2023. This derivative protects us from interest rate risk caused by changes in the SOFR curve in relation to a certain designated fixed rate loan. The derivative converts the fixed rate loan to a floating rate. Settlement occurs in any given period where there is a difference in the stated fixed rate and variable rate and the difference is recorded in net interest income. The fair value of this hedge is recorded in either other assets or in other liabilities depending on the ~~derivatives are recognized in earnings immediately.~~

When applying hedge accounting for derivatives, the Company establishes a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspectposition of the hedge ~~upon the inception of the hedge.~~

During 2009, the Company entered into a forward starting interest rate swap agreement with a notional amount of $8.0 million to manage interest rate risk due to periodic rate resets on its junior subordinated debt issued by SCBT Capital Trust II, an unconsolidated subsidiary of the Company established for the purpose of issuing trust preferred securities. The Company hedges the variable rate cash flows of subordinated debt against future interest rate increases by using an interest rate swap that effectively fixed the rate on the debt beginning on June 15, 2010, at which time the debt contractually converted from a fixed interest rate to a variable interest rate. This hedge expires on June 15, 2019. The notional amount on which the interest payments are based will not be exchanged. This derivatives contract calls for the Company to pay a fixed rate of 4.06% on $8.0 million notional amount and receive a variable rate of three-month LIBOR on the $8.0 million notional amount.

The Company recognized an after-tax unrealized gain on its cash flow hedge in other comprehensive income of $38,000 and $105,000 for the three and nine months ended September 30, 2017, respectively. This compares to an unrealized gain of $74,000 and $38,000 for the three and nine months ended September 30, 2016, respectively. The

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Company recognized a $328,000 cash flow hedge liability in other liabilities on the balance sheet at September 30, 2017, compared to a $655,000 liability at September 30, 2016. There was no ineffectiveness in the cash flow hedge during the three and nine months ended September 30, 2017 and 2016.

On January 3, 2017, the Company, through its merger with SBFC, acquired two forward starting interest rate swaps with a total notational amount of $10.0 million which was used to manage interest rate risk by SBFC on its $20.6 million in junior subordinated debt issued by capital trusts. Like the Company, SBFC was using the swaps to hedge the variable rate cash flows of subordinated debt against future interest rate increases by using an interest rate swap that effectively fixed the rate on the debt. The subordinated debt was paying interest at three month LIBOR plus 1.40% (2.36% at the time of the merger) while the interest rate swaps were providing a fixed rate of approximately 5.35% on $10.0 million of the junior subordinated debt. During the first quarter of 2017, the Company decided to terminate the interest rate swaps acquired through the merger with SBFC with an immaterial effect to net income.

Credit risk related to the derivative arises when amounts receivable from the counterparty (derivatives dealer) exceed those payable. The Company controls the risk of loss by only transacting with derivatives dealers that are national market makers whose credit ratings are strong. Each party to the interest rate swap is required to provide collateral in the form of cash or securities to the counterparty when the counterparty’s exposure to a mark-to-market replacement value exceeds certain negotiated limits. These limits are typically based on current credit ratings and vary with ratings changes. As of September 30, 2017 and 2016, the Company provided $450,000 and $750,000 of collateral, respectively, which is included in cash and cash equivalents on the balance sheet as interest-bearing deposits with banks. Also, the Company has a netting agreement with the ~~counterparty.~~offset recorded in loans.

Non-designated Hedges of Interest Rate Risk

Customer Swap

~~On December 28, 2016, the~~The Company ~~entered into two~~maintains interest rate swap contracts with loan customers of respondent bank customers of the Correspondent Banking Division, in addition to loan customers of the Bank, that ~~were~~are classified as non-designated hedges and are not speculative in nature. ~~One of~~These agreements are designed to convert customer’s variable rate loans with the ~~derivatives is an~~Company and respondent bank customers to fixed rate. These interest rate ~~swap that was~~swaps are executed with ~~a commercial borrower~~loan customers to facilitate a respective risk management strategy and allow the customer to pay a fixed rate of interest to the Company. ~~This~~These interest rate ~~swap was~~swaps are simultaneously hedged by executing an offsetting interest rate ~~swap that was entered into~~swaps with ~~a derivatives dealer~~unrelated market counterparties to minimize the net risk exposure to the Company resulting from the transactions and allow the Company to receive a variable rate of interest. The interest rate swaps pay and receive interest based on a one-month SOFR floating rate plus a credit spread, with payments being calculated on the notional amount.

The variation margin settlement payment and the related derivative instruments fair value are considered a single unit of account for accounting and financial reporting purposes. Depending on the net position of the swaps with LCH and CME, the fair value, net of the variation margin, is reported in Derivative Assets or Derivative Liabilities on the Consolidated Balance Sheets. In addition, the expense or income attributable to the variation margin for the centrally cleared swaps with LCH and CME is reported in Noninterest Income, specifically within Correspondent and Capital Markets Income. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.

As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of ~~September 30, 2017,~~March 31, 2024 and December 31, 2023, the interest rate swaps had an aggregate notional amount of approximately ~~$27.0 million~~$22.9 billion and $22.6 billion, respectively. At March 31, 2024, the fair value of the interest rate swap derivatives ~~are~~is recorded in other assets at ~~$200,000~~$174.0 million and in other liabilities at ~~$197,000 for a net asset carrying~~$954.3 billion. The fair value of ~~$3,000, which~~derivative assets at March 31, 2024 was ~~recorded~~reduced by $781.1 million in variation margin payments applicable to swaps centrally cleared through ~~earnings. The~~LCH and CME. At December 31, 2023, the fair value of the interest rate swap derivatives was recorded in other assets at $169.0 million and other liabilities at $803.5 billion. The fair value of derivative ~~with~~assets at December 31, 2023 was reduced by $635.3 million in variation margin payments applicable to swaps centrally cleared through LCH and CME. All changes in fair value are recorded through earnings within Correspondent and Capital Markets Income, a component of Noninterest Income on the ~~derivatives dealer~~Consolidated Statements of Income.There was in a net ~~liability position~~gain of ~~$197,000 at September 30, 2017 and~~$113,000 recorded on these derivatives for the ~~Company~~year ended March 31, 2024. There was ~~required to provide $300,000~~a net gain of $96,000 recorded on these derivatives for the quarter ended March 31, 2023. As of March 31, 2024, we provided $237.8 million of cash collateral on the customer swaps, which is included in ~~cash~~Cash and ~~cash equivalents~~Cash Equivalents on the ~~balance sheet~~Consolidated Balance Sheets as ~~interest-bearing deposits~~Deposits in Other Financial Institutions (Restricted Cash). We also provided $99.5 million in investment securities at market value as collateral on the customer swaps which is included in Investment Securities – available for sale on the Consolidated Balance Sheets. Counterparties provided $53.7 million of cash collateral to the Company to secure swap asset positions that were not centrally cleared, which is included in Interest-bearing Deposits within Total Liabilities on the Consolidated Balance Sheets.

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Balance Sheet Economic Hedge

During the third quarter of 2023, management began executing a series of short-term interest rate hedges to address monthly accrual mismatches related to the Company’s Assumable Rate Conversion (“ARC”) program and its transition from LIBOR to SOFR after June 30, 2023. The Company is required to execute the correspondent side of its back-to-back swaps with ~~banks.~~customers with the central clearinghouses (CME or LCH). Term SOFR was not available to execute through CME and LCH, and therefore, management elected to convert to the CME-eligible daily SOFR. Because many of the respondent bank customers converted to Term SOFR, this created interest rate basis risk. To address this risk, monthly interest rate hedges were executed to minimize the impact of accrual mismatches between the monthly Term SOFR used by the customer and the daily SOFR rates used by the central clearinghouses.

As of March 31, 2024, the Company maintained an aggregate notional amount of $1.8 billion short-term interest rate hedges that were accounted for as economic hedges. As noted above, the derivatives protect the Company from interest rate risk caused by changes in the term and daily SOFR accrual mismatches. The fair value of these hedges is recorded in either Other Assets or in Other Liabilities depending on the position of the hedge with the offset recorded in Correspondent Banking and Capital Market Income, a component of Noninterest Income on the Consolidated Statements of Income. There was a net lossof $1,000 for these derivatives for the three months ended March 31, 2024. There was a net loss of $5,000 for these derivatives for the year ended December 31, 2023.

Foreign Exchange

The Company may enter into foreign exchange contracts with customers to accommodate their need to convert certain foreign currencies into U.S. Dollars. To offset the foreign exchange risk, the Company may enter into substantially identical agreements with an unrelated market counterparty to hedge these foreign exchange contracts. If there were foreign currency contracts outstanding at March 31, 2024, the fair value of these contracts would be included in Other Assets and Other Liabilities in the accompanying Consolidated Balance Sheets. All changes in fair value are recorded as other noninterest income. There was no gain or loss recorded related to the foreign exchange derivative for the three months ended March 31, 2024 and 2023.

Mortgage Banking

The Company also has derivatives contracts that are not classified as ~~non-designated hedges. These derivatives contracts are a part of~~accounting hedges to mitigate risks related to the Company’s ~~risk management strategy for its~~ mortgage banking activities. These instruments may include financial forwards, futures contracts, and options written and purchased, which are used to hedge MSRs; while forward sales commitments are typically used to hedge the mortgage pipeline. Such instruments derive their cash flows, and therefore their values, by reference to an underlying instrument, index or referenced interest rate. The Company does not elect hedge accounting treatment for any of these derivative instruments and as a result, changes in fair value of the instruments (both gains and losses) are recorded in the Company’s ~~consolidated statements~~Consolidated Statements of ~~income~~Income in ~~mortgage banking income.~~Mortgage Banking Income.

Mortgage Servicing Rights (“MSRs”)

Derivatives contracts related to MSRs are used to help offset changes in fair value and are written in amounts referred to as notional amounts. Notional amounts provide a basis for calculating payments between counterparties but

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do not represent amounts to be exchanged between the parties and are not a measure of financial risk. On ~~September 30, 2017, the Company~~March 31, 2024, we had derivative financial instruments outstanding with notional amounts totaling ~~$108.5~~$107.0 million related to MSRs, compared to ~~$128.5~~$142.0 million on ~~September 30, 2016.~~December 31, 2023. The estimated net fair value of the open contracts related to the MSRs was recorded as a ~~loss~~gain of ~~$775,000~~$381,000 at ~~September 30, 2017,~~ March 31, 2024,compared to a gain of ~~$42,000~~$2.6 million at ~~September 30, 2016.~~December 31, 2023.

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Mortgage Pipeline

The following table presents ~~the Company’s~~our notional value of forward sale commitments and the fair value of those obligations along with the fair value of the mortgage ~~pipeline.~~pipeline related to the held for sale portfolio.




(Dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016		March 31, 2024		December 31, 2023
Mortgage loan pipeline	$	90,452	$	85,445	$	155,747	$	117,590	$	65,051
Expected closures		(22,613)		64,083		116,810		102,911		54,993
Fair value of mortgage loan pipeline commitments		941		1,037		3,049		2,030		1,154
Forward sales commitments		89,593		97,092		146,000		123,000		77,500
Fair value of forward commitments		(3)		1,366		(445)		(491)		(947)

Note 1716 — Capital Ratios

The Company is subject to regulations with respect to certain risk-based capital ratios. These risk-based capital ratios measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The values of both balance sheet and off-balance sheet items are adjusted based on the rules to reflect categorical credit risk. In addition to the risk-based capital ratios, the regulatory agencies have also established a leverage ratio for assessing capital adequacy. The leverage ratio is equal to Tier 1 capital divided by total consolidated on-balance sheet assets (minus amounts deducted from Tier 1 capital). The leverage ratio does not involve assigning risk weights to assets.

In July 2013, the Federal Reserve announced its approval of a final rule to implement the regulatory capital reforms developed by the Basel Committee on Banking Supervision (“Basel III”), among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules became effective January 1, 2015, subject to a phase-in period for certain aspects of the new rules.

~~As applied to~~Under current regulations, the Company and the Bank ~~the new rules include~~are subject to a ~~new~~ minimum required ratio of common equity Tier 1 capital ~~("CET1"~~(“CET1”) to risk-weighted assets of 4.5%~~. The new rules also raised the~~ and a minimum required ratio of Tier 1 capital to risk-weighted assets ~~from 4% to~~of 6%. The minimum required leverage ratio ~~under the new rules~~ is 4%. The minimum required total capital to risk-weighted assets ratio ~~remains at~~ is 8% ~~under the new rules.~~.

In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, ~~under the new rules~~ a covered banking organization is also required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of ~~common equity Tier 1,~~CET1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer ~~will be phased in incrementally over time, beginning January 1, 2016 and becoming fully effective on January 1, 2019, and will ultimately consist~~consists of an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets.

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The following table presents actual and required capital ratios as of ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016~~2023 for the Company and the Bank under the ~~Basel III~~current capital rules. The minimum required capital amounts presented include the minimum required capital levels as of September 30, 2017 based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action ~~regulations, as amended to reflect the changes under the Basel III Capital Rules.~~regulations.


					Minimum Capital				Minimum Capital				Required to be
					Required - Basel III				Required - Basel III				Considered Well
	Actual				Phase-In Schedule				Fully Phased In				Capitalized

																									Required to be
																					Minimum Capital				Considered Well
																	Actual				Required – Basel III				Capitalized
(Dollars in thousands)	Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio		Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
September 30, 2017
March 31, 2024:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	1,013,065	12.11	%	$	480,973	5.75	%	$	585,532	7.00	%	$	543,709	6.50	%	$	4,203,524	11.95	%	$	2,461,344	7.00	%	$	2,285,534	6.50	%
South State Bank (the Bank)		1,050,203	12.56	%		480,977	5.75	%		585,537	7.00	%		543,713	6.50	%
SouthState Bank (the Bank)																		4,447,788	12.67	%		2,458,057	7.00	%		2,282,481	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		1,084,145	12.96	%		606,444	7.25	%		711,004	8.50	%		669,180	8.00	%		4,203,524	11.95	%		2,988,775	8.50	%		2,812,965	8.00	%
South State Bank (the Bank)		1,050,203	12.56	%		606,449	7.25	%		711,009	8.50	%		669,185	8.00	%
SouthState Bank (the Bank)																		4,447,788	12.67	%		2,984,783	8.50	%		2,809,208	8.00	%
Total capital to risk-weighted assets:
Consolidated		1,129,742	13.51	%		773,739	9.25	%		878,299	10.50	%		836,475	10.00	%		5,036,477	14.32	%		3,692,016	10.50	%		3,516,206	10.00	%
South State Bank (the Bank)		1,095,624	13.10	%		773,745	9.25	%		878,305	10.50	%		836,481	10.00	%
SouthState Bank (the Bank)																		4,890,571	13.93	%		3,687,085	10.50	%		3,511,510	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		1,084,145	10.34	%		419,265	4.00	%		419,265	4.00	%		524,082	5.00	%		4,203,524	9.58	%		1,754,572	4.00	%		2,193,216	5.00	%
South State Bank (the Bank)		1,050,203	10.02	%		419,148	4.00	%		419,148	4.00	%		523,935	5.00	%
December 31, 2016:
SouthState Bank (the Bank)																		4,447,788	10.14	%		1,753,939	4.00	%		2,192,423	5.00	%
December 31, 2023:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	788,544	11.66	%	$	346,730	5.125	%	$	473,582	7.00	%	$	439,755	6.50	%	$	4,159,187	11.75	%	$	2,476,926	7.00	%	$	2,300,003	6.50	%
South State Bank (the Bank)		815,823	12.06	%		346,629	5.125	%		473,444	7.00	%		439,627	6.50	%
SouthState Bank (the Bank)																		4,424,466	12.52	%		2,473,961	7.00	%		2,297,250	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		841,266	12.43	%		448,212	6.625	%		575,064	8.50	%		541,237	8.00	%		4,159,187	11.75	%		3,007,696	8.50	%		2,830,773	8.00	%
South State Bank (the Bank)		815,823	12.06	%		448,081	6.625	%		574,896	8.50	%		541,079	8.00	%
SouthState Bank (the Bank)																		4,424,466	12.52	%		3,004,096	8.50	%		2,827,384	8.00	%
Total capital to risk-weighted assets:
Consolidated		881,957	13.04	%		583,521	8.625	%		710,374	10.50	%		676,546	10.00	%		4,983,012	14.08	%		3,715,389	10.50	%		3,538,466	10.00	%
South State Bank (the Bank)		856,388	12.66	%		583,351	8.625	%		710,166	10.50	%		676,349	10.00	%
SouthState Bank (the Bank)																		4,858,292	13.75	%		3,710,942	10.50	%		3,534,230	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		841,266	9.88	%		340,612	4.00	%		340,612	4.00	%		425,765	5.00	%		4,159,187	9.42	%		1,765,295	4.00	%		2,206,619	5.00	%
South State Bank (the Bank)		815,823	9.58	%		340,483	4.00	% ��		340,483	4.00	%		425,604	5.00	%
September 30, 2016:
Common equity Tier 1 to risk-weighted assets:
Consolidated	$	765,032	11.48	%	$	341,538	5.125	%	$	466,491	7.00	%	$	433,170	6.50	%
South State Bank (the Bank)		790,497	11.86	%		341,492	5.125	%		466,428	7.00	%		433,112	6.50	%
Tier 1 capital to risk-weighted assets:
Consolidated		817,746	12.27	%		441,500	6.625	%		566,453	8.50	%		533,132	8.00	%
South State Bank (the Bank)		790,497	11.86	%		441,441	6.625	%		566,377	8.50	%		533,061	8.00	%
Total capital to risk-weighted assets:
Consolidated		858,813	12.89	%		574,783	8.625	%		699,736	10.50	%		666,415	10.00	%
South State Bank (the Bank)		831,429	12.48	%		574,706	8.625	%		699,643	10.50	%		666,326	10.00	%
Tier 1 capital to average assets (leverage ratio):
Consolidated		817,746	9.74	%		335,972	4.00	%		335,972	4.00	%		419,964	5.00	%
South State Bank (the Bank)		790,497	9.42	%		335,798	4.00	%		335,798	4.00	%		419,748	5.00	%
SouthState Bank (the Bank)																		4,424,466	10.03	%		1,764,736	4.00	%		2,205,921	5.00	%

As of ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016, and September 30, 2016,~~2023, the capital ratios of the Company and the Bank were well in excess of the minimum regulatory requirements and exceeded the thresholds for the “well capitalized” regulatory classification.

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

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Note ~~18—~~17 — Goodwill and Other Intangible Assets

The carrying amount of goodwill was ~~$597.2 million~~$1.9 billion at ~~September 30, 2017. The Company added $258.9 million in goodwill related to the SBFC merger during 2017.~~ March 31, 2024and December 31, 2023. The Company’s other intangible assets, consisting of core deposit intangibles, noncompete intangibles, and client list intangibles are included on the face of the balance sheet.

The Company ~~added $18.1 million in core deposit intangible related~~last completed its annual valuation of the carrying value of its goodwill as of October 31, 2023 and determined there was no impairment of the Company’s goodwill. Management continues to monitor the ~~SBFC merger.~~ impact of market conditions on the Company’s business, operating results, cash flows and/or financial condition.

The following is a summary of gross carrying amounts and accumulated amortization of other intangible assets:



			September 30,		December 31,		September 30,

									March 31,		December 31,
(Dollars in thousands)		2017			2016		2016		2024		2023
Gross carrying amount	Gross carrying amount		$	100,274	$	82,154	$	82,154	$	275,168	$	274,753
Accumulated amortization	Accumulated amortization			(49,802)		(42,306)		(40,416)		(191,975)		(185,977)
			$	50,472	$	39,848	$	41,738
									$	83,193	$	88,776

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Amortization expense totaled ~~$2.5 million and $7.5~~$6.0 million for the ~~three and nine months~~quarter ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~$1.9 million and $5.7~~$7.3 million for the ~~three and nine months~~quarter ended ~~September 30, 2016, respectively.~~March 31, 2023. Other intangibles are amortized using either the straight-line method or an accelerated basis over their estimated useful lives, with lives generally between two and 15 years.

The Company applies fair value accounting to the Company’s SBA servicing asset. The change in fair value of the SBA servicing asset is recorded in SBA Income, a component of Noninterest Income on the Consolidated Statements of Income, during each applicable reporting period. As a result of the fair value accounting treatment, the Company does not amortize the SBA servicing asset and therefore excludes the SBA servicing asset from the future amortization expense table presented below. The fair value of the SBA servicing asset was $6.4 million and $6.0 million, respectively, at March 31, 2024 and December 31, 2023. The fair value of the SBA servicing asset is included in Core Deposit and Other Intangibles on the Consolidated Balance Sheets.

Estimated amortization expense for other intangibles for each of the next five quarters is as follows:

(Dollars in thousands)

Quarter ending:

December 31, 2017

$
2,494

March 31, 2018

2,331

June 30, 2018

2,319

September 30, 2018

2,318

December 31, 2018

2,317

Thereafter

38,693

$
50,472


(Dollars in thousands)
Quarter ending:
June 30, 2024	$	5,744
September 30, 2024		5,327
December 31, 2024		5,326
March 31, 2025		5,100
June 30, 2025		4,836
Thereafter		50,493
	$	76,826

Note 1918 — Mortgage Loan Servicing, ~~Mortgage~~ Origination, and Loans Held for Sale

~~As of September 30, 2017, December 31, 2016, and September 30, 2016, the~~The portfolio of residential mortgages serviced for others, which is not included in the accompanying ~~balance sheets,~~Consolidated Balance Sheets the portfolio of residential mortgages serviced for others, was ~~$2.9~~$6.6 billion ~~$2.7 billion,~~as of March 31, 2024 and ~~$2.7 billion, respectively.~~December 31, 2023. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts and disbursing payments to investors. The ~~amount~~amounts of contractually specified servicing fees we earned ~~by the Company~~ during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~September 30, 2016 was $1.8~~March 31, 2023 were $4.2 million and ~~$5.4 million, and $1.7 million and $5.1~~$4.1 million, respectively. Servicing fees are recorded in ~~mortgage banking income~~Mortgage Banking Income in ~~the Company’s consolidated statements~~our Consolidated Statements of ~~income.~~Income.

At ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016, and September 30, 2016,~~2023, MSRs were ~~$29.9 million, $29.0~~$88.0 million and ~~$23.1~~$85.2 million on ~~the Company’s consolidated balance sheets,~~our Consolidated Balance Sheets, respectively. MSRs are recorded at fair value with changes in fair value recorded as a component of ~~mortgage banking income~~Mortgage Banking Income in the ~~consolidated statements~~Consolidated Statements of ~~income.~~Income. The market value adjustments related to MSRs recorded in ~~mortgage banking income~~Mortgage Banking Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~September 30, 2016~~March 31, 2023 were gains of $2.4 million, compared with losses of ~~$684,000 and $1.1 million, respectively, compared with a gain of $171,000 and a loss of $4.3~~$1.3 million, respectively. The Company has used various free standing derivative instruments to mitigate the income statement effect of changes in fair value ~~due to~~resulting from changes in market value adjustments, ~~and~~in addition to changes in valuation inputs and assumptions related to MSRs.

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See Note 1413 — Fair Value for the changes in fair value of MSRs. The following table presents the changes in the fair value of the MSR and offsetting hedge.

Three Months Ended

Nine Months Ended
(Dollars in thousands)

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016
Increase (decrease) in fair value of MSRs

$
(684)

$
171

$
(1,055)

$
(4,305)
Decay of MSRs

(977)

(1,245)

(2,809)

(3,015)
Gain (loss) related to derivatives

$
(85)

$
(492)

$
1,010

$
4,521
Net effect on statements of income

$
(1,746)

$
(1,566)

$
(2,854)

$
(2,799)


	Three Months Ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Increase/(decrease) in fair value of MSRs	$	2,384	$	(1,290)
Decay of MSRs		(1,442)		(1,409)
(Loss) gain related to derivatives		(2,580)		145
Net effect on Consolidated Statements of Income	$	(1,638)	$	(2,554)

The fair value of MSRs is highly sensitive to changes in assumptions and ~~fair value~~ is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and with the use of independent ~~third party~~third-party appraisals. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of the ~~MSRs.~~MSR. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if ~~they are~~ applied at a different time. See Note 1413 — Fair Value for additional information regarding fair value.

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The characteristics and sensitivity analysis of the MSRs are included in the following table.


	March 31,			December 31,
(Dollars in thousands)	2024			2023
Composition of residential loans serviced for others
Fixed-rate mortgage loans		100.0	%		100.0	%
Adjustable-rate mortgage loans		—	%		—	%
Total		100.0	%		100.0	%
Weighted average life		8.04	years		8.03	years
Constant Prepayment rate (CPR)		7.0	%		7.0	%
Estimated impact on fair value of a 10% increase	$	(528)		$	(522)
Estimated impact on fair value of a 20% increase		(1,037)			(1,014)
Estimated impact on fair value of a 10% decrease		546			551
Estimated impact on fair value of a 20% decrease		1,106			1,128
Weighted average discount rate		10.8	%		10.7	%
Estimated impact on fair value of a 10% increase	$	(3,192)		$	(3,270)
Estimated impact on fair value of a 20% increase		(6,377)			(6,458)
Estimated impact on fair value of a 10% decrease		3,061			3,242
Estimated impact on fair value of a 20% decrease		5,804			6,283
Effect on fair value due to change in interest rates
25 basis point increase	$	1,595		$	1,647
50 basis point increase		3,044			3,189
25 basis point decrease		(1,729)			(1,723)
50 basis point decrease		(3,548)			(3,501)

September 30,

December 31,

September 30,

(Dollars in thousands)

2017


2016


2016

Composition of residential loans serviced for others

Fixed-rate mortgage loans

99.7
%

99.6
%

99.5
%

Adjustable-rate mortgage loans

0.3
%

0.4
%

0.5
%

Total

100.0
%

100.0
%

100.0
%

Weighted average life

7.38
years

7.70
years

5.80
years

Constant Prepayment rate (CPR)

8.3
%

7.7
%

12.3
%

Weighted average discount rate

9.5
%

9.8
%

9.8
%

Effect on fair value due to change in interest rates

25 basis point increase

$
1,605

$
1,399

$
2,093

50 basis point increase

2,934

2,557

3,968

25 basis point decrease

(1,940)

(1,713)

(2,398)

50 basis point decrease

(4,249)

(3,670)

(4,845)

The sensitivity calculations ~~in the previous table~~above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on ~~adverse~~ changes in assumptions generally cannot be extrapolated because the relationship of the ~~changes~~change in ~~assumptions~~assumption to the change in fair value may not be linear. Also, the ~~effects~~effect of ~~an adverse~~a variation in a particular assumption on the fair value of the residential MSRs is calculated without changing any other ~~assumptions,~~assumption, while in reality changes in one factor may result in ~~changing~~changes in another, which may either magnify or ~~contract~~counteract the effect of the change. The derivative instruments utilized by the Company would serve to reduce the estimated impacts to fair value included in the table above.

~~Custodial escrow balances maintained in connection with the loan servicing were $28.4 million and $24.3 million at September 30, 2017 and September 30, 2016, respectively.~~

~~Mandatory cash forwards and whole~~Whole loan sales were ~~$206.8 million and $565.1~~$222.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~$215.2 million and $530.6~~$159.4 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2023. For ~~the three and nine months ended September 30, 2017, $149.8 million and $424.0~~March 31, 2024, $160.7 million, or ~~72.4% and 75.0%~~72.2%, ~~respectively,~~ were sold with the servicing rights retained by the ~~company,~~Company, compared to ~~$175.2 million and $418.8~~$123.0 million, or ~~81.4% and 78.9%,~~77.2% for March 31, 2023.

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The Company retains no beneficial interests in these sales but may retain the servicing rights for the loans sold. The risks related to the sold loans with the retained servicing rights due to a representation or warranty violation such as noncompliance with eligibility or servicing requirements, or customer fraud, that should have been identified in a loan file review are disclosed in Note 1 — Summary of Significant Accounting Policies, under the “Loans Held for Sale” section, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company is obligated to subsequently repurchase a loan if such representation or warranty violation is identified by the purchaser. The aggregated principal balances of loans repurchased for the three ~~and nine~~ months ended ~~September 30, 2016, respectively .~~March 31, 2024 and March 31, 2023 were approximately $117,000 and $345,000, respectively. There were approximately $9,000 and $11,000 in loss reimbursement and settlement claims paid during the three months ended March 31, 2024 and 2023, respectively.

Loans held for sale have historically been comprised of residential mortgage loans awaiting sale in the secondary market, which generally settle in 15 to 45 ~~days.~~days. Loans held for sale ~~which consists primarily of residential mortgage loans to be sold in the secondary market,~~ were ~~$46.3 million, $50.6~~$56.6 million and ~~$57.1~~$50.9 million at ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016, and September 30, 2016,~~2023, respectively.

Please see Note ~~20 – Investments~~13 — Fair Value, under the “Fair Value Option”, section in ~~Qualified Affordable Housing Projects~~

~~The Company has investments in qualified affordable housing projects (“QAHPs”) that provide low income housing tax credits and operating loss benefits over an extended period. The tax credits~~this Quarterly Report on Form 10-Q for summary of the fair value and the ~~operating loss tax benefits that are generated by each~~unpaid principal balance of loans held for sale and the ~~properties are expected to exceed the total~~changes in fair value of the investment made by the Company. For the nine months ended September 30, 2017, tax credits and other tax benefits of $2.3 million and amortization of $1.8 million were recorded. For the nine months ended September 30, 2016, the Company recorded tax credits and other tax benefits of $1.8 million and amortization of $1.1 million. At September 30, 2017 and 2016, the Company’s carrying value of QAHPs was $32.0 million and $27.2 million, respectively, with an original investment of $40.8 million. The Company has $14.2 million and $14.7 million in remaining funding obligations relatedthese loans.

Note 19 — Short-Term Borrowings

Securities Sold Under Agreements to these QAHPs recorded in liabilities at September 30, 2017 and 2016, respectively. None of the original investment will be repaid. The investment in QAHPs is being accounted for using the equity method.Repurchase (“Repurchase agreements”)

~~Note 21 –~~ Repurchase ~~Agreements~~

~~Securities sold under~~ agreements ~~to repurchase ("repurchase agreements")~~ represent funds received from customers, generally on an overnight or continuous basis, which are collateralized by investment securities owned or, at times, borrowed and re-hypothecated by the Company. Repurchase agreements are subject to terms and conditions of the

~~Table of Contents~~

master repurchase agreements between the Company and the client and are accounted for as secured borrowings. Repurchase agreements are included in ~~federal funds purchased and securities sold under agreements~~Securities Sold Under Agreements to ~~repurchase~~Repurchase on the ~~condensed consolidated balance sheets.~~

Consolidated Balance Sheets. At ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016, the Company's~~2023, our repurchase agreements totaled ~~$240.2 million, $238.3~~$281.3 million and ~~$238.6~~$241.0 million, respectively. All of ~~the Company’s~~our repurchase agreements were overnight or continuous (until-further-notice) agreements at ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016.~~2023. These borrowings were collateralized with government, government-sponsored enterprise, or state and political subdivision-issued securities with a carrying value of ~~$240.2 million, $238.3~~$397.7 million and ~~$238.6~~$410.4 million at ~~September 30, 2017,~~March 31, 2024 and December 31, ~~2016 and September 30, 2016,~~2023, respectively. Declines in the value of the collateral would require ~~the Company~~us to increase the amounts of securities pledged.

Federal Funds Purchased

~~Note 22 – Subsequent Events~~Federal funds purchased are generally overnight daily borrowings with no defined maturity date. At March 31, 2024 and December 31, 2023, our federal funds purchased totaled $273.4 million and $248.2 million, respectively.

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) Borrowings

~~On October 25, 2017,~~The Company has from time-to-time entered into borrowing agreements with the FHLB and FRB. Borrowings under these agreements are collateralized by stock in the FHLB, qualifying first and second mortgage residential loans, investment securities, and commercial real estate loans under a blanket-floating lien.

As of March 31, 2024 and December 31, 2023, the Company ~~held a special meeting~~had $0 and $100.0 million, respectively, of ~~shareholders in Columbia, South Carolina. At the special meeting, the shareholders~~outstanding FHLB borrowings. Net eligible loans of the Company pledged via a blanket lien to the FHLB for advances and letters of credit at March 31, 2024, were approximately $11.3 billion (collateral value of $6.5 billion) and investment securities and cash pledged were approximately $145.4 million (collateral value of $122.9 million). This allows the Company a total borrowing capacity at the FHLB of approximately $6.6 billion. After accounting for letters of credit totaling $2.9 million, the Company had unused net credit available with the FHLB in the amount of approximately $6.6 billion at March 31, 2024. The Company also has a total borrowing capacity at the FRB of $1.8 billion at March 31, 2024 secured by a blanket lien on $2.6 billion (collateral value of $1.8 billion) in net eligible loans of the Company. The Company had no outstanding borrowings with the FRB at March 31, 2024 or December 31, 2023.

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Note 20 — Stock Repurchase Program

On April 27, 2022, the Company’s Board of Directors approved ~~an amendment~~a stock repurchase program (“2022 Stock Repurchase Program”) authorizing the Company to ~~South State’s Amended and Restated Articles~~repurchase up to 3,750,000 of ~~Incorporation to increase South State’s~~the Company’s common shares along with the remaining authorized shares of ~~common~~370,021 from the Company’s 2021 stock ~~from 40~~repurchase program (“2021 Stock Repurchase Plan”) for a total authorization of 4,120,021 shares. During the first quarter of 2024, the Company repurchased a total of 100,000 shares at a weighted average price of $79.85 per share pursuant to the 2022 Stock Repurchase Program. During 2023, the Company repurchased a total of 100,000 shares at a weighted average price of $67.48 per share pursuant to the 2022 Stock Repurchase Program.

The Company repurchased 95,537 and 43,889 shares at a cost of $8.0 million and $3.4 million, respectively, during the first quarter of March 31, 2024 and 2023 under other arrangements whereby directors or officers surrender shares to ~~80 million shares (the “Amendment”). The Amendment had been previously approved by~~ the ~~South State board~~Company to cover the option cost for stock option exercises or tax liabilities resulting from the vesting of ~~directors on July 20, 2017, subject to shareholder approval.~~restricted stock awards or restricted stock units.

Note 21 — Investments in Qualified Affordable Housing Projects

The Company has ~~evaluated subsequent events~~investments in qualified affordable housing projects (“QAHPs”) that provide low-income housing tax credits (“LIHTC”) and operating loss benefits over an extended period. Effective January 1, 2024, the Company adopted ASU No. 2023-02 and began to apply the proportional amortization method of accounting for its QAHPs. Prior to the adoption of ASU No. 2023-02, the Company applied the equity method of accounting for its QAHPs. For the three months ended March 31, 2024, the Company recorded $3.8 million in tax credits and ~~disclosure purposes through~~other tax benefits and $3.4 million of amortization attributable to the ~~date~~QAHPs within Provision for Income Taxes on its Consolidated Statement of Income. For the ~~financial statements~~three months ended March 31, 2023, the Company recorded $3.6 million of tax credits and other tax benefits within Provision for Income Taxes and amortization of $2.0 million within Other Noninterest Expense on the Consolidated Statement of Income. At March 31, 2024 and December 31, 2023, the Company’s carrying value of QAHPs was $88.5 million and $101.8 million, respectively, recorded in Other Assets on the Consolidated Balance Sheet. The Company had $11.9 million and $12.5 million in remaining funding obligations related to these QAHPs recorded in Other Liabilities on the Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively. For the remaining funding obligations at March 31, 2024, approximately 92% are ~~issued.~~expected to be funded by 2026. For more information on the adoption of ASU 2023-02, refer to Recent Accounting and Regulatory Pronouncements under Note 3 — Recent Accounting and Regulatory Pronouncements.

Note 22 — Subsequent Events

On April 25, 2024, the Company announced the declaration of a quarterly cash dividend on its common stock at $0.52 per share. The dividend is payable on May 17, 2024 to shareholders of record as of May 10, 2024.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MSMD&A”) relates to the financial statements contained in this Quarterly Report beginning on page 3. For further information, refer to the MD&A appearing in the Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023. Results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the results for the year ending December 31, ~~2017~~2024 or any future period.

~~Overview~~Unless otherwise mentioned or unless the context requires otherwise, references to “SouthState,” the “Company,” “we,” “us,” “our” or similar references mean SouthState Corporation and its consolidated subsidiaries. References to the “Bank” means SouthState Corporation’s wholly owned subsidiary, SouthState Bank, National Association, a national banking association.

Overview

~~South State Corporation~~SouthState is a ~~bank~~financial holding company headquartered in ~~Columbia, South Carolina,~~Winter Haven, Florida, and was incorporated under the laws of South Carolina in 1985. We provide a wide range of banking services and products to our customers through our ~~wholly-owned bank subsidiary, South State~~Bank. The Bank operates SouthState|Duncan-Williams, a ~~South Carolina-chartered commercial bank~~registered broker-dealer headquartered in Memphis, Tennessee that ~~opened for business~~serves primarily institutional clients across the U.S. in ~~1934.~~the fixed income business. The Bank also operates ~~Minis & Co.~~SouthState Advisory, Inc., ~~Inc. and South State Advisory (formerly First Southeast 401K Fiduciaries), both~~a wholly owned registered investment ~~advisors.~~advisor. Corporate Billing, a transaction-based division headquartered in Decatur, Alabama, that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers nationwide, merged into the Bank in March 2024 and now operates as a division of the Bank. The ~~Company does not engage~~Bank formed SSB First Street Corporation, an investment subsidiary headquartered in ~~any significant operations other than~~Wilmington, Delaware, to hold tax-exempt municipal investment securities as part of the ~~ownership~~Bank’s investment portfolio. The holding company also owns SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b) of ~~our banking subsidiary.~~the U.S. Tax Code.

At ~~September 30, 2017,~~March 31, 2024, we had approximately ~~$11.2~~$45.1 billion in assets and ~~2,255~~5,179 full-time equivalent employees. Through ~~the~~our Bank branches, ATMs and online banking platforms, we provide our customers with ~~checking~~a wide range of financial products and services, through a six (6) state footprint in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia. These financial products and services include deposit accounts ~~NOW~~such as checking accounts, savings and time deposits of various types, safe deposit boxes, bank money orders, wire transfer and ACH services, brokerage services and alternative investment products such as annuities and mutual funds, trust and asset management services, loans of all types, including business loans, agriculture loans, real ~~estate~~estate-secured (mortgage) loans, personal use loans, home improvement loans, automobile loans, manufactured housing loans, ~~automobile~~boat loans, credit cards, letters of credit, home equity lines of credit, ~~safe deposit boxes, bank money orders, wire transfer~~treasury management services, and merchant services.

We also operate a correspondent banking and capital markets division within our national bank subsidiary, of which the majority of its bond salesmen, traders and operational personnel are housed in facilities located in Atlanta, Georgia, Memphis, Tennessee, Walnut Creek, California, and Birmingham, Alabama. This division’s primary revenue generating activities are related to its capital markets division, which includes commissions earned on fixed income security sales, fees from hedging services, loan brokerage fees and ~~use of ATM facilities.~~consulting fees for services related to these activities; and its correspondent banking division, which includes spread income earned on correspondent bank deposits (i.e., federal funds purchased) and correspondent bank checking account deposits and fees from safe-keeping activities, bond accounting services for correspondents, asset/liability consulting related activities, international wires, and other clearing and corporate checking account services.

We have pursued, and continue to pursue, a growth strategy that focuses on organic growth, supplemented by ~~acquisition~~acquisitions of select financial institutions, or branches in certain market areas.

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The following discussion describes our results of operations for the ~~three and nine months~~quarter ended ~~September 30, 2017 as~~March 31, 2024 compared to the ~~three and nine months~~quarter ended ~~September 30, 2016~~March 31, 2023 and also analyzes our financial condition as of ~~September 30, 2017~~March 31, 2024 as compared to December 31, ~~2016 and September 30, 2016.~~2023. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we may pay interest. Consequently, one of the key measures of our success is the amount of our net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

Of course, there are risks inherent in all loans, soas such, we maintain an ~~ALLL~~allowance for credit losses, otherwise referred to herein as ACL, to absorb probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for ~~loan~~credit losses against our operating earnings. In the following ~~section,~~discussion, we have included a detailed discussion of this process.

In addition to earning interest on our loans and investments, we earn income through fees and other services we charge to our customers. We incur costs in addition to interest expense on deposits and other borrowings, the largest of which is salaries and employee benefits. We describe the various components of this noninterest income and noninterest expense in the following discussion.

The following ~~section~~sections also ~~identifies~~identify significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report.

~~Table of Contents~~

~~Recent Events~~

~~Park Sterling Corporation Proposed Acquisition~~

~~On April 26, 2017, SSB entered into an Agreement and Plan of Merger with~~ ~~Park Sterling Corporation, a North Carolina corporation ("PSTB"), and a bank holding company headquartered in Charlotte, North Carolina.~~ The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, PSTB will merge with and into SSB, with SSB as the surviving corporation in the Merger. Immediately following the Merger, PSTB's wholly owned bank subsidiary, Park Sterling Bank ("PSB"), will merge with and into the Bank, with the Bank as the surviving entity in the bank merger. At September 30, 2017, PSTB reported $3.3 billion in total assets, $2.4 billion in loans and $2.5 billion in deposits. PSTB has over 50 full service branches in North Carolina, South Carolina, Georgia and Virginia that serve individuals and businesses. With the closing of the merger with PSTB, the Company plans to close 12 PSB branches and 2 legacy SSB branches by the end of 2018.

Under the terms of the merger agreement, PSTB common shareholders will receive aggregate consideration of approximately 7,471,072 shares of SSB common stock plus cash for the value of “in the money” outstanding stock options. The common stock consideration is based upon a fixed exchange ratio of 0.14 shares of SSB common stock for each of the outstanding shares of PSTB common stock.

~~Southeastern Bank Financial Corporation Acquisition~~

On January 3, 2017, SSB closed its merger with Southeastern Banking financial Corporation (“SBFC”), and SBFC’s wholly-owned bank subsidiary, Georgia Bank & Trust (“GB&T”), merged into the Bank. SSB issued 4,978,338 shares using a fixed exchange ratio of 0.7307 shares of SSB common stock for each outstanding share of SBFC common stock. The total purchase price was $435.1 million, including the value of “in the money” outstanding stock options totaled $490,000.GB&T had nine full service branches in Augusta, Georgia, three full service branches in Aiken, South Carolina that served individuals and businesses and a limited service loan production office in Athens, Georgia and was ranked second in market share in the Augusta, Georgia market. See Note 4 – Mergers and Acquisitions for detail on the asset purchased and liabilities assumed through this merger.

Critical Accounting Policies

~~We have established various accounting policies that govern~~Our consolidated financial statements are prepared based on the application of ~~GAAP in the preparation of our financial statements. Significant~~ accounting policies in accordance with Generally Accepted Accounting Principles (“GAAP”) and follow general practices within the banking industry. Our financial position and results of operations are ~~described in Note 1~~affected by management’s application of accounting policies, including estimates, assumptions and judgments made to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. These policies may involve significant judgments and estimates that have a material impact onarrive at the carrying value of ~~certain~~ assets and ~~liabilities. Different assumptions made~~liabilities and amounts reported for revenues and expenses. Differences in the application of these policies could result in material changes in our consolidated financial position and consolidated results of operations and related disclosures. Understanding our accounting policies is fundamental to understanding our consolidated financial position and consolidated results of operations.

~~Allowance for Loan Losses~~

~~The ALLL reflects the estimated losses that will result from the inability~~ Accordingly, our significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in Note 2 — Summary of Significant Accounting Policies and Note 3 — Recent Accounting and Regulatory Pronouncements of our bank’s borrowers to make required loan payments. In determining an appropriate level for the allowance, we identify portions applicable to specific loans as well as providing amounts that are not identified with any specific loan but are derived with reference to actual loss experience, loan types, loan volumes, economic conditions, and industry standards. Changes in these factors may cause our estimate of the allowance to increase or decrease and result in adjustments to the provision for loan losses. See Note 6 — Loans and Allowance for Loan Lossesconsolidated financial statements in this Quarterly Report on Form 10-Q ~~“Provision for Loan Losses~~ and ~~Nonperforming Assets” in this MD&A and ALLL~~ in Note 1 ~~to the audited consolidated financial~~

~~Table~~— Summary of ~~Contents~~

~~statements in~~Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, ~~2016 for further detailed descriptions of our estimation process and methodology related to the allowance for loan losses.~~2023.

~~Goodwill and Other Intangible Assets~~

Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed in a business combination. As of September 30, 2017, December 31, 2016 and September 30, 2016, the balance of goodwill was $597.2 million, $338.3 million, and $338.3 million, respectively. Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment, if any.

If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. Management has determined that the Company has two reporting units.

In January 2017, the FASB issued ASU No. 2017-04, which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC Topic 350 and eliminating Step 2 from the goodwill impairment test. This guidance is effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those years.

Our stock price has historically traded above its book value. As of September 30, 2017, book value was $55.79 per common share. The lowest trading price during the first nine months of 2017, as reported by the NASDAQ Global Select Market, was $78.60 per share, and the stock price closed on September 30, 2017 at $90.05 per share. In the event our stock was to consistently trade below its book value during the reporting period, we would consider performing an evaluation of the carrying value of goodwill as of the reporting date. Such a circumstance would be one factor in our evaluation that could result in an eventual goodwill impairment charge. We evaluated the carrying value of goodwill as of April 30, 2017, our annual test date, and determined that no impairment charge was necessary. Additionally, should our future earnings and cash flows decline and/or discount rates increase, an impairment charge to goodwill and other intangible assets may be required.

Core deposit intangibles, client list intangibles, and noncompetition (“noncompete”) intangibles consist of costs that resulted from the acquisition of other banks from other financial institutions. Core deposit intangibles represent the estimated value of long-term deposit relationships acquired in these transactions. Client list intangibles represent the value of long-term client relationships for the wealth and trust management business. Noncompete intangibles represent the value of key personnel relative to various competitive factors such as ability to compete, willingness or likelihood to compete, and feasibility based upon the competitive environment, and what the Bank could lose from competition. These costs are amortized over the estimated useful lives, such as deposit accounts in the case of core deposit intangible, on a method that we believe reasonably approximates the anticipated benefit stream from this intangible. The estimated useful lives are periodically reviewed for reasonableness.

~~Income Taxes and Deferred Tax Assets~~

Income taxes are provided for the tax effects of the transactions reported in our condensed consolidated financial statements and consist of taxes currently due plus deferred taxes related to differences between the tax basis

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and accounting basis of certain assets and liabilities, including available-for-sale securities, ALLL, write downs of OREO properties, accumulated depreciation, net operating loss carryforwards, accretion income, deferred compensation, intangible assets, MSRs, and pension plan and post-retirement benefits. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is recorded in situations where it is “more likely than not” that a deferred tax asset is not realizable. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The Company files a consolidated federal income tax return with its subsidiary.

The Company recognizes interest and penalties accrued relative to unrecognized tax benefits in its respective federal or state income taxes accounts. As of September 30, 2017, there were no accruals for uncertain tax positions and no accruals for interest and penalties. The Company and its subsidiary file a consolidated United States federal income tax return, as well as income tax returns for its subsidiary in the states of South Carolina, Georgia, North Carolina, Florida, Virginia, Alabama, and Mississippi. Federal tax returns for 2014 and subsequent tax years remain subject to examination by taxing authorities as of September 30, 2017. State tax returns for 2013 and subsequent tax years remain subject to examination by taxing authorities as of September 30, 2017.

~~Other Real Estate Owned~~

OREO, consisting of properties obtained through foreclosure or through a deed in lieu of foreclosure in satisfaction of loans or through reclassification of former branch sites, is reported at the lower of cost or fair value, determined on the basis of current valuations obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure or initial possession of collateral, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the ALLL. Subsequent adjustments to this value are described below.

Subsequent declines in the fair value of OREO below the new cost basis are recorded through valuation adjustments. Significant judgments and complex estimates are required in estimating the fair value of OREO, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility. In response to market conditions and other economic factors, management may utilize liquidation sales as part of its problem asset disposition strategy. As a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from sales transactions could differ significantly from the current valuations used to determine the fair value of OREO. Management reviews the value of OREO periodically and adjusts the values as appropriate. Revenue and expenses from OREO operations as well as gains or losses on sales and any subsequent adjustments to the value are recorded as OREO expense and loan related expense, a component of non-interest expense. Prior to the termination of our loss share agreements with the FDIC in the second quarter of 2016, revenues, expenses and gains or losses on sales of covered OREO were offset against the FDIC indemnification asset.

~~Business Combinations, Method of Accounting for Loans Acquired, and FDIC Indemnification Asset~~

~~We account for acquisitions under FASB ASC Topic 805,~~ ~~Business Combinations~~, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No ALLL related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk.

~~Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30,~~ ~~Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality,~~ ~~formerly American Institute of Certified Public Accountants Statement of Position 03-3,~~ ~~Accounting for Certain Loans or Debt Securities Acquired in a Transfer~~, and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration are considered impaired. Loans acquired through business combinations that do not meet the specific criteria of FASB ASC Topic 310-30, but for which a discount is attributable, at least in part to credit quality, are also accounted for under this guidance. Certain acquired loans, including performing loans and revolving lines of credit (consumer and commercial), are accounted for in accordance with FASB ASC Topic

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~~310-20, where the discount is accreted through earnings based on estimated cash flows over the estimated life of the loan.~~

In accordance with FASB ASC Topic 805, the FDIC indemnification assets were initially recorded at fair value, and were measured separately from the loan assets and foreclosed assets because the loss sharing agreements were not contractually embedded in them or transferrable with them in the event of disposal. The FDIC indemnification asset was measured at carrying value subsequent to initial measurement. During the second quarter of 2016, the Bank entered into an agreement with the FDIC for the early termination of all of its outstanding loss share agreements. As a result, the Company no longer has any covered assets.

For further discussion of the Company’s loan accounting and acquisitions, see “Business Combinations and Method of Accounting for Loans Acquired” in our Annual Report on Form 10-K for the year ended December 31, 2016 and Note 4—Mergers and Acquisitions and Note 6—Loans and Allowance for Loan Losses in this Quarterly Report on Form 10-Q.

With the closing of the merger between the Company and SBFC and our organic growth, we surpassed $10.0 billion in total assets as of the closing date of the merger. Crossing over $10.0 billion in total assets and sustaining assets in excess of $10.0 billion for six quarters will result in a loss of interchange revenue and additional expenses associated with stress testing and FDIC insurance premiums. Beginning in the first quarter of 2018, our FDIC insurance costs will increase as a result of having been over $10.0 billion in total assets for four consecutive quarters. Including the Park Sterling impact, we currently estimate the added expense to be approximately $500,000 annually related to insurance premiums. Effective in July of 2018, the cap on interchange fees under the Durbin amendment will be in place. Including the Park Sterling impact, we estimate an annual reduction of interchange fees of approximately $17.0 million pre-tax and $11.0 million after-tax, or $0.30 per share. Also, as a part of crossing $10.0 billion in total assets, we will submit our first Dodd-Frank Act Stress Test (DFAST) in July of 2019.

Results of Operations

Overview

We reported consolidated net income of ~~$35.0~~$115.1 million, or diluted earnings per share (“EPS”) of ~~$1.19,~~$1.50, for the ~~third~~first quarter of ~~2017~~2024 as compared to consolidated net income of ~~$28.1~~$139.9 million, or diluted ~~EPS~~earnings of ~~$1.16,~~$1.83, in the comparable period of ~~2016,~~2023, a ~~24.7% increase. The $7.0 million increase~~17.8% decrease in consolidated net income and a 18.0% decrease in diluted EPS. The $24.9 million decrease in consolidated net income was ~~primarily~~ the net result of the following items:

●

Higher interest income of $21.1 million which resulted both from the merger with SBFC which contributed to higher investment securities income of $2.7 million and acquired loan interest income of $5.2 million and an increase in non-acquired loan interest income of $13.1 million due to organic loan growth;

Higher interest expense of $2.1 million which mainly resulted from the merger with SBFC as average interest-bearing liabilities increased $1.3 billion and cost of funds on interest-bearing liabilities increased 9 basis points;

~~Higher provision for loan losses of $1.2 million which mainly resulted from a $1.2~~A $66.8 million increase in ~~the provision for loan losses within the non-acquired loan portfolio due to increased loan production in 2017;~~

~~Higher noninterest~~interest income, ~~of $700,000 which resulted~~resulting from a ~~$1.7 million improvement in fees on deposit accounts, a $1.4~~$70.3 million increase in ~~trust~~interest income from loans and ~~investment services income, and a $525,000 net gain on~~loans held for sale ~~of securities~~partially offset by a $2.8 million ~~decline~~decrease in interest income from investment securities, and a $667,000 decrease in interest income on federal funds sold, securities purchased under agreement to resell and interest-bearing deposits. The increase in interest income from loans was due to an increase in the yield as loans continued to reprice higher from the rising rate environment in 2022 and in 2023 as the Federal Reserve Bank raised its federal funds rate by 525 basis points. The increase in interest income was also due to an increase in the average balance of loans of $2.1 billion through organic loan growth;

●

A $104.2 million increase in interest expense, which resulted from a $104.2 million increase in interest expense from deposits, a $1.9 million increase in interest expense in federal funds purchased and securities sold under agreements to repurchase partially offset by a $1.9 million decrease in interest expense from corporate and subordinated debentures and other borrowings. The increase in interest expense from deposits resulted mainly from an increase in costs due to the higher interest rate environment with the increase in interest rates in 2022 and 2023. This increase in average cost of deposits was felt throughout 2023 starting with the stress in the financial markets and liquidity that occurred in March 2023 with the closure of a few failed financial institutions. The average cost of deposits, excluding non-interest bearing deposits, increased by 147 basis points compared to the first quarter of 2023;

●

A $20.4 million decrease in the provision for credit losses, as the Company recorded a provision for credit losses of $12.7 million in the first quarter of 2024 while recording a provision for credit losses of $33.1 million in the first quarter of 2023. During the first quarter of 2024, we recorded a lower provision for credit losses as economic forecasts improved since the first quarter of 2023, with inflation falling and interest rates stabilizing, along with lower new loan growth in the first quarter of 2024 compared to the same period in 2023;

●

A $203,000 increase in noninterest income, primarily from an increase in service charges on deposit accounts of $2.0 million, in debit prepaid, ATM and merchant card related income of $1.2 million, in mortgage banking income of $1.8 million and in other noninterest ~~income;~~

income of $3.3 million. The increase in other noninterest income is mainly attributable to the recognition of credit from an external vendor of $2.5 million during the first quarter of 2024. These increases were mostly offset by a decline in correspondent banking and capital market income of $9.3 million. See Noninterest Income section on page 52 for further discussion;

●

~~Higher~~An $8.8 million increase in noninterest expense, ~~by $8.4 million~~ which resulted primarily from ~~the effects of the merger with SBFC as merger and branch consolidation related expense increased $842,000,~~an increase in salaries and employee benefits ~~increased $5.3~~of $6.4 million, an accrual for the FDIC special assessment of $3.9 million, in FDIC assessment and other regulatory charges of $2.2 million, and an information services expense ~~increased $766,000, net occupancy~~of $2.4 million. These increases were partially offset by declines in merger, branch consolidation, severance related and ~~furniture and equipment~~other expense ~~increased $1.3~~of $4.9 million and amortization of intangibles ~~increased $603,000;~~of $1.3 million. See Noninterest Expense section on page 54 for further discussion; and

●

~~An increase~~Lower income tax provision of $634,000 primarily due to lower pretax book income between the two quarters. The Company recorded pretax book income of $153.5 million in the ~~provision~~first quarter of 2024 compared to pretax book income of $179.0 million in the first quarter of 2023. The effects of the lower pretax book income were mostly offset by the effects of the Company adopting ASU 2023-02 in the first quarter of 2024 whereby it applied the proportional amortization method of accounting related to its low income housing tax credits partnerships (“LIHTC”). With the adoption of ASU 2023-02, the amortization of the LIHTCs is now recorded within Provision for ~~income taxes~~Income Taxes rather than Other Noninterest Expense on the Statement of ~~$3.3~~Income. The amortization for the Company’s LIHTCs totaled $3.5 million ~~due~~during the first quarter of 2024. The change in the accounting method, in addition to ~~higher pre-tax income.~~

other items recorded during the current quarter, increased our effective tax rate for the first quarter in 2024 compared to the same period in 2023. Our effective tax rate was 25.05% for the three months ended March 31, 2024 compared to 21.84% for the three months ended March 31, 2023. See Income Tax Expense section on page 55 for further discussion.

Our asset quality related to non-acquired loans continued to remain strong at the end of the third quarter of 2017 compared to the third quarter of 2016. Non-acquired nonperforming assets declined from $21.6 million at September 30, 2016 to $19.2 million at September 30, 2017, a decline of $2.4 million which resulted from a $1.9 million decline in non-acquired nonperforming loans and a $366,000 decline in OREO. Compared to the balance of non-acquired nonperforming assets at December 31, 2016, non-acquired nonperforming assets increased slightly from $18.7 million at December 31, 2016 to $19.2 million at September 30, 2017. This increase was mainly due to the moving of the GB&T operations center from fixed assets to OREO during the third quarter of 2017. Annualized net charge-offs for the third

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~~quarter of 2017 were 0.04%, or $547,000, compared to net charge-offs in the third quarter of 2016 of 0.03%, or $394,000, and net charge-offs in the second quarter of 2017 of 0.05%, or $756,000.~~

The ALLL decreased to 0.67% of total non-acquired loans at September 30, 2017, down from 0.71% at December 31, 2016 and 0.75% at September 30, 2016. The allowance provides 3.22 times coverage of non-acquired nonperforming loans at September 30, 2017, an increase from 2.51 times at December 31, 2016, and 2.49 times at September 30, 2016. The Company continues to show improvement in its asset quality numbers and ratios.

During the third quarter of 2017, the Company had net recoveries related to “acquired non-credit impaired loans” which totaled $4,000, or 0.00% annualized, and accordingly, recorded a negative provision for loan losses equal to the net recovery for the same amount. Additionally, we have $6.4 million in nonperforming loans from this loan portfolio, up from $4.8 million at December 31, 2016 and up $1.8 million from $4.6 million at September 30, 2016.

The Company performs ongoing assessments of the estimated cash flows of its acquired credit impaired loan portfolios. In general, increases in cash flow expectations result in a favorable adjustment to interest income over the remaining life of the related loans, and decreases in cash flow expectations result in an immediate recognition of a provision for loans losses. When a provision for loan losses (impairments) has been recognized in earlier periods, subsequent improvement in cash flows will result in reversals of those impairments.

These ongoing assessments of the acquired loan portfolio resulted in lower interest income from both lower acquired loan balances and a decline in the rate. Below is a summary of the third quarter of 2017 assessment of the impact from the changes within the acquired loan portfolio:

Acquired credit impaired loan balances decreased by $23.6 million, and acquired non-credit impaired loan balances decreased by $130.4 million, from June 30, 2017. In addition, the yield on acquired loans was down to 6.65% from 6.69% at June 30, 2017. The modest decline in the yield in the third quarter of 2017 was the result of unexpected payoffs received in the acquired credit impaired loan portfolio. During the third quarter of 2016, the acquired loan yield was 7.66%, and did not include any acquired loans from SBFC;

Releases from certain loan pools of acquired credit impaired loans in the second quarter of 2017 resulted in a credit to the provision for loan losses of $572,000 compared to an impairment of $127,000 in the third quarter of 2017. This impairment was driven primarily by certain loan pools in construction and land development and residential real estate. There was a small net release in the acquired credit impaired loan portfolios in the third quarter of 2016 totaling $23,000.

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The table below provides an analysis of the total loan portfolio yield which includes both non-acquired and acquired loans (credit impaired and non-credit impaired loan portfolios). The acquired loan yield declined from the third quarter of 2016 due to acquired credit impaired loans being renewed and the cash flow from these assets being extended out, increasing the weighted average life of the loan pools within all acquired loan portfolios. In addition, the yield on the loans acquired in the merger with SBFC were lower than the existing acquired loan portfolio. These factors resulted in a lower yield on the acquired loan portfolio.

Three Months Ended

Nine Months Ended


September 30,

September 30,

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Average balances:

Acquired loans, net of allowance for loan losses

$
2,103,794

$
1,559,963

$
2,249,537

$
1,646,629

Non-acquired loans

6,123,750

4,903,522

5,770,160

4,620,284

Total loans, excluding held for sale

$
8,227,544

$
6,463,485

$
8,019,697

$
6,266,913

Interest income:

Noncash interest income on acquired performing loans

$
2,227

$
1,125

$
9,730

$
3,856

Acquired loan interest income

33,036

28,909

103,852

93,314

Total acquired loans

35,263

30,034

113,582

97,170

Non-acquired loans

60,098

46,960

166,262

133,593

Total loans, excluding held for sale

$
95,361

$
76,994

$
279,844

$
230,763

Non-taxable equivalent yield:

Acquired loans

6.65
%

7.66
%

6.75
%

7.88
%
Non-acquired loans

3.89
%

3.81
%

3.85
%

3.86
%
Total loans, excluding held for sale

4.60
%

4.74
%

4.67
%

4.92
%

Compared to the balance at June 30, 2017, our non-acquired loan portfolio has increased $237.9 million, or 15.8% annualized, to $6.2 billion, driven by increases in almost all categories: consumer real estate lending by $80.1 million, or 17.7% annualized; consumer non real estate lending by $14.0 million, or 15.5% annualized; commercial owner occupied loans by $73.5 million, or 24.2% annualized; commercial and industrial by $19.2 million, or 10.0% annualized; and construction/land development by $54.7 million, or 30.5% annualized; Commercial non-owner occupied decreased by $3.0 million, or 1.3% annualized. The acquired loan portfolio decreased by $154.1 million to $2.0 billion in the third quarter of 2017 compared to $2.2 billion at June 30, 2017. This decrease was due to continued payoffs, charge-offs, transfers to OREO, and renewals of acquired loans moved to the non-acquired loan portfolio. Since September 30, 2016, the non-acquired loan portfolio has grown by $1.2 billion, or 24.4%, driven by increases in most loan categories. Consumer real estate loans and commercial non-owner occupied real estate loans have accounted for the largest increases by $327.3 million, or 21.2%, and $524.1 million, or 43.9%, respectively, since September 30, 2016. Since September 30, 2016, the acquired loan portfolio increased by $516.4 million due to the merger with SBFC. Excluding the addition of SBFC’s acquired loans at the date of the merger, the acquired loan portfolio declined by $293.1 million due to continued payoffs, charge-offs, transfers to OREO, and renewals of acquired loans moved to the non-acquired loan portfolio.

Non-taxable equivalent net interest income increased $19.1 million, or 23.5% and the non-taxable equivalent net interest margin declined to 4.06% from 4.13% during the third quarter of 2017 compared to the same period in 2016. The increase in net interest income was due to an increase in average interest-earning assets of $2.0 billion or 25.3% from the merger with SBFC and through organic loan growth. The decline in the net interest margin was due to the decline in the yield on the acquired loan portfolio of 101 basis points and an increase in the rate on interest-bearing liabilities of 9 basis points.

Compared to the second quarter of 2017, net interest margin (non-taxable equivalent) decreased by 1 basis point. This was primarily due to a decline in the yield on interest-earning assets by 1 basis point mainly as a result of a decrease in the yield on the acquired loan portfolio by 4 basis points and a decline in yield of investment securities of 9 basis points. These declines were offset by an increase of 4 basis points in the yield on the non-acquired loan portfolio. The yield on the acquired loan portfolio declined 4 basis points due to the acquired credit impaired loans being renewed and the cash flow from these assets being extended out, therefore, increasing the weighted average life of the loan pools

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within all acquired loan portfolios. The decline in yield on the investment securities of 9 basis points was due to the company selling $49.5 million in higher yielding small lot mortgage backed securities in the third quarter of 2017. The yield on the non-acquired loan portfolio increased mainly due to the Federal Reserve increasing the federal funds target rate 75 basis points since December 2016 which effectively increased the Prime Rate which is used in pricing for a majority of our variable rate loans and new originated loans.

Our quarterly efficiency ratio ~~improved~~increased to ~~59.5%~~58.5% in the first quarter of 2024 compared to ~~62.8%~~51.4% in the ~~second~~first quarter of ~~2017 and 62.3% in the third quarter of 2016.~~2023. The ~~improvement~~increase in the efficiency ratio compared to the ~~second~~first quarter of ~~2017~~2023 was the result of an 8.3% decrease in the total of tax-equivalent net interest income and noninterest income along with a ~~5.7% decrease~~4.3% increase in noninterest expense ~~and~~(excluding amortization of intangibles). This decrease was reflective of a ~~1.3%~~150.7% increase in ~~net~~ interest ~~income which were slightly offset by a 4.1% decline in noninterest income. The decrease in noninterest~~ expense ~~was mainly due to a decline in merger related expense of $2.8 million~~ as the ~~Company has integrated~~repricing of interest-bearing liabilities caught up with the ~~SBFC merger from~~repricing of interest-earning assets in 2023 and into the first quarter of ~~2017.~~2024 resulting from the rising rate environment.

Basic and diluted EPS were $1.51 and $1.50, respectively, for the first quarter of 2024, compared to $1.84 and $1.83, respectively for the first quarter of 2023. The ~~Company also saw declines~~decrease in ~~salaries~~basic and ~~benefits of $335,000, information services of $410,000, professional fees of $334,000 and other noninterest expense of $514,000. The reduction in noninterest expense~~diluted EPS was due to a decline in operational charge-offs of $485,000. The increase in net interest income of $1.3 million resulted from a $1.6 million increase in interest income due to a $54.7 million increase in interest-earning assets. Noninterest income decreased by $1.5 million which resulted from $1.7 million decline in mortgage banking income. The improvement in the efficiency ratio compared to the third quarter of 2016 was the result of a 2.0% increase in noninterest income and a 23.5% increase in net interest income, partially offset by an 11.5% increase in noninterest expense. The increase in noninterest expense, noninterest income and net interest income compared to the third quarter of 2016 were all due to the merger with SBFC.

Diluted EPS and basic EPS increased to $1.19 and $1.20, respectively for the third quarter of 2017, from the third quarter 2016 amounts of $1.16 and $1.17, respectively. This was the result of the 24.7% increase17.8% decrease in net income ~~being higher than~~in the ~~20.9% increase in outstanding common shares.~~

~~Selected Figures and Ratios~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Return on average assets (annualized)

1.25
%

1.28
%

1.03
%

1.19
%
Return on average equity (annualized)

8.57
%

10.00
%

7.14
%

9.41
%
Return on average tangible equity (annualized)*

14.93
%

15.86
%

12.73
%

15.18
%
Dividend payout ratio **

27.56
%

26.71
%

34.01
%

27.93
%
Equity to assets ratio

14.62
%

12.78
%

14.62
%

12.78
%
Average shareholders’ equity

$
1,622,951

$
1,117,307

$
1,594,604

$
1,094,787

* - Ratio is a non-GAAP financial measure. The section titled “Reconciliation of GAAP to non-GAAP” below provides a table that reconciles GAAP measures to non-GAAP measures.

** - See explanation of the dividend payout ratio below.

For the three months ended September 30, 2017, return on average tangible equity decreased to 14.93% compared to 15.86% for the same period in 2016. This decrease was the result of the higher percentage increase in average tangible shareholder’s equity of 32.5% as compared to a 25.1% increase in net income excluding amortization of intangibles.

For the three months ended September 30, 2017, return on average assets decreased to 1.25%, compared to 1.28% for the three months ended September 30, 2016, due to a 26.9% increase in average assets offset by the effects of a 24.7% increase in net income.

Dividend payout ratio increased to 27.56% for the three months ended September 30, 2017 compared with 26.71% for the three months ended September 30, 2016. The increase from the comparable period in 2016 primarily reflects the increase in the cash dividends declared per common share of 28.7% as compared to a 24.7% increase in net income. The dividend payout ratio is calculated by dividing total dividends paid during the quarter by the total net income reported for the same period.

Equity to assets ratio increased to 14.62% for the three months ended September 30, 2017 compared with 12.78% for the three months ended September 30, 2016. The increase from the comparable period in 2016 primarily reflects the higher percentage increase in equity of 45.3% as compared to a 27.0% increase in assets.

~~Table of Contents~~

~~Reconciliation of GAAP to Non-GAAP~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Return on average equity (GAAP)

8.57
%

10.00
%

7.14
%

9.41
%
Effect to adjust for intangible assets

6.36
%

5.86
%

5.59
%

5.77
%
Return on average tangible equity (non-GAAP)

14.93
%

15.86
%

12.73
%

15.18
%

Average shareholders’ equity (GAAP)

$
1,622,951

$
1,117,307

$
1,594,604

$
1,094,787

Average intangible assets

(647,623)

(381,195)

(647,120)

(383,031)

Adjusted average shareholders’ equity (non-GAAP)

$
975,328

$
736,112

$
947,484

$
711,756

Net income (GAAP)

$
35,046

$
28,095

$
85,133

$
77,105

Amortization of intangibles

2,494

1,891

7,496

5,687

Tax effect

(836)

(640)

(2,425)

(1,922)

Net income excluding the after-tax effect of amortization of intangibles (non-GAAP)

$
36,704

$
29,346

$
90,204

$
80,870

The return on average tangible equity is a non-GAAP financial measure. It excludes the effect of the average balance of intangible assets and adds back the after-tax amortization of intangibles to GAAP basis net income. Management believes that this non-GAAP measure provides additional useful information, particularly since this measure is widely used by industry analysts following 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 our results of financial condition as reported under GAAP.

~~Net Interest Income and Margin~~

~~Summary~~

~~Our taxable equivalent (“TE”) net interest margin for the third~~first quarter of 2017 decreased by 7 basis points from the third quarter of 2016, due to the following: (1) a decrease of 2 basis points in the yield on interest-earning assets from the decline in the yield on the acquired loan portfolio by 101 basis points, (2) an increase of 9 basis points in the rate on interest-bearing liabilities related to an 8 basis point increase in funding cost from interest-bearing deposits, and (3) a 19 basis point increase in funding cost from federal funds purchased and repurchase agreements. The TE net interest margin decreased by 2 basis points from the second quarter of 2017 to 4.11% in the third quarter of 2017, which was the result of the yield on interest-earning assets decreasing by 1 basis point and the cost on interest-bearing liabilities increasing by 2 basis points during the period. The decrease in yield on interest-earning assets was due to the decrease in yield on the acquired loan portfolio by 4 basis points and on investment securities by 9 basis points, partially offset by an increase in yield of 4 basis points on the non-acquired loan portfolio. The yield on the acquired loan portfolio declined due to the acquired credit impaired loans being renewed the cash flow from these assets is being extended out, therefore increasing the weighted average life of the loan pools within all acquired loan portfolios. The decline in yield on the investment securities of 9 basis points was due to the company selling $49.5 million in higher yielding small lot mortgage backed securities in the third quarter of 2017. The yield on the non-acquired loan portfolio increased due to the Federal Reserve increasing the federal funds target rate 75 basis points since December 2016 which effectively increased the Prime Rate, which is used in pricing for a majority of our variable rate loans and new originated loans.

~~Net interest income increased from the third quarter of 2016 by $19.1 million. This increase was driven by the following:~~

~~Table of Contents~~

Higher loan interest income of $18.4 million with acquired loan interest income increasing by $5.2 million due to the addition of the SBFC loan portfolio through the merger and non-acquired loan interest income increasing by $13.2 million due to higher average balances through organic loan growth and due to higher yields due to the rising rate environment; offset partially by;

Higher interest expense of $2.1 million, due to higher average balances in most categories of interest-bearing liabilities as a result of the merger with SBFC and due to higher rates on most categories of interest-bearing liabilities as a result of both the merger with SBFC, whose deposits rates were higher than the Company’s legacy deposit rates and higher costs related to the rising rate environment.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Non-TE net interest income

$
100,319

$
81,245

$
296,712

$
244,246

Non-TE yield on interest-earning assets

4.22
%

4.24
%

4.25
%

4.33
%
Non-TE rate on interest-bearing liabilities

0.24
%

0.15
%

0.23
%

0.15
%
Non-TE net interest margin

4.06
%

4.13
%

4.09
%

4.22
%
TE net interest margin

4.11
%

4.18
%

4.14
%

4.27
%

~~Non-TE net interest income increased $19.1 million, or 23.5%, in the third quarter of 2017~~2024 compared to the same period in ~~2016.~~ 2023 along with an increase in average basic common shares of 0.5%. The decrease in net income in the first quarter of 2023 was mainly attributable to an increase in interest expense pertaining to interest-bearing liabilities resulting from the rising rate environment as noted above.

Selected Figures and Ratios


	Three Months Ended
	March 31,
(Dollars in thousands)	2024			2023
Return on average assets (annualized)		1.03	%		1.29	%
Return on average equity (annualized)		8.36	%		10.96	%
Return on average tangible equity (annualized)*		13.63	%		18.81	%
Dividend payout ratio		34.42	%		27.09	%
Equity to assets ratio		12.29	%		11.68	%
Average shareholders’ equity	$	5,536,551		$	5,177,048

Denotes a non-GAAP financial measure. The section titled “Reconciliation of GAAP to non-GAAP” below provides a table that reconciles GAAP measures to non-GAAP measures.

●

For the three months ended March 31, 2024, the return on average assets declined compared to the same period in 2023. This decrease was primarily due to the decrease in net income of $24.9 million, or 17.8%, which was attributable to an increase in the cost of interest-bearing liabilities resulting from the rising rate environment. The decline in the return on average assets was also due to an increase in average assets for the three months ended March 31, 2024 of $906.7 million, or 2.1%, compared to the same period in 2023, mainly due to an increase in loans of $2.1 billion through organic growth.

●

For the three months ended March 31, 2024, the return on average equity and the return on average tangible equity declined compared to the same period in 2023. These decreases were primarily due to lower net income of 17.8%, along with an increase in average equity of 6.9% and tangible equity of 12.3%.

●

The equity-to-assets ratio was 12.29% for the three months ended March 31, 2024, an increase of 0.61% from March 31, 2023. This increase resulted from net income earned during the last twelve months being greater than the increase in total assets of 0.5% from March 31, 2023.

●

Dividend payout ratios were 34.42% for the three-month period ending March 31, 2024 and 27.09% for the three-month period ending March 31, 2023. The increase in the dividend payout ratio for the three months ended March 31, 2024 was due to the 17.8% decrease in net income along with total dividends paid during the first quarter of 2024 increasing 4.4% compared to the same period in 2023.

Net Interest Income and Margin

Non-Tax Equivalent (“TE”) net interest income decreased $37.3 million, or 9.8%, to $343.9 million in the first quarter of 2024 compared to $381.3 million in the same period in 2023. Interest earning assets averaged $40.7 billion during the three months period ended March 31, 2024 compared to $39.4 billion for the same period in 2023, an increase of $1.2 billion, or 3.2%. Interest bearing liabilities averaged $27.5 billion during the three months period ended March 31, 2024 compared to $24.6 billion for the same period in 2023, an increase of $2.9 billion, or 11.7%.

Table of Contents

The Federal Reserve made four 25 basis-point rate increases during 2023, starting early February 2023 with the most recent increase in late July 2023, resulting in a range of 5.25% to 5.50% at March 31, 2024. As a result, the Company operated under a higher rate environment for the first quarter of 2024 while it operated under a comparatively lower rate environment in the first quarter of 2023. Some key highlights are outlined below:

●

~~Average interest-earning assets increased 25.3% to $9.8 billion~~Both the non-TE and TE net interest margin decreased by 52 basis points in the ~~third~~first quarter of ~~2017~~2024 compared to the same ~~period in 2016~~quarter of 2023 due to the increase in ~~acquired loans~~the cost of interest-bearing liabilities of 139 basis points outweighing the increase in the yield on interest earning assets of 48 basis points. The increase in the cost of interest-bearing liabilities lagged the increase in yield on interest-earning assets during this rising interest rate cycle and ~~investment securities through~~has caught up in the ~~merger with SBFC in~~latter half of 2023 and into the first quarter of ~~2017 and due to the increase in non-acquired loans through organic growth.~~

2024.

Non-TE yield on interest-earning assets for the ~~third~~first quarter of ~~2017 decreased 2~~2024 increased by 48 basis points to 5.12% from the comparable period in ~~2016. The decrease since the third quarter of 2016 was driven by a 101 basis point decline in the yield~~2023 due to higher yields on the ~~acquired loan portfolio. The decline in yield on the acquired loan portfolio is due to the acquired credit impaired~~majority of interest-earning assets, including loans being renewed and the cash flow from these assets being extended out, therefore increasing the weighted average life of the loan pools within all acquired loan portfolios. This decrease was partially offset by a 8 basis point increase in the yield on the non-acquired loan portfolio, a 16 basis point increase in the yield onheld for investment, investments securities, and ~~a 61 basis point increase in the yield on~~ federal funds sold and ~~reverse repurchase agreements.~~interest-earning deposits with banks, as the Federal Reserve Bank raised interest rates during 2023. The increases in interest rates, in combination with the increase in the average balance of the higher yielding loan portfolio of $2.1 billion, the decline in the average balances of lower yielding investment securities of $766.8 million and federal funds sold and interest-earning deposits with banks of $90.9 million, affected the overall yield increase between the comparable periods.

The average cost of interest-bearing liabilities for the first quarter of 2024 increased by 139 basis points to 2.53% from the same period in 2023. This increase was driven by the effects from the higher rate environment on the repricing of all deposit accounts, federal funds purchased, securities purchased with agreement to repurchase, trust preferred corporate debt, and other borrowings. The average cost of interest-bearing deposits increased by 147 basis points as the increase occurred in all deposit categories and was a result of the rising rate environment and a change in the deposit mix. Our deposits have shifted from lower-costing savings and transaction deposit accounts to higher-costing certificates and other time deposits and money market accountsas customers have sought higher yields during the rising rate environment. The average cost of securities sold with agreements to repurchase and federal funds purchased increased 123 by basis points and 69 basis points, respectively, while the average cost of corporate and subordinated debentures increased by 24 basis points. Other borrowings, consisting of FHLB advances had an average cost of 5.66% during the first quarter of 2024 compared to 4.76% for the compared period in 2023. Our overall cost of funds, including noninterest-bearing deposits, was 1.83% for the three months ended March 31, 2024 compared to 0.75% for the three months ended March 31, 2023.

Table of Contents

The tables below summarize the analysis of changes in interest income and interest expense for the quarter ended March 31, 2024 and 2023 and net interest margin on a tax equivalent basis.


	Three Months Ended
	March 31, 2024						March 31, 2023
	Average		Interest		Average		Average		Interest		Average
(Dollars in thousands)	Balance		Earned/Paid		Yield/Rate		Balance		Earned/Paid		Yield/Rate
Interest-Earning Assets:
Federal funds sold and interest-earning deposits with banks	$	668,349	$	8,254	4.97	%	$	759,239	$	8,921	4.77	%
Investment securities (taxable)⁽¹⁾		6,652,981		39,745	2.40	%		7,315,911		41,565	2.30	%
Investment securities (tax-exempt)⁽¹⁾		812,754		5,568	2.76	%		916,671		6,557	2.90	%
Loans held for sale		42,872		681	6.39	%		23,123		402	7.05	%
Acquired loans, net		5,758,426		89,563	6.26	%		7,159,538		105,405	5.97	%
Non-acquired loans		26,721,794		373,444	5.62	%		23,234,858		287,559	5.02	%
Total interest-earning assets		40,657,176		517,255	5.12	%		39,409,340		450,409	4.64	%
Noninterest-Earning Assets:
Cash and due from banks		458,837						513,460
Other assets		4,352,024						4,538,020
Allowance for credit losses		(456,874)						(356,342)
Total noninterest-earning assets		4,353,987						4,695,138
Total Assets	$	45,011,163					$	44,104,478

Interest-Bearing Liabilities:
Transaction and money market accounts	$	19,544,019	$	117,292	2.41	%	$	16,874,909	$	40,516	0.97	%
Savings deposits		2,589,251		1,818	0.28	%		3,298,221		1,756	0.22	%
Certificates and other time deposits		4,282,749		41,052	3.86	%		3,114,354		13,670	1.78	%
Federal funds purchased		256,506		3,369	5.28	%		193,259		2,187	4.59	%
Securities sold with agreements to repurchase		280,674		1,358	1.95	%		373,563		666	0.72	%
Corporate and subordinated debentures		391,870		6,009	6.17	%		392,238		5,735	5.93	%
Other borrowings		171,978		2,421	5.66	%		393,333		4,616	4.76	%
Total interest-bearing liabilities		27,517,047		173,319	2.53	%		24,639,877		69,146	1.14	%
Noninterest-Bearing Liabilities:
Demand deposits		10,530,597						12,771,019
Other liabilities		1,426,968						1,516,534
Total noninterest-bearing liabilities (“Non-IBL”)		11,957,565						14,287,553
Shareholders’ equity		5,536,551						5,177,048
Total Non-IBL and shareholders’ equity		17,494,116						19,464,601
Total Liabilities and Shareholders’ Equity	$	45,011,163					$	44,104,478

Net Interest Income and Margin (Non-Tax Equivalent)			$	343,936	3.40	%			$	381,263	3.92	%
Net Interest Margin (Tax Equivalent)					3.41	%					3.93	%

Total Deposit Cost (without debt and other borrowings)					1.74	%					0.63	%
Overall Cost of Funds (including demand deposits)					1.83	%					0.75	%

(1)

Investment securities (taxable) and (tax-exempt) include trading securities.

Investment Securities

The interest earned on investment securities decreased by $2.8 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This is a result of the Bank carrying a lower average balance in investment securities in 2024 compared to the same period in 2023. The average balance of investment securities for the three months ended March 31, 2024 decreased by $766.8 million from the comparable period in 2023. This decrease was due to maturities, mortgage paydowns and sales within the AFS and HTM investment portfolios being greater than the purchases of these securities as the Company has only purchased $80.4 million in AFS and HTM securities since March 31, 2023. The effects from the decline in average balance were partially offset by the increase in yield. The yield on the total investment securities increased by 7 basis points during the three months ended March 31, 2024 compared to the same periods in 2023 due to the rising rate environment.

Table of Contents

Loans

Interest earned on loans held for investment increased by $70.0 million to $463.0 million in the first quarter ended March 31, 2024 from the comparable period in 2023. Interest earned on loans held for investment included loan accretion income recognized during the quarters ended March 31, 2024 and 2023 of $4.3 million and $7.4 million, respectively, a decrease of $3.1 million. Some key highlights for the quarter ended March 31, 2024 are outlined below:

●

Our non-TE yield on total loans increased by 49 basis points in the ~~investment portfolio is~~first quarter of 2024 compared to the same period in 2023 due to ~~the addition of the investment portfolio through the merger with SBFC, which had~~ a ~~higher yield than our legacy investment portfolio, and the~~60 basis-point increase in yield on the non-acquired loan portfolio and on federal funds sold and reverse repurchase agreements was due to the rising rate environment and the Federal Reserve increasing the federal funds target rate 75 basis points since December 2016. The loan portfolio continues to remix with 75% of the portfolio being comprised of non-acquired loans and 25% being acquired loans. This compares to 77% and 23%, respectively, one year ago. Thea 29 basis-point increase in the yield on the acquired loan portfolio.

The yield on the acquired loan portfolio ~~as a percentage of the total portfolio was due~~increased by 29 basis points to ~~the addition of the SBFC loan portfolio through the merger~~6.26% in the first quarter of ~~2017. The percentage of the non-acquired loan portfolio of the total loan portfolio increased~~2024 from ~~June 30, 2017 with 73% being non-acquired loans and 27% being acquired loans.~~

The average cost of interest-bearing liabilities for the third quarter of 2017 increased 9 basis points from the same period in 2016. The increase since the third quarter of 2016 was primarily the result of an increase in the cost of deposits due to rates on the deposits acquired through the merger with SBFC being higher than the rates on our legacy deposits. The average cost of deposits increased from 0.11% during the second quarter of 2016 to 0.19%5.97% in the same period in ~~2017. Also,~~2023, while interest income on the acquired loan portfolio decreased by $15.8 million during the same period.

◾

The interest income on acquired loans decreased due to a $1.4 billion decrease in average ~~costs on federal funds purchased and repurchase agreements increased 19 basis points to 0.36% for~~balance during the ~~third~~first quarter of ~~2017~~2024 compared to the same period in ~~2016. This increase was the result of the Federal Reserve increasing the federal funds target rate by 75 basis points since December 2016, which has increased short term borrowing rates.~~

~~TE net interest margin~~2023. The average balance decreased ~~by 7 basis points in the third quarter of 2017 compared to the third quarter of 2016.~~

~~Table of Contents~~

~~Loans~~

~~The following table presents a summary of the loan portfolio by category:~~

September 30,

% of

December 31,

% of

September 30,

% of

LOAN PORTFOLIO (ENDING balance)

2017

Total

2016

Total

2016

Total

Acquired loans:

Acquired non-credit impaired loans:

Commercial non-owner occupied real estate:

Construction and land development
$
76,886

0.9
%
$
10,090

0.2
%
$
10,683

0.2
%
Commercial non-owner occupied

199,704

2.4
%

34,628

0.5
%

35,775

0.5
%
Total commercial non-owner occupied real estate

276,590

3.3
%

44,718

0.7
%

46,458

0.7
%
Consumer real estate:

Consumer owner occupied

492,615

6.0
%

408,270

6.1
%

435,132

6.7
%
Home equity loans

164,291

2.0
%

160,879

2.4
%

168,758

2.6
%
Total consumer real estate

656,906

8.0
%

569,149

8.5
%

603,890

9.3
%
Commercial owner occupied real estate

207,572

2.5
%

27,195

0.4
%

29,444

0.4
%
Commercial and industrial

101,427

1.2
%

13,641

0.2
%

14,201

0.2
%
Other income producing property

76,924

0.9
%

39,342

0.6
%

43,152

0.7
%
Consumer non real estate

136,136

1.6
%

142,654

2.1
%

148,512

2.3
%
Other

-

-
%

-

-
%

-

-
%
Total acquired non-credit impaired loans

1,455,555

17.5
%

836,699

12.5
%

885,657

13.6
%
Acquired credit impaired loans:

Commercial non-owner occupied real estate:

Construction and land development

39,400

0.5
%

39,891

0.6
%

42,201

0.6
%
Commercial non-owner occupied

105,373

1.3
%

109,453

1.6
%

116,423

1.8
%
Total commercial non-owner occupied real estate

144,773

1.8
%

149,344

2.2
%

158,624

2.4
%
Consumer real estate:

Consumer owner occupied

146,256

1.8
%

149,257

2.2
%

156,628

2.4
%
Home equity loans

67,138

0.8
%

72,857

1.1
%

74,807

1.1
%
Total consumer real estate

213,394

2.6
%

222,114

3.3
%

231,435

3.5
%
Commercial owner occupied real estate

90,200

1.1
%

94,593

1.4
%

99,098

1.5
%
Commercial and industrial

17,974

0.2
%

18,262

0.3
%

20,720

0.3
%
Other income producing property

63,334

0.7
%

62,856

0.9
%

64,826

1.0
%
Consumer non real estate

52,858

0.6
%

58,772

0.9
%

61,317

0.9
%
Other

-

-
%

-

-
%

-

-
%
Total acquired credit impaired loans

582,533

7.0
%

605,941

9.0
%

636,020

9.6
%
Total acquired loans

2,038,088

24.5
%

1,442,640

21.5
%

1,521,677

23.2
%
Non-acquired loans:

Commercial non-owner occupied real estate:

Construction and land development

766,957

9.3
%

580,464

8.7
%

562,336

8.6
%
Commercial non-owner occupied

949,870

11.5
%

714,715

10.7
%

630,437

9.7
%
Total commercial non-owner occupied real estate

1,716,827

20.8
%

1,295,179

19.4
%

1,192,773

18.3
%
Consumer real estate:

Consumer owner occupied

1,454,758

17.6
%

1,197,621

17.9
%

1,183,441

18.1
%
Home equity loans

419,760

5.1
%

383,218

5.7
%

363,825

5.6
%
Total consumer real estate

1,874,518

22.7
%

1,580,839

23.6
%

1,547,266

23.7
%
Commercial owner occupied real estate

1,278,487

15.4
%

1,177,745

17.7
%

1,153,480

17.7
%
Commercial and industrial

781,757

9.5
%

671,398

10.0
%

617,525

9.4
%
Other income producing property

194,335

2.4
%

178,238

2.7
%

179,595

2.8
%
Consumer non real estate

371,758

4.5
%

324,238

4.9
%

305,687

4.7
%
Other

12,645

0.2
%

13,404

0.2
%

11,787

0.2
%
Total non-acquired loans

6,230,327

75.5
%

5,241,041

78.5
%

5,008,113

76.8
%
Total loans (net of unearned income)
$
8,268,415

100.0
%
$
6,683,681

100.0
%
$
6,529,790

100.0
%

~~Note:~~ ~~Loan data excludes loans held for sale.~~

Total loans, net of deferred loan costs and fees (excluding mortgage loans held for sale), increased by $1.7 billion, or 26.6%, at September 30, 2017 as compared to the same period in 2016. Acquired non-credit impaired loans increased by $569.9 million and acquired credit impaired loans decreased by $53.5 million as compared to the same period in 2016. The overall increase in acquired loans was the result of the addition of approximately $1.0 billion in loans through the SBFC acquisition during the first quarter of 2017, partially offset by principal payments, charge offs, and foreclosures and due to renewals of acquired loans moved to the non-acquired loan portfolio. Non-acquired loans or legacy loans increased by $1.2 billion, or 24.4%, from September 30, 2016 to September 30, 2017. With the addition of approximately $1.0 billion in loans through the SBFC acquisition, the trend in the makeup of the loan portfolio shifted during the first quarter of 2017 as acquired loans as a percentage of total loans increased to 30% at March 31, 2017. However, during the second and third quarters of 2017, acquired loans as percentage of total loans continued to decline

~~Table of Contents~~

as before the merger and were 24.5% of the total loan portfolio at September 30, 2017. As of September 30, 2016, non-acquired loans as a percentage of the overall portfolio was 76.8% and acquired loans were 23.2%. The percentage of acquired loans was higher in 2017 than in 2016 due to acquisition of loans through the merger with SBFC.

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

2017

2016

2017

2016

Average total loans

$
8,227,544

$
6,463,485

$
8,019,697

$
6,266,913

Interest income on total loans

95,361

76,944

279,844

230,763

Non-TE yield

4.60
%

4.74
%

4.67
%

4.92
%

~~Interest earned on loans increased in the third quarter of 2017 compared to the third quarter of 2016. Some key highlights for the quarter ended September 30, 2017 are outlined below:~~

Our non-TE yield on total loans decreased 14 basis points in the third quarter of 2017 compared to the same period in 2016. Average total loans increased 27.3% in the third quarter of 2017, as compared to the same period in 2016. The increase in average total loans was the result of 24.9% growth in the average non-acquired loan portfolio and of 34.9% growth in the average acquired loan portfolio during period. The growth in the non-acquired loan portfolio was due to normal organic growth while the growth in the acquired loan portfolio was due to the addition of approximately $1.0 billion in loans through the merger with SBFC in the first quarter of 2017, partially offset by principal payments, charge offs,paydowns, pay-offs and ~~foreclosures and by~~ renewals of acquired loans that are moved to ~~the~~our non-acquired loan portfolio. The effect from the decline in average acquired loans balance was partially offset by the increase in yield of 29 basis points.

The yield on the non-acquired loan portfolio increased ~~from 3.81%~~by 60 basis points to 5.62% in the ~~third~~first quarter of ~~2016~~2024 compared to ~~3.89%~~5.02% in the same period in 2017 and the yield on the acquired loan portfolio declined from 7.66% in the third quarter of 2016 to 6.65% in the same period in 2017. With the Federal Reserve increasing the federal funds target rate 75 basis points since December 2016, we have begun to see the yield in the non-acquired loan portfolio increase. In comparing the third quarter of 2017 to the second quarter of 2017, the yield2023. Interest income on the non-acquired loan portfolio increased ~~4 basis points.~~ by $85.9 million during the same period.

◾

The ~~decline~~increases in both yield and interest income on ~~the~~non-acquired loans were attributable to both a higher average balance of $3.5 billion through organic loan growth and renewals of matured acquired loans that are moved to our non-acquired loan portfolio, ~~from~~along with a higher yield of 60 basis points due to the higher rate environment.

Interest-Bearing Liabilities

The quarter-to-date average balance of interest-bearing liabilities increased by $2.9 billion, or 11.7%, in the first quarter of 2024 compared to the same period in 2023. The cost of interest-bearing liabilities increased by 139 basis points to 2.53% and the overall cost of funds, including demand deposits, increased by 108 basis points to 1.83% in the first quarter of 2024 compared to the same period in 2023. Some key highlights for the quarter ended March 31, 2024 compared to the same period in 2023 include:

●

The cost of interest-bearing deposits was 2.44% for the first quarter of 2024 compared to 0.97% for the same period in ~~2016~~2023.

Interest expense on interest-bearing deposits increased by $104.2 million in the first quarter of 2024 compared to the same period in 2023 as interest expense on all interest-bearing deposit accounts increased. Interest expense on transaction and money market accounts, savings, and certificates and other time deposits increased by $76.8 million, $62,000, and $27.4 million, respectively. One factor driving the increase in average cost and interest expense was the repricing of deposits in the higher rate environment in 2024 compared to the first quarter of 2023. The increase in the cost of interest-bearing deposits lagged the increase in the yield on interest-earning assets during this rising interest rate cycle and has caught up in the latter half of 2023 and into the first quarter of 2024.

The average balance of interest-bearing deposits increased by $3.1 million, driving up interest expense. The increase in average balance of interest-bearing deposit was due to an increase in the average balance of transaction and money market accounts of $2.7 billion, along with an increase in the average balance of higher costing time deposits of $1.2 billion,partially offset by a decrease in average saving deposits of $709.0 million. The increase in average cost and interest expense was also due to a change in deposit mix. During the rising rate environment, our deposits have shifted from lower-costing savings and transaction deposit accounts to higher-costing certificates and other time deposits and money market accounts with customers seeking higher yields.

●

The cost of federal funds purchased increased by 69 basis points in the first quarter of 2024 due to the ~~impact~~rising rate environment. This increase in cost along with the increase in the average balance of $63.2 million drove the ~~yield~~$1.2 million increase in interest expense compared to the same period in 2023.

Table of Contents

●

The cost of repurchase agreements was 1.95% for the ~~SBFC loan portfolio acquired~~first quarter of 2024 compared to 0.72% for the same period in 2023 driven by the effects from the higher interest environment. The effects from the increase in the cost of repurchase agreements, partially offset by the effects from a decline in the average balance of $92.9 million, drove the increase in the interest expense of $692,000 during the first quarter of ~~2017,~~2024 compared to the same period in 2023.

●

The cost of the corporate and subordinated debt increased by 24 basis points to 6.17% for the three months ended March 31, 2024 compared to the same period in 2023, also driven by the effects from the rising rate environment on the repricing of variable rate corporate debentures. The interest expense from corporate and subordinated debentures increased by $274,000 during the first quarter of 2024 compared to the same period in 2023 due to the increase in average cost.

●

The cost of other borrowings, consisting of FHLB advances, for the three months ended March 31, 2024 was 5.66% and interest expense was $2.4 million compared to 4.76% and $4.6 million during the first quarter of 2023. The decline in interest expense was due to a decline in the average balance of other borrowings of $221.4 million from $393.3 million during the first quarter of 2023 compared to $172.0 million during the same period in 2024. The Bank used FHLB advances in the first quarter of 2023 to provide excess liquidity during the financial turmoil from the closures of failed banks in 2023, having $900 million in outstanding advances at March 31, 2023.

We continue to monitor and adjust rates paid on deposit products as part of our strategy to manage our net interest margin. Interest-bearing liabilities include interest-bearing transaction accounts, savings deposits, CDs, other time deposits, federal funds purchased, and other borrowings. Interest-bearing transaction accounts include NOW, HSA, Interest on Lawyers’ Trust Accounts (“IOLTA”), and Market Rate checking accounts.

Noninterest-Bearing Deposits

Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. Average noninterest-bearing deposits decreased by $2.2 billion, or 17.5%, to $10.5 billion in the first quarter of 2024 compared to $12.8 billion during the same period in 2023. The decrease in the average balance of noninterest bearing deposits was due to customers moving funds from noninterest bearing checking accounts to seek higher yields resulting from the rising rate environment, along with customers having less excess cash as funds from government support programs related to the COVID-19 pandemic began to decline.

Noninterest Income

Noninterest income provides us with additional revenues that are significant sources of income. For the three months ended March 31, 2024 and 2023, noninterest income comprised 17.2% and 15.8%, respectively, of total net interest income and noninterest income.


	Three Months Ended
	March 31,
(Dollars in thousands)	2024		2023
Service charges on deposit accounts	$	22,670	$	20,611
Debit, prepaid, ATM and merchant card related income		10,475		9,248
Mortgage banking income		6,169		4,332
Trust and investment services income		10,391		9,937
Correspondent banking and capital markets income		4,311		13,594
Securities gains, net		—		45
SBA income		4,363		3,722
Bank owned life insurance income		6,892		6,813
Other		6,287		3,053
Total noninterest income	$	71,558	$	71,355

Noninterest income increased by $203,000, or 0.3%, during the first quarter of 2024 compared to the same period in 2023. This quarterly change in total noninterest income resulted from the following:

●

Service charges on deposit accounts were higher by $2.1 million, or 10.0%, in the first quarter of 2024 compared to the same period in 2023. The increase was mainly attributable to a $1.2 million increase in Non-Sufficient Fund (“NSF”) fees, a $674,000 increase in account maintenance fees, and approximately $209,000 increase in other services charges during the first quarter of 2024 compared to the same period in 2023.

Table of Contents

●

Debit, prepaid, ATM and merchant card related income increased by $1.2 million, or 13.3%, during the first quarter of 2024 compared to the same period in 2023. The increase was primarily driven by an increase in debit/ATM fee income, net of card expense.

●

Mortgage banking income increased by $1.8 million, or 42.4%, during the first quarter of 2024 compared to the same period of 2023, which comprised of a $950,000, or 60.7%, increase in mortgage servicing related income and a $887,000, or 32.1%, increase in secondary market mortgage income. Mortgage production declined from $556.0 million in the first quarter of 2023 to $428.8 million in the first quarter of 2024 with higher mortgage rates continuing during 2024. We allocated a higher percentage of mortgage production to the secondary market in the first quarter of 2024 compared to the same period in 2023 as ~~well~~the percentage allocated increased from 28% to 53%. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and will fluctuate year to year.

The increase in mortgage servicing related income, net of the hedge, in the first quarter of 2024 was primarily due to a $916,000 increase in the change in fair value of the MSR including decay. The increase in fair value of the MSR between the comparable periods was primarily due to an increase in the change in fair value from interest rates of $3.7 million, offset by a decrease from gains/losses on the MSR hedge of $2.7 million and a $33,000 decline in MSR decay.

Mortgage income from the secondary market increased by $887,000 between the comparable periods resulting from decreases in the change in fair value of the pipeline of $449,000 and loans held for sale of $135,000, offset by an increase in the fair value of MBS forward trades of $1.5 million and a $5,000 increase in the gain on sale of mortgage loans, which is net of the commission expense related to mortgage production. Mortgage commission expense was $2.2 million during the first quarter of 2024 compared to $1.3 million during the comparable period in 2023.

●

Trust and investment services income for the first quarter of 2024 increased by $454,000, or 4.6%, from the first quarter of 2023 as ~~acquired credit impaired~~assets under management have increased by $881.5 million, or 11.9%, in that same time frame.

●

Correspondent banking and capital markets income in the first quarter of 2024 decreased by $9.3 million, or 68.3%, compared to the same period in 2023. The decline was primarily related to a decrease of $6.3 million in income generated from the sale of customer swap ARC hedges during the first quarter of 2024 compared to the first quarter of 2023 resulting from the higher interest rate environment in 2024. The decline was also due to the expense attributable to the variation margin payments for centrally cleared swaps where we recorded an expense of $10.3 million related to variation margin payments in the first quarter of 2024 compared to an expense of $8.4 million in the first quarter of 2023. In addition, commissions and fees earned on fixed income security sales were lower by $917,000 in the first quarter of 2024 compared to the same period in 2023.

●

SBA income increased by $641,000, or 17.2%, during the first quarter of 2024 compared to the same period in 2023. SBA income includes changes in fair value of the servicing asset, loan servicing fees and gains on sale of SBA loans. The increase was attributable to higher gains on sale of SBA loans ~~being renewed~~of $802,000, partially offset by declines in SBA servicing fee income and the ~~cash flow from these assets being extended out, increasing the weighted average life~~change in fair value of the ~~loan pools within all acquired loan portfolios. In comparing~~SBA servicing asset of $123,000 and $38,000, respectively.

●

Other income increased by $3.2 million, or 105.9%, in the ~~third~~first quarter of ~~2017~~2024 compared to the ~~second~~same quarter in 2023. This increase was primarily due to the Bank recognizing approximately $2.5 million in credits from an external vendor during the first quarter of ~~2017,~~2024.

Table of Contents

Noninterest Expense


	Three Months Ended
	March 31,
(Dollars in thousands)	2024		2023
Salaries and employee benefits	$	150,453	$	144,060
Occupancy expense		22,577		21,533
Information services expense		22,353		19,925
OREO and loan related expense		606		169
Amortization of intangibles		5,998		7,299
Business development and staff related expense		5,799		5,957
Supplies and printing		909		884
Postage expense		1,631		1,756
Professional fees		3,115		3,702
FDIC assessment and other regulatory charges		8,534		6,294
FDIC special assessment		3,854		—
Advertising and marketing		1,984		2,118
Merger, branch consolidation, severance related and other expense		4,513		9,412
Other		16,964		17,396
Total noninterest expense	$	249,290	$	240,505

Noninterest expense increased by $8.8 million, or 3.7%, in the first quarter of 2024 compared to the same period in 2023. The quarterly increase in total noninterest expense primarily resulted from the following:

●

Salaries and employee benefits increased by $6.4 million, or 4.4%, in the ~~yield~~first quarter of 2024 compared to the same period in 2023. The increase was primarily due to an increase in salaries of $6.6 million resulting from merit increases and an increase in the number of employees, along with higher employee benefits of $2.2 million from higher FICA tax paid and medical insurance expense. These increases were partially offset by a decrease in commissions of $2.2 million, which is mainly attributable to lower commissions related to the correspondent banking division resulting from lower bond sales and lower income from the ARC hedging program.

●

Information services expense increased by $2.4 million, or 12.2% in the first quarter of 2024 compared to the same period in 2023.The increase was due to additional cost associated with the Company updating systems and software as it grows in size and complexity.

●

Amortization of intangibles, which is related to the Company’s prior mergers, decreased by $1.3 million, or 17.8%.

●

Professional fees decreased by $587,000, or 15.9%, primarily due to lower legal and other general business consulting expenses incurred in the first quarter of 2024 compared to the same period in 2023.

●

FDIC assessment and other regulatory charges increased by $2.2 million, or 35.6%, in the first quarter of 2024 compared to the same period in 2023. The increase in the FDIC assessment was primarily due to an increase in the FDIC assessment rate to bring the overall FDIC fund to 1.35x total deposits by the end of 2028. The increase also reflects changes in the Company’s size and complexity along with the effects from the increase in the Company’s classified assets.

●

The Company accrued an additional $3.9 million related to the FDIC’s special assessment introduced in 2023 to recover losses to the FDIC’s Deposit Insurance Fund resulting from the bank failures that occurred in early 2023. The FDIC notified banks in the first quarter of 2024 the estimate of the losses expected from the bank failures were larger than originally estimated. As a result, the Bank increased its accrual of the FDIC special assessment in anticipation of the higher assessment that may be allocated to the Bank.

●

Merger, branch consolidation, severance related and other expense decreased by $4.9 million, or 52.1%, to $4.5 million in the first quarter of 2024 compared to the same period in 2023. Of the $4.5 million in 2024, approximately $4.4 million pertains to one-time costs associated with the cybersecurity incident, which was identified as an isolated event as previously disclosed by the Company. The Company did not incur any merger expense pertaining to prior acquisitions during the first quarter of 2024, while it had a total of $1.3 million merger expense associated with the Atlantic Capital acquisition during the comparative period in 2023. In the first quarter of 2023, the Company also recorded $8.1 million in restructuring costs. The restructuring costs included approximately $7.0 million of severance related expense pertaining to the elimination of the Company’s executive officer position and approximately $1.1 million of severance related expense pertaining to the reduction in force of the Company’s mortgage division.

Table of Contents

●

Other noninterest expense decreased by $432,000, or 2.5%, in the first quarter of 2024 compared to the same period in 2023. This decrease primarily resulted from a $2.1 million decline in amortization expenses related to the adoption of ASU 2023-02 effective January 1, 2024, which changed the accounting method of the Company’s LIHTC structured investments. Starting in the first quarter of 2024, the amortization expense related to the Company’s LIHTC investments is being recorded within Provision for Income Taxes on the ~~acquired loan portfolio decreased 4 basis points.~~

Consolidated Statement of Income. Additionally, there was a $1.2 million decrease in tax payments due to higher other franchise taxes incurred during the first quarter of 2023, and a $642,000 decrease in incurred but not reported insurance loss reserves. These decreases were offset by a $3.3 million increase in earnings credit expense to Homeowners Association (“HOA”) customers. The Bank provides a credit to HOA customers based on the average deposit balances held that reduces fees for other services provided.

Income Tax Expense

Our effective tax rate was 25.05% for the three months ended March 31, 2024 compared to 21.84% for the three months ended March 31, 2023. The ~~balance~~increase in the effective rate for the quarter, when compared to the same period in the prior year, is driven by amortization of ~~mortgage~~LIHTCs as a result of the adoption of the proportional amortization under ASU 2023-02 effective January 1, 2024, as well as an increase in non-deductible FDIC premiums recorded during the current period. This was partially offset by a decrease in disallowed executive compensation and disallowed interest expense. In addition, the Company recorded approximately $2.8 million in income tax provision related to the revaluations of its deferred income taxes and other tax adjustments during the current period.

Analysis of Financial Condition

Summary

Our total assets increased by approximately $242.8 million, or 0.5%, from December 31, 2023 to approximately $45.1 billion at March 31, 2024. Within total assets, cash and cash equivalents increased by $210.6 million, or 21.1% and loans ~~held for sale~~increased by $278.8 million or 0.9% during the period, while investment securities decreased ~~$4.3~~by $231.6 million, or 3.1%. Within total liabilities, deposits grew $129.5 million, or 0.3%, and federal funds purchased and securities sold under agreements to repurchase increased by $65.5 million, or 13.4%. Total borrowings decreased by $100.1 million, or 20.3%. Total shareholder’s equity increased by $13.9 million, or 0.3%. The increase in cash and cash equivalents was primarily due to the increase in deposits of $129.5 million along with decline in investments of $231.6 million from maturities and pay downs of mortgage-backed securities. The increase in deposits was mainly from the increase in money market accounts of $356.7 million during the quarter. The increase in loans was due to normal organic growth. Our loan to deposit ratio was 88% and 87% at March 31, 2024 and December 31, ~~2016~~2023, respectively, while our percentage of non-interest bearing deposit accounts to ~~$46.3 million~~total deposits was 28% and 29% at ~~September 30, 2017,~~March 31, 2024 and ~~decreased $10.7 million from a balance of $57.1 million at September 30, 2016.~~December 31, 2023, respectively.

Investment Securities

We use investment securities, our second largest category of earning assets, to generate interest income, ~~through the deployment of excess funds, to~~ provide liquidity, to fund loan demand or deposit liquidation, and to pledge as collateral for public funds deposits, repurchase agreements, derivative exposures and ~~repurchase agreements.~~to augment borrowing capacity at the Federal Reserve Bank of Atlanta, and the Federal Home Loan Bank of Atlanta. At ~~September 30, 2017,~~March 31, 2024, investment securities totaled ~~$1.3~~$7.2 billion, compared to ~~$1.0~~$7.5 billion ~~and $941.7 million~~ at December 31, ~~2016 and September 30, 2016, respectively. Our~~2023, a decrease of $231.6 million, or 3.1%. At March 31, 2024, approximately 63.6% of the investment portfolio ~~increased $321.8~~was classified as available for sale, approximately 33.8% was classified as held to maturity and 2.6% was classified as other investments. During the three months ended March 31, 2024, we purchased $54.6 million ~~and $395.1~~of capital stock with the Federal Home Loan Bank classified as other investment securities on the balance sheet of which we sold back $59.4 million. The net decrease to the capital stock holding for the Federal Home Loan Bank of Atlanta of $4.8 million ~~from December 31, 2016 and September 30, 2016, respectively, primarily as a result of the acquisition of SBFC and its investment portfolio~~ during the first quarter of ~~2017. Otherwise, we generally plan~~2024 was due to ~~continue~~the decrease in Federal Home Loan Bank borrowings. During the first quarter of 2024, the Bank did not purchase any securities available for sale or held to ~~try~~maturity. There were maturities, paydowns, and ~~slowly increase our~~calls of investment securities totaling $168.4 million during the first quarter of 2024. Net amortization of premiums was $4.8 million in the first three months of 2024.

Table of Contents

At March 31, 2024, the unrealized net loss of the available for sale securities portfolio ~~as we identify~~was $830.2 million, or 15.3%, below its amortized cost basis, compared to an unrealized net loss of $776.6 million, or 14.0%, at December 31, 2023. At March 31, 2024, the unrealized net losses of the held to maturity securities portfolio was $430.0 million, or 17.6%, below its amortized cost basis, compared to an unrealized net losses of $402.7 million, or 16.2%, at December 31, 2023. The increase in the unrealized net loss in the available for sale investment portfolio of $53.6 and the increase in the unrealized net losses for the held to maturity portfolio of $27.3 during the first three months of 2024 was mainly due to the expectation that ~~meet our strategy and objectives.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Average investment securities

$
1,355,559

$
964,451

$
1,404,868

$
986,786

Interest income on investment securities

7,966

5,271

25,044

16,549

Non-TE yield

2.33
%

2.17
%

2.38
%

2.24
%

~~Interest earned on investment securities was~~interest rates will remain higher in 2024 as inflation continues to remain higher than the ~~third quarter~~Federal Reserve Bank target of 2017 compared to the third quarter of 2016, as result of a higher average balance and an increase in yield which were both a result of the addition of the investment portfolio through the acquisition of SBFC.2.0%.

~~Table of Contents~~

The following ~~table provides a summary~~is the combined amortized cost and fair value of ~~the~~investment securities available for sale and held for maturity, aggregated by credit ~~ratings for our investment portfolio (including held-to-maturity and available-for-sale securities) at September 30, 2017:~~quality indicator:

Amortized

Fair

Unrealized

(Dollars in thousands)

Cost

Value

Net Loss

AAA – A

Not Rated

March 31, 2024

U.S. Treasuries

24,920

24,587

(333)

24,920

—

U.S. Government agencies

443,387

395,253

(48,134)

443,387

—

Residential mortgage-backed securities issued by U.S. government

agencies or sponsored enterprises*

3,187,278

2,652,099

(535,179)

3,187,184

Residential collateralized mortgage-obligations issued by U.S. government

agencies or sponsored enterprises*

1,048,762

873,237

(175,525)

—

1,048,762

Commercial mortgage-backed securities issued by U.S. government

agencies or sponsored enterprises*

1,565,948

1,291,322

(274,626)

20,887

1,545,061

State and municipal obligations

1,127,834

960,359

(167,475)

1,125,663

2,171

Small Business Administration loan-backed securities

446,533

391,256

(55,277)

446,533

—

Corporate securities

30,521

26,854

(3,667)

—

30,521

7,875,183

6,614,967

(1,260,216)

2,061,484

5,813,699

Unrealized












Amortized

Fair

Gain

BB or

(Dollars in thousands)

Cost

Value

(Loss)

AAA - A

BBB

Lower

Not Rated

September 30, 2017

Government-sponsored entities debt

$
86,521

$
85,951

$
(570)

$
86,521

$
—

$
—

$
—

State and municipal obligations

203,576

208,026

4,450

203,576

—

—

—

Mortgage-backed securities *

1,027,827

1,027,477

(350)

—

—

—

1,027,827

Corporate stocks

2,882

2,957

75

—

—

—

2,882

$
1,320,806

$
1,324,411

$
3,605

$
290,097

$
—

$
—

$
1,030,709

* - Agency mortgage-backed securities (“MBS”), agency collateralized mortgage-obligations (“CMO”) and agency commercial mortgage-backed securities (“CMBS”) are guaranteed by the issuing ~~GSE~~government-sponsored enterprise (“GSE”) as to the timely payments of principal and interest. Except for Government National Mortgage Association ~~(“GNMA”)~~ securities, which have the full faith and credit backing of the United States Government, the GSE alone is responsible for making payments on this guaranty. While the rating agencies have not rated any of the MBS, CMO and CMBS issued, senior debt securities issued by GSEs are rated consistently as “Triple-A.” Most market participants consider agency MBS, CMOs and CMBSs as carrying an implied Aaa rating (S&P rating of AA+) because of the guarantees of timely payments and selection criteria of mortgages backing the securities. We do not own any private label mortgage-backed securities.

The balances presented under the ratings above reflect the amortized cost of the investment securities.

At ~~September 30, 2017,~~March 31, 2024, we had ~~119~~1,236 investment securities, including both available for sale and held to maturity, which totaled $1.3 billion unrealized loss position. At December 31, 2023, we had 1,232 investment securities, including both available for sale and held to maturity, in an unrealized loss position, which totaled $5.9 million. At December 31, 2016, we had 129 securities available for sale in an unrealized loss position, which totaled $8.6 million. At September 30, 2016, we had 17 securities available for sale in an unrealized loss position, which totaled $439,000.

~~During the third quarter of 2017 as compared to the third quarter of 2016, the~~$1.2 billion. The total number of ~~available for sale~~investment securities with an unrealized loss position increased by ~~102~~4 securities, while the total dollar amount of the unrealized loss increased by ~~$5.4~~$80.0 million. ~~This increase was~~The level of unrealized losses for each period is due to an overall increase in short- and long-term interest rates in 2022 and 2023 and the ~~higher~~expectation that interest ~~rate environment at September 30, 2017 compared to September 30, 2016.~~rates will not fall until late 2024 or 2025.

All ~~debt~~investment securities ~~available for sale~~ in an unrealized loss position as of ~~September 30, 2017~~March 31, 2024 continue to perform as scheduled. We have evaluated the ~~cash flows~~securities and have determined that ~~all contractual cash flows should be received; therefore impairment~~the decline in fair value, relative to its amortized cost, is ~~temporary because~~not due to credit-related factors. In addition, we have the ability and intent to hold these securities within the portfolio until ~~the~~ maturity or until the value recovers, and we believe that it is not more likely than not that we will be required to sell these securities prior to recovery. With respect to equity securities held by the Company, the Company recorded an OTTI charge of $753,000 related to two equity securities during the third quarter of 2017. This charge was recorded due to the fact that management made the decision to sell the two securities in the fourth quarter of 2017 and therefore, no longer had the intent to hold the investments for a period of time sufficient to allow for any anticipated recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of ~~these~~our securities ~~are other than temporarily impaired, which~~may be sold or would require a charge to earnings as a provision for credit losses in such periods. Any charges as a provision for ~~OTTI~~credit losses related to investment securities ~~available-for-sale would not~~could impact cash flow, tangible capital or liquidity. See Note 2 — Summary of Significant Accounting Policies and Note 4 — Investment Securities for further discussion on the application of ASU 2016-13 on the investment securities portfolio.

As securities held for investment are purchased, they are designated as held to maturity or available for sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. ~~We do not currently hold, nor have we ever held, any securities that are designated as trading securities.~~ Although securities classified as available for sale may be sold from time to time to meet liquidity or other needs, it is not our normal practice to trade this segment of the investment securities portfolio. From time to time, the Bank may execute transactions to reposition the investment portfolio. Such activity has not expanded the broad asset classes used by the Bank. While management generally holds these assets on a long-term basis or until maturity, any short-term investments or securities available for sale could be converted at an earlier point, depending partly on changes in interest rates and alternative investment opportunities.

Table of Contents

The following table presents a summary of our investment portfolio by contractual maturity and related yield as of March 31, 2024:


	Due In					Due After					Due After					Due After
	1 Year or Less					1 Thru 5 Years					5 Thru 10 Years					10 Years					Total
(Dollars in thousands)	Amount			Yield		Amount			Yield		Amount			Yield		Amount			Yield		Amount		Yield
Held to Maturity (amortized cost)
U.S. Government agencies	$	64,365		2.11	%	$	—		—		$	132,904		1.73	%	$	—		—	%	$	197,269	1.86	%
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—			—		—			165,509		1.97			1,240,931		1.84			1,406,440	1.86
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—			—		—			—		—			437,718		2.49			437,718	2.49
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—			36,550		0.94			170,117		1.48			145,732		1.58			352,399	1.47
Small Business Administration loan-backed securities		—		—			—		—			—		—			52,763		1.20			52,763	1.20
Total held to maturity	$	64,365		2.11	%	$	36,550		0.94	%	$	468,530		1.72	%	$	1,877,144		1.95	%	$	2,446,589	1.90	%
Available for Sale (fair value)
U.S. Government treasuries	$	24,587		2.04	%	$	—		—	%	$	—		—	%	$	—		—	%	$	24,587	2.04	%
U.S. Government agencies		125,021		2.63			—		—			98,784		1.68			—		—			223,805	2.17
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		—		—			3,361		2.06			148,341		2.39			1,340,721		1.97			1,492,423	2.01
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		—		—			6,867		2.50			11,213		2.29			490,032		2.19			508,112	2.20
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		76		5.93			187,784		2.86			580,436		1.94			243,921		1.82			1,012,217	2.06
State and municipal obligations		2,258		3.76			30,703		3.26			128,842		2.53			798,556		2.79			960,359	2.77
Small Business Administration loan-backed securities		3,426		0.35			17,668		4.51			118,037		3.91			210,912		2.79			350,043	3.21
Corporate securities		—		—			489		8.22			25,676		3.96			689		4.50			26,854	4.05
Total available for sale	$	155,368		2.51	%	$	246,872		3.02	%	$	1,111,329		2.30	%	$	3,084,831		2.26	%	$	4,598,400	2.31	%
Total other investments	$	—		—	%	$	—		—	%	$	—		—	%	$	187,185		3.77	%	$	187,185	3.77	%
Total investment securities	$	219,733		2.39	%	$	283,422		2.75	%	$	1,579,859		2.13	%	$	5,149,160		2.20	%	$	7,232,174	2.21	%
Percent of total		3	%				4	%				22	%				71	%
Cumulative percent of total		3	%				7	%				29	%				100	%

(1)

Yields on tax exempt income have been presented on a taxable equivalent basis in the table above.

(2)

FRB, FHLB and other non-marketable equity securities have no set maturity date and are classified in “Due after 10 Years.”

(3)

The total values presented in the table above represent total fair value for available for sale and amortized cost for held to maturity.

Approximately 86.0% of the investment portfolio is comprised of U.S. Treasury securities, U.S. Government agency securities, and U.S. Government Agency Mortgage-backed securities. These securities may be pledged to the Federal Home Loan Bank of Atlanta or the Federal Reserve Bank of Atlanta Discount Window. Approximately 13.6% of the investment portfolio is comprised of municipal securities. A portion of the municipal bond portfolio may be pledged to the Federal Home Loan Bank of Atlanta subject to their credit approval. Approximately 98% of the municipal bond portfolio has ratings in the Double A or Triple A category.

During the first quarter of 2024, the Company did not sell any securities that are available for sale or held to maturity. As of March 31, 2024, the portfolio had an effective duration of 5.89 years. We continue to monitor duration risk and seek to align actual duration with the target range.

Table of Contents

The following table presents a summary of our investment portfolio duration for the periods presented:


	March 31, 2024			December 31, 2023
(Dollars in thousands, duration in years)	Amount		Duration	Amount		Duration
Held to Maturity (amortized cost)
U.S. Government agencies	$	197,269	4.76	$	197,267	5.03
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,406,440	6.34		1,438,102	6.40
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		437,718	5.72		444,883	6.24
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		352,399	3.55		354,055	4.06
Small Business Administration loan-backed securities		52,763	6.83		53,133	6.95
Total held to maturity	$	2,446,589	5.71	$	2,487,440	5.94
Available for Sale (fair value)
U.S. Treasuries	$	24,587	0.41	$	73,890	0.35
U.S. Government agencies		223,805	3.17		224,706	3.41
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,492,423	6.05		1,558,306	6.12
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises		508,112	5.46		527,422	5.69
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises		1,012,217	3.60		1,024,170	3.73
State and municipal obligations		960,359	10.35		977,461	8.62
Small Business Administration loan-backed securities		350,043	3.73		371,686	3.81
Corporate securities		26,854	2.18		26,747	2.45
Total available for sale	$	4,598,400	5.98	$	4,784,388	5.65

Other Investments

Other investment securities include primarily our investments in FHLB and FRB stock with no readily determinable market value. ~~The amortized cost~~Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of March 31, 2024, we determined that there was no impairment on our other investment securities. As of March 31, 2024, other investment securities represented approximately $187.3 million, or 0.41% of total assets, and primarily consists of FHLB and FRB stock which totals to approximately $168.3 million, or 0.37% of total assets. There were no gains or losses on the sales of these securities for three months ended March 31, 2024 and 2023, respectively.

Trading Securities

We have a trading portfolio associated with our Correspondent Banking Division and its subsidiary SouthState|Duncan-Williams. This portfolio is carried at fair value and realized and unrealized gains and losses are included in trading securities revenue, a component of ~~all these~~Correspondent Banking and Capital Markets Income in our Consolidated Statements of Income. Securities purchased for this portfolio have primarily been municipal bonds, treasuries and mortgage-backed agency securities, which are ~~equal~~held for short periods of time and totaled $66.2 million and $31.3 million at ~~September 30, 2017. As~~March 31, 2024 and December 31, 2023, respectively.

Loans Held for Sale

The balance of

mortgage loans held for sale increased $5.7 million from December 31, 2023 to $56.6 million at March 31, 2024. Total mortgage production was $429 million in the first quarter of 2024. This compares to $436 million in the fourth quarter of 2023. Mortgage production has declined as mortgage rates have continued to remain high. The percentage of mortgage production sold into the secondary market increased to 53% at March 31, 2024 compared to 49% in the fourth quarter of 2023. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and will fluctuate over time.

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~~September 30, 2017,~~Loans

The following table presents a summary of the ~~investment in FHLB stock represented approximately $10.2~~loan portfolio by category (excludes loans held for sale):


LOAN PORTFOLIO	March 31,		% of		December 31,		% of
(Dollars in thousands)	2024		Total		2023		Total
Acquired loans:
Acquired - non-purchased credit deteriorated loans:
Construction and land development	$	79,796	0.2	%	$	135,819	0.4	%
Commercial non-owner occupied		1,673,833	5.1	%		1,730,990	5.4	%
Commercial owner occupied real estate		1,079,710	3.3	%		1,115,539	3.4	%
Consumer owner occupied		478,388	1.5	%		496,674	1.5	%
Home equity loans		214,078	0.7	%		227,789	0.7	%
Commercial and industrial		797,388	2.4	%		863,584	2.7	%
Other income producing property		138,049	0.4	%		148,361	0.5	%
Consumer non real estate		73,135	0.2	%		77,930	0.2	%
Other		206	—	%		227	—	%
Total acquired - non-purchased credit deteriorated loans		4,534,583	13.8	%		4,796,913	14.8	%
Acquired - purchased credit deteriorated loans (PCD):
Construction and land development		6,380	—	%		9,506	—	%
Commercial non-owner occupied		421,636	1.3	%		445,270	1.4	%
Commercial owner occupied real estate		318,860	1.0	%		349,755	1.1	%
Consumer owner occupied		163,356	0.5	%		169,923	0.5	%
Home equity loans		26,038	0.1	%		27,239	0.1	%
Commercial and industrial		33,163	0.1	%		39,951	0.1	%
Other income producing property		31,661	0.1	%		35,358	0.1	%
Consumer non real estate		30,189	0.1	%		31,811	0.1	%
Total acquired - purchased credit deteriorated loans (PCD)		1,031,283	3.2	%		1,108,813	3.4	%
Total acquired loans		5,565,866	17.0	%		5,905,726	18.2	%
Non-acquired loans:
Construction and land development		2,351,167	7.2	%		2,778,189	8.6	%
Commercial non-owner occupied		7,017,005	21.5	%		6,395,374	19.7	%
Commercial owner occupied real estate		4,113,285	12.6	%		4,032,377	12.5	%
Consumer owner occupied		6,172,728	19.0	%		5,928,408	18.3	%
Home equity loans		1,168,478	3.6	%		1,143,417	3.5	%
Commercial and industrial		4,713,580	14.4	%		4,601,004	14.2	%
Other income producing property		470,345	1.4	%		472,615	1.5	%
Consumer non real estate		1,093,571	3.3	%		1,123,909	3.5	%
Other		1,285	—	%		7,470	—	%
Total non-acquired loans		27,101,444	83.0	%		26,482,763	81.8	%
Total loans (net of unearned income)	$	32,667,310	100.0	%	$	32,388,489	100.0	%

Total loans, net of deferred loan costs and fees (excluding mortgage loans held for sale), increased by $278.8 million, or ~~0.09%~~3.5% annualized, to $32.7 billion at March 31, 2024. Our non-acquired loan portfolio increased by $618.7 million, or 9.4% annualized, mainly driven by organic growth. Commercial non-owner occupied loans, consumer owner occupied loans, commercial and industrial loans, commercial owner occupied real estate, and home equity loans led the way with $621.6 million, $244.3 million, $112.6 million, $80.9 million and $25.1 million in year-to-date loan growth, respectively, or 39.1%, 16.6%, 9.8%, 8.1% and 8.8% annualized growth, respectively. The acquired loan portfolio decreased by $339.9 million, or 23.1% annualized. This decline in acquired loans was due to paydowns and payoffs in both the PCD and Non-PCD loan categories along with renewals of acquired loans that were moved to our non-acquired loan portfolio. The main categories that declined were commercial non-owner occupied loans, commercial and industrial loans and commercial owner occupied loans, which decreased by $80.8 million, $73.0 million and $66.7 million, respectively, during the quarter. Acquired loans as a percentage of total ~~assets.~~loans decreased to 17.0% and non-acquired loans as a percentage of the overall portfolio increased to 83.0% at March 31, 2024. This compares to acquired loans as a percentage of total loans of 18.2% and non-acquired loans as a percentage of total loans of 81.8% at December 31, 2023.

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Allowance for Credit Losses (“ACL”) on Loans and Certain Off-Balance-Sheet Credit Exposures

The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. The Company records loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized. Please see Note 1 — Summary of Significant Accounting Policies, under the “ACL – Loans” section, of our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 2 — Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL on loans.

Management considers forward-looking information in estimating expected credit losses. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by management to determine the best estimate within the range of expected credit losses. Management evaluates the appropriateness of the reasonable and supportable forecast scenarios and takes into consideration the scenarios in relation to actual economic and other data, such as gross domestic product growth, monetary and fiscal policy, inflation, supply chain issues and global events like the Russian/Ukraine conflict and unrest in middle east, as well as the volatility and magnitude of changes within those scenarios quarter over quarter, and consideration of conditions within the Bank’s operating environment and geographic area. Additional forecast scenarios may be weighted along with the baseline forecast to arrive at the final reserve estimate. While periods of relative economic stability should generally lead to stability in forecast scenarios and weightings to estimate credit losses, periods of instability can likewise require management to adjust the selection of scenarios and weightings, in accordance with the accounting standards. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors within four quarters using a straight-line approach. The Company generally uses a four-quarter forecast and a four-quarter reversion period.

In spite of the rapid interest rate hikes experienced cycle-to-date, the U.S. has thus far avoided a recession, although an inverted yield curve such as observed in the current interest rate environment often portends a coming recession. Management continues to use a blended forecast scenario of the baseline, upside, and more severe scenario, depending on the circumstances and economic outlook. For the quarter ending March 31, 2024, management selected a baseline weighting of 50%, a 25% weighting for an upside scenario and a 25% weighting for the more severe scenario. The scenario weightings were consistent with the first quarter of 2023. The scenario weightings reflect continued recognition of downside risks in the economic forecast from persistent levels of inflation, rising interest rates, and tightening credit conditions conducive of a mild recession. While employment figures and recent commercial real estate market sales data still show resilience and actual loan losses remain at low levels, continued projected weakness in the forecasted commercial real estate price index continues to elevate modeled expected losses for the Commercial Real Estate and Commercial Construction and Land Development, which excludes Residential Construction, loan segments. The resulting provision was approximately $12.7 million during the first quarter of 2024.

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. Please see MD&A, under the “Financial Condition”, “Allowance for Credit Losses (“ACL”)” section, of our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 2 — Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL on certain off-balance-sheet credit exposures.

As of March 31, 2024, the balance of the ACL was $469.7 million or 1.44% of total loans. The ACL increased $13.1 million from the balance of $456.6 million recorded at December 31, 2023. The net increase during the first quarter of 2024 included a $15.8 million provision and $2.7 million in net charge-offs. During the three months ended March 31, 2024, the Company recorded a provision for credit losses based on loan growth and current forecasts applied to our modeling to adequately capture potential economic recessionary risks.

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At March 31, 2024, the Company had a reserve on unfunded commitments of $53.2 million, which was recorded as a liability on the Balance Sheet, compared to $56.3 million at December 31, 2023. During the three months ended March 31, 2024, the Company recorded a decrease in the reserve for unfunded commitments of $3.1 million. This amount was recorded in Provision (Recovery) for Credit Losses on the Consolidated Statements of Income. For the comparative period in 2023, the Company had a reserve on unfunded commitments of $85.1 million recorded at March 31, 2023. The Company did not have an allowance for credit losses or record a provision for credit losses on investment securities or other financial assets during the first three months of 2024.

The ACL provides 2.73 times coverage of nonperforming loans at March 31, 2024. Net charge-offs to the total average loans during the three months ended March 31, 2024 were 0.03%, compared to 0.01% during the three months ended March 31, 2023. We continued to experience solid and stable asset quality numbers and ratios as of March 31, 2024.

The following table provides the allocation, by segment, for expected credit losses as of March 31, 2024:


	March 31, 2024
(Dollars in thousands)	Amount		%*
Residential Mortgage Senior	$	87,484	22.2	%
Residential Mortgage Junior		1,230	0.1	%
Revolving Mortgage		11,724	4.6	%
Residential Construction		4,552	1.8	%
Other Construction and Development		60,860	5.5	%
Consumer		23,353	3.6	%
Multifamily		17,012	3.6	%
Municipal		876	2.3	%
Owner Occupied Commercial Real Estate		72,597	16.9	%
Non-Owner Occupied Commercial Real Estate		134,698	24.4	%
Commercial and Industrial		55,268	15.0	%
Total	$	469,654	100.0	%

* Loan balance in each category expressed as a percentage of total loans.

The following table presents a summary of net charge off ratios (annualized) by loan segment, for the quarters ended March 31, 2024 and 2023:


	Three Months Ended
	March 31, 2024						March 31, 2023
(Dollars in thousands)	Net Recovery (Charge Off)		Average Balance		Net Recovery (Charge Off) Ratio		Net Recovery (Charge Off)		Average Balance		Net Recovery (Charge Off) Ratio
Residential Mortgage Senior	$	(220)	$	7,142,755	(0.01)	%	$	292	$	5,851,428	0.02	%
Residential Mortgage Junior		39		14,639	1.07	%		5		12,186	0.17	%
Revolving Mortgage		182		1,487,324	0.05	%		206		1,387,299	0.06	%
Residential Construction		(297)		634,180	(0.19)	%		72		866,661	0.03	%
Other Construction and Development		(468)		2,009,144	(0.09)	%		258		1,912,705	0.05	%
Consumer		(1,372)		1,199,449	(0.46)	%		(2,145)		1,262,393	(0.69)	%
Multifamily		25		1,033,034	0.01	%		—		760,375	—	%
Municipal		—		741,355	—	%		—		719,003	—	%
Owner Occupied Commercial Real Estate		103		5,488,913	0.01	%		293		5,485,976	0.02	%
Non-Owner Occupied Commercial Real Estate		(61)		7,839,935	(0.00)	%		55		7,418,486	0.00	%
Commercial and Industrial		(610)		4,889,492	(0.05)	%		(74)		4,717,885	(0.01)	%
Total	$	(2,679)	$	32,480,220	(0.03)	%	$	(1,038)	$	30,394,397	(0.01)	%

Table of Contents

The following table presents a summary of the changes in the ACL, for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024							2023
	Non-PCD			PCD				Non-PCD			PCD
(Dollars in thousands)	Loans			Loans		Total		Loans			Loans		Total
Balance at beginning of period	$	423,876		$	32,697	$	456,573	$	309,606		$	46,838	$	356,444
Loans charged-off		(7,718)			(222)		(7,940)		(4,516)			(111)		(4,627)
Recoveries of loans previously charged off		2,975			2,286		5,261		2,327			1,262		3,589
Net (charge-offs) recoveries		(4,743)			2,064		(2,679)		(2,189)			1,151		(1,038)
Provision (recovery) for credit losses		20,055			(4,295)		15,760		20,498			(5,259)		15,239
Balance at end of period	$	439,188		$	30,466	$	469,654	$	327,915		$	42,730	$	370,645

Total loans, net of unearned income:
At period end	$	32,667,310						$	30,696,142
Average		32,480,220							30,394,397
Net charge-offs as a percentage of average loans (annualized)		0.03	%						0.01	%
Allowance for credit losses as a percentage of period end loans		1.44	%						1.21	%
Allowance for credit losses as a percentage of period end non-performing loans (“NPLs”)		272.62	%						297.42	%

Nonperforming Assets (“NPAs”)

The following table summarizes our nonperforming assets for the past five quarters:


	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in thousands)	2024			2023			2023			2023			2023
Non-acquired:
Nonaccrual loans	$	106,189		$	110,467		$	105,579		$	104,491		$	67,894
Accruing loans past due 90 days or more		2,497			11,305			783			3,620			2,667
Restructured loans - nonaccrual		—			—			277			281			282
Total non-acquired nonperforming loans		108,686			121,772			106,639			108,392			70,843
Other real estate owned (“OREO”) ^{(1) (6)}		1,035			228			118			118			58
Other nonperforming assets ⁽²⁾		554			483			331			109			129
Total non-acquired nonperforming assets		110,275			122,483			107,088			108,619			71,030
Acquired:
Nonaccrual loans ⁽³⁾		62,612			58,916			57,464			59,821			51,650
Accruing loans past due 90 days or more		135			1,174			1,821			571			983
Restructured loans - nonaccrual		839			839			—			913			1,144
Total acquired nonperforming loans		63,586			60,929			59,285			61,305			53,777
Acquired OREO^{(1) (7)}		609			609			316			962			3,415
Other acquired nonperforming assets ⁽²⁾		46			103			62			19			31
Total acquired nonperforming assets		64,241			61,641			59,663			62,286			57,223
Total nonperforming assets	$	174,516		$	184,124		$	166,751		$	170,905		$	128,253

Excluding Acquired Assets
Total nonperforming assets as a percentage of total loans and repossessed assets ⁽⁴⁾		0.41	%		0.46	%		0.42	%		0.43	%		0.30	%
Total nonperforming assets as a percentage of total assets ⁽⁵⁾		0.24	%		0.27	%		0.24	%		0.24	%		0.16	%
Nonperforming loans as a percentage of period end loans⁽⁴⁾		0.40	%		0.46	%		0.41	%		0.43	%		0.30	%

Including Acquired Assets
Total nonperforming assets as a percentage of total loans and repossessed assets⁽⁴⁾		0.53	%		0.57	%		0.52	%		0.54	%		0.42	%
Total nonperforming assets as a percentage of total assets ⁽⁵⁾		0.39	%		0.41	%		0.37	%		0.38	%		0.29	%
Nonperforming loans as a percentage of period end loans ⁽⁴⁾		0.53	%		0.56	%		0.52	%		0.54	%		0.41	%

(1)

Consists of real estate acquired as a result of foreclosure.

(2)

Consists of non-real estate foreclosed assets, such as repossessed vehicles.

(3)

Includes nonaccrual loans that are purchase credit deteriorated (PCD loans).

(4)

Loan data excludes mortgage loans held for sale.

(5)

For purposes of this calculation, total assets include all assets (both acquired and non-acquired).

(6)

Excludes non-acquired bank properties held for sale of $9.0 million, $9.0 million, $11.8 million, $10.0 million, and $13.3 million as of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively, that is now separately disclosed on the balance sheet.

(7)

Excludes acquired bank properties held for sale of $0, $3.4 million, $3.4 million, $3.4 million, and $3.4 million as of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively, that is now separately disclosed on the balance sheet.

Table of Contents

Total nonperforming assets were $174.5 million, or 0.53% of total loans and repossessed assets, at March 31, 2024, a decrease of $9.6 million, or 5.2%, from December 31, 2023. Total nonperforming loans were $172.3 million, or 0.53%, of total loans, at March 31, 2024, a decrease of $10.4 million, or 5.7%, from December 31, 2023. Non-acquired nonperforming loans decreased by $13.1 million from December 31, 2023. The decrease in non-acquired nonperforming loans was driven primarily by a decrease in commercial nonaccrual loans of $7.2 million, a decrease in accruing loans past due 90 days or more of $8.8 million, offset by an increase in consumer nonaccrual loans of $2.9 million. The accruing loans past due 90 days or more decreased by $8.8 million at March 31, 2024 compared to December 31, 2023, due primarily to a decrease in accruing loans past due 90 days or more of factored receivables, which are trade credits rather than promissory notes loans that are deemed to be low risk. Acquired nonperforming loans increased $2.7 million from December 31, 2023. The increase in the acquired nonperforming loan balances was due primarily to an increase in commercial nonaccrual loans of $4.6 million, offset by a decrease in consumer nonaccrual loans of $1.0 million and a decline in accruing loans past due 90 days or more of $1.0 million.

Interest-Bearing Liabilities

Interest-bearing liabilities include interest-bearing transaction accounts, savings deposits, CDs, other time deposits, federal funds purchased, securities sold under agreements to repurchase and other borrowings. Interest-bearing transaction accounts include NOW, HSA, ~~IOLTA,~~Interest on Layers’ Trust Accounts (“IOLTA”), and Market Rate checking accounts.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)
2017

2016


2017

2016

Average interest-bearing liabilities

$
6,773,313

$
5,430,625

$
6,788,550

$
5,455,931

Interest expense

4,092

2,035

11,464

6,229

Average rate

0.24
%

0.15
%

0.23
%

0.15
%

~~The average balance of~~Total interest-bearing ~~liabilities~~deposits increased ~~$1.3~~by $232.4 million, or 3.5% annualized, to $26.6 billion in the third quarter of 2017 compared to the third quarter of 2016 due to increases in all categories of interest bearing liabilities, with the exception of federal funds purchased and repurchase agreements. The overallat March 31, 2024 from $26.4 billion at December 31, 2023. This increase was ~~mostly related to increases~~mainly driven by growth in ~~transaction and~~ money market accounts of $356.7 million, including $167.1 million in reciprocal insured money market deposits. This increase was partially offset by declines in interest-bearing checking accounts of $80.0 million and ~~saving~~savings deposits ~~acquired through the SBFC acquisition during the first quarter~~ of ~~2017 which totaled approximately $943,000 at September 30, 2017. The increase~~$75.0 million. Customers continue to move funds from lower yielding deposit products seeking higher yields in ~~interest expense in the third quarter of 2017 compared~~money market accounts. Federal funds purchases related to the ~~same period in 2016 was largely driven~~Correspondent Banking Division and securities sold under agreements to repurchase were $554.7 million at March 31, 2024, a $65.5 million increase from December 31, 2023. Other borrowings, consisting of FHLB borrowings, decreased to $0 at March 31, 2024 from $100 million at December 31, 2023. Corporate and subordinated debentures declined by ~~higher balances in all interest-bearing liabilities, as well as the impact of higher interest rates on our interest-bearing liabilities. The increase in rates was due~~$92,000 to the fact that the cost of deposits acquired through the merger with SBFC were at higher rates than that of our legacy deposits and due to the Federal Reserve increasing the federal funds target rate 75 basis points since December 2016. Overall, this resulted in a 9 basis point increase in the average rate on all interest-bearing liabilities from the three months ended September 30, 2016.$391.8 million. Some key highlights are outlined below:

●

~~Average interest-bearing deposits for~~As noted above, the ~~three months ended September 30, 2017~~Company’s higher yielding money market accounts increased ~~26.0% from the same period in 2016.~~

Interest-bearing deposits increased to $6.6 billion at September 30, 2017 from the period end balance at September 30, 2016 of $5.1 billion. This was mainly the result of the addition of interest bearing-deposits during the first quarter of ~~2017 from the SBFC acquisition, which totaled $1.1 billion at September 30, 2017.~~2024. The ~~company continues to monitor and adjust~~Company raised interest rates ~~paid~~ on most interest-bearing deposit products ~~as part of its strategy to manage its net interest margin.~~

~~The average rate on certificates of deposit and other time deposits for the three months ended September 30, 2017 increased 26 basis points to 52 basis points from the comparable period in 2016.~~

~~Average transaction and~~(in particular money market accounts ~~balances~~and time deposit specials) due to competitive pressures to retain deposits. Average interest-bearing deposits increased ~~18.4%, up $612.7 million from the average balance~~by $3.1 billion to $26.4 billion in the ~~third~~ quarter of 2016 as balances acquired from the SBFC transaction totaled approximately $439.4 at September 30, 2017. Interest expense on transaction and money market accounts increased $388,000 as a result of the growth in average balances and a 3 basis point increase in the average rate to 11 basis points for the three months ended ~~September 30, 2017 as~~March 31, 2024 compared to the same period in ~~2016.~~

2023. For more information on the composition of our total deposits, see Note 8 – Deposits.

●

~~Average savings account balances increased 74.5%, up $586.4~~Other borrowings, consisting of FHLB borrowings, decreased to $0 at March 31, 2024 from $100 million ~~from the average balance~~at December 31, 2023. The Company paid down its FHLB borrowings in the ~~third~~first quarter of ~~2016 as balances acquired from the SBFC transaction totaled approximately $503.7 million at September 30, 2017. Interest expense on savings accounts increased $401,000 as a result of~~2024 with the growth in ~~average balances~~deposits and ~~a 9 basis point increase~~the maturities and pay downs in ~~the average rate to 15 basis points for the three months ended September 30, 2017 as compared to the same period in 2016.~~

investment securities providing liquidity.

In the third quarter of 2017, average other borrowings increased $37.7 million compared to the third quarter of 2016. This increase was the result of the SBFC acquisition as we acquired $18.5 million in trust preferred securities and $91.3 million in FHLB advances through the merger. Since the merger, the company has paid off $82.0 million of the acquired FHLB advances, including $15.0 million during the third quarter of 2017. The average rate on other borrowings experienced an 8 basis point increase to 3.59% for the three months ended September 30, 2017. This increase was due to the cost on trust preferred securities, which are variable rate and reprice quarterly. As interest rates have risen, the cost of the trust preferred securities increased from 3.48% for the quarter ended September 30, 2016 to 4.19% for the same period in 2017.



~~Table of Contents~~

Noninterest-Bearing Deposits

Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. Average noninterest-bearing deposits increased $478.9 million, or 22.3%, to $2.6 billion in the third quarter of 2017 compared to $2.1 billion during the same period in 2016. The noninterest-bearing deposits added through the SBFC acquisition totaled approximately $261.1 million at September 30, 2017 as the remaining increase was through organic deposit growth. At ~~September 30, 2017,~~March 31, 2024, the period end balance of noninterest-bearing deposits ~~was $2.5~~of $10.5 billion ~~exceeding the September 30, 2016 balance by $329.4 million.~~

~~Provision for Loan Losses and Nonperforming Assets~~

The ALLL is based upon estimates made by management. We maintain an ALLL at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside and internal credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

The ALLL on non-acquired loans consists of general and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience for each class of loans and management’s evaluation and “risk grading” of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. Currently, these adjustments are applied to the non-acquired loan portfolio when estimating the level of reserve required. The specific reserves are determined on a loan-by-loan basis based on management’s evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as doubtful or substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for a specific reserve is evaluated on impaired loans, and once a specific reserve is established for a loan, a charge off of that amount occurs in the quarter subsequent to the establishment of the specific reserve. Loans that are determined to be impaired are provided a specific reserve, if necessary, and are excluded from the calculation of the general reserves.

Beginning with the First Federal Holdings, Inc. (“FFHI”) business combination, the Company segregates the acquired loan portfolio into performing loans (“non‑credit impaired”) and credit impaired loans. The acquired non‑credit impaired loans and acquired revolving type loans are accounted for under FASB ASC 310‑20, with each loan being accounted for individually. Acquired credit impaired loans are recorded net of any acquisition accounting discounts and have no ALLL associated with them at acquisition date. The related discount, if applicable, is accreted into interest income over the remaining contractual life of the loan using the level yield method. Subsequent deterioration in the credit quality of these loans is recognized by recording a provision for loan losses through the income statement, increasing the non‑acquired and acquired non‑credit impaired ALLL. The acquired credit impaired loans will follow the description in the next paragraph.

In determining the acquisition date fair value of acquired credit impaired loans, and in subsequent accounting, the Company generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an ALLL. Evidence of credit quality deterioration for the loan pools may include information such as increased past‑due and nonaccrual levels and migration in the pools to lower loan grades.

In previous periods, we offset the impact of the provision established for acquired covered loans by adjusting the receivable from the FDIC to reflect the indemnified portion of the post-acquisition exposure with a corresponding credit to the provision for loan losses. However, as noted above, on June 23, 2016, the Bank ~~entered into an early agreement with the FDIC with respect to all of its outstanding loss share agreements. All assets previously classified as~~

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covered became uncovered, and the Bank will now recognize the full amount of future charge-offs, recoveries, gains, losses, and expenses related to these previously covered assets, as the FDIC will no longer share in these amounts. ~~For further discussion of the Company’s ALLL on acquired loans, see Note 6—Loans and Allowance for Loan Losses.~~

During the third quarter of 2017, the valuation allowance on acquired credit impaired loans declined by $71,000. This was the result of impairment of $127,000 which was recorded through the provision for loan losses, being fully offset by loan removals of $198,000.

~~The following table presents a summary of the changes in the ALLL for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended September 30,

2017

2016

Acquired

Acquired

Acquired

Acquired

Non-credit

Credit

Non-credit

Credit


Non-acquired

Impaired

Impaired



Non-acquired

Impaired

Impaired


(Dollars in thousands)

Loans

Loans

Loans

Total

Loans

Loans

Loans

Total

Balance at beginning of period

$
40,149

$
—

$
3,741

$
43,890

$
36,939

$
—

$
3,752

$
40,691

Loans charged-off

(1,383)

(275)

—

(1,658)

(1,108)

(280)

—

(1,388)

Recoveries of loans previously charged off

836

279

—

1,115

713

120

—

833

Net charge-offs

(547)

4

—

(543)

(395)

(160)

—

(555)

Provision for loan losses

1,939

(4)

127

2,062

775

160

(23)

912

Benefit attributable to FDIC loss share agreements

—

—

—

—

—

—

—

—

Total provision for loan losses charged to operations

1,939

(4)

127

2,062

775

160

(23)

912

Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

—

—

—

—

Reductions due to loan removals

—

—

(198)

(198)

—

—

(326)

(326)

Balance at end of period

$
41,541

$
—

$
3,670

$
45,211

$
37,319

$
—

$
3,403

$
40,722

Total non-acquired loans:

At period end

$
6,230,327

$
5,008,113

Average

6,123,750

4,903,522

Net charge-offs as a percentage of average non-acquired loans (annualized)

0.04
%

0.03
%

Allowance for loan losses as a percentage of period end non-acquired loans

0.67
%

0.75
%

Allowance for loan losses as a percentage of period end non-performing non-acquired loans (“NPLs”)

322.12
%

248.63
%

Nine Months Ended September 30,

2017

2016

Acquired

Acquired

Acquired

Acquired

Non-credit

Credit

Non-credit

Credit


Non-acquired

Impaired

Impaired



Non-acquired

Impaired

Impaired


(Dollars in thousands)

Loans

Loans

Loans

Total

Loans

Loans

Loans

Total
Balance at beginning of period

$
36,960

$
—

$
3,395

$
40,355

$
34,090

$
—

$
3,706

$
37,796
Loans charged-off

(3,972)

(1,165)

—

(5,137)

(4,384)

(810)

—

(5,194)
Recoveries of loans previously charged off

2,041

414

—

2,455

2,358

262

—

2,620
Net charge-offs

(1,931)

(751)

—

(2,682)

(2,026)

(548)

—

(2,574)
Provision for loan losses on non-acquired loans

6,512

751

819

8,082

5,255

548

372

6,175
Benefit attributable to FDIC loss share agreements

—

—

—

—

—

—

23

23
Total provision for loan losses charged to operations

6,512

751

819

8,082

5,255

548

395

6,198
Provision for loan losses recorded through the FDIC loss share receivable

—

—

—

—

—

—

(23)

(23)
Reductions due to loan removals

—

—

(544)

(544)

—

—

(675)

(675)
Balance at end of period

$
41,541

$
—

$
3,670

$
45,211

$
37,319

$
—

$
3,403

$
40,722

Total non-acquired loans:

At period end

$
6,230,327

$
5,008,113

Average

5,770,160

4,620,284

Net charge-offs as a percentage of average non-acquired loans (annualized)

0.04
%

0.06
%

Allowance for loan losses as a percentage of period end non-acquired loans

0.67
%

0.75
%

Allowance for loan losses as a percentage of period end non-performing non-acquired loans (“NPLs”)

322.12
%

248.63
%

The ALLL as a percent of non-acquired loans reflects the continued improvement in credit quality, as well as the continued decline in our three-year historical charge off rate. Our nonaccrual loans and classified loans both declined during the third quarter of 2017 compared to the same quarter in 2016, while our past due loans still accruing increased. The same trend occurred when compared to the second quarter of 2017, nonaccrual loans and classified loans declined during the period, while past due loans still accruing increased. Our overall net charge offs for the quarter on non-

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acquired loans was 4 basis points annualized, or $547,000, compared to 3 basis points annualized, or $395,000, a year ago, and 5 basis points, or $756,000 in the second quarter of 2017. Net charge offs on non-acquired loans have remained low at 5 basis points or less over the past four quarters. Excluding acquired assets, nonperforming assets decreased by $2.4 million during the third quarter of 2017 compared to the third quarter of 2016 and increased $1.1 million from the second quarter of 2017, to $19.2 million. The increase from the second quarter was primarily due to an increase of $1.7 million in OREO due to the moving of the GB&T operations center ($2.3 million) from fixed assets to OREO during the third quarter of 2017. The increase in nonperforming assets related to OREO was offset by a decline in nonaccrual loans of $700,000. The ratio of the ALLL to cover total nonperforming non-acquired loans increased from 248.63% at September 30, 2016 and 297.42% at June 30, 2017 to 322.12% at September 30, 2017.

We increased the ALLL compared to the third quarter of 2016, as well as compared to the second quarter of 2017, due primarily to larger loan growth and increases in certain loan types during the third quarter that require higher reserves. From a general perspective, we generally consider a three-year historical loss rate on all loan portfolios, unless circumstances within a portfolio loan type require the use of an alternate historical loss rate to better capture the risk within the portfolio. We also consider qualitative factors such as economic risk, model risk and operational risk when determining the ALLL. We adjust our qualitative factors to account for uncertainty and certain risk inherent in the portfolio that cannot be measured with historical loss rates. All of these factors are reviewed and adjusted each reporting period to account for management’s assessment of loss within the loan portfolio. Overall, the general reserve increased by $3.7 millionfairly stable compared to the balance at ~~September 30, 2016, and $1.8 million~~December 31, 2023 of $10.6 billion. Average noninterest-bearing deposits were $10.5 billion for the first quarter of 2024 compared to $12.8 billion for the ~~balance at June 30, 2017.~~

~~On a specific reserve basis, the ALLL decreased $438,000 from June 30, 2017, with loan balances being evaluated for specific reserves increasing $11.7 million during the third~~first quarter of 2017, to $60.8 million. Specific reserves increased $483,000, to $1.9 million at September 30, 2017, from $1.4 million at September 30, 2016 with the loan balances being evaluated for specific reserves increasing $39.6 million from $21.2 million at September 30, 2016. The increase in loans being evaluated for specific reserves during the third quarter of 2017 include builder loans for which greater scrutiny was provided. All of these loans are performing under their contractual terms.

~~During the three months ended September 30, 2017, qualitative factors remained consistent, which is reflective of stability~~2023. This decrease in the ~~unemployment rates~~average noninterest bearing deposits from the quarter ended March 31, 2023 was mainly due to customers seeking higher yields in the rising rate environment. Also, customers have less excess cash as funds from government support programs related to the COVID-19 pandemic began to decline, as well as the resulting effects of higher costs related to inflation.

Uninsured Deposits

At March 31, 2024 and ~~economy as a whole within~~December 31, 2023, the ~~markets that we serve. We continue to work our nonperforming assets out through collections, transfers to OREO~~Company had approximately $13.3 billion and ~~disposals of OREO.~~

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$14.2 billion, respectively, in estimated uninsured deposits. The ~~following table summarizes our nonperforming assets~~amounts above are estimates and are based on the same methodologies and assumptions used for the ~~past five quarters:~~

September 30,

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2017

2017

2016

2016

2016

Non-acquired:

Nonaccrual loans

$
11,509

$
12,100

$
11,909

$
12,485

$
12,386

Accruing loans past due 90 days or more

529

432

77

281

125

Restructured loans - nonaccrual

858

967

1,049

1,979

2,499

Total nonperforming loans

12,896

13,499

13,035

14,745

15,010

Other real estate owned (2)

6,219

4,519

5,653

3,927

6,585

Other nonperforming assets (3)

111

114

52

71

29

Total non-acquired nonperforming assets

19,226

18,132

18,740

18,743

21,624

Acquired non-credit impaired:

Nonaccrual loans

5,457

5,134

4,915

4,728

4,633

Accruing loans past due 90 days or more

944

659

35

106

—

Total acquired nonperforming loans (1)

6,401

5,793

4,950

4,834

4,633

Acquired OREO and other nonperforming assets:

Covered OREO (2)

—

—

—

—

—

Acquired OREO not covered under loss share (2)

7,308

9,911

14,355

14,389

15,626

Other acquired nonperforming assets (3)

538

528

637

637

653

Total acquired OREO and other nonperforming assets

7,846

10,439

14,992

15,026

16,279

Total nonperforming assets

$
33,473

$
34,364

$
38,682

$
38,603

$
42,536

Excluding Acquired Assets

Total NPAs as a percentage of total loans and repossessed assets (4)

0.31
%

0.30
%

0.34
%

0.36
%

0.43
%
Total NPAs as a percentage of total assets (5)

0.17
%

0.16
%

0.17
%

0.21
%

0.25
%
Total NPLs as a percentage of total loans (4)

0.21
%

0.23
%

0.23
%

0.28
%

0.30
%

Including Acquired Assets

Total NPAs as a percentage of total loans and repossessed assets (4)

0.40
%

0.42
%

0.49
%

0.58
%

0.65
%
Total NPAs as a percentage of total assets

0.30
%

0.31
%

0.35
%

0.43
%

0.48
%
Total NPLs as a percentage of total loans (4)

0.23
%

0.24
%

0.23
%

0.29
%

0.30
%

~~(1)~~

Excludes the acquired credit impaired loans that are contractually past due 90 days or more totaling $13.1 million, $19.0 million, $20.8 million, $14.8 million, and $11.5 million as of September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively, including the valuation discount. Acquired credit impaired loans are considered to be performing due to the application of the accretion method under FASB ASC Topic 310-30. (For further discussion of the Company’s application of the accretion method, see “Business Combinations and Method of Accounting for Loans Acquired” in our Annual Report on Form 10-K for the year ended December 31, 2016.

~~(2)~~

~~Includes certain real estate acquired as a result of foreclosure and property not intended for bank use.~~

~~(3)~~

Consists of non-real estate foreclosed assets, such as repossessed vehicles. Prior to our termination agreement with the FDIC in the second quarter of 2016, these assets were covered through loss share agreements.

~~(4)~~

~~Loan data excludes mortgage loans held for sale.~~

~~(5)~~

~~For purposes of this calculation, total assets include all assets (both acquired and non-acquired).~~

Excluding the acquired non-credit impaired loans, total nonperforming loans, including restructured loans, were $12.9 million, or 0.21% of non-acquired loans, a decrease of $2.1 million, or 14.1%, from September 30, 2016. The decrease in nonperforming loans was driven primarily by a decrease in commercial nonaccrual loans of $1.3 million and restructured nonaccrual loans of $1.6 million, partially offset by consumer nonaccrual loans which increased by $471,000 and past due 90 day loans still accruing of $404,000.

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Nonperforming non-acquired loans overall, including restructured loans, decreased by $603,000 during the third quarter of 2017 from the level at June 30, 2017. This decrease was primarily driven by a decrease in commercial nonaccrual loans of $532,000, restructured nonaccrual loans of $59,000, and consumer nonaccrual loans of $109,000, partially offset by an increase in loans greater than ninety days past due but still accruing of $97,000.

At September 30, 2017, non-acquired OREO increased by $1.7 million from June 30, 2017. At September 30, 2017, non-acquired OREO consisted of 20 properties with an average value of $311,000. This compared to 24 properties with an average value of $188,000 at June 30, 2017. In the third quarter of 2017, we added 5 properties with an aggregate value of $2.3 million into non-acquired OREO, and we sold 9 properties with a basis of $607,000. The increase in OREO and the average value of each property was due to the moving of the GB&T operations center at a value of $2.3 million from fixed assets to OREO during the third quarter of 2017. Our non-acquired OREO balance of $6.2 million at September 30, 2017 is comprised of 9% in the Lowcountry/Orangeburg region of South Carolina, 31% in the Central region (Columbia), and 60% in the Upstate region (Greenville).

~~Potential Problem Loans~~

Potential problem loans (excluding all acquired loans) totaled $8.8 million, or 0.14% of total non-acquired loans outstanding, at September 30, 2017, compared to $8.8 million, or 0.17% of total non-acquired loans outstanding, at December 31, 2016, and compared to $14.0 million, or 0.28% of total non-acquired loans outstanding, at September 30, 2016. Potential problem loans related to acquired non-credit impaired loans totaled $7.1 million, or 0.49% of total acquired non-credit impaired loans, at September 30, 2017, compared to $2.0 million, or 0.24% of total acquired non-credit impaired loans outstanding, at December 31, 2016, and compared to $2.0 million, or 0.23% of total acquired non-credit impaired loans outstanding, at September 30, 2016. All potential problem loans represent those loans where information about possible credit problems of the borrowers has caused management to have serious concern about the borrower’s ability to comply with present repayment terms.

~~Noninterest Income~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Fees on deposit accounts

$
22,448

$
20,776

$
66,322

$
62,439

Mortgage banking income

3,446

6,286

14,210

16,104

Trust and investment services income

6,310

4,877

18,703

14,573

Securities gains, net

1,278

—

1,388

122

Other-than-temporary impairment losses

(753)

—

(753)

—

Amortization of FDIC indemnification asset

—

—

—

(5,901)

Recoveries on acquired loans

1,944

2,207

5,647

5,130

Other

1,367

1,194

4,532

5,032

Total noninterest income

$
36,040

$
35,340

$
110,049

$
97,499

~~Note that “Fees on deposit accounts” include service charges on deposit accounts and bankcard income~~

Noninterest income increased by $700,000, or 2.0%, during the third quarter of 2017 compared to the same period in 2016. The quarterly increase in total noninterest income primarily resulted from the following:

~~Trust and investment services income increased by $1.4 million due to the increase in wealth customers added with the SBFC merger and through organic growth of the legacy wealth business;~~

Fees on deposit accounts increased $1.7 million, or 8.0%, which resulted primarily from higher bankcard services income and higher service charges on deposit accounts associated with the increase in customers through the merger with SBFC; and

~~Net securities gains of $1.3 million during the third quarter of 2017; partially offset by~~

Mortgage banking income decreased by $2.8 million, or 58.2%, which was a result from a decline in the mortgage pipeline and mortgage production during the third quarter of 2017. This resulted in a $2.8 million decline in secondary mortgage income due to lower gains on sale of mortgage loans and a reduction in the fair value of the mortgage pipeline and loans held for sale;

~~Other-than-temporary impairment losses on securities of $753,000 during the third quarter of 2017.~~

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~~Noninterest income increased by $12.6 million, or 12.9%, during the first nine months of 2017 compared to the same period in 2016. This year over year increase resulted primarily from the following:~~

Amortization of FDIC indemnification asset decreased $5.9 million as a result of the elimination of the FDIC indemnification asset as the Loss Share Agreements with the FDIC were terminated in the second quarter of 2016;

~~Trust and investment services income increased $4.1 million, or 28.3%, due to the increase in wealth customers added with the SBFC merger and through organic growth of the legacy wealth business;~~

Fees on deposit accounts increased $3.9 million, or 6.2%, which resulted primarily from higher bankcard services income and higher service charges on deposit accounts associated with the increase in customers through the merger with SBFC; and

Recoveries on acquired loans increased $517,000, or 10.1%, as a result of no longer sharing any recoveries with the FDIC under loss share agreements which were terminated in the second quarter of 2016; partially offset by

Mortgage banking income decreased $1.9 million, or 11.8%, which was a result from a decline in the mortgage pipeline and mortgage production during 2017. This resulted in a $2.1 million decline in secondary mortgage income due to a reduction in the fair value of the mortgage pipeline and loans held for sale and the mortgage backed security forward and an increase in our costs related to mortgage production.

~~Bankcard Services Income~~

~~The Company exceeded $10 billion in total consolidated assets upon consummation of our merger with SBFC on January 3, 2017. Banks with over $10 billion in total assets are no longer exempt from the~~Bank’s regulatory reporting requirements of the Federal Reserve’s rules on interchange transaction fees for debit cards. This means that, beginning on July 1 of the year following the time when our total assets reach or exceed $10 billion, the Bank will be limited to receiving only a “reasonable” interchange transaction fee for any debit card transactions processed using debit cards issued by the Bank to our customers. The Federal Reserve has determined that it is unreasonable for a bank with more than $10 billion in total assets to receive more than $0.21 plus 5 basis points of the transaction plus a $0.01 fraud adjustment for an interchange transaction fee for debit card transactions. A reduction in the amount of interchange fees we receive for electronic debit interchange will reduce our revenues. As noted above, bankcard income including interchange transaction fees is included in “Fees on deposit accounts”. In the first nine months of 2017, we earned approximately $25 million in interchange transaction fees for debit cards. This regulation will become effective for us in July 2018; however, if it were effectiveFDIC for the ~~first nine months of 2017, we estimate that our bankcard services income would have been reduced by approximately $11 million.~~FFIEC 041, also referred to as the Call Report.

~~Noninterest Expense~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2017

2016

2017

2016

Salaries and employee benefits

$
47,245

$
41,972

$
143,711

$
123,941

Net occupancy expense

6,214

5,464

18,650

16,364

Information services expense

6,003

5,237

18,776

15,353

Furniture and equipment expense

3,751

3,234

11,422

9,157

OREO expense and loan related

1,753

2,085

5,648

4,733

Bankcard expense

2,748

2,940

8,404

8,859

Amortization of intangibles

2,494

1,891

7,496

5,687

Supplies, printing and postage expense

1,491

1,345

4,715

4,910

Professional fees

1,265

1,758

4,637

4,663

FDIC assessment and other regulatory charges

918

1,001

3,029

3,162

Advertising and marketing

852

790

2,400

2,293

Merger and branch consolidation related expense

1,551

709

26,882

3,240

Other

5,289

4,765

17,066

16,712

Total noninterest expense

$
81,574

$
73,191

$
272,836

$
219,074

Table of Contents

Noninterest expense increased by $8.4 million, or 11.5%, in the third quarter of 2017 as compared to the same period in 2016. The quarterly increase in total noninterest expense primarily resulted from the following:

Salaries and employee benefits expense increased by $5.3 million, or 12.6%, in 2017 compared to the same period in 2016. This increase was attributable to the addition of personnel mainly through the merger with SBFC. The number of full time equivalent employees increased by 216, or 10.6%, from September 30, 2016 to September 30, 2017;

An increase in merger and branch consolidation related expense of $842,000 compared to the third quarter of 2016. The 2017 expense was mostly related to our merger with SBFC, while the 2016 expense was related to the branch consolidation project;

Information services expense was up by $766,000 in 2017 as compared to the same period in 2016. This increase was related to the additional cost associated with facilities, employees and systems added through the merger with SBFC;

Net occupancy expense and furniture and equipment expense increased by $750,000 and $517,000, respectively, in 2017 as compared to the same period in 2016. These increases were due to additional costs related to the facilities added through the acquisition of SBFC; and

~~Amortization of intangibles increased $603,000 due to amortization from the core deposit intangible created with the merger with SBFC.~~

~~Noninterest expense increased by $53.8 million, or 24.5%, during the first nine months of 2017 compared to the same period in 2016. This year over year increase resulted primarily from the following:~~

An increase in merger and branch consolidation related expense of $23.6 million compared to the first nine months of 2016. The 2017 expense was mostly related to our merger with SBFC, while the 2016 expense was related to the branch consolidation project. The $26.9 million in merger and branch consolidation related expense in the first half of 2017 mainly consisted of $9.5 million from change in control payments, severance payments and other merger related incentive payments and of $9.2 million in vendor contract resolution payments;

~~Salaries and employee benefits expense increased by $19.8 million in 2017 compared to the same period in 2016. This increase was mainly attributable to the cost of personnel added from SBFC;~~

Information services expense was up by $3.4 million in 2017 as compared to the same period in 2016. This increase was related to the additional cost associated with facilities, employees and systems added through the merger with SBFC;

Net occupancy expense and furniture and equipment expense increased by $2.3 million and $2.3 million, respectively, in 2017 as compared to the same period in 2016. These increases were due to additional costs related to the facilities added through the acquisition of SBFC; and

~~Amortization of intangibles increased $1.8 million due to amortization from the core deposit intangible created with the merger with SBFC.~~

~~Income Tax Expense~~

Our effective income tax rate was 33.53% and 32.35% for the three and nine months ended September 30, 2017, respectively. This compares to 33.87% and 33.80% for the three and nine months ended September 30, 2016, respectively. The reason for the decline during the nine months ended September 30, 2017 compared to the same period in 2016 is the implementation of the new accounting standard which requires the excess tax benefit associated with vested or exercised stock awards be included in determination of the effective tax rate each reporting period. A significant number of stock awards vested during the first quarter as happens in most years which reduced our effective tax rate by 2.90%, or $735,000. This is a discrete income tax item which should not occur at this level in subsequent quarters during 2017. We expect our effective income tax rate to increase in the 4th ~~quarter of 2017 due to continued profitability and expected non-deductible expenses from the Park Sterling transaction.~~

Capital Resources

Our ongoing capital requirements have been met primarily through retained earnings, less the payment of cash dividends. As of ~~September 30, 2017,~~March 31, 2024, shareholders’ equity was ~~$1.6~~$5.5 billion, an increase of ~~$498.2~~$13.9 million, or ~~43.9%~~0.3%, from December 31, ~~2016, and~~2023.

The following table shows the changes in shareholders’ equity during 2024.


(Dollars in thousands)
Total shareholders' equity at December 31, 2023	$	5,533,098
Net income		115,056
Cumulative adjustment pursuant to adoption of ASU 2023-02		(10,246)
Dividends paid on common shares ($0.52 per share)		(39,598)
Dividends paid on restricted stock units		(1,163)
Net increase in market value of securities available for sale, net of deferred taxes		(40,458)
Stock options exercised		391
Equity based compensation		5,867
Common stock repurchased pursuant to stock repurchase plan		(7,985)
Common stock repurchased - equity plans		(7,953)
Total shareholders' equity at March 31, 2024	$	5,547,009

The Company repurchased 100,000 shares, at an ~~increase~~average price of ~~$508.7~~$79.85 per share for a total of $8.0 million ~~or 45.3%, from $1.1 billion at September 30, 2016. The driving factor for~~under the ~~increase from year-end was issuance of common stock through the merger with SBFC~~2022 Stock Repurchase Plan during the first quarter of ~~2017~~2024. The number of ~~$434.6 million. The increase was also attributable~~shares to ~~net income~~be purchased and the timing of ~~$85.1 million, which was~~

~~Table~~the purchases are based on a variety of ~~Contents~~

~~offset by~~factors, including, but not limited to, the level of cash balances, general business conditions, regulatory requirements, the market price of our common stock, ~~dividend paid~~and the availability of ~~$29.0 million. At September 30, 2017, we had accumulated other comprehensive loss~~alternative investment opportunities. As of ~~$3.8 million compared to an accumulated other comprehensive loss~~March 31, 2024, a total of ~~$8.2 million at December 31, 2016. This change was mainly attributable to the increase to an unrealized gain position in the~~ 3,920,021 authorized shares remainavailable for sale securities portfolio of $4.0 million, net of tax during the first nine months of 2017 due to the continued low interest rate environment for long-term rates. The increase in shareholder’s equity from September 30, 2016 was also primarily the result of the issuance of common stock through the merger with SBFC during the first quarter of 2017 of $434.6 million. The increase was also attributable to net income of $109.3 million and partially offset by dividends paid to common shareholders of $36.7 million. Our common equity-to-assets ratio was 14.62% at September 30, 2017, up from 12.75% at December 31, 2016 and 12.78% at September 30, 2016. repurchase.

~~We are subject to~~Under current regulations, with respect to certain risk-based capital ratios. These risk-based capital ratios measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The values of both balance sheet and off-balance sheet items are adjusted based on the rules to reflect categorical credit risk. In addition to the risk-based capital ratios, the regulatory agencies have also established a leverage ratio for assessing capital adequacy. The leverage ratio is equal to Tier 1 capital divided by total consolidated on-balance sheet assets (minus amounts deducted from Tier 1 capital). The leverage ratio does not involve assigning risk weights to assets.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, in July 2013, the Federal Reserve announced its approval of a final rule to implement the regulatory capital reforms developed by the Basel Committee on Banking Supervision (“Basel III”), among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules became effective January 1, 2015, subject to a phase-in period for certain aspects of the new rules.

The new capital rules framework requires banking organizations to hold more and higher quality capital, which acts as a financial cushion to absorb losses, taking into account the impact of risk. As applied to the Company and the Bank ~~the new rules include~~are subject to a ~~new~~ minimum ratio of common equity Tier 1 capital (“CET1”) to risk-weighted assets of 4.5%~~. The new rules also raise our~~ and a minimum required ratio of Tier 1 capital to risk-weighted assets ~~from 4% to~~of 6%. ~~Our~~The minimum required leverage ratio ~~under the new rules~~ is 4% ~~(the new rules eliminated an exemption that permitted a minimum leverage ratio of 3% for certain institutions)~~. ~~Our~~The minimum required total capital to risk-weighted assets ratio ~~remains at~~is 8% ~~under~~. Refer to Note 16 — Capital Ratios for more information regarding Company and Bank’s regulatory capital compliance requirements.

In response to the ~~new rules.~~

~~In order~~COVID-19 pandemic in 2020, the federal banking agencies issued a final rule for additional transitional relief to ~~avoid restrictions on~~regulatory capital ~~distributions~~related to the impact of the adoption of CECL. The Company chose the five-year transition method and ~~discretionary bonus payments to executives, under~~is deferring the new rules a covered banking organization will also be required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer will be required to consist solelyrecognition of ~~common equity Tier 1,~~the effects from the adoption date and the ~~buffer will apply to all three risk-based measurements (CET1, Tier 1 capital~~CECL difference for the first two years of application. The modified CECL transitional amount was fixed as of December 31, 2021, and ~~total capital). The capital conservation buffer will be phased~~that amount began the three-year phase out in over a four year period at 0.625% per annual, beginning January 1, 2016 and becoming fully effective on January 1, 2019, and will ultimately consist of an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets.

In terms of quality of capital, the final rule emphasizes common equity Tier 1 capital and implements strict eligibility criteria for regulatory capital instruments. It also changes the methodology for calculating risk-weighted assets to enhance risk sensitivity.

Under the Basel III rules, accumulated other comprehensive income (“AOCI”) is presumptively included in common equity Tier 1 capital and can operate to reduce this category of capital. The final rule provided a one-time opportunity at the end of the first quarter of ~~2015 for covered banking organizations~~2022 with 25% phased out in 2024. At March 31, 2024, approximately $15.3 million was added to ~~opt out of much of this treatment of AOCI, which election the Bank and the Company have made. As a result,~~Tier 1 capital at the Company and ~~the~~ Bank ~~will retain the pre-existing treatment for AOCI.~~

The Bank is also subject to the regulatory framework for prompt corrective action, which identifies five capital categories for insured depository institutions (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) and is based on specified thresholds for eachas a result of the ~~three risk-based regulatory capital ratios (CET1,~~modified CECL transition. Had the Company elected not to apply the modified CECL transitional amount to its Tier 1 capital, the Company and ~~total capital) and for the leverage ratio.~~Bank would have still been considered well capitalized as of March 31, 2024.

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The well-capitalized minimums and the Company’s and the Bank’s regulatory capital ratios for the following periods are reflected below:

September 30,

December 31,

September 30,


2017

2016

2016

South State Corporation:

Common equity Tier 1 risk-based capital

12.11
%
11.66
%
11.48
%
Tier 1 risk-based capital

12.96
%
12.43
%
12.27
%
Total risk-based capital

13.51
%
13.04
%
12.89
%
Tier 1 leverage

10.34
%
9.88
%
9.74
%

South State Bank:

Common equity Tier 1 risk-based capital

12.56
%
12.06
%
11.86
%
Tier 1 risk-based capital

12.56
%
12.06
%
11.86
%
Total risk-based capital

13.10
%
12.66
%
12.48
%
Tier 1 leverage

10.02
%
9.58
%
9.42
%


	Well-Capitalized		March 31,		December 31,
	Minimums		2024		2023
SouthState Corporation:
Common equity Tier 1 risk-based capital	N/A		11.95	%	11.75	%
Tier 1 risk-based capital	6.00	%	11.95	%	11.75	%
Total risk-based capital	10.00	%	14.32	%	14.08	%
Tier 1 leverage	N/A		9.58	%	9.42	%

SouthState Bank:
Common equity Tier 1 risk-based capital	6.50	%	12.67	%	12.52	%
Tier 1 risk-based capital	8.00	%	12.67	%	12.52	%
Total risk-based capital	10.00	%	13.93	%	13.75	%
Tier 1 leverage	5.00	%	10.14	%	10.03	%

The ~~Tier 1 leverage ratio increased compared to December 31, 2016 due to the increase in our capital outpacing the increase in our average asset size. The~~Company’s and Bank’s Common equity Tier 1 risk-based capital, Tier 1 risk-based capital and total risk-based capital and Tier 1 leverage ratios all ~~increased~~improved compared to December 31, ~~2016~~2023. All of these ratios mainly improved due to net income recognized during the first quarter of 2024 of $115.1 million. Tier 1 capital increased by 1.1% and 0.5% at both the Company and Bank, respectively, with the increase in ~~our~~equity from the net income recognized. Total risk-based capital ~~outpacing~~increased by 1.1% and 0.7% at both the Company and Bank, respectively, with the increase in ~~our risk-based assets. The~~equity resulting from net income along with the increase in ~~our capital was mainly attributable~~the allowance for credit losses and unfunded commitments includable in Tier 2 capital. Both regulatory risk-based assets and quarterly average assets remained reasonably flat compared to the ~~issuance of common stock through our merger~~fourth quarter with ~~SBFC.~~ average assets for both the Company and Bank decreasing by 0.6% and risk-based assets decreasing by 0.6%. Our capital ratios are currently well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification.

Liquidity

~~Liquidity~~

Liquidity refers to our ability to generate sufficient cash to meet our financial obligations, which arise primarily from the withdrawal of deposits, extension of credit and payment of operating expenses. Liquidity risk is the risk that the Bank’s financial condition or overall safety and soundness is adversely affected by an inability (or perceived inability) to meet its obligations. Our ~~Asset/~~Asset Liability Management Committee (“ALCO”) is charged with the responsibility of monitoring ~~liquidity management~~ policies ~~which are~~ designed to ensure acceptable composition of our asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management. We have employed our funds in a manner to provide liquidity from both assets and liabilities sufficient to meet our cash needs.

The ALCO has established key risk indicators to monitor liquidity and interest rate risk. The key risk indicators are reviewed and approved by the ALCO on an annual basis. The liquidity key risk indicators include the loan to deposit ratio, net noncore funding dependence ratio, On-hand liquidity to total liabilities ratio, the percentage of securities pledged to total securities, and the ratio of brokered deposits to total deposits. As of March 31, 2024, the Company was operating within its liquidity policy limits.

Asset liquidity is maintained by the maturity structure of loans, investment securities and other short-term investments. Management has policies and procedures governing the length of time to maturity on loans and investments. Normally, changes in the earning asset mix are of a longer-term nature and are not ~~utilized~~used for day-to-day corporate liquidity needs.

Our liabilities provide liquidity on a day-to-day basis. Daily liquidity needs are met from deposit levels or from our use of federal funds purchased, securities sold under agreements to repurchase, interest-bearing deposits at other banks and other short-term borrowings. We engage in routine activities to retain deposits intended to enhance our liquidity position. These routine activities include various measures, such as the following:

●

Emphasizing relationship banking to new and existing customers, where borrowers are encouraged and normally expected to maintain deposit accounts with our Bank;

●

Pricing deposits, including certificates of deposit, at rate levels that will attract ~~and/or~~and /or retain balances of deposits that will enhance our Bank’s asset/liability management and net interest margin requirements; and

●

Continually working to identify and introduce new products that will attract customers or enhance our Bank’s appeal as a primary provider of financial services.

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Our non-acquired loan portfolio increased by approximately ~~$1.2 billion,~~$618.7 million, or approximately ~~24.4%, compared to the balance at September 30, 2016, and by $989.3 million, or 18.9%~~9.4% annualized, compared to the balance at December 31, ~~2016.~~ 2023. The increase from December 31, 2023 was mainly related to organic growth and renewals of acquired loans that are moved to our non-acquired loan portfolio. The acquired loan portfolio decreased by $339.9 million from the balance at December 31, 2023 through principal paydowns, charge-offs, foreclosures and renewals of acquired loans.

Our investment securities portfolio ~~increased $395.1 million, or 42.0%, compared to the balance at September 30, 2016, and increased~~(excluding trading securities) decreased by ~~$321.8~~$231.6 million compared to the balance at December 31, ~~2016.~~2023. The ~~main reason for the increase~~decrease in investment securities from ~~both~~ December 31, ~~2016~~2023 was a result of maturities, calls, sales and ~~September 30, 2016 was~~paydowns of investment securities totaling $227.8 million, a reduction from the ~~addition~~net amortization of premiums of $4.8 million as well as decrease in the market value of the available for sale investment securities portfolio of ~~SBFC through~~$53.6 million. These decreases were partially offset by purchases of other investment securities totaling $54.6 million. There were no purchases of available for sale or held to maturity securities during the ~~merger in~~quarter. The purchases of other investment securities were related to capital stock with the Federal Home Loan Bank of which we sold back $59.4 million during the first quarter of ~~2017.~~2024. The ~~Company’s recent strategy has been~~activity in the purchases and sales of the Federal Home Loan Bank Capital Stock was due to ~~increase~~activity with FHLB borrowings during the ~~investment~~

~~Table~~year. The Bank pledges a portion of ~~Contents~~

its investment portfolio asfor a ~~percentage~~variety of purposes, including, but not limited to, ~~total assets as we identify~~collateral for public funds and credit with the Federal Home Loan Bank of Atlanta. As of March 31, 2024, the bank pledged 39.5% of the market value of its investment portfolio. As of March 31, 2024, the Bank had unpledged securities ~~that meet our strategy~~with a market value of $4.0 billion. These securities included Treasury, Agency, Agency MBS, Municipals and ~~objectives.~~ Corporate securities.

Total cash and cash equivalents were ~~$403.9 million~~$1.2 billion at ~~September 30, 2017~~March 31, 2024 as compared to ~~$374.4~~$1.0 billion at December 31, 2023. Liquidity has tightened starting in 2023 with the rising rate environment and turmoil in the financial markets occurring in early 2023. Competition for in-market deposits has increased throughout 2023 and 2024 resulting in increases in deposit rates to retain local deposits. The Bank supplements its in-market deposits with brokered deposits. While the Bank has a policy limit for brokered time deposits of no more than 15% of total deposits, it has operated well below this policy limit. At March 31, 2024, the percentage of brokered time deposits to total deposits was 2.0% compared to 1.9% at December 31, 2023. During the first quarter of 2024, the Company also borrowed funds from the FHLB on a short-term basis; however, no FHLB advances were outstanding at March 31, 2024. The outstanding borrowings from the FHLB were $100.0 million at December 31, ~~2016 and $507.5 million at September 30, 2016.~~

~~At September 30, 2017, December 31, 2016 and September 30, 2016, the Company had $23.9 million, $2.9 million and $2.9 million, respectively, in traditional, out-of-market~~2023. See below for further discussion around brokered deposits and ~~$52.5~~FHLB borrowings.

Our ongoing philosophy is to remain in a liquid position, as reflected by such indicators as the composition of our earning assets, typically including some level of reverse repurchase agreements; federal funds sold; balances at the Federal Reserve Bank; and/or other short-term investments; asset quality; well-capitalized position; and profitable operating results. Cyclical and other economic trends and conditions can disrupt our desired liquidity position at any time. We expect that these conditions would generally be of a short-term nature. Under such circumstances, we expect our reverse repurchase agreements and federal funds sold positions, or balances at the Federal Reserve Bank, if any, to serve as the primary source of immediate liquidity. We could draw on additional alternative immediate funding sources from lines of credit extended to us from our correspondent banks. The Bank may also access funds from borrowing facilities established with the Federal Home Loan Bank of Atlanta and the discount window of the Federal Reserve Bank of Atlanta.

Deposit flows are significantly influenced by general and local economic conditions, changes in prevailing interest rates, internal pricing decisions and competition. Our deposits are primarily obtained from depositors located around our branch footprint, and we believe that we have attractive opportunities to capture additional retail and commercial deposits in our markets, in addition to having access to brokered deposits. Of the $37.2 billion in total deposits at March 31, 2024, approximately 70% were insured or collateralized. The Bank has a granular deposit base comprised of over 1.4 million ~~$57.6~~accounts, with an average deposit size of $27,000. The top ten and twenty deposit relationships comprise approximately 2% and 4% of total deposits, and approximately 28% of total deposits are non-interest bearing. The Bank’s deposit beta, which represents the change in the Bank’s cost of deposits over the change in the federal funds target rate, during this cycle (from March 2022 through March 2024) is approximately 33%.

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At March 31, 2024 and December 31, 2023, we had $728.8 million and ~~$57.7~~$719.7 million of traditional, out–of–market brokered time deposits, respectively. At March 31, 2024 and December 31, 2023, we had $2.3 billion and $2.2 billion, respectively, of reciprocal brokered deposits.Total deposits were ~~$9.1~~$37.2 billion at ~~September 30, 2017, up $1.8~~March 31, 2024, an increase of $129.5 million from $37.0 billion ~~or 25.0%, from September 30, 2016.~~ at December 31, 2023. This increase in deposits from December 31, 2023 was ~~mainly related to the deposits acquired through the merger with SBFC, which totaled $1.3 billion at September 30, 2017. The deposits related to SBFC included $261.1~~driven by an increase in money market accounts of $356.7 million, including $167.1 million in reciprocal insured money market deposits along with a $30.6 million increase in time deposits. These increases were partially offset by declines in noninterest-bearing ~~transaction~~deposits of $102.9 million, interest-bearing checking deposits of $80.0 million and savings deposits of $75.0 million. As customers moved funds from noninterest-bearing deposits, interest-bearing checking and savings accounts, ~~$322.8 million~~seeking higher yields in ~~interest-bearing transaction accounts, $620.3 million~~the rising rate environment, the Company has seen an increase in ~~savings and~~its balance of higher yielding money market accounts and ~~$132.8 million in certificates of deposit. These deposit balances do not include new~~time deposits opened in the SBFC market. The Company has had legacy deposit growth since September 30, 2016 of $477.6 million, which included an increase in interest-bearing transaction accounts of $210.8 million, savings and money market accounts of $158.0 million, certificates of deposit of $40.5 million and noninterest-bearing transaction account of $68.3 million. Other borrowings increased $28.0 million from September 30, 2016 mainly through the addition of trust preferred debt of $20.6 million and FHLB advances of 34.0 million through the merger with SBFC during the first quarter of ~~2017. During the second~~2024. The Company raised interest rates on most interest-bearing deposit products (in particular money market accounts and ~~third quarters~~time deposit specials) due to competitive pressures to retain deposits.

Total short-term borrowings at March 31, 2024 were $554.7 million, consisting of ~~2017, $25.0~~$273.4 million in federal funds purchased and $281.3 million in securities sold under agreements to repurchase. Total long-term borrowing at March 31, 2024 were $391.8 million and consisted of ~~the FHLB advance acquired in the merger with SBFC matured reducing the advances outstanding at September 30, 2017 to $9.0 million.~~trust preferred securities and subordinated debentures. To the extent that we employ other types of non-deposit funding sources, typically to accommodate retail and correspondent customers, we continue to take in ~~some~~ shorter maturities of such funds. Our current approach may provide an opportunity to sustain a low funding rate or possibly lower our cost of funds but could also increase our cost of funds if interest rates rise.

Our ongoing philosophy is to remain in a liquid position taking into account our current composition of earning assets, asset quality, capital position, and operating results. Our liquid earning assets include federal funds sold, balances at the Federal Reserve Bank, reverse repurchase agreements, and/or other short-term investments. Cyclical and other economic trends and conditions can disrupt our Bank’s desired liquidity position at any time. We expect that these conditions would generally be of a short-term nature. Under such circumstances, our Bank’s federal funds sold position and any balances at the Federal Reserve Bank serve as the primary sources of immediate liquidity. At September 30, 2017, our Bank had total federal funds credit lines of $516.0 million with no balance outstanding. If additional liquidity were needed, the Bank would turn to short-term borrowings as an alternative immediate funding source and would consider other appropriate actions such as promotions to increase core deposits or the sale of a portion of our investment portfolio. At September 30, 2017, our Bank had $336.2 million of credit available at the Federal Reserve Bank’s Discount Window, but had no outstanding advances as of the end of the quarter. In addition to deposits, we ~~could draw on additional alternative immediate~~have other contingency funding sources ~~from lines of credit extended~~available to ~~us from our correspondent banks and/or~~ the ~~FHLB.~~Bank. At ~~September 30, 2017,~~March 31, 2024, our Bank had a total FHLB credit facility of ~~$1.3~~$6.6 billion, with ~~total outstanding~~$2.9 million in FHLB letters of credit ~~consuming $6.3~~outstanding at quarter-end, leaving $6.6 billion in availability on the FHLB credit facility. In addition, our Bank had $1.8 billion of credit available at the Federal Reserve Bank’s discount window and total federal funds credit lines of $300.0 million ~~$9.1~~with no balances outstanding at quarter-end. The Bank also has an internal limit on brokered deposits of 15% of total deposits which would allow capacity of $5.6 billion as of March 31, 2024. The Bank had $728.8 million of outstanding brokered deposits at the end of the quarter leaving $4.8 billion in ~~outstanding advances and $94,000~~available capacity. All of these resources provide $13.5 billion of additional funding for the Bank. In addition, the Bank has $3.1 billion in ~~credit enhancements from participation in the FHLB’s Mortgage Partnership Finance Program.~~market value of unpledged securities at March 31, 2024 that can be pledged to obtain additional funds, if necessary. The Company has a ~~$10.0~~$100.0 million unsecured line of credit with U.S. Bank National Association with no balance outstanding ~~advances.~~at March 31, 2024. We believe that our liquidity position continues to be adequate and readily available.

As discussed previously and presented below, the Bank maintains credit facilities with the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank of Atlanta. The table below compares Primary Funding Sources to uninsured deposits as of March 31, 2024.


(Dollars in millions)	Available Capacity
Federal Home Loan Bank of Atlanta	$	6,594
Federal Reserve Bank of Atlanta Discount Window		1,770
Cash and cash equivalents		1,209
Fair value of securities that can be pledged		3,046
Total primary sources	$	12,619
Uninsured deposits, excluding collateralized deposits	$	11,182
Uninsured and collateralized deposits	$	13,341
Coverage ratio, uninsured deposits		112.9	%
Coverage ratio, uninsured and collateralized deposits		94.6	%
Ratio of uninsured and collateralized deposits to total deposits		35.9	%

In addition to adequate liquidity, the Company and Bank are considered well capitalized by all regulatory capital standards as the Company and the Bank were significantly above the required capital levels as of March 31, 2024. The Company’s tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 9.58%, 11.95% and 14.39%, respectively, at March 31, 2024. The Bank’s Tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 10.14%, 12.66% and 13.99%, respectively, at March 31, 2024. As permitted, we elected to exclude accumulated other comprehensive income related to available for sale securities from Tier 1, CET 1 and total risk-based capital; however, even if our unrealized losses as of March 31, 2024 in our available for sale and held to maturity investment portfolios were recognized by selling the portfolios for liquidity purposes, all else being equal, our regulatory capital ratios would remain well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification.

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Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes. We believe that we have adequate sources of liquidity to fund commitments that are drawn upon by the borrowers. In addition to commitments to extend credit, we also issue standby letters of credit, which are assurances to third parties that they will not suffer a loss if our customer fails to meet its contractual obligation to the third-party. Although our experience indicates that many of these standby letters of credit will expire unused, through our various sources of liquidity, we believe that we will have the resources to meet these obligations should the need arise.

Our contingency funding ~~plans incorporate~~plan describes several potential stages based on stressed liquidity levels. ~~Also,~~Liquidity key risk indicators are reported to the Board of Directors on a quarterly basis. As noted previously, we ~~review on at least an annual basis our liquidity position and our contingency funding plans with our principal banking regulator. The Company maintains~~maintain various wholesale sources of funding. If our deposit retention efforts were to be unsuccessful, ~~our Company~~we would ~~utilize~~use these alternative sources of funding. Under such circumstances, depending on the external source of funds, our interest cost would vary based on the range of interest rates ~~charged to our Company.~~charged. This could increase our ~~Company’s~~ cost of funds, impacting our net interest ~~margins~~margin and net interest ~~spreads.~~spread.

Asset-Liability Management and Market Risk Sensitivity

Our earnings and the economic value of equity vary in relation to the behavior of interest rates and the accompanying fluctuations in market prices of certain of our financial instruments. We define interest rate risk as the risk to earnings and equity arising from the behavior of interest rates. These behaviors include increases and decreases in interest rates as well as continuation of the current interest rate environment.

Our interest rate risk principally consists of reprice, option, basis, and yield curve risk. Reprice risk results from differences in the maturity or repricing characteristics of asset and liability portfolios. Option risk arises from embedded options in the investment and loan portfolios such as investment securities calls and loan prepayment options. Option risk also exists since deposit customers may withdraw funds at their discretion in response to general market conditions, competitive alternatives to existing accounts or other factors. The exercise of such options may result in higher costs or lower revenue. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in narrowing spreads on interest-earning assets and interest-bearing liabilities. Basis risk also exists in administered rate liabilities, such as interest-bearing checking accounts, savings accounts, and money market accounts where the price sensitivity of such products may vary relative to general markets rates. Yield curve risk refers to adverse consequences of nonparallel shifts in the yield curves of various market indices that impact our assets and liabilities.

We use simulation analysis as a primary method to assess earnings at risk and equity at risk due to assumed changes in interest rates. Management uses the results of its various simulation analyses in combination with other data and observations to formulate strategies designed to maintain interest rate risk within risk tolerances.

Simulation analysis involves the use of several assumptions including, but not limited to, the timing of cash flows such as the terms of contractual agreements, investment security calls, loan prepayment speeds, deposit attrition rates, the interest rate sensitivity of loans and deposits relative to general market rates, and the behavior of interest rates and spreads. The assumptions for loan prepayments, deposit decay, and nonstable deposit balances are derived from models that use historical bank data. These models are independently validated. Equity at risk simulation uses assumptions regarding discount rates that value cash flows. Simulation analysis is highly dependent on model assumptions that may vary from actual outcomes. Key simulation assumptions are subject to sensitivity analysis to assess the impact of assumption changes on earnings at risk and equity at risk. Model assumptions are reviewed by our Assumptions Committee. While the Bank is continuously refining its modeling methodology, the core principles of the methodology have remained stable over the past two years.

Earnings at risk is defined as the percentage change in net interest income due to assumed changes in interest rates. Earnings at risk is generally used to assess interest rate risk over relatively short time horizons.

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Equity at risk is defined as the percentage change in the net economic value of assets and liabilities due to changes in interest rates compared to a base net economic value. The discounted present value of all cash flows represents our economic value of equity. Equity at risk is generally considered a measure of the long-term interest rate exposures of the balance sheet at a point in time.

The earnings simulation models consider our contractual agreements with regard to investments, loans, deposits, borrowings, and derivatives as well as a number of behavioral assumptions applied to certain assets and liabilities.

Mortgage banking derivatives used in the ordinary course of business consist of forward sales contracts and interest rate lock commitments on residential mortgage loans. These derivatives involve underlying items, such as interest rates, and are designed to mitigate risk. Derivatives are also used to hedge mortgage servicing rights. For additional information see Note 15 — Derivative Financial Instruments in the consolidated financial statements.

From time to time, we execute interest rate swaps to hedge some of our interest rate risks. Under these arrangements, the Company enters into a variable rate loan with a client in addition to a swap agreement. The swap agreement effectively converts the client’s variable rate loan into a fixed rate loan. The Company then enters into a matching swap agreement with a third-party dealer to offset its exposure on the customer swap. The Company may also execute interest rate swap agreements that are not specific to client loans. As of March 31, 2024, the Company had a series of short-term interest rate hedges to address monthly accrual mismatches related to the Company’s ARC program and its transition from LIBOR to SOFR after June 30, 2023. For additional information on these derivatives refer to Note 15 — Derivative Financial Instruments in the consolidated financial statements.

Our interest rate risk key indicators are applied to a static balance sheet using forward rates from the Moody’s Baseline Scenario. The Company will also use other rate forecasts, including, but not limited to, Moody’s Consensus Scenario. This Base Case Scenario assumes the maturity composition of asset and liability rollover volumes is modeled to approximately replicate current consolidated balance sheet characteristics throughout the simulation. These treatments are consistent with the Company’s goal of assessing current interest rate risk embedded in its current balance sheet. The Base Case Scenario assumes that maturing or repricing assets and liabilities are replaced at prices referencing forward rates derived from the selected rate forecast consistent with current balance sheet pricing characteristics. Key rate drivers are used to price assets and liabilities with sensitivity assumptions used to price non-maturity deposits. The sensitivity assumptions for the pricing of non-maturity deposits are subjected to sensitivity analysis no less frequently than on an annual basis.

Interest rate shocks are applied to the Base Case on an instantaneous basis. Our policy establishes the use of upward and downward interest rate shocks applied in 100 basis point increments through 400 basis points. We calculate smaller rate shocks as needed. At times, market conditions may result in assumed rate movements that will be deemphasized. For example, during a period of ultra-low interest rates, certain downward rate shocks may be impractical. The model simulation results produced from the Base Case Scenario and related instantaneous shocks for changes in net interest income and changes in the economic value of equity are referred to as the Core Scenario Analysis and constitute the policy key risk indicators for interest rate risk when compared to risk tolerances. As of March 31, 2024, the Company was operating within its interest rate key risk indicator policy limits.

During 2023 and the first quarter of 2024, the beta assumption applied to total deposits increased to reflect changes in deposit mix. From the beginning of the upward rate cycle, our deposit costs have increased from five basis points to one hundred and seventy-four basis points. During this period, the federal funds rate has increased 525 basis points. Accordingly, our cycle to date beta has been approximately 33%. Management recognizes the difficulty in using historical data to forecast deposit betas in the current environment. For internal purposes, and based on the deposit mix as of March 31, 2024, the total deposit beta assumption was 35.0%. For internal forecasting, management will apply overlays to certain assumptions to adjust for current market conditions rather than use assumptions modeled over longer periods of time.

The following interest rate risk metrics are derived from analysis using the Moody’s Baseline Scenario published in April 2024 as the Base Case Scenario. As of March 31, 2024, the earnings simulations indicated that the year 1 impact of an instantaneous 100 basis point parallel increase / decrease in rates would result in an estimated 1.1% increase (up 100) and 1.8% decrease (down 100) in net interest income.

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We use Economic Value of Equity (“EVE”) analysis as an indicator of the extent to which the present value of our capital could change, given potential changes in interest rates. This measure also assumes a static balance sheet (Base Case Scenario) with rate shocks applied as described above. At March 31, 2024, the percentage change in EVE due to a 100-basis point increase or decrease in interest rates was 2.4% decrease and 0.7% increase, respectively. The percentage changes in EVE due to a 200-basis point increase or decrease in interest rates were 5.9% decrease and 0.4% decrease, respectively. The interest rate shock analysis results for EVE sensitivities are unusual as the benefits of repricing assets are mitigated by increasing deposit costs, and downward shocks are constrained on various balance sheet categories due to the inability to price products below floors or zero. This is particularly meaningful given the cost of deposits as of March 31, 2024.

The analysis below reflects a Base Case and shocked scenarios that assume a static balance sheet projection where volume is added to maintain balances consistent with current levels. Base Case assumes new and repricing volumes reference forward rates derived from the Moody’s Baseline rate forecast. Instantaneous, parallel, and sustained interest rate shocks are applied to the Base Case scenario over a one-year time horizon.


Percentage Change in Net Interest Income over One Year
Up 100 basis points	1.1	%
Up 200 basis points	1.8	%
Up 300 basis points	2.1	%
Up 400 basis points	2.3	%
Down 100 basis points	(1.8)	%
Down 200 basis points	(4.4)	%
Down 300 basis points	(8.6)	%
Down 400 basis points	(13.2)	%

Deposit Concentrations

At March 31, 2024 and ~~Loan Concentrations~~

WeDecember 31, 2023, we have no material concentration of deposits from any single customer or group of customers. We have no significant portion of our ~~loans~~deposits concentrated within a single industry or group of related industries. Furthermore, we attempt to avoid making loans that, in an aggregate amount, exceed 10% of total loans to a multiple number of borrowers engaged in similar business activities. As of September 30, 2017, there were no aggregated loan concentrations of this type. We do not believe there are any material seasonal factors that would have a material adverse effect on us. The total deposit balances held by top 10 and 20 deposit holders were below 5% of the Company’s average total deposit balances at March 31, 2024. We do not have any foreign ~~loans or~~ deposits.

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Concentration of Credit Risk

Each category of earning assets has a certain degree of credit risk. We use various techniques to measure credit risk. Credit risk in the investment portfolio can be measured through bond ratings published by independent agencies. In the investment securities portfolio, the investments consist of U.S. government-sponsored entity securities, tax-free securities, or other securities having ratings of “AAA” to “Not Rated”. All securities, with the exception of those that are not rated, were rated by at least one of the nationally recognized statistical rating organizations. The credit risk of the loan portfolio can be measured by historical experience. We maintain our loan portfolio in accordance with credit policies that we have established. Although the Bank has a diversified loan portfolio, a substantial portion of our borrowers’ abilities to honor their contracts is dependent upon economic conditions within our geographic footprint and the surrounding regions.

We consider concentrations of credit to exist when, pursuant to regulatory guidelines, the amounts loaned to a multiple number of borrowers engaged in similar business activities which would cause them to be similarly impacted by general economic conditions represents 25% of total ~~risk-based~~Tier 1 capital plus regulatory adjusted allowance for credit losses of the Company, or ~~$282.4 million~~$1.2 billion at ~~September 30, 2017.~~March 31, 2024. Based on this criteria, ~~the Company~~we had ~~four~~eight such credit concentrations ~~for non-acquired loans and acquired non-credit impaired loans~~ at ~~September 30, 2017,~~March 31, 2024, including ~~$344.2 million of loans to lessors of residential buildings, $891.8 million of~~ loans to lessors of nonresidential buildings (except mini-warehouses)~~, $302.5 million~~ of $6.1 billion, loans secured by owner occupied office buildings (including medical office buildings) of $1.9 billion, loans secured by owner occupied nonresidential buildings (excluding office buildings) of $1.8 billion, loans to ~~religious organizations,~~lessors of residential buildings (investment properties and ~~$295.1 million~~multi-family) of $2.5 billion, loans secured by 1st mortgage 1-4 family owner occupied residential property (including condos and home equity lines) of $9.0 billion, loans secured by jumbo (original loans greater than $548,250) of $2.5 billion, loans secured by business assets including accounts receivable, inventory and equipment of $2.2 billion and loans to consumers secured by non-real estate of $1.2 billion. The risk for these loans and for all loans is managed collectively through the use of credit underwriting practices developed and updated over time. The loss estimate for these loans is determined using our standard ACL methodology.

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After the adoption of CECL in the first quarter of 2020, banking regulators established guidelines for calculating credit concentrations. Banking regulators set the guidelines for construction, ~~purposes.~~land development and other land loans to total less than 100% of total Tier 1 capital less modified CECL transitional amount plus ACL (CDL concentration ratio) and for total commercial real estate loans (construction, land development and other land loans along with other non-owner occupied commercial real estate and multifamily loans) to total less than 300% of total Tier 1 capital less modified CECL transitional amount plus ACL (CRE concentration ratio). Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total Tier 1 capital less modified CECL transitional amount plus ACL. At March 31, 2024 and December 31, 2023, the Bank’s CDL concentration ratio was 48.9% and 59.7%, respectively, and its CRE concentration ratio was 235.1% and 236.5%, respectively. As of March 31, 2024, the Bank was below the established regulatory guidelines. When a bank’s ratios are in excess of one or both of these loan concentration ratios guidelines, banking regulators generally require an increased level of monitoring in these lending areas by bank management. Therefore, we monitor these two ratios as part of our concentration management processes.

Reconciliation of GAAP to Non-GAAP

The return on average tangible equity is a non-GAAP financial measure that excludes the effect of the average balance of intangible assets and adds back the after-tax amortization of intangibles to GAAP basis net income. Management believes these non-GAAP financial measures provide additional information that is useful to investors in evaluating our performance and capital and may facilitate comparisons with other institutions in the banking industry as well as period-to-period comparisons. 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, are not audited, and may not be comparable to other similarly titled financial measures used by other companies. Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.


	Three Months Ended
	March 31,
(Dollars in thousands)	2024			2023
Return on average equity (GAAP)		8.36	%		10.96	%
Effect to adjust for intangible assets		5.27	%		7.85	%
Return on average tangible equity (non-GAAP)		13.63	%		18.81	%

Average shareholders’ equity (GAAP)	$	5,536,551		$	5,177,048
Average intangible assets		(2,009,649)			(2,036,661)
Adjusted average shareholders’ equity (non-GAAP)	$	3,526,902		$	3,140,387

Net income (GAAP)	$	115,056		$	139,926
Amortization of intangibles		5,998			7,299
Tax effect		(1,503)			(1,594)
Net income excluding the after-tax effect of amortization of intangibles (non-GAAP)	$	119,551		$	145,631

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Cautionary Note Regarding Any Forward-Looking Statements

Statements included in ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations that~~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 27A of the Securities Act of 1933 and Section 21E of the Securities ~~and~~ Exchange Act of 1934. ~~The words~~Forward looking statements are based on, among other things, management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and the acquisition of Atlantic Capital. Words and phrases such as “may,” “approximately,” “continue,” “should,” “expects,” “projects,” “anticipates,” “is likely,” “look ahead,” “look forward,” “believes,” “will,” ~~“anticipate,~~“intends,” ~~“should,~~“estimates,” ~~“would,~~“strategy,” ~~“believe,~~“plan,” ~~“contemplate,~~“could,” ~~“expect,~~“potential,” ~~“estimate,” “continue,” “may,”~~“possible” and ~~“intend,” as well as other similar~~variations of such words and similar expressions ~~of the future,~~ are intended to identify such forward-looking statements. We caution readers that forward-looking statements are ~~estimates reflecting our judgment based on current information, and are~~ subject to certain risks, uncertainties and ~~uncertainties~~assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and ~~uncertainties~~assumptions, include, among others, the ~~matters described in Item 1A. Risk Factors of~~following:

Risks relating to our ~~Annual Report on Form 10-K for the year ended December 31, 2016,~~Business and ~~the following:~~Business Strategy

●

Economic downturn risk, potentially resulting in deterioration in the credit markets, inflation, greater than expected noninterest 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;

●

Risks related to the ability of the Company to pursue its strategic plans which depend upon certain growth goals in our lines of business;

●

Risks relating to the ability to retain our culture and attract and retain qualified people, which could be exacerbated by the continuing work from remote environment;

●

Credit ~~risk~~risks associated with an obligor’s failure to meet the terms of any contract with the Bank or otherwise fail to perform as ~~agreed;~~

agreed under the terms of any loan-related document;

●

Interest rate risk ~~involving~~ primarily resulting from our inability to effectively manage the ~~effect of a change in interest rates~~risk, and their impact on ~~both~~ the Bank’s earnings, including from the correspondent and mortgage divisions, housing demand, the market value of the Bank’s loan and securities portfolios, and the market value of ~~the portfolio~~SouthState’s equity;

●

A decrease in our net interest income due to the interest rate environment;

●

Liquidity risk affecting ~~our~~the Bank’s ability to meet its obligations when they come due;

●

Unexpected outflows of uninsured deposits may require us to sell investment securities at a loss;

●

Potential deterioration in real estate values;

●

The loss of value of our investment portfolio could negatively impact market perceptions of us and could lead to deposit withdrawals;

●

Price risk focusing on changes in market factors that may affect the value of ~~financial~~traded instruments ~~which are “marked-to-market” periodically;~~

in “mark-to-market” portfolios;

●

~~Merger and merger integration risk~~ including potential deposit attrition, higher than expected costs, customer loss and business disruption, including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related-matters, and the potential inability to identify and successfully negotiate and complete additional successful combinations with potential merger or acquisition partners;

Transaction risk arising from problems with service or product delivery;

●

~~Compliance risk~~ ~~involving risk~~The impact of increasing digitization of the banking industry and movement of customers to ~~earnings or capital resulting from violations~~on-line platforms, and the possible impact on the Bank’s results of ~~or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards;~~

operations, customer base, expenses, suppliers and operations;

●

Controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures;

●

~~Regulatory change~~ risk resulting from new laws, rules, regulations, proscribed practices or ethical standards, including the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums, including the impact of the new capital rules under Basel III and the possibility of changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to loan loss recognition;

Strategic risk resulting from adverse business decisions or improper implementation of business decisions;

●

Reputation risk that adversely affects earnings or capital arising from negative public ~~opinion;~~

opinion including the effects of social media on market perceptions of us and banks generally;

●

~~Terrorist activities risk~~ ~~that result in loss of consumer confidence and economic disruptions;~~

Cybersecurity risk related to ~~our~~the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of ~~third-party~~internal or external security breaches, ~~subjects us~~which may subject the Company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;

●

~~Noninterest income risk~~ ~~resulting from~~Reputational and operational risks associated with environment, social and governance (ESG) matters, including the ~~effect~~impact of ~~final rules amending Regulation E that prohibit financial institutions from charging consumer fees for paying overdrafts on ATM~~recently passed state legislation and ~~one-time debit card transactions, unless the consumer consents or opts-in~~proposed federal and state regulatory guidance and regulation relating to ~~the overdraft service for those types of transactions;~~

climate change;

●

Excessive loan losses;

●

~~Economic downturn~~Reputational risk ~~resulting in~~ and possible higher than estimated reduced revenue from previously announced or proposed regulatory changes in the Bank’s consumer programs and products;

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●

Operational, technological, cultural, regulatory, legal, credit ~~markets, greater than expected non-interest expenses, excessive loan losses~~ and other ~~factors, which~~ risks ~~could be exacerbated by~~associated with the exploration, consummation and integration of potential ~~negative economic~~

future acquisitions, whether involving stock or cash consideration; and

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~~developments~~

●

Geopolitical risk from terrorist activities and armed conflicts that may result in economic and supply disruptions, and loss of market and consumer confidence.

Risks relating to the Regulatory Environment

●

Compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards, and contractual obligations regarding data privacy and cybersecurity; and

●

Regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the ~~expiration~~possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and including the impact of special FDIC assessments, the Consumer Financial Protection Bureau regulations or other guidance, and the possibility of changes in accounting standards, policies, principles and practices.

Risks relating to our Common Stock

●

The risks of fluctuations in market prices for SouthState common stock that may or may not reflect economic condition or performance of SouthState;

●

The payment of dividends on SouthState common stock, which is subject to legal and regulatory limitations as well as the discretion of the ~~federal tax reductions,~~board of directors of SouthState, SouthState’s performance and other factors; and

●

Ownership dilution risk associated with potential acquisitions in which SouthState’s stock may be issued as consideration for an acquired company.

Risks relating to Economic Conditions and Other Outside Forces

●

Volatility in the financial services industry (including failures or rumors of failures of other depository institutions), along with actions taken by governmental agencies to address such turmoil, could affect the ability of depository institutions, including us, to attract and retain depositors and to borrow or raise capital;

●

The impact of competition with other financial institutions, including deposit and loan pricing pressures and the ~~implementation~~resulting impact, including as a result of ~~federal spending cuts currently scheduled~~compression to ~~go into effect;~~net interest margin; and

●

~~$10.0 billion asset size threshold risk~~ ~~resulting~~Catastrophic events such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including public health crises and infectious disease outbreaks, as well as any government actions in ~~increased expenses, loss~~response to such events, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of ~~revenues,~~the foregoing may have on SouthState and ~~increased regulatory scrutiny associated with our total assets exceeding $10.0 billion.~~

its customers and other constituencies.

For any forward-looking statements made in this report or in any documents incorporated by reference into this Report, we claim the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. All forward-looking statements speak only as of the date they are made and are based on information available at that time. We do not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. All subsequent written and oral forward-looking statements by us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Additional information with respect to factors that may cause actual results to differ materially from those contemplated by our forward-looking statements may also be included in other reports that ~~the Company files~~we file with the SEC. ~~The Company cautions~~We caution that the foregoing list of risk factors is not exclusive and not to place undue reliance on forward-looking statements.

For any forward-looking statements made in this Quarterly Report on Form 10-Q or in any documents incorporated by reference into this Quarterly Report on Form 10-Q, we claim the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference in Quarterly Report on Form 10-Q. We do not undertake to update forward looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. All subsequent written and oral forward looking statements by the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our quantitative and qualitative disclosures about market risk as of ~~September 30, 2017~~March 31, 2024 from those disclosures presented in our Annual Report on Form 10-K for the year ended ~~December 31, 2016.~~2023.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Management, including our~~SouthState’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of ~~our~~the design and operation of SouthState’s disclosure controls and procedures ~~(as defined~~as of March 31, 2024, in accordance with Rule 13a-15 of the Securities Exchange Act ~~Rules 13a-15(e)~~of 1934. We applied our judgment in the process of reviewing these controls and ~~15d-15(e)) as of the end of the period covered~~procedures, which, by ~~this report.~~their nature, can provide only reasonable assurance regarding our control objectives. Based upon that evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that ~~our~~SouthState’s disclosure controls and procedures as of March 31, 2024, were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated toprovide reasonable assurance regarding our ~~management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.~~control objectives.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, that has materially affected, or is ~~reasonably~~ likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

On February 9, 2024, the Company disclosed that it detected what was determined to be a cybersecurity incident on February 6, 2024 (the “Cyber Incident”). The Bank notified banking regulators and law enforcement and, based on its investigation and findings, notified individuals whose personal information may have been compromised in the Cyber Incident. Further, the Bank has taken other actions, such as offering credit monitoring services. While the Company is unable to estimate the total cost of any remediation that may be required, as of March 31, 2024, the Company had not incurred material costs as a result of the Cyber Incident.

On April 3, 2024, a putative class action lawsuit (the “Original Suit”) was filed against the Bank purportedly on behalf of a class consisting of those persons impacted by the Cyber Incident. As of ~~September 30, 2017~~the date of this Quarterly Report on Form 10-Q, 14 putative class action lawsuits, including the Original Suit, are pending. For more information about the Original Suit and other litigations filed in connection with the Cyber Incident, please refer to Note 12 — Commitments and Contingent Liabilities, in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Other than the Cyber Incident Suits (as defined in Note 12 — Commitments and Contingent Liabilities), as of March 31, 2024, and the date of this Quarterly Report on Form 10-Q, we believe that we are not party to, nor is any orof our property the subject of, any pending material legal proceeding other than those that may occur in the ordinary course of our business.

Item 1A. RISK FACTORS

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2023, as well as cautionary statements contained in this Quarterly Report on Form 10-Q, including those under the caption “Cautionary Note Regarding Any Forward-Looking Statements” set forth in Part I, Item 22. of this Quarterly Report on Form 10-Q, risks and matters described elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

There have been no material changes to the risk factors disclosed in Item 1A. of Part I in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

~~(a)~~

Not applicable

(b)

~~(b)~~

Not applicable

(c)

~~(c)~~

Issuer Purchases of Registered Equity Securities:

In ~~February 2004, we announced~~April 2022, the Company’s Board of Directors approved a new stock repurchase program ~~with no formal expiration date~~(“2022 Stock Repurchase Program”) authorizing the Company to repurchase up to ~~250,000~~3,750,000 of the Company’s common shares along with the remaining authorized shares of 370,021 from the 2021 Stock Repurchase Program for a total authorization of 4,120,021 shares. The Company repurchased a total of 100,000 shares at a weighted average price of $79.85 per share shares through the 2022 Stock Repurchase Program during the first quarter of 2024. During 2023, the Company repurchased a total of 100,000 shares at a weighted average price of $67.48 per share pursuant to the 2022 Stock Repurchase Program. As of March 31, 2024, there is a total of 3,920,021 shares authorized to be repurchased. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, general business conditions, regulatory requirements, the market price of our common ~~stock. In March 2017,~~stock, and the ~~Board~~availability of ~~Directors approved and reset the number of shares available to be repurchased under the 2004 stock repurchase program to 1,000,000.~~ alternative investment opportunities.

The following table reflects share repurchase activity during the ~~third~~first quarter of ~~2017:~~2024:


						(d) Maximum
					(c) Total	Number (or
					Number of	Approximate
					Shares (or	Dollar Value) of
					Units)	Shares (or
	(a) Total				Purchased as	Units) that May
	Number of				Part of Publicly	Yet Be
	Shares (or		(b) Average		Announced	Purchased
	Units)		Price Paid per		Plans or	Under the Plans
Period	Purchased		Share (or Unit)		Programs	or Programs
January 1 ‑ January 31	27,743	*	$	83.72	—	4,020,021
February 1 - February 29	63,024	*		83.11	—	4,020,021
March 1 - March 31	104,770	*		79.96	100,000	3,920,021
Total	195,537				100,000	3,920,021

For the three months ended March 31, 2024, totals include 27,743, 63,024, and 4,770 shares, respectively, that were repurchased under arrangements, authorized by our stock based compensation plans and Board of Directors, whereby officers or directors may sell previously owned shares to SouthState in order to pay for the exercises of stock options or for income taxes owed on vesting shares of restricted stock. These shares were not repurchased under the 2022 Stock Repurchase Program.

(d) Maximum

(c) Total

Number (or

Number of

Approximate

Shares (or

Dollar Value) of

Units)

Shares (or

(a) Total

Purchased as

Units) that May

Number of

Part of Publicly

Yet Be

Shares (or

(b) Average

Announced

Purchased

Units)

Price Paid per

Plans or

Under the Plans

Period

Purchased

Share (or Unit)

Programs

or Programs

July 1 - July 31

243
*
$
85.35

—

1,000,000

August 1 - August 31

—

—

—

1,000,000

September 1 - September 30

—

—

—

1,000,000

Total

243

—

1,000,000

*These shares were repurchased under arrangements, authorized by our stock-based compensation plans and Board of Directors, whereby officers or directors may sell previously owned shares to the Company in order to pay for the exercises of stock options or for income taxes owed on vesting shares of restricted stock. These shares were not purchased under the 2004 stock repurchase program to purchase 1,000,000 shares.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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Item 5. OTHER INFORMATION

None.

~~Not applicable.~~75

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Item 6. EXHIBITS

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index attached hereto and are incorporated by reference.

Exhibit Index


Exhibit No.	Description of Exhibit	Incorporated by Reference
Exhibit No.	Description of Exhibit		Form	Commission File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Bylaws of SouthState Corporation dated April 26, 2023	10-Q	001-12669	3.1	8/4/2023

31.1	Rule 13a-14(a) Certification of Principal Executive Officer					X

31.2	Rule 13a-14(a) Certification of Principal Financial Officer					X
32	Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer					X
101	The following financial statements from the Quarterly Report on Form 10-Q of SouthState Corporation for the quarter ended March 31, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statement of Cash Flows and (vi) Notes to Consolidated Financial Statements.					X
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).					X

Table of Contents

SIGNATURES

~~Exhibit Index~~

~~Exhibit No.~~		~~Description~~


~~Exhibit 2.1~~		Agreement and Plan of Merger, dated as of April 26, 2017, by and between Park Sterling Corporation and South State Corporation (incorporated by reference as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 1, 2017)

~~Exhibit 31.1~~		~~Rule 13a-14(a) Certification of Principal Executive Officer~~

~~Exhibit 31.2~~		~~Rule 13a-14(a) Certification of Principal Financial Officer~~

~~Exhibit 32~~		~~Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer~~

~~Exhibit 101~~		The following financial statements from the Quarterly Report on Form 10-Q of South State Corporation for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) Condensed Consolidated Statement of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~SOUTH STATE~~SOUTHSTATE CORPORATION
	(Registrant)


Date: ~~November~~May 3, ~~2017~~2024	/s/ ~~Robert R. Hill, Jr.~~John C. Corbett
	~~Robert R. Hill, Jr.~~John C. Corbett
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: ~~November~~May 3, ~~2017~~2024	/s/ ~~John C. Pollok~~William E. Matthews, V
	~~John C. Pollok~~William E. Matthews, V
	Senior Executive Vice President,
	Chief Financial Officer ~~and~~
	~~Chief Operating Officer~~
	(Principal Financial Officer)

Date: ~~November~~May 3, ~~2017~~2024	/s/ ~~Keith S. Rainwater~~Sara G. Arana
	~~Keith S. Rainwater~~Sara G. Arana
	Executive Vice President and
	Principal Accounting Officer

8277








											Accumulated Other
	Preferred Stock			Common Stock					Retained		Comprehensive
	Shares	Amount		Shares	Amount		Surplus		Earnings		Income (Loss)		Total
Balance, December 31, 2015	—	$	—	24,162,657	$	60,407	$	703,929	$	298,919	$	(3,871)	$	1,059,384
Comprehensive income	—		—	—		—		—		77,105		7,866		84,971
Cash dividends declared on common stock at $0.89 per share	—		—	—		—		—		(21,534)		—		(21,534)
Employee stock purchases	—		—	7,793		19		455		—		—		474
Stock options exercised	—		—	44,491		111		1,402		—		—		1,513
Restricted stock awards	—		—	39,431		99		(99)		—		—		—
Stock issued pursuant to restricted stock units	—		—	35,903		90		(90)		—		—		—
Common stock repurchased - buyback plan	—		—	(32,900)		(82)		(2,048)		—		—		(2,130)
Common stock repurchased	—		—	(48,253)		(121)		(3,129)		—		—		(3,250)
Share-based compensation expense	—		—	—		—		4,704		—		—		4,704
Balance, September 30, 2016	—	$	—	24,209,122	$	60,523	$	705,124	$	354,490	$	3,995	$	1,124,132
Balance, December 31, 2016	—	$	—	24,230,392	$	60,576	$	711,307	$	370,916	$	(8,211)	$	1,134,588
Comprehensive income	—		—	—		—		—		85,133		4,423		89,556
Cash dividends declared on common stock at $0.99 per share	—		—	—		—		—		(28,956)		—		(28,956)
Employee stock purchases	—		—	6,742		17		536		—		—		553
Stock options exercised	—		—	33,896		84		1,050		—		—		1,134
Common stock issued for Southeastern Bank Financial Corp. acquisition	—		—	4,978,338		12,446		422,163		—		—		434,609
Restricted stock awards	—		—	20,683		51		(51)		—		—		—
Common stock repurchased	—		—	(40,484)		(101)		(3,525)		—		—		(3,626)
Stock issued pursuant to restricted stock units	—		—	37,802		95		(95)		—		—		—
Share-based compensation expense	—		—	—		—		4,967		—		—		4,967
Balance, September 30, 2017	—	$	—	29,267,369	$	73,168	$	1,136,352	$	427,093	$	(3,788)	$	1,632,825


			Intial			Subsequent
	As Recorded		Fair Value			Fair Value			As Recorded by
(Dollars in thousands)	by SBFC		Adjustments			Adjustments			the Company
Assets
Cash and cash equivalents	$	72,043	$	—		$	—		$	72,043
Investment securities		591,824		(1,770)	(a)		—			590,054
Loans held for sale		13,652		—			—			13,652
Loans, net of allowance and mark		1,060,618		(10,668)	(b)		—			1,049,950
Premises and equipment		25,419		(2,212)	(c)		—			23,207
Intangible assets		140		17,980	(d)		—			18,120
OREO and repossessed assets		580		(30)	(e)		(165)	(e)		385
Bank owned life insurance		44,513		—			—			44,513
Deferred tax asset		16,247		(687)	(f)		850	(f)		16,410
Other assets		7,545		(482)	(g)		—			7,063
Total assets	$	1,832,581	$	2,131		$	685		$	1,835,397

Liabilities
Deposits:
Noninterest-bearing	$	262,967	$	—		$	—		$	262,967
Interest-bearing		1,257,953		—			—			1,257,953
Total deposits		1,520,920		—			—			1,520,920
Federal funds purchased and securities sold under agreements to repurchase		1,014		—			—			1,014
Other borrowings		110,620		(1,120)	(h)		—			109,500
Other liabilities		19,980		5,553	(i)		2,210	(i)		27,743
Total liabilities		1,652,534		4,433			2,210			1,659,177
Net identifiable assets acquired over (under) liabilities assumed		180,047		(2,302)			(1,525)			176,220
Goodwill		—		257,370			1,525			258,895
Net assets acquired over liabilities assumed	$	180,047	$	255,068		$	—		$	435,115

Consideration:
South State Corporation common shares issued										4,978,338
Purchase price per share of the Company's common stock									$	87.30

Company common stock issued ($434,609) and cash exchanged for fractional shares ($16)									$	434,625
Cash paid for stock option redemptions										490
Fair value of total consideration transferred									$	435,115


	Securities				Securities
	Held to Maturity				Available for Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	2,225	$	2,253	$	12,023	$	12,090
Due after one year through five years		1,153		1,179		109,509		110,127
Due after five years through ten years		300		300		275,960		278,021
Due after ten years		—		—		919,535		920,441
	$	3,678	$	3,732	$	1,317,027	$	1,320,679


	Less Than				Twelve Months
	Twelve Months				or More
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
(Dollars in thousands)	Losses		Value		Losses		Value
September 30, 2017:
Securities Available for Sale
Government-sponsored entities debt	$	473	$	68,366	$	169	$	11,830
State and municipal obligations		188		21,851		—		—
Mortgage-backed securities		4,457		455,145		566		35,917
Corporate stocks		—		—		—		—
	$	5,118	$	545,362	$	735	$	47,747
December 31, 2016:
Securities Available for Sale
Government-sponsored entities debt	$	846	$	84,642	$	—	$	—
State and municipal obligations		190		11,506		—		—
Mortgage-backed securities		7,148		592,228		77		2,058
Corporate stocks		—		—		347		1,395
	$	8,184	$	688,376	$	424	$	3,453
September 30, 2016:
Securities Available for Sale
Government-sponsored entities debt	$	36	$	11,962	$	—	$	—
State and municipal obligations		15		1,947		—		—
Mortgage-backed securities		106		56,023		37		2,325
Corporate stocks		—		—		245		1,496
	$	157	$	69,932	$	282	$	3,821


	January 3, 2017
	Loans Impaired
(Dollars in thousands)	at Acquisition
Contractual principal and interest	$	73,365
Non-accretable difference		(12,912)
Cash flows expected to be collected		60,453
Accretable difference		(4,603)
Carrying value	$	55,850


	Non-acquired		Acquired Non-Credit		Acquired Credit
(Dollars in thousands)	Loans		Impaired Loans		Impaired Loans		Total
Three Months Ended September 30, 2017:
Balance at beginning of period	$	40,149	$	—	$	3,741	$	43,890
Loans charged-off		(1,383)		(275)		—		(1,658)
Recoveries of loans previously charged off (1)		836		279		—		1,115
Net charge-offs		(547)		4		—		(543)
Provision for loan losses charged to operations		1,939		(4)		127		2,062
Provision for loan losses recorded through the FDIC loss share receivable		—		—		—		—
Reduction due to loan removals		—		—		(198)		(198)
Balance at end of period	$	41,541	$	—	$	3,670	$	45,211
Three Months Ended September 30, 2016:
Balance at beginning of period	$	36,939	$	—	$	3,752	$	40,691
Loans charged-off		(1,108)		(280)		—		(1,388)
Recoveries of loans previously charged off (1)		713		120		—		833
Net charge-offs		(395)		(160)		—		(555)
Provision		775		160		(23)		912
Benefit attributable to FDIC loss share agreements		—		—		—		—
Provision for loan losses charged to operations		775		160		(23)		912
Provision for loan losses recorded through the FDIC loss share receivable		—		—		—		—
Reduction due to loan removals		—		—		(326)		(326)
Balance at end of period	$	37,319	$	—	$	3,403	$	40,722


	Construction		Commercial		Commercial		Consumer						Other Income
	& Land		Non-owner		Owner		Owner		Home		Commercial		Producing				Other
(Dollars in thousands)	Development		Occupied		Occupied		Occupied		Equity		& Industrial		Property		Consumer		Loans		Total
Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, June 30, 2017	$	5,746	$	6,164	$	7,539	$	8,569	$	3,247	$	5,143	$	1,379	$	2,532	$	(170)	$	40,149
Charge-offs		(19)		—		—		—		(17)		(440)		(10)		(897)		—		(1,383)
Recoveries		333		80		92		65		38		31		29		168		—		836
Provision (benefit)		(88)		(7)		479		492		(171)		469		(10)		889		(114)		1,939
Balance, September 30, 2017	$	5,972	$	6,237	$	8,110	$	9,126	$	3,097	$	5,203	$	1,388	$	2,692	$	(284)	$	41,541
Loans individually evaluated for impairment	$	1,266	$	133	$	64	$	47	$	116	$	18	$	211	$	7	$	—	$	1,862
Loans collectively evaluated for impairment	$	4,706	$	6,104	$	8,046	$	9,079	$	2,981	$	5,185	$	1,177	$	2,685	$	(284)	$	39,679
Loans:
Loans individually evaluated for impairment	$	42,638	$	716	$	5,874	$	4,455	$	2,623	$	627	$	3,605	$	254	$	—	$	60,792
Loans collectively evaluated for impairment		724,319		949,154		1,272,613		1,450,303		417,137		781,130		190,730		371,504		12,645		6,169,535
Total non-acquired loans	$	766,957	$	949,870	$	1,278,487	$	1,454,758	$	419,760	$	781,757	$	194,335	$	371,758	$	12,645	$	6,230,327
Three Months Ended September 30, 2016
Allowance for loan losses:
Balance , June 30, 2016	$	4,665	$	4,656	$	8,003	$	7,530	$	3,148	$	4,269	$	1,812	$	2,014	$	842	$	36,939
Charge-offs		—		—		(16)		(45)		—		(31)		—		(1,016)		—		(1,108)
Recoveries		241		28		25		27		64		104		8		216		—		713
Provision (benefit)		(795)		(93)		516		338		69		368		(201)		1,094		(521)		775
Balance, September 30, 2016	$	4,111	$	4,591	$	8,528	$	7,850	$	3,281	$	4,710	$	1,619	$	2,308	$	321	$	37,319
Loans individually evaluated for impairment	$	359	$	181	$	65	$	58	$	38	$	385	$	289	$	4	$	—	$	1,379
Loans collectively evaluated for impairment	$	3,752	$	4,410	$	8,463	$	7,792	$	3,243	$	4,325	$	1,330	$	2,304	$	321	$	35,940
Loans:
Loans individually evaluated for impairment	$	3,431	$	764	$	6,352	$	3,127	$	1,599	$	1,453	$	4,319	$	142	$	—	$	21,187
Loans collectively evaluated for impairment		558,905		629,673		1,147,128		1,180,314		362,226		616,072		175,276		305,545		11,787		4,986,926
Total non-acquired loans	$	562,336	$	630,437	$	1,153,480	$	1,183,441	$	363,825	$	617,525	$	179,595	$	305,687	$	11,787	$	5,008,113


	Commercial				Commercial
	Loans Greater				Real Estate-
	Than or Equal		Commercial		Construction and		Residential				Commercial
(Dollars in thousands)	to $1 Million-CBT		Real Estate		Development		Real Estate		Consumer		and Industrial		Single Pay		Total
Three Months Ended September 30, 2017
Allowance for loan losses:
Balance, June 30, 2017	$	—	$	40	$	92	$	2,741	$	548	$	320	$	—	$	3,741
Provision (benefit) for loan losses before benefit attributable to FDIC loss share agreements		—		(40)		133		184		(85)		(65)		—		127
Benefit attributable to FDIC loss share agreements		—		—		—		—		—		—		—		—
Total provision (benefit) for loan losses charged to operations		—		(40)		133		184		(85)		(65)		—		127
Provision for loan losses recorded through the FDIC loss share receivable		—		—		—		—		—		—		—		—
Reduction due to loan removals		—		—		(36)		(149)		(1)		(12)		—		(198)
Balance, September 30, 2017	$	—	$	—	$	189	$	2,776	$	462	$	243	$	—	$	3,670
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	—	$	189	$	2,776	$	462	$	243	$	—	$	3,670
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		8,439		199,082		46,248		249,666		53,302		25,796		—		582,533
Total acquired credit impaired loans	$	8,439	$	199,082	$	46,248	$	249,666	$	53,302	$	25,796	$	—	$	582,533

Three Months Ended September 30, 2016
Allowance for loan losses:
Balance , June 30, 2016	$	—	$	35	$	151	$	2,592	$	778	$	196	$	—	$	3,752
Provision (benefit) for loan losses before benefit attributable to FDIC loss share agreements		—		—		—		2		(23)		(2)		—		(23)
Benefit attributable to FDIC loss share agreements		—		—		—		—		—		—		—		—
Total provision (benefit) for loan losses charged to operations		—		—		—		2		(23)		(2)		—		(23)
Provision for loan losses recorded through the FDIC loss share receivable		—		—		—		—		—		—		—		—
Reduction due to loan removals		—		5		(6)		(102)		(211)		(12)		—		(326)
Balance, September 30, 2016	$	—	$	40	$	145	$	2,492	$	544	$	182	$	—	$	3,403
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	40	$	145	$	2,492	$	544	$	182	$	—	$	3,403
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		10,958		220,489		47,081		268,968		61,866		26,658		—		636,020
Total acquired credit impaired loans	$	10,958	$	220,489	$	47,081	$	268,968	$	61,866	$	26,658	$	—	$	636,020



	Construction & Development						Commercial Non-owner Occupied							Commercial Owner Occupied
	September 30,		December 31,		September 30,			September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
(Dollars in thousands)	2017		2016		2016			2017		2016		2016		2017		2016		2016
Pass	$	755,633	$	567,398	$	548,984		$	939,125	$	701,150	$	615,521	$	1,247,881	$	1,149,417	$	1,118,421
Special mention		7,445		8,421		8,492			8,475		11,434		11,499		24,277		22,133		26,429
Substandard		3,879		4,645		4,860			2,270		2,131		3,417		6,329		6,195		8,630
Doubtful		—		—		—			—		—		—		—		—		—
	$	766,957	$	580,464	$	562,336		$	949,870	$	714,715	$	630,437	$	1,278,487	$	1,177,745	$	1,153,480


	Commercial & Industrial						Other Income Producing Property						Commercial Total
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	770,975	$	655,157	$	604,058	$	186,639	$	167,025	$	165,451	$	3,900,253	$	3,240,147	$	3,052,435
Special mention		8,894		14,325		11,246		6,090		9,280		12,099		55,181		65,593		69,765
Substandard		1,888		1,916		2,221		1,606		1,933		2,045		15,972		16,820		21,173
Doubtful		—		—		—		—		—		—		—		—		—
	$	781,757	$	671,398	$	617,525	$	194,335	$	178,238	$	179,595	$	3,971,406	$	3,322,560	$	3,143,373


	Consumer Owner Occupied						Home Equity						Consumer
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
(Dollars in thousands)	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	1,427,278	$	1,167,768	$	1,155,481	$	405,945	$	368,655	$	349,382	$	370,258	$	322,654	$	304,117
Special mention		14,914		15,283		14,370		7,346		8,145		8,493		316		468		611
Substandard		12,566		14,570		13,590		6,469		6,418		5,950		1,184		1,116		959
Doubtful		—		—		—		—		—		—		—		—		—
	$	1,454,758	$	1,197,621	$	1,183,441	$	419,760	$	383,218	$	363,825	$	371,758	$	324,238	$	305,687


	Other						Consumer Total
	September 30, 2017		December 31, 2016		September 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Pass	$	12,645	$	13,404	$	11,787	$	2,216,126	$	1,872,481	$	1,820,767
Special mention		—		—		—		22,576		23,896		23,474
Substandard		—		—		—		20,219		22,104		20,499
Doubtful		—		—		—		—		—		—
	$	12,645	$	13,404	$	11,787	$	2,258,921	$	1,918,481	$	1,864,740


							Commercial Non-owner
	Construction & Development						Occupied						Commercial Owner Occupied
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
(Dollars in thousands)	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	74,665	$	8,997	$	9,562	$	195,808	$	28,368	$	29,509	$	201,498	$	26,920	$	28,926
Special mention		1,403		253		278		3,806		6,171		6,173		4,048		—		—
Substandard		818		840		843		90		89		93		2,026		275		518
Doubtful		—		—		—		—		—		—		—		—		—
	$	76,886	$	10,090	$	10,683	$	199,704	$	34,628	$	35,775	$	207,572	$	27,195	$	29,444


							Other Income Producing
	Commercial & Industrial						Property						Commercial Total
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	95,523	$	13,475	$	14,016	$	74,994	$	38,361	$	42,159	$	642,488	$	116,121	$	124,172
Special mention		5,385		117		122		1,208		273		276		15,850		6,814		6,849
Substandard		519		49		63		722		708		717		4,175		1,961		2,234
Doubtful		—		—		—		—		—		—		—		—		—
	$	101,427	$	13,641	$	14,201	$	76,924	$	39,342	$	43,152	$	662,513	$	124,896	$	133,255


	Total Acquired
	Non-credit Impaired Loans
	September 30,		December 31,		September 30,
(Dollars in thousands)	2017		2016		2016
Pass	$	1,417,304	$	812,320	$	860,150
Special mention		24,570		13,355		14,066
Substandard		13,681		11,024		11,441
Doubtful		—		—		—
	$	1,455,555	$	836,699	$	885,657


	Commercial Loans Greater												Commercial Real Estate—
	Than or Equal to												Construction and
	$1 million-CBT						Commercial Real Estate						Development
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
(Dollars in thousands)	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	8,120	$	8,297	$	9,616	$	152,305	$	162,870	$	164,737	$	26,666	$	21,150	$	20,889
Special mention		—		—		1,000		22,638		26,238		32,081		6,455		12,643		14,092
Substandard		319		320		342		24,139		21,096		23,671		13,127		10,580		12,100
Doubtful		—		—		—		—		—		—		—		—		—
	$	8,439	$	8,617	$	10,958	$	199,082	$	210,204	$	220,489	$	46,248	$	44,373	$	47,081


	Residential Real Estate						Consumer						Commercial & Industrial
	September 30,		December 31,		September 30,		September 30,		December 31,		September 30,		September 30,		December 31,		September 30,
	2017		2016		2016		2017		2016		2016		2017		2016		2016
Pass	$	133,969	$	138,343	$	143,946	$	8,261	$	8,513	$	9,072	$	15,755	$	17,371	$	18,715
Special mention		50,488		52,546		54,597		17,733		19,685		20,635		1,397		4,614		4,476
Substandard		65,209		67,211		70,425		27,308		31,102		32,159		8,644		3,362		3,467
Doubtful		—		—		—		—		—		—		—		—		—
	$	249,666	$	258,100	$	268,968	$	53,302	$	59,300	$	61,866	$	25,796	$	25,347	$	26,658


	Total Acquired
	Credit Impaired Loans
	September 30,		December 31,		September 30,
	2017		2016		2016
Pass	$	345,076	$	356,544	$	366,975
Special mention		98,711		115,726		126,881
Substandard		138,746		133,671		142,164
Doubtful		—		—		—
	$	582,533	$	605,941	$	636,020


	30 - 59 Days		60 - 89 Days		90+ Days		Total				Total
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
September 30, 2017
Commercial real estate:
Construction and land development	$	728	$	76	$	483	$	1,287	$	765,670	$	766,957
Commercial non-owner occupied		26		567		85		678		949,192		949,870
Commercial owner occupied		2,382		300		1,824		4,506		1,273,981		1,278,487
Consumer real estate:
Consumer owner occupied		2,587		1,514		1,073		5,174		1,449,584		1,454,758
Home equity loans		841		416		1,361		2,618		417,142		419,760
Commercial and industrial		772		1,162		92		2,026		779,731		781,757
Other income producing property		76		100		252		428		193,907		194,335
Consumer		541		110		441		1,092		370,666		371,758
Other loans		—		—		—		—		12,645		12,645
	$	7,953	$	4,245	$	5,611	$	17,809	$	6,212,518	$	6,230,327
December 31, 2016
Commercial real estate:
Construction and land development	$	256	$	313	$	1,026	$	1,595	$	578,869	$	580,464
Commercial non-owner occupied		647		232		137		1,016		713,699		714,715
Commercial owner occupied		1,272		957		1,478		3,707		1,174,038		1,177,745
Consumer real estate:
Consumer owner occupied		1,473		246		1,454		3,173		1,194,448		1,197,621
Home equity loans		566		889		838		2,293		380,925		383,218
Commercial and industrial		1,033		216		345		1,594		669,804		671,398
Other income producing property		310		94		147		551		177,687		178,238
Consumer		666		355		395		1,416		322,822		324,238
Other loans		—		—		—		—		13,404		13,404
	$	6,223	$	3,302	$	5,820	$	15,345	$	5,225,696	$	5,241,041
September 30, 2016
Commercial real estate:
Construction and land development	$	548	$	249	$	1,079	$	1,876	$	560,460	$	562,336
Commercial non-owner occupied		655		768		207		1,630		628,807		630,437
Commercial owner occupied		1,795		71		1,267		3,133		1,150,347		1,153,480
Consumer real estate:
Consumer owner occupied		1,549		894		1,682		4,125		1,179,316		1,183,441
Home equity loans		1,000		186		832		2,018		361,807		363,825
Commercial and industrial		229		739		674		1,642		615,883		617,525
Other income producing property		318		187		413		918		178,677		179,595
Consumer		286		430		302		1,018		304,669		305,687
Other loans		—		—		—		—		11,787		11,787
	$	6,380	$	3,524	$	6,456	$	16,360	$	4,991,753	$	5,008,113


	Unpaid		Recorded		Gross
	Contractual		Investment		Recorded		Total
	Principal		With No		Investment		Recorded		Related
(Dollars in thousands)	Balance		Allowance		With Allowance		Investment		Allowance
September 30, 2017
Commercial real estate:
Construction and land development	$	46,664	$	954	$	41,684	$	42,638	$	1,266
Commercial non-owner occupied		2,361		207		509		716		133
Commercial owner occupied		9,504		3,936		1,938		5,874		64
Consumer real estate:
Consumer owner occupied		5,986		1,369		3,086		4,455		47
Home equity loans		3,184		716		1,907		2,623		116
Commercial and industrial		1,753		—		627		627		18
Other income producing property		4,334		—		3,605		3,605		211
Consumer		623		—		254		254		7
Other loans		—		—		—		—		—
Total	$	74,409	$	7,182	$	53,610	$	60,792	$	1,862
December 31, 2016
Commercial real estate:
Construction and land development	$	7,394	$	1,074	$	1,959	$	3,033	$	348
Commercial non-owner occupied		2,417		223		583		806		170
Commercial owner occupied		10,118		3,976		2,269		6,245		67
Consumer real estate:
Consumer owner occupied		7,090		2,120		3,553		5,673		80
Home equity loans		2,165		244		1,430		1,674		40
Commercial and industrial		2,335		—		1,263		1,263		386
Other income producing property		3,166		99		2,273		2,372		242
Consumer		394		—		145		145		4
Other loans		—		—		—		—		—
Total	$	35,079	$	7,736	$	13,475	$	21,211	$	1,337
September 30, 2016
Commercial real estate:
Construction and land development	$	7,744	$	1,331	$	2,100	$	3,431	$	359
Commercial non-owner occupied		2,372		228		536		764		181
Commercial owner occupied		10,204		4,301		2,051		6,352		65
Consumer real estate:
Consumer owner occupied		4,390		1,284		1,843		3,127		58
Home equity loans		2,054		251		1,348		1,599		38
Commercial and industrial		2,738		259		1,194		1,453		385
Other income producing property		5,167		101		4,218		4,319		289
Consumer		342		—		142		142		4
Other		—		—		—		—		—
Total	$	35,011	$	7,755	$	13,432	$	21,187	$	1,379


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Price		(Yrs.)	(000's)
Outstanding at January 1, 2017	246,535	$	42.53
Granted	33,634		91.23
Exercised	(29,030)		34.09
Outstanding at September 30, 2017	251,139		50.02	5.15	$	10,094
Exercisable at September 30, 2017	181,152		39.84	3.87	$	9,096
Weighted-average fair value of options granted during the year	$ 35.42


			Weighted Average
			September 30,		December 31,		September 30,
	Valuation Technique	Unobservable Input	2017		2016		2016
Nonrecurring measurements:
Non-acquired impaired loans	Discounted appraisals	Collateral discounts	3	%	6	%	7	%
OREO	Discounted appraisals	Collateral discounts and estimated costs to sell	23	%	18	%	24	%



			Unrealized Gains
			and Losses		Gains and
			on Securities		Losses on
	Benefit		Available		Cash Flow
(Dollars in thousands)	Plans		for Sale		Hedges		Total
Three Months Ended September 30, 2017
Balance at June 30, 2017	$	(5,962)	$	2,506	$	(241)	$	(3,697)
Other comprehensive income before reclassifications		—		80		3		83
Amounts reclassified from accumulated other comprehensive income (loss)		116		(325)		35		(174)
Net comprehensive income (loss)		116		(245)		38		(91)
Balance at September 30, 2017	$	(5,846)	$	2,261	$	(203)	$	(3,788)

Three Months Ended September 30, 2016
Balance at June 30, 2016	$	(5,762)	$	12,752	$	(480)	$	6,510
Other comprehensive income (loss) before reclassifications		—		(2,715)		32		(2,683)
Amounts reclassified from accumulated other comprehensive income		126		—		42		168
Net comprehensive income (loss)		126		(2,715)		74		(2,515)
Balance at September 30, 2016	$	(5,636)	$	10,037	$	(406)	$	3,995

Nine Months Ended September 30, 2017
Balance at December 31, 2016	$	(6,195)	$	(1,708)	$	(308)	$	(8,211)
Other comprehensive income (loss) before reclassifications		—		4,362		(35)		4,327
Amounts reclassified from accumulated other comprehensive income (loss)		349		(393)		140		96
Net comprehensive income		349		3,969		105		4,423
Balance at September 30, 2017	$	(5,846)	$	2,261	$	(203)	$	(3,788)

Nine Months Ended September 30, 2016
Balance at December 31, 2015	$	(6,015)	$	2,588	$	(444)	$	(3,871)
Other comprehensive income (loss) before reclassifications		—		7,524		(91)		7,433
Amounts reclassified from accumulated other comprehensive income (loss)		379		(75)		129		433
Net comprehensive income		379		7,449		38		7,866
Balance at September 30, 2016	$	(5,636)	$	10,037	$	(406)	$	3,995



(Dollars in thousands)
Quarter ending:
December 31, 2017	$	2,494
March 31, 2018		2,331
June 30, 2018		2,319
September 30, 2018		2,318
December 31, 2018		2,317
Thereafter		38,693
	$	50,472



		September 30,	% of			December 31,	% of			September 30,	% of
LOAN PORTFOLIO (ENDING balance)		2017	Total			2016	Total			2016	Total
Acquired loans:
Acquired non-credit impaired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	76,886	0.9	%	$	10,090	0.2	%	$	10,683	0.2	%
Commercial non-owner occupied		199,704	2.4	%		34,628	0.5	%		35,775	0.5	%
Total commercial non-owner occupied real estate		276,590	3.3	%		44,718	0.7	%		46,458	0.7	%
Consumer real estate:
Consumer owner occupied		492,615	6.0	%		408,270	6.1	%		435,132	6.7	%
Home equity loans		164,291	2.0	%		160,879	2.4	%		168,758	2.6	%
Total consumer real estate		656,906	8.0	%		569,149	8.5	%		603,890	9.3	%
Commercial owner occupied real estate		207,572	2.5	%		27,195	0.4	%		29,444	0.4	%
Commercial and industrial		101,427	1.2	%		13,641	0.2	%		14,201	0.2	%
Other income producing property		76,924	0.9	%		39,342	0.6	%		43,152	0.7	%
Consumer non real estate		136,136	1.6	%		142,654	2.1	%		148,512	2.3	%
Other		-	-	%		-	-	%		-	-	%
Total acquired non-credit impaired loans		1,455,555	17.5	%		836,699	12.5	%		885,657	13.6	%
Acquired credit impaired loans:
Commercial non-owner occupied real estate:
Construction and land development		39,400	0.5	%		39,891	0.6	%		42,201	0.6	%
Commercial non-owner occupied		105,373	1.3	%		109,453	1.6	%		116,423	1.8	%
Total commercial non-owner occupied real estate		144,773	1.8	%		149,344	2.2	%		158,624	2.4	%
Consumer real estate:
Consumer owner occupied		146,256	1.8	%		149,257	2.2	%		156,628	2.4	%
Home equity loans		67,138	0.8	%		72,857	1.1	%		74,807	1.1	%
Total consumer real estate		213,394	2.6	%		222,114	3.3	%		231,435	3.5	%
Commercial owner occupied real estate		90,200	1.1	%		94,593	1.4	%		99,098	1.5	%
Commercial and industrial		17,974	0.2	%		18,262	0.3	%		20,720	0.3	%
Other income producing property		63,334	0.7	%		62,856	0.9	%		64,826	1.0	%
Consumer non real estate		52,858	0.6	%		58,772	0.9	%		61,317	0.9	%
Other		-	-	%		-	-	%		-	-	%
Total acquired credit impaired loans		582,533	7.0	%		605,941	9.0	%		636,020	9.6	%
Total acquired loans		2,038,088	24.5	%		1,442,640	21.5	%		1,521,677	23.2	%
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development		766,957	9.3	%		580,464	8.7	%		562,336	8.6	%
Commercial non-owner occupied		949,870	11.5	%		714,715	10.7	%		630,437	9.7	%
Total commercial non-owner occupied real estate		1,716,827	20.8	%		1,295,179	19.4	%		1,192,773	18.3	%
Consumer real estate:
Consumer owner occupied		1,454,758	17.6	%		1,197,621	17.9	%		1,183,441	18.1	%
Home equity loans		419,760	5.1	%		383,218	5.7	%		363,825	5.6	%
Total consumer real estate		1,874,518	22.7	%		1,580,839	23.6	%		1,547,266	23.7	%
Commercial owner occupied real estate		1,278,487	15.4	%		1,177,745	17.7	%		1,153,480	17.7	%
Commercial and industrial		781,757	9.5	%		671,398	10.0	%		617,525	9.4	%
Other income producing property		194,335	2.4	%		178,238	2.7	%		179,595	2.8	%
Consumer non real estate		371,758	4.5	%		324,238	4.9	%		305,687	4.7	%
Other		12,645	0.2	%		13,404	0.2	%		11,787	0.2	%
Total non-acquired loans		6,230,327	75.5	%		5,241,041	78.5	%		5,008,113	76.8	%
Total loans (net of unearned income)	$	8,268,415	100.0	%	$	6,683,681	100.0	%	$	6,529,790	100.0	%


	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2017			2017			2016			2016			2016
Non-acquired:
Nonaccrual loans	$	11,509		$	12,100		$	11,909		$	12,485		$	12,386
Accruing loans past due 90 days or more		529			432			77			281			125
Restructured loans - nonaccrual		858			967			1,049			1,979			2,499
Total nonperforming loans		12,896			13,499			13,035			14,745			15,010
Other real estate owned (2)		6,219			4,519			5,653			3,927			6,585
Other nonperforming assets (3)		111			114			52			71			29
Total non-acquired nonperforming assets		19,226			18,132			18,740			18,743			21,624
Acquired non-credit impaired:
Nonaccrual loans		5,457			5,134			4,915			4,728			4,633
Accruing loans past due 90 days or more		944			659			35			106			—
Total acquired nonperforming loans (1)		6,401			5,793			4,950			4,834			4,633
Acquired OREO and other nonperforming assets:
Covered OREO (2)		—			—			—			—			—
Acquired OREO not covered under loss share (2)		7,308			9,911			14,355			14,389			15,626
Other acquired nonperforming assets (3)		538			528			637			637			653
Total acquired OREO and other nonperforming assets		7,846			10,439			14,992			15,026			16,279
Total nonperforming assets	$	33,473		$	34,364		$	38,682		$	38,603		$	42,536

Excluding Acquired Assets
Total NPAs as a percentage of total loans and repossessed assets (4)		0.31	%		0.30	%		0.34	%		0.36	%		0.43	%
Total NPAs as a percentage of total assets (5)		0.17	%		0.16	%		0.17	%		0.21	%		0.25	%
Total NPLs as a percentage of total loans (4)		0.21	%		0.23	%		0.23	%		0.28	%		0.30	%

Including Acquired Assets
Total NPAs as a percentage of total loans and repossessed assets (4)		0.40	%		0.42	%		0.49	%		0.58	%		0.65	%
Total NPAs as a percentage of total assets		0.30	%		0.31	%		0.35	%		0.43	%		0.48	%
Total NPLs as a percentage of total loans (4)		0.23	%		0.24	%		0.23	%		0.29	%		0.30	%


						(d) Maximum
					(c) Total	Number (or
					Number of	Approximate
					Shares (or	Dollar Value) of
					Units)	Shares (or
	(a) Total				Purchased as	Units) that May
	Number of				Part of Publicly	Yet Be
	Shares (or		(b) Average		Announced	Purchased
	Units)		Price Paid per		Plans or	Under the Plans
Period	Purchased		Share (or Unit)		Programs	or Programs

July 1 - July 31	243	*	$	85.35	—	1,000,000
August 1 - August 31	—			—	—	1,000,000
September 1 - September 30	—			—	—	1,000,000

Total	243				—	1,000,000