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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Amendment No. 1

Commission file number 001-12669

(Exact name of registrant as specified in its charter)

(800) 277-2175

(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:

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Securities registered pursuant to Section 12 (g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒.

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 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, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 Act). Yes ☐ No ☒.

The aggregate market value of the voting stock of the registrant held by non-affiliates was $2,512,032,000 based on the closing sale price of $73.67 per share on June 30, 2019. For purposes of the foregoing calculation only, all directors and executive officers of the registrant have been deemed affiliates. The number of shares of common stock outstanding as of March 5, 2020 was 33,450,861.

Documents Incorporated by Reference

None.

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EXPLANATORY NOTE

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This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) amends our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“Original Filing”), filed with the U.S. Securities and Exchange Commission (“SEC”) on February 21, 2020 (“Original Filing Date”). The sole purpose of this Amendment No. 1 is to include the information required by Items 10 through 14 of Part III of Form 10-K. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in the Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We are filing this amendment No. 1 to include Part III information in our Form 10-K because we will not file a definitive proxy statement containing such information within 120 days after the end of the fiscal year covered by the Original Filing. The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement into Part III of the Original Filing is hereby deleted.

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In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), Part III, Items 10 through 14 and Part IV, Item 15 of the Original Filing are hereby amended and restated in their entirety. This Amendment No. 1 does not amend, modify, or otherwise update any other information in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing. In addition, this Amendment No. 1 does not reflect events that may have occurred subsequent to the Original Filing Date.

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Pursuant to Rule 12b-15 under the Exchange Act, this Amendment No. 1 also contains new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached hereto. Because no financial statements are included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4, and 5 of the certifications have been omitted.

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Unless otherwise indicated, references to “we,” “us,” “our,” “Company,” or “South State” mean South State Corporation and its subsidiaries, and references to “fiscal” mean the Company’s fiscal year ended December 31. References to the “parent company” mean South State Corporation.

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South State Corporation

Index

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THE BOARD OF DIRECTORS AND COMMITTEES

During 2019, our Board of Directors held eight meetings. Each director attended at least 75% of the aggregate of the total number of board meetings and the total number of meetings held by the committees of the Board on which he or she served.

There is no formal policy regarding director attendance at annual shareholder meetings, though we strongly encourage such attendance.  We recognize that conflicts may occasionally arise that will prevent a director from attending an annual meeting. All of our directors attended the 2019 annual meeting.

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Our Board of Directors maintains executive, audit, compensation, governance, and risk committees. The composition and frequency of meetings for these committees during 2019 were as follows:

The functions of these committees are as follows:

Executive Committee—The Executive Committee may, between meetings of the Board of Directors, exercise authority on behalf of the Board of Directors except with respect to those matters specifically delegated to another Board committee and those matters required by law, the rules and regulations of any securities exchange on which the Company’s securities are listed, or the Company’s or Bank’s charter or bylaws to be exercised by the full Board of Directors.  The Executive Committee has the authority to recommend and approve new policies and to review and approve present policies or policy updates and changes. The Executive Committee charter can be found on our website at https://www.southstatebank.com/ under Investor Relations.

Audit Committee—Our Board of Directors has determined that all members of the Audit Committee are independent directors under the independence requirements of The NASDAQ Stock Market, including the requirements of SEC Rule 10A-3. Our Board of Directors has also determined that Kevin P. Walker is an “Audit Committee financial expert” for purposes of the rules and regulations of the SEC adopted pursuant to the Sarbanes-Oxley Act of 2002 and has “banking or related financial expertise” as defined by the FDIC. The primary function of the Audit Committee is to assist our Board of Directors in overseeing (i) our accounting and financial reporting processes generally, (ii) the audits of our financial statements and (iii) our systems of internal controls regarding finance and accounting. In such role, the Audit Committee reviews the qualifications, performance, effectiveness and independence of our independent accountants and has the authority to appoint, evaluate and, where appropriate, replace our independent accountants. The Audit Committee also oversees our internal audit department and consults with management regarding the internal audit process and the effectiveness and reliability of our internal accounting controls. Our Board of Directors has adopted a charter for the Audit Committee, a copy of which is located on our website at https://www.southstatebank.com/ under Investor Relations.

Compensation Committee—Our Board of Directors has determined that all members of the Compensation Committee are independent directors under the independence requirements of The NASDAQ Stock Market applicable to directors who serve on the Compensation Committee. Further, our Board of Directors has also determined that each of the

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members of the Compensation Committee qualifies as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”). The Compensation Committee, among other functions, has overall responsibility for evaluating, and approving or recommending to the Board for approval, our director and officer compensation plans, policies and programs. Until January 2019, following recommendations by the Compensation Committee, the full Board of Directors was responsible for approving or disapproving compensation paid to our Chief Executive Officer and each of our other executive officers, other than compensation that was approved by the Compensation Committee under our Omnibus Stock and Performance Plan or our Annual Incentive Plan. The Compensation Committee charter was amended in January of 2019 to provide that the Compensation Committee shall review and approve the compensation of all our executives and officers as it deems appropriate. The Compensation Committee, which currently consists of five independent directors, is required to be made up of no fewer than three independent directors who are recommended by the Chairman of the Board of Directors and approved by the Board. The Compensation Committee’s processes and procedures for considering and determining executive compensation are described below under “Compensation Discussion and Analysis.” The Compensation Committee charter can be found on our website at https://www.southstatebank.com/ under Investor Relations.

Governance Committee—Our Board of Directors has determined that all members of the Governance Committee are independent directors under the independence requirements of The NASDAQ Stock Market applicable to directors who serve on the Governance Committee. The Governance Committee identifies and recommends individuals qualified to become Board members, reviews our corporate governance practices and recommends changes thereto, and assists our Board in its periodic review of the Board’s performance. The Governance Committee charter can be found on our website at https://www.southstatebank.com/ under Investor Relations.

The Governance Committee acts as the nominating committee for the purpose of recommending to the Board of Directors nominees for election to the Board. The Governance Committee has not established any specific, minimum qualifications that must be met for a person to be nominated to serve as a director, and the Governance Committee has not identified any specific qualities or skills that it believes are necessary to be nominated as a director. The Governance Committee charter provides that potential candidates for the Board, including any nominees submitted by shareholders in accordance with our Bylaws, are to be reviewed by the Governance Committee and that candidates are selected based on a number of criteria, including a proposed nominee’s independence, age, skills, occupation, diversity, experience and any other factors beneficial to the Company in the context of the needs of the Board. The Governance Committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, Governance Committee members consider and discuss diversity, among other factors, with a view toward the needs of the Board of Directors as a whole. The Governance Committee members generally conceptualize diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoints, professional experience, education, skills and other qualities or attributes that contribute to Board heterogeneity when identifying and recommending director nominees. The Governance Committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with its goal of creating a Board of Directors that best serves our needs and the interest of our shareholders.

The Governance Committee has performed a review of the experience, qualifications, attributes and skills of the Board’s current membership, including the director nominees for election to the Board of Directors and the other members of the Board, and believes that the current members of the Board, including the director nominees, as a whole possess a variety of complementary skills and characteristics, including the following:

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Each individual director has qualifications and skills that the Governance Committee believes, together as a whole, create a strong, well-balanced Board. The experiences and qualifications of our directors are found in the table on pages 4-7.

The Governance Committee will consider director nominees identified by its members, other directors, our officers and employees and other persons, including our shareholders. For a shareholder to nominate a director candidate, the shareholder must comply with the advance notice provisions and other requirements of our Bylaws. Each notice must state, among other things:

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In addition to the information required above, each notice must also state, among other things, as to each person, if any, whom the shareholder proposes to nominate for election or re-election to the board of directors:

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For a complete description of the procedures and disclosure requirements to be complied with by shareholders in connection with submitting director nominations, shareholders should refer to our Bylaws.

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Risk Committee—The Risk Committee of our Board of Directors provides assistance to the Board of Directors by striving to identify, assess, and monitor key business risks that may impact our operations and results. The charter for the Risk Committee can be found at https://www.southstatebank.com/ under Investors Relations.

While the Risk Committee oversees and reviews our risk functions to monitor key business risks, management is ultimately responsible for designing, implementing, and maintaining an effective risk management program to identify, plan for, and respond to our material risks. The Risk Committee charter acknowledges that our Audit Committee is primarily responsible for certain risks, including accounting and financial reporting. Although the Risk Committee does not have primary responsibility for the risks which are subject to the jurisdiction of the Audit Committee, it is anticipated that on occasion certain results from audit functions will be reviewed by the Risk Committee.

Code of Ethics and Corporate Governance Guidelines

Code of Ethics—Our Board of Directors and the Board of Directors of the Bank have adopted a Code of Ethics to provide ethical guidelines for the activities of our, and our subsidiaries’, agents, attorneys, directors, officers, and employees (including, among others, our chief executive officer, chief financial officer, principal accounting officer and all mangers reporting to these individuals who are responsible for accounting and financial reporting). The Code of Ethics is intended to promote, train, and encourage adherence in business and personal affairs to a high ethical standard and also helps maintain the Company as an institution that serves the public with honesty, integrity and fair-dealing. The Code of Ethics is designed to comply with the Sarbanes-Oxley Act of 2002, and certain other laws that provide guidelines in connection with possible breaches of fiduciary duty, dishonest efforts to undermine financial institution transactions and the intent to corrupt or reward a Company employee or other Company representative. A copy of the Code of Ethics can be found on our website at https://www.southstatebank.com/ under Investor Relations. We will disclose any future amendments to, or waivers from, provisions of these ethics policies and standards on our website promptly as practicable, as and to the extent required under The NASDAQ Stock Market listing standards and applicable SEC rules.

Board of Directors’ Corporate Governance Guidelines—Our Board of Directors and the Board of Directors of the Bank have each adopted certain guidelines governing the qualifications, conduct and operation of the Board. Among other things, these guidelines outline the duties and responsibilities of each director, and establish certain minimum requirements for director training. Each director is required to read, review and sign the corporate governance guidelines on an annual basis. A copy of these guidelines can be found on our website at https://www.southstatebank.com/ under Investor Relations.

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Board Leadership Structure and Role in Risk Oversight

We are focused on our corporate governance practices and value independent Board oversight as an essential component of strong corporate performance to enhance shareholder value. Our commitment to independent oversight is demonstrated by the fact that over 73% of all of our directors are independent. In addition, our Board has determined all of the members of our Board’s Audit, Compensation, Risk and Governance Committees are independent. See the discussion entitled “Certain Relationships and Related Transactions” on page 50 for additional information concerning Board independence.

In view of the Board of Directors extensive oversight responsibilities, we believe it is beneficial to have separate individuals in the role of Chairman and Chief Executive Officer. Our Board believes that it is preferable for Mr. Horger to serve as Chairman of the Board because of his strong institutional knowledge of our business, history, industry, markets, organization and executive management gained in his 20 years of experience in a leadership position on the Board. We believe it is the Chief Executive Officer’s responsibility to manage the Company and the Chairman’s responsibility to guide the Board as the Board provides leadership to our executive management. Traditionally, the Company has maintained the separateness of the roles of the Chairman and the Chief Executive Officer. In making its decision to continue to have a separate individual serve as Chairman and Chief Executive Officer, the Board considered the time and attention that Mr. Hill is required to devote to managing our day-to-day operations. We believe that this Board leadership structure is appropriate in maximizing the effectiveness of Board oversight and in providing perspective to our business that is independent from executive management.

Our Board of Directors oversees risk through the various Board standing committees, principally the Audit Committee and the Risk Committee, which report directly to the Board. Our Audit Committee is primarily responsible for overseeing our accounting and financial reporting risk management processes on behalf of the full Board of Directors. The Audit Committee focuses on financial reporting risk and oversight of the internal audit process. It receives reports from management at least quarterly regarding our assessment of risks and the adequacy and effectiveness of internal control systems, and also reviews credit and market risk (including liquidity and interest rate risk), and operational risk (including compliance and legal risk). Our Chief Credit Officer and Chief Financial Officer meet with the Audit Committee on a quarterly basis in executive sessions to discuss any potential risks or control issues involving management. Our Chief Risk Officer meets with the Risk Committee each quarter to identify, assess, and monitor key business risks that may impact our operations and results.

With respect to cybersecurity, the goal is to manage the Cybersecurity and Information Security Risk across the Enterprise to safeguard sensitive Bank Information including NPPI and to ensure the availability and integrity of the Technology Systems that the Bank relies upon to serve and protect its customers. On a regular basis, we track and report our results/data in the form of Key Risk Indicators and Key Performance Indicators to the Risk Committee to demonstrate compliance with industry best practices, governmental standards and guidelines. In addition, the Bank continually strives to further the Cyber and Information Security Program maturity via new and evolving Cyber controls as a way to address and prevent future risks and continually reports those to the Risk Committee. While the Risk Committee, and the Board of Directors to which it reports, oversees our cybersecurity risk management, management is responsible for the day-to-day cybersecurity risk management processes. Threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. Our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. While we believe that our cybersecurity programs are appropriate and have been effective to prevent material incidents thus far, risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Each of the Board’s standing committees, as described above, is involved to varying extents in the following:

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The full Board of Directors focuses on the risks that it believes to be the most significant facing the Company and our general risk management strategy. The full Board of Directors also seeks to ensure that risks undertaken by the Company are consistent with the Board of Directors’ approved risk management strategies. While the Board of Directors oversees our risk management, management is responsible for the day-to-day risk management processes. We believe this division of responsibility is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.

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We recognize that different Board leadership structures may be appropriate for companies in different situations. We will continue to reexamine our corporate governance policies and leadership structures on an ongoing basis in an effort to ensure that they continue to meet our needs.

DELINQUENT SECTION 16(A) REPORTS

As required by Section 16(a) of the Exchange Act, our directors and executive officers are required to report periodically their ownership of our stock and any changes in ownership to the SEC. Based on written representations made by these affiliates to the Company and a review of the Forms 3, 4 and 5, it appears that all such reports for these persons were filed timely in 2019, except for one late Form 4 relating to 1,332 shares of Restricted Stock Units granted to Keith S. Rainwater, Principal Accounting Officer, on October 23, 2019, pursuant to which the related Form 4 was inadvertently not reported until October 29, 2019.

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Part 1—Executive Summary

The Compensation Committee seeks to provide compensation arrangements for our executive officers that are designed to retain and attract talented executives who can perform at a high level and manage the Company in our shareholders’ best interest. Among other things, these compensation arrangements are intended to align executive compensation with our performance, both on a short-term basis and a long-term basis. This is accomplished through incentive compensation that is based primarily on our performance and secondarily on individual contributions. In this Amendment No. 1, our “named executive officers,” or NEOs, are the individuals who served as our principal executive officer, our principal financial officer and our three other most highly compensated executive officers in 2019, as set forth in the following table:

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Our mission is to build a high-performing bank based on a balance of soundness, profitability and growth, moving us forward to our longer-term financial targets. We believe we will accomplish this through relationship banking, delivered by engaged employees with clear strategic goals, objectives and values. These priorities have enabled us to be well-positioned to take advantage of strategic growth opportunities in the past ten years.  Our culture, focused values and strong management team seek to drive these priorities and are the core contributors of our success.

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The following summarizes certain significant events for us in 2019:

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Additionally, on January 25, 2020, we entered into a merger agreement with CenterState Bank Corporation, a Florida corporation (“CenterState”). Under the merger agreement, the Company and CenterState have agreed to combine their respective companies in an all-stock merger of equals, pursuant to which CenterState will merge with and into the Company, with the Company continuing as the surviving entity. The merger agreement was approved by the boards of directors of the Company and CenterState and is subject to shareholder and regulatory approval and other customary closing conditions. If the merger is completed, our total assets are expected to exceed $34 billion and will create the eighth largest bank headquartered in the Southeast.

We believe that key 2019 indicators of soundness, profitability and growth include the following:

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Soundness - Our loan portfolio is our largest asset and having a sound loan portfolio is a foundation of our business model.  

For 2019:

As discussed below, our performance-based annual cash incentive plan included a metric related to regulatory soundness, which includes an asset quality component, weighed at 25%.

Profitability - We believe earnings per share (EPS) is generally highly correlated with value creation for our shareholders.

For 2019:

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As discussed below, our performance-based annual cash incentive plan included a profitability metric of adjusted EPS, weighted at 75%. Our long-term incentive plan also includes profitability metrics of adjusted EPS (weighted at 67%) and adjusted ROATCE (weighted at 33%).

*Please see “Non-GAAP Financial Measures” beginning on page 43 in our Annual Report on Form 10-K for the year ended December 31, 2019, for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

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Growth - Growth results in potentially higher profitability and is measured by loans, deposits and total assets. For 2019:  

Key 2019 Compensation Decisions by the Compensation Committee

Our Compensation Committee made the following key compensation decisions during 2019:

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Consistent with our compensation philosophy, our NEO compensation is focused on performance-based compensation that is variable and subject to the attainment of specified performance metrics. The chart below shows the average pay mix for the Chief Executive Officer and the average of our other NEOs compared to recent peer practices.  As reflected in the chart, the pay mix for our Chief Executive Officer and other NEOs was more weighted toward performance-based compensation than at peer companies.

For 2019, we paid CEO cash incentives at 73.12% of the maximum grant level and paid between 72.90% to 74.50% of the maximum grant level for our other NEOs, based on results for the year as set forth under the annual cash incentive component of the 2019 Executive Incentive Plan described below.

Part 2—South State Executive Compensation Process

Compensation Philosophy

In 2019, the Compensation Committee reviewed and validated its compensation philosophy with the assistance of the Compensation Committee’s independent compensation consultant. The purpose of the review was to ensure that compensation decisions made by the Compensation Committee and the Board of Directors were consistent with this philosophy. The fundamental philosophy of our compensation program is to offer competitive compensation opportunities for executive officers that:

Our philosophy is to structure compensation that is designed to retain and reward executive officers who are capable of leading us in achieving our business objectives. The Compensation Committee considers this philosophy as it develops incentive plans. Cash incentives for 2019 were designed to reward executives for achieving annual financial and performance goals based on soundness and profitability, reflecting this focus. Long-term equity awards for 2019 were designed to reward our executive officers for the achievement of business objectives that benefit shareholders, to align their interests with those of our shareholders and to support the retention of a talented management team over time. When making compensation determinations for our executive officers, the Compensation Committee considers many

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factors in establishing executive officer compensation levels, including peer data and individual roles, responsibilities, tenure, and performance.

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Role of the Compensation Committee

The Compensation Committee is responsible for the design, implementation and administration of the compensation programs for our executive officers and directors in a manner consistent with our compensation philosophy. The Compensation Committee keeps the full Board of Directors apprised of its decisions and activities, and when appropriate, makes recommendations to the Board of Directors on items that require approval by the full Board of Directors.

Under the Compensation Committee’s Charter, the committee, among other things, annually:

The Compensation Committee may receive recommendations from the chairman of the Board of Directors with respect to the Chief Executive Officer’s performance in light of the goals and objectives relevant to the compensation of our Chief Executive Officer. As part of the Compensation Committee’s review and approval of the compensation of the other NEOs, the Chief Executive Officer reviews the performance of the other NEOs with the Compensation Committee and makes recommendations to the Compensation Committee about the total compensation of the other NEOs. The Chief Executive Officer does not participate in, and is not present during, deliberations or approvals by the Compensation Committee or the Board of Directors with respect to his own compensation.

Compensation Consultant

During 2019, the Compensation Committee engaged the services of McLagan, an Aon company, to provide independent compensation consulting services for both directors and executive management of the Company. McLagan reports directly to the Compensation Committee. The Compensation Committee has the sole authority to hire consultants and set the engagements and the related fees of those consultants.

The following consulting services were provided to the Compensation Committee in 2019:

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Compensation Committee’s Relationship with its Independent Compensation Consultant

The Compensation Committee considered the independence of McLagan in light of applicable SEC rules and The Nasdaq Stock Market listing standards. The Compensation Committee requested and received a report from McLagan addressing the independence of McLagan and its senior advisors. The following factors were considered: (1) services other than compensation consulting provided to us by McLagan; (2) fees paid by us as a percentage of McLagan’s total revenue; (3) policies or procedures maintained by McLagan that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisors of McLagan and a member of our Compensation Committee; (5) any stock of the Company owned by the senior advisors of McLagan; and (6) any business or personal relationships between our executive officers and the senior advisors of McLagan. The Compensation Committee discussed these considerations and concluded that the work performed by McLagan and McLagan’s senior advisors involved in the engagements did not raise any conflict of interest.

Compensation Benchmarking and Compensation Committee Functions

Each year, with assistance from McLagan, the Compensation Committee reviews the compensation practices of our peers in order to assess the competitiveness of the compensation arrangements of our NEOs. Although benchmarking is an active tool used to measure compensation structures among peers, it is only one of the tools used by the Compensation Committee to determine total compensation. Benchmarking is used by the Compensation Committee primarily to ascertain competitive total compensation levels (including base salary, equity awards, cash incentives, etc.) with comparable institutions. Using this data as a reference point, the Compensation Committee addresses pay-for-performance (meritocracy) as discussed further in the sections below on cash incentives and long-term retention. Peer performance, market factors, our performance and personal performance are all factors that the Compensation Committee considers when establishing total compensation, including incentives. This practice is in line with our meritocracy philosophy of pay. The Compensation Committee, at its discretion, may determine that it is in our best interest to negotiate total compensation packages that deviate from regular compensation and incentive levels in order to attract and retain specific talent.

The Compensation Committee reviews the composition of the peer group annually, at a minimum, and may change it as a result of mergers, changes to banks within the group, or changes within the Company. For 2019, the Company elected to maintain the 2018 peer group, with three peers excluded due to acquisition.  The criteria used to select the 2018 peer group are as follows:

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When making compensation determinations for our NEOs, our Compensation Committee uses many factors, peer data being one of them. In addition to peer pay data, we also assess individual roles, responsibilities, tenure, and performance to set NEO pay levels. When considering compensation decisions disclosed herein, the Compensation Committee reviewed a group of 23 peers with median assets of $14.3 billion. The specific members of the peer group selected for reference in determining 2019 compensation are as follows:

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Part 3—Key Components of Executive Compensation

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Base Salary

The Compensation Committee, with the assistance of McLagan, determines base salaries based on historical and anticipated individual contribution and performance, and reviews base salaries in the context of comparability with the key executives of our peer group. Effective January 1, 2019, the Compensation Committee provided the following merit increases in base salary to our NEOs as a result of our 2018 performance and to maintain competitive salaries within our peer group:  Mr. Hill (8.68%); Mr. Lapointe (15.95%); Mr. Goettee (2.75%); Mr. Pollok (10%); and Mrs. Brooks (17.16%).  The increase in base salary for Mr. Lapointe was also due to his new role as President of the Bank.

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2019 Executive Incentive Plan

The 2019 Executive Incentive Plan was composed of two elements—(1) the Annual Cash Incentive Plan, and (2) the Long-Term Equity Incentive Awards, with grants made under the 2012 Omnibus Stock and Performance Plan, as amended and restated (the “Omnibus Plan”), each weighted at 50% of the NEOs incentive opportunity, as follows:

For 2019, the Compensation Committee chose the following two metrics:

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The Compensation Committee chose the profitability metric because it believes this metric is a key component in building shareholder value and chose the soundness measure to ensure that our regulatory soundness was not sacrificed at the expense of our growth or profitability.  The Compensation Committee established threshold, target and maximum performance goals for the profitability metric, with threshold representing the minimum level of performance for which the NEO would earn a payment. Actual performance between threshold, target and maximum performance levels is interpolated linearly to determine the exact level of achievement (provided the minimum performance triggers are achieved).  

The soundness measure is considered a “yes/no” objective, as the level of performance is either met or is not met. If the soundness measure is met, the Compensation Committee determined that each NEO would receive the maximum performance level for this metric.  

In addition to the performance metrics referenced above, each of the following “minimum performance triggers”

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were required to be achieved for each NEO to receive any cash incentives under the AIP (both of which were achieved):

The goals and the actual results of the AIP are outlined in the table below:

Long-Term Equity Incentive Plan

We do not disclose forward-looking goals for our multi-year incentive programs, because we do not provide forward-looking guidance to our investors with respect to multi-year periods and this information is competitively sensitive. Consistent with our past and current practice, we disclose multi-year performance goals in full after the close of the performance period.

The PRSUs granted in 2019 vest based on the attainment of the following pre-established performance goals over the three-year period ending December 31, 2021, if the NEO remains employed through the performance period subject to certain exceptions.

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The grants are reported in the “Summary Compensation Table” on page 33 at target level, in accordance with FASB ASC Topic 718.

Results of 2017 Long-Term Incentive Plan Which Ended in 2019

On January 1, 2017, the Compensation Committee granted PRSUs to each of our NEOs. The vesting of 67% of these PRSUs was dependent on achieving pre-determined levels of cumulative adjusted EPS, with the remaining 33% vesting based on adjusted ROATCE.  Both objectives were measured over the three-year performance period from January 1, 2017 through December 31, 2019. Vesting also required achievement of positive earnings sufficient to cover dividends for the performance period and a minimum specified regulatory rating as of the end of the performance period (both of which were achieved). The Compensation Committee determined that payouts with respect to the performance goals were earned at 100% of the maximum award on December 31, 2019, as indicated in the table below.

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The PRSUs that have been earned and have vested in 2019 are shown in the Option Exercises and Stock Vested table on page 36.

Part 4—Other Aspects of Our Executive Compensation Program

Benefits

During 2019, we maintained various employee benefit plans that constitute a portion of the total compensation package available to the NEOs and all eligible employees. These plans consisted of the following:

Employees’ Pension Plan— The NEOs (other than Mr. Lapointe) were participants in a non-contributory defined pension plan which covered substantially all of our employees hired by legacy SCBT Financial Corporation (now the Company) before January 1, 2006. Pension benefits are paid based upon age of the employee and years of service with the Company. We froze the pension plan in July 2009, and no further benefits are being accrued. In March 2018, the Board voted to terminate the pension plan effective September 1, 2018. Assets of the pension plan were fully distributed in the fourth quarter of 2019. See the Pension Benefits table and the accompanying footnotes and narrative for more information.

Retirement Savings Plan-401(k)—Each of the NEOs are participants in a defined contribution plan which in 2019 permitted employees to contribute a portion of their compensation, on a tax-deferred basis, up to certain IRS compensation deferral amount limits applicable to a tax-qualified retirement plan. We matched 100% up to 4% of participants’ deferrals (Safe Harbour) and 0.375% discretionary at year-end. See the table in footnote 7 of the Summary Compensation Table.

Health Care—The NEOs are eligible to receive medical and dental coverage that is provided to all eligible employees.

Other Welfare Benefits—The NEOs receive Paid Time Off (PTO) and other benefits available to all of our eligible employees.

The employee benefits for the NEOs discussed in the subsection above are determined by the same criteria applicable to all of our employees. These benefits help keep us competitive in attracting and retaining employees. We believe that our employee benefits are generally competitive with benefits provided by our peer group and are consistent with industry standards.

Deferred Compensation Plan—We make available to selected members of our senior management group, including all NEOs and/or other selected employees who are highly compensated, the opportunity to elect to defer current compensation for retirement income or other future financial needs. The plan is a nonqualified deferred compensation plan that is designed to be exempt from certain ERISA requirements as a plan that covers a select group of management and certain other highly compensated employees. Each year participants can choose to have their compensation for the upcoming year reduced by a certain whole percentage amount ranging between 5% and 80% or by a specific dollar amount (in all cases, subject to a minimum value established by us). In addition, we may make matching or partially-matching contributions for participant deferrals. We may also make discretionary contributions for any or all participant(s). Both of these types of employer contributions would be subject to certain vesting requirements. There are also forfeiture provisions, which can result from unvested amounts existing at terminations or from materially incorrect earnings that are subsequently adjusted or corrected. Deferrals may be held by a trustee in a grantor (rabbi) trust and may be invested in funds that mirror deemed investments selected by the participants and offered pursuant to the plan. Such a trust would not isolate assets for the benefit of the participants. Consequently, distributions made under the plan will be made from the general assets of the Bank which could be subject to claims of its creditors. Amounts deferred

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under the plan will generally be subject to income taxes payable by the participant in the year in which received (end of the deferral period), but these deferred amounts are subject to employment taxes in the year of deferral. No employer contributions have been made to this plan in 2019 or in the past to the above-named NEOs.

See the discussion entitled “Deferred Compensation Plan” for additional information.

Perquisites—We also provide limited perquisites to NEOs that are not available to all employees. Some examples of these include club and membership dues. The values of these items are presented in the Summary Compensation Table under the heading All Other Compensation. We and the Board of Directors believe that the use of each of these perquisites is important for the recruitment and retention of NEOs.

Role of Shareholder Say on Pay Vote

As required by Dodd-Frank, we held an annual advisory vote on the compensation of our executive officers, or a Say on Pay vote, at our 2019 annual meeting of shareholders. At the 2019 annual meeting of shareholders, 93.89% of the votes cast on the Say on Pay proposal were cast in support of the compensation of our named executive officers. While the 2019 shareholder vote reflected strong support for our executive compensation programs, the Compensation Committee, Board of Directors and executive management have evaluated compensation programs each year to ensure the plans have continued to align the interest of the executives with those of our shareholders and continued to strengthen the linkage of pay to performance. We engaged with proxy advisors during 2019 on compensation and we regularly participate in investor outreach regarding company performance.

At the Annual Meeting, we are submitting an advisory Say on Pay proposal for shareholders to vote on. See Proposal No. 2 for more information on the Say on Pay proposal.

Clawback Policy

The Compensation Committee is committed to adopting a formal clawback provision for adjustment or recovery of incentive awards or payments in the event the performance measures upon which they are based are restated or otherwise adjusted in a manner that would reduce the size of an award or payment. The Compensation Committee intends to fully comply with Dodd-Frank regarding this issue once rulemaking has been completed with respect to these provisions. Until formal guidance is available, the Compensation Committee will seek to address any situation that may arise and determine the proper and appropriate course of action in fairness to shareholders and NEO award recipients.

Share Ownership Guidelines

Our stock ownership guidelines call for NEOs to own equity representing a multiple of their salary and to retain this equity throughout their tenure with the Company. The specific share ownership guidelines are:

Our NEOs have five years from being named an NEO to comply with the stock ownership guidelines. As of the end of our fiscal year, all NEOs have exceeded their required ownership levels. Beneficially owned shares include shares held by a named executive officer, directly or indirectly, and unvested shares of restricted stock, as to which the executive officer has full voting privileges, but excludes vested and unexercised stock options. Until the stock ownership guidelines are achieved, the sale of shares of our common stock is restricted.

Equity Grant Practices

To address volatility concerns, the 30-day moving average of our stock was utilized to determine the number of PRSUs to be issued under the LTIP for 2019. The 30-day average is defined as the 30 trading days immediately preceding the last business day of the prior month. Beginning with the 2018 Long-Term Incentive Plan, the issuance of stock options was no longer a component of the long-term incentive plan.

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Employment and Non-Competition Agreements

Current Employment and Non-Competition Agreements

Each of our NEOs has an employment agreement. The purpose of these agreements is to attract and retain highly qualified executive officers, recognizing that termination and change in control protections are commonly provided at comparable financial institutions with which we compete for executive talent. In addition, the Compensation Committee believes change in control protections enhance the impartiality and objectivity of the NEOs in the event of a change in control transaction and better ensure that shareholder interests are protected. Finally, these agreements include non-competition provisions that further protect us should the NEO elect to pursue other employment opportunities. The employment agreements provide for the following:

See the discussion entitled “Potential Payments upon Termination or Change in Control,” which provides the amount of compensation each executive would receive under various termination events based upon the employment agreements.

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New Employment and Non-Competition Agreements

In connection with the execution of the merger agreement between the Company and CenterState, the Company has entered into amended and restated employment agreements with Messrs. Hill and Pollok, and the Bank entered into new employment agreements with Mrs. Brooks and Messrs. Lapointe and Goettee, in each case setting forth the terms of the NEO’s employment with the Company or the combined bank, as applicable, following the effective time of the merger (the “effective time”). The employment agreement with Mr. Hill is for an initial term from the effective time until December 31st of the fifth (5th) full calendar year following the effective time, and the employment agreements with Mrs. Brooks and Messrs. Lapointe and Goettee are for an initial term of three (3) years following the effective time, subject to extension for an additional year on December 31st of the fourth full calendar year following the effective time (in the case of Mr. Hill) or on the first anniversary of the effective time (in the case of Mrs. Brooks and Messrs. Lapointe and Goettee), unless either party provides notice of non-renewal before such anniversary date. Mr. Pollok’s employment agreement provides that he will serve as an employee until July 5, 2021 and thereafter will serve as a consultant until December 31, 2024.

The base salaries and short-term and long-term incentive opportunities (expressed as a percentage of annual base salary) contained in the employment agreements are as follows: Mr. Hill—$585,000, 115% and 280%; Mr. Pollok—$615,000 (while serving as an employee) or $375,000 (while serving as a consultant), 120% (for 2020 only) and 120% (for 2020 only); Mrs. Brooks—$500,000, 70% and 100%; Mr. Lapointe—$500,000, 70% and 100%; and Mr. Goettee—$425,000, 70% and 70%. The employment agreements each provide for payment of a one-time lump-sum cash payment payable within thirty (30) days following successful completion of the systems conversion of South State and CenterState (the “Pay to Integrate Award”) as follows: Mr. Hill—$3,300,000; Mr. Pollok—$1,600,000; and Mrs. Brooks and Messrs. Lapointe and Goettee—$330,000. The employment agreements with Messrs. Hill, Lapointe and Goettee and Mrs. Brooks also provide for the grant of a Company RSU (the “Pay to Lead Award”), which will vest in full on the second anniversary of the effective time subject to the NEO’s continued employment through such date (except as otherwise described below), with a grant date fair value for Mr. Hill of $3,300,000 and for Mrs. Brooks and Messrs. Lapointe and Goettee of $670,000. In addition, at the effective time, a payment will be deposited into a deferred compensation account maintained for Mr. Hill of $6,187,000 and for Mr. Pollok of $3,336,300, in respect of each of their existing contractually entitled payments.

If an NEO’s employment is terminated by the Company or the combined bank, as applicable, without cause or the NEO resigns for good reason, he or she would be entitled to the following payments and benefits:

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If an NEO’s employment is terminated by reason of death or disability, he or she would be entitled to substantially the same payments and benefits as would be payable upon a termination without cause or for good reason, excluding the cash severance payment. In the case of Mrs. Brooks and Messrs. Lapointe and Goettee, the NEO would not be entitled to the employer-paid medical and dental benefits described above in the case of disability, but his or her family would be entitled to such benefits for twelve (12) months following death.

If the services of Mr. Hill or Mr. Pollok are terminated by reason of retirement after age fifty-five (55) and ten (10) years of service to the Company, the applicable NEO would be entitled to full vesting of outstanding equity awards granted following the effective time, with performance-based awards remaining subject to applicable performance metrics, and to a prorated annual bonus for the year of retirement (in the case of Mr. Pollok, payment of a prorated annual bonus is only available if retirement occurs in 2020) based on actual performance. A termination of Mr. Hill’s employment on or following the expiration of the term of his employment agreement and the termination of Mr. Pollok’s services at the end of his consulting term would each be treated as a retirement for purposes of the employment agreements.

In consideration for the foregoing payments and benefits payable upon a termination by the Company or the combined bank, as applicable, without cause or by the NEO for good reason (and, in the case of Messrs. Hill and Pollok, benefits payable upon termination due to death, disability or retirement), each of the NEOs is required to execute a release of claims in favor of the Company or the combined bank, as applicable.  In addition, the employment agreements contain restrictive covenants concerning nondisclosure of confidential information at any time following a termination of employment, mutual nondisparagement of either party at any time following a termination of employment (in the case of Mrs. Brooks and Messrs. Lapointe and Goettee), noncompetition (for a period of two (2) years in the case of Messrs. Hill and Pollok and one (1) year in the case of Mrs. Brooks and Messrs. Lapointe and Goettee) and nonsolicitation of customers and employees for a period of two (2) years following termination of employment.  The severance benefits (and, in the case of Messrs. Hill and Pollok, the retirement benefits) described above are also contingent on the NEO’s compliance with the restrictive covenants.  In the event that payments to Messrs. Hill and Pollok become subject to Sections 280G and 4999 of the Code (a) as a result of the merger, the indemnification provisions in their prior employment agreements with the Company would apply or (b) as a result of a change in control that occurs following the effective time of the merger, such payments would be reduced if such reduction would leave the NEO better off on an after-tax basis.  In the event that payments to Mrs. Brooks or Messrs. Lapointe or Goettee become subject to Sections 280G and 4999 of the Code, such payments would be reduced if such reduction would leave such NEO better off on an after-tax basis.

Tax Deductibility of Compensation

Section 162(m) of the Code limits our ability to deduct certain compensation in excess of $1,000,000 paid to our Chief Executive Officer and to certain other executives. Prior to 2018, this limitation generally did not apply to compensation that qualified under applicable regulations as “performance-based.” In line with this, we historically aimed to design and approve the performance-based compensation paid to our NEOs so that such compensation would satisfy the requirements for deductibility under Section 162(m). Prior to 2018, the Compensation Committee considered Section 162(m) when making compensation decisions. However, other considerations, such as providing our NEOs with competitive and adequate incentives to remain with us and increase our business operations, financial performance and prospects, as well as rewarding extraordinary contributions, also significantly factored into the Compensation Committee’s decisions.

In December 2017, the Tax Cuts and Jobs Act was enacted. Under the Tax Cuts and Jobs Act, the qualified performance-based compensation exception to Section 162(m) that generally provided for the continued deductibility of performance-based compensation was repealed, effective for tax years commencing on or after January 1, 2018. Accordingly, commencing with our fiscal year ended December 31, 2018, compensation to our NEOs in excess of $1,000,000 will not be deductible unless it is paid pursuant to a written binding contract that was in effect on November 2, 2017, and not modified in any material respect on or after such date. Performance-based compensation awarded to our NEOs for periods prior to November 2, 2017, such as PRSUs granted in 2017 and prior years that have not yet been settled into shares of common stock, may potentially continue to qualify for the performance-based compensation exemption

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under Section 162(m). The United States Treasury has not yet issued comprehensive guidance on limitations on the continued deductibility of these awards. Accordingly, the future deductibility of these grandfathered awards is uncertain and cannot be guaranteed.

Governance of Compensation Programs

During 2018, a new incentive governance process was developed for the oversight of the Bank’s incentive plans to be compliant with the Federal Reserve’s guidance on Sound Incentive Compensation Practices. This included development of new incentive compensation policies and procedures along with a more robust risk review process. The Compensation Committee has ultimate authority regarding all incentive plans. This updated process includes the addition of an Incentive Steering Committee that reviews and recommends approval of annual incentive plans or changes to incentive plans to the Compensation Committee. The Incentive Steering Committee is also responsible for the annual risk review process of incentive plans. The Incentive Steering committee is co-chaired by the Chief Risk Officer and the Director of Human Resources.

At the January 2019 and 2020 meetings of the Compensation Committee, the Chief Risk Officer and the Director of Human Resources presented the incentive plan and risk review analysis for 2019 and 2020, respectively. Based on the Compensation Committee’s deliberations, the Compensation Committee concluded that our compensation policy and practices for 2019 and 2020 do not create risks that are likely to have a material adverse effect that would cause plan participants to take unnecessary risks.  

In general, SEC rules prohibit uncovered short sales of shares of our common stock by our executive officers, including the NEOs. Accordingly, our insider trading policy prohibits short sales of shares of our common stock by our executive officers, including the NEOs, and discourages all of our officers, directors, employees or agents, including consultants, from engaging in any hedging or monetization transactions relating to our common stock. The policy also requires all directors, executive officers subject to Section 16 of the Exchange, and certain of our designated employees and agents who may have access to material nonpublic information about us to pre-clear with our Treasurer or Chief Executive Officer any hedging transactions involving our common stock; however, such compliance officers are under no obligation to approve such request for pre-clearance. Further, if any hedging or monetization transaction is considered a short sale, it is prohibited.

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In 2019, no executive officer consulted with our Treasurer or Chief Executive Officer regarding hedging transactions.

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Compensation Committee Interlocks and Insider Participation

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Cynthia A. Hartley, Paula Harper Bethea Jean E. Davis, Thomas J. Johnson and James W. Roquemore served as members of the Compensation Committee during fiscal 2019. During fiscal 2019, there were no Compensation Committee interlocks and no insider participation in Compensation Committee decisions that were required to be reported under the rules and regulations of the Exchange Act.

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COMPENSATION COMMITTEE REPORT

This report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the Securities Act of 1933 or the Exchange Act.

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment No. 1.

This report is provided by the following independent directors, who comprise the Compensation Committee:

Cynthia A. Hartley, Chair

Paula Harper Bethea

Jean E. Davis

Thomas J. Johnson

James W. Roquemore

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