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Table of Contents 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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(Mark One)

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☒

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

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For the quarterly period ended June 30, 2023

OR

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☐

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

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For the transition period from              to              

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Commission file number 001-12669

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Graphic

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SOUTHSTATE CORPORATION

(Exact name of registrant as specified in its charter)

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South Carolina

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57-0799315

(State or other jurisdiction of incorporation)

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(I.R.S. Employer Identification No.)

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1101 First Street South, Suite 202

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Winter Haven, Florida

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33880

(Address of principal executive offices)

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(Zip Code)

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(863) 293-4710

(Registrant’s telephone number, including area code)

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Not Applicable

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

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

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Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $2.50 par value

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SSB

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The Nasdaq Global Select Market

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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  ☐

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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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No  ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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.

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Large Accelerated Filer ☒

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Accelerated Filer ☐

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Non-Accelerated Filer ☐

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Smaller Reporting Company ☐

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Emerging Growth Company ☐

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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. ☐

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

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

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​

​

​

​

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Class

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Outstanding as of August 2, 2023

Common Stock, $2.50 par value

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76,006,490

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Table of Contents 

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SouthState Corporation and Subsidiaries

June 30, 2023 Form 10-Q

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INDEX

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Page

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​

​

PART I — FINANCIAL INFORMATION

​

​

​

Item 1.

Financial Statements

​

​

​

​

​

Consolidated Balance Sheets at June 30, 2023 and December 31, 2022

3

​

​

​

​

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022

4

​

​

​

​

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022

5

​

​

​

​

Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended June 30, 2023 and 2022

6

​

​

​

​

Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2023 and 2022

7

​

​

​

​

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022

8

​

​

​

​

Notes to consolidated Financial Statements

9

​

​

​

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

47

​

​

​

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

81

​

​

​

Item 4.

Controls and Procedures

81

​

​

​

PART II — OTHER INFORMATION

​

​

​

Item 1.

Legal Proceedings

81

​

​

​

Item 1A.

Risk Factors

82

​

​

​

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

​

​

​

Item 3.

Defaults Upon Senior Securities

82

​

​

​

Item 4.

Mine Safety Disclosures

82

​

​

​

Item 5.

Other Information

82

​

​

​

Item 6.

Exhibits

83

​

​

​

2

Table of Contents 

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

​

SouthState Corporation and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except par value)

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

​

    

2023

    

2022

    

​

​

​

(Unaudited)

​

​

​

​

ASSETS

​

​

    

    

​

    

    

Cash and cash equivalents:

​

​

​

​

​

​

​

Cash and due from banks

​

$

552,900

​

$

548,387

​

Federal funds sold and interest-earning deposits with banks

​

​

694,581

​

​

580,491

​

Deposits in other financial institutions (restricted cash)

​

 

266,268

​

 

183,685

​

Total cash and cash equivalents

​

 

1,513,749

​

 

1,312,563

​

Trading securities, at fair value

​

​

56,580

​

​

31,263

​

Investment securities:

​

​

​

​

​

​

​

Securities held to maturity (fair value of $2,144,514 and $2,250,168)

​

 

2,585,155

​

 

2,683,241

​

Securities available for sale, at fair value

​

 

4,949,334

​

 

5,326,822

​

Other investments

​

 

196,728

​

 

179,717

​

Total investment securities

​

 

7,731,217

​

 

8,189,780

​

Loans held for sale

​

 

42,951

​

 

28,968

​

Loans:

​

​

​

​

​

​

​

Acquired - non-purchased credit deteriorated loans

​

​

5,275,913

​

​

5,943,092

​

Acquired - purchased credit deteriorated loans

​

​

1,269,983

​

​

1,429,731

​

Non-acquired loans

​

 

24,990,889

​

 

22,805,039

​

Less allowance for credit losses

​

 

(427,392)

​

 

(356,444)

​

Loans, net

​

 

31,109,393

​

 

29,821,418

​

Other real estate owned

​

 

1,080

​

 

1,023

​

Bank property held for sale

​

​

13,472

​

​

17,754

​

Premises and equipment, net

​

​

518,353

​

​

520,635

​

Bank owned life insurance ("BOLI")

​

​

979,494

​

​

964,708

​

Deferred tax assets

​

​

164,426

​

​

177,801

​

Derivatives assets

​

​

174,480

​

​

211,016

​

Mortgage servicing rights

​

​

87,539

​

​

86,610

​

Core deposit and other intangibles

​

 

102,256

​

 

116,450

​

Goodwill

​

​

1,923,106

​

​

1,923,106

​

Other assets

​

 

522,236

​

 

515,601

​

Total assets

​

$

44,940,332

​

$

43,918,696

​

LIABILITIES AND SHAREHOLDERS’ EQUITY

​

​

​

​

​

​

​

Deposits:

​

​

​

​

​

​

​

Noninterest-bearing

​

$

11,489,483

​

$

13,168,656

​

Interest-bearing

​

 

25,252,395

​

 

23,181,967

​

Total deposits

​

 

36,741,878

​

 

36,350,623

​

Federal funds purchased

​

​

246,910

​

​

213,597

​

Securities sold under agreements to repurchase

​

 

334,536

​

 

342,820

​

Corporate and subordinated debentures

​

​

392,090

​

​

392,275

​

Other borrowings

​

 

400,000

​

 

—

​

Reserve for unfunded commitments

​

​

63,399

​

​

67,215

​

Derivative liabilities

​

​

975,717

​

​

1,034,143

​

Other liabilities

​

 

495,792

​

 

443,096

​

Total liabilities

​

 

39,650,322

​

 

38,843,769

​

Shareholders’ equity:

​

​

​

​

​

​

​

Common stock - $2.50 par value; authorized 160,000,000 shares; 75,995,979 and 75,704,563 shares issued and outstanding, respectively

​

 

189,990

​

 

189,261

​

Surplus

​

 

4,228,910

​

 

4,215,712

​

Retained earnings

​

 

1,533,508

​

 

1,347,042

​

Accumulated other comprehensive loss

​

 

(662,398)

​

 

(677,088)

​

Total shareholders’ equity

​

 

5,290,010

​

 

5,074,927

​

Total liabilities and shareholders’ equity

​

$

44,940,332

​

$

43,918,696

​

​

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

​

3

Table of Contents 

SouthState Corporation and Subsidiaries

Consolidated Statements of Income (unaudited)

(In thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30,

​

June 30,

 

​

    

2023

    

2022

    

2023

    

2022

 

Interest income:

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans, including fees

​

$

419,355

​

$

272,000

​

$

812,720

​

$

505,617

​

Investment securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable

​

 

41,254

​

 

38,948

​

 

82,819

​

 

69,068

​

Tax-exempt

​

 

5,586

​

 

6,076

​

 

12,144

​

 

9,951

​

Federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with banks

​

 

11,858

​

 

9,309

​

 

20,779

​

 

12,168

​

Total interest income

​

 

478,053

​

 

326,333

​

 

928,462

​

 

596,804

​

Interest expense:

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

 

100,787

​

 

4,914

​

 

156,729

​

 

9,506

​

Federal funds purchased and securities sold under agreements to repurchase

​

 

3,535

​

 

781

​

 

6,388

​

 

1,050

​

Corporate and subordinated debentures

​

​

5,823

​

​

4,823

​

​

11,558

​

​

8,916

​

Other borrowings

​

 

6,165

​

 

—

​

 

10,781

​

 

—

​

Total interest expense

​

 

116,310

​

 

10,518

​

 

185,456

​

 

19,472

​

Net interest income

​

 

361,743

​

 

315,815

​

 

743,006

​

 

577,332

​

Provision for credit losses

​

 

38,389

​

 

19,286

​

 

71,480

​

 

10,837

​

Net interest income after provision for credit losses

​

 

323,354

​

 

296,529

​

 

671,526

​

 

566,495

​

Noninterest income:

​

​

​

​

​

​

​

​

​

​

​

​

​

Fees on deposit accounts

​

 

33,101

​

 

32,862

​

 

62,960

​

 

60,871

​

Mortgage banking income

​

 

4,354

​

 

5,480

​

 

8,686

​

 

16,074

​

Trust and investment services income

​

 

9,823

​

 

9,831

​

 

19,760

​

 

19,549

​

Correspondent banking and capital market income

​

​

19,187

​

​

26,068

​

​

32,781

​

​

54,019

​

SBA income

​

​

2,885

​

​

4,343

​

​

6,607

​

​

7,524

​

Securities gains, net

​

 

—

​

 

—

​

 

45

​

 

—

​

Other income

​

 

7,864

​

 

8,172

​

 

17,730

​

 

14,766

​

Total noninterest income

​

 

77,214

​

 

86,756

​

 

148,569

​

 

172,803

​

Noninterest expense:

​

​

​

​

​

​

​

​

​

​

​

​

​

Salaries and employee benefits

​

 

147,342

​

 

137,037

​

 

291,402

​

 

274,710

​

Occupancy expense

​

 

22,196

​

 

22,759

​

 

43,729

​

 

44,599

​

Information services expense

​

 

21,119

​

 

19,947

​

 

41,044

​

 

39,140

​

OREO and loan related expense (recovery)

​

 

(14)

​

 

(3)

​

 

155

​

 

(241)

​

Amortization of intangibles

​

 

7,028

​

 

8,847

​

 

14,327

​

 

17,341

​

Supplies, printing and postage expense

​

​

2,554

​

​

2,400

​

​

5,194

​

​

4,589

​

Professional fees

​

 

4,364

​

 

4,331

​

 

8,066

​

 

8,080

​

FDIC assessment and other regulatory charges

​

 

9,819

​

 

5,332

​

 

16,113

​

 

10,144

​

Advertising and marketing

​

 

1,521

​

 

2,286

​

 

3,639

​

 

4,049

​

Merger, branch consolidation and severance related expense

​

 

1,808

​

 

5,390

​

 

11,220

​

 

15,666

​

Other expense

​

 

24,889

​

 

22,843

​

 

48,242

​

 

41,692

​

Total noninterest expense

​

 

242,626

​

 

231,169

​

 

483,131

​

 

459,769

​

Earnings:

​

​

​

​

​

​

​

​

​

​

​

​

​

Income before provision for income taxes

​

 

157,942

​

 

152,116

​

 

336,964

​

 

279,529

​

Provision for income taxes

​

 

34,495

​

 

32,941

​

 

73,591

​

 

60,025

​

Net income

​

$

123,447

​

$

119,175

​

$

263,373

​

$

219,504

​

Earnings per common share:

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

$

1.62

​

$

1.58

​

$

3.47

​

$

2.99

​

Diluted

​

$

1.62

​

$

1.57

​

$

3.45

​

$

2.96

​

Weighted average common shares outstanding:

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

 

76,058

​

 

75,461

​

 

75,981

​

 

73,465

​

Diluted

​

 

76,418

​

 

76,094

​

 

76,394

​

 

74,104

​

​

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

​

​

​

4

Table of Contents 

SouthState Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(Dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30,

​

June 30,

​

​

    

2023

    

2022

    

2023

    

2022

 

Net income

    

$

123,447

    

$

119,175

    

$

263,373

    

$

219,504

​

Other comprehensive income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized holding (losses) gains on available for sale securities:

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized holding (losses) gains arising during period

​

 

(64,741)

​

 

(261,178)

​

 

8,120

​

 

(623,298)

​

Tax effect

​

 

16,127

​

 

64,250

​

 

6,603

​

 

153,560

​

Reclassification adjustment for gains included in net income

​

 

—

​

 

—

​

 

(45)

​

 

—

​

Tax effect

​

 

—

​

 

—

​

 

12

​

 

—

​

Net of tax amount

​

 

(48,614)

​

 

(196,928)

​

 

14,690

​

 

(469,738)

​

Other comprehensive (loss) income, net of tax

​

 

(48,614)

​

 

(196,928)

​

 

14,690

​

 

(469,738)

​

Comprehensive income (loss)

​

$

74,833

​

$

(77,753)

​

$

278,063

​

$

(250,234)

​

​

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

​

​

​

5

Table of Contents 

SouthState Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

Three months ended June 30, 2023 and 2022

(Dollars in thousands, except for share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

 

​

​

Common Stock

​

​

​

​

Retained

​

Comprehensive

​

​

​

 

​

    

Shares

    

Amount

    

Surplus

    

Earnings

    

Loss

    

Total

 

Balance, March 31, 2022

    

75,761,018

​

$

189,403

​

$

4,214,897

​

$

1,064,064

​

$

(293,956)

​

$

5,174,408

​

Comprehensive loss:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

—

​

 

—

​

 

—

​

 

119,175

​

 

—

​

 

119,175

​

Other comprehensive loss, net of tax effects

​

—

​

 

—

​

 

—

​

 

—

​

 

(196,928)

​

​

(196,928)

​

Total comprehensive loss

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

(77,753)

​

Cash dividends declared on common stock at $0.49 per share

​

—

​

 

—

​

 

—

​

 

(36,983)

​

 

—

​

 

(36,983)

​

Cash dividend equivalents paid on restricted stock units

​

—

​

 

—

​

 

—

​

 

(26)

​

 

—

​

​

(26)

​

Employee stock purchases

​

9,078

​

 

23

​

 

681

​

 

—

​

 

—

​

​

704

​

Stock options exercised

​

8,553

​

 

21

​

 

308

​

 

—

​

 

—

​

 

329

​

Restricted stock awards (forfeits)

​

(1,266)

​

 

(3)

​

 

3

​

 

—

​

 

—

​

 

—

​

Stock issued pursuant to restricted stock units

​

236,507

​

 

591

​

 

(590)

​

 

—

​

 

—

​

​

1

​

Common stock repurchased - buyback plan

​

(300,000)

​

 

(750)

​

 

(22,996)

​

 

—

​

 

—

​

​

(23,746)

​

Common stock repurchased

​

(72,568)

​

 

(182)

​

 

(5,640)

​

 

—

​

 

—

​

 

(5,822)

​

Share-based compensation expense

​

—

​

 

—

​

 

9,313

​

 

—

​

 

—

​

 

9,313

​

Balance, June 30, 2022

​

75,641,322

​

$

189,103

​

$

4,195,976

​

$

1,146,230

​

$

(490,884)

​

$

5,040,425

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, March 31, 2023

​

75,859,665

​

$

189,649

​

$

4,224,503

​

$

1,448,636

​

$

(613,784)

​

$

5,249,004

​

Comprehensive income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

—

​

 

—

​

 

—

​

 

123,447

​

 

—

​

 

123,447

​

Other comprehensive loss, net of tax effects

​

—

​

 

—

​

 

—

​

 

—

​

 

(48,614)

​

 

(48,614)

​

Total comprehensive loss

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

74,833

​

Cash dividends declared on common stock at $0.50 per share

​

—

​

 

—

​

 

—

​

 

(37,962)

​

 

—

​

 

(37,962)

​

Cash dividend equivalents paid on restricted stock units

​

—

​

 

—

​

 

—

​

 

(613)

​

 

—

​

 

(613)

​

Employee stock purchases

​

9,562

​

 

24

​

 

623

​

 

—

​

 

—

​

​

647

​

Restricted stock awards (forfeits)

​

(120)

​

 

(1)

​

 

1

​

 

—

​

 

—

​

 

—

​

Stock issued pursuant to restricted stock units

​

181,076

​

 

453

​

 

(453)

​

 

—

​

 

—

​

 

—

​

Common stock repurchased

​

(54,204)

​

 

(135)

​

 

(3,471)

​

 

—

​

 

—

​

 

(3,606)

​

Share-based compensation expense

​

—

​

 

—

​

 

7,707

​

 

—

​

 

—

​

 

7,707

​

Balance, June 30, 2023

​

75,995,979

​

$

189,990

​

$

4,228,910

​

$

1,533,508

​

$

(662,398)

​

$

5,290,010

​

​

​

6

Table of Contents 

SouthState Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

Six months ended June 30, 2023 and 2022

(Dollars in thousands, except for share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated Other

​

​

​

​

​

​

Common Stock

​

​

​

​

Retained

​

Comprehensive

​

​

​

 

​

    

Shares

    

Amount

    

Surplus

    

Earnings

    

Loss

    

Total

 

Balance, December 31, 2021

    

69,332,297

​

$

173,331

​

$

3,653,098

​

$

997,657

​

$

(21,146)

​

$

4,802,940

​

Comprehensive loss:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

—

​

 

—

​

 

—

​

 

219,504

​

 

—

​

​

219,504

​

Other comprehensive loss, net of tax effects

​

—

​

 

—

​

 

—

​

 

—

​

 

(469,738)

​

​

(469,738)

​

Total comprehensive loss

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(250,234)

​

Cash dividends declared on common stock at $0.98 per share

​

—

​

 

—

​

 

—

​

 

(70,805)

​

 

—

​

 

(70,805)

​

Cash dividend equivalents paid on restricted stock units

​

—

​

​

—

​

 

—

​

​

(126)

​

 

—

​

​

(126)

​

Employee stock purchases

​

9,078

​

​

23

​

​

681

​

​

—

​

 

—

​

​

704

​

Stock options exercised

​

18,256

​

 

45

​

 

692

​

 

—

​

 

—

​

 

737

​

Restricted stock awards (forfeits)

​

(1,266)

​

 

(3)

​

 

3

​

 

—

​

 

—

​

 

—

​

Stock issued pursuant to restricted stock units

​

364,809

​

​

912

​

​

(911)

​

​

—

​

 

—

​

​

1

​

Common stock repurchased - buyback plan

​

(1,312,038)

​

 

(3,280)

​

 

(106,924)

​

​

—

​

​

—

​

 

(110,204)

​

Common stock repurchased

​

(100,617)

​

 

(252)

​

 

(7,927)

​

 

—

​

 

—

​

 

(8,179)

​

Share-based compensation expense

​

—

​

 

—

​

 

17,799

​

 

—

​

 

—

​

 

17,799

​

Common stock issued for Atlantic Capital merger

​

7,330,803

​

​

18,327

​

​

641,445

​

​

—

​

 

—

​

 

659,772

​

Net fair value of unvested equity awards assumed in the Atlantic Capital acquisition

​

—

​

​

—

​

​

(1,980)

​

​

—

​

​

—

​

​

(1,980)

​

Balance, June 30, 2022

​

75,641,322

​

$

189,103

​

$

4,195,976

​

$

1,146,230

​

$

(490,884)

​

$

5,040,425

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, December 31, 2022

​

75,704,563

​

$

189,261

​

$

4,215,712

​

$

1,347,042

​

$

(677,088)

​

$

5,074,927

​

Comprehensive income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

—

​

​

—

​

​

—

​

​

263,373

​

​

—

​

​

263,373

​

Other comprehensive income, net of tax effects

​

—

​

​

—

​

​

—

​

​

—

​

​

14,690

​

​

14,690

​

Total comprehensive income

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

278,063

​

Cash dividends declared on common stock at $1.00 per share

​

—

​

 

—

​

 

—

​

 

(75,874)

​

 

—

​

 

(75,874)

​

Cash dividend equivalents paid on restricted stock units

​

—

​

 

—

​

 

—

​

​

(1,033)

​

​

—

​

​

(1,033)

​

Employee stock purchases

​

9,562

​

​

24

​

​

623

​

​

—

​

 

—

​

​

647

​

Stock options exercised

​

23,516

​

 

59

​

 

1,114

​

 

—

​

 

—

​

 

1,173

​

Restricted stock awards (forfeits)

​

(2,353)

​

 

(6)

​

 

6

​

 

—

​

 

—

​

 

—

​

Stock issued pursuant to restricted stock units

​

358,784

​

​

897

​

​

(897)

​

​

—

​

 

—

​

​

—

​

Common stock repurchased

​

(98,093)

​

 

(245)

​

 

(6,777)

​

 

—

​

 

—

​

 

(7,022)

​

Share-based compensation expense

​

—

​

 

—

​

 

19,129

​

 

—

​

 

—

​

​

19,129

​

Balance, June 30, 2023

​

75,995,979

​

$

189,990

​

$

4,228,910

​

$

1,533,508

​

$

(662,398)

​

$

5,290,010

​

​

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

​

​

7

Table of Contents 

SouthState Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(Dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

June 30,

​

​

    

2023

    

2022

 

Cash flows from operating activities:

​

​

​

​

​

​

​

Net income

​

$

263,373

​

$

219,504

​

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

​

​

​

​

​

​

​

Depreciation and amortization

​

 

29,864

​

 

32,954

​

Provision for credit losses

​

 

71,480

​

 

10,837

​

Deferred income taxes

​

 

19,990

​

 

91,013

​

Gains on sale of securities, net

​

 

(45)

​

 

—

​

Share-based compensation expense

​

 

19,129

​

 

17,799

​

Accretion of discount related to acquired loans

​

 

(12,878)

​

 

(19,511)

​

(Gains) losses on disposal of premises and equipment

​

 

(89)

​

 

778

​

Gains on sale of bank properties held for sale and repossessed real estate

​

 

(1,430)

​

 

(871)

​

Net amortization of premiums on investment securities

​

 

10,197

​

 

14,884

​

Bank properties held for sale and repossessed real estate write downs

​

 

1,231

​

 

176

​

Fair value adjustment for loans held for sale

​

 

(66)

​

 

5,456

​

Originations and purchases of loans held for sale

​

 

(422,596)

​

 

(1,038,147)

​

Proceeds from sales of loans held for sale

​

 

411,489

​

 

1,146,583

​

(Gains) losses on sales of loans held for sale

​

​

(2,810)

​

​

3,951

​

Increase in cash surrender value of BOLI

​

​

(12,135)

​

​

(11,106)

​

Net change in:

​

​

​

​

​

​

​

Accrued interest receivable

​

 

(2,636)

​

 

(8,230)

​

Prepaid assets

​

 

(829)

​

 

2,019

​

Operating leases

​

 

196

​

 

195

​

Bank owned life insurance

​

​

(976)

​

​

(423)

​

Trading securities

​

​

(25,317)

​

​

(10,399)

​

Derivative assets

​

​

36,536

​

​

291,514

​

Miscellaneous other assets

​

 

4,258

​

 

(37,918)

​

Accrued interest payable

​

 

25,573

​

 

583

​

Accrued income taxes

​

 

(9,601)

​

 

(56,183)

​

Derivative liabilities

​

​

(58,426)

​

​

374,241

​

Miscellaneous other liabilities

​

 

28,174

​

 

(63,243)

​

Net cash provided by operating activities

​

 

371,656

​

 

966,456

​

Cash flows from investing activities:

​

​

​

​

​

​

​

Proceeds from sales of investment securities available for sale

​

 

125,298

​

 

415,503

​

Proceeds from maturities and calls of investment securities held to maturity

​

 

95,566

​

 

109,776

​

Proceeds from maturities and calls of investment securities available for sale

​

 

255,808

​

 

326,323

​

Proceeds from sales and redemptions of other investment securities

​

 

146,625

​

 

13,216

​

Purchases of investment securities available for sale

​

 

(3,174)

​

 

(1,157,493)

​

Purchases of investment securities held to maturity

​

​

—

​

​

(1,099,691)

​

Purchases of other investment securities

​

 

(163,636)

​

 

(20,446)

​

Net increase in loans

​

 

(1,361,435)

​

 

(1,616,946)

​

Net cash received from acquisitions

​

 

—

​

 

250,115

​

Recoveries of loans previously charged off

​

​

7,858

​

​

6,980

​

Purchase of bank owned life insurance

​

​

(5,966)

​

​

(85,966)

​

Purchases of premises and equipment

​

 

(15,034)

​

 

(9,102)

​

Proceeds from redemption and payout of bank owned life insurance policies

​

​

4,292

​

​

1,188

​

Proceeds from sale of bank properties held for sale and repossessed real estate

​

 

7,610

​

 

8,297

​

Proceeds from sale of premises and equipment

​

 

675

​

 

511

​

Net cash used in investing activities

​

 

(905,513)

​

 

(2,857,735)

​

Cash flows from financing activities:

​

​

​

​

​

​

​

Net increase in deposits

​

 

392,123

​

 

302,826

​

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

​

 

25,029

​

 

(111,240)

​

Proceeds from FHLB borrowings

​

​

4,850,000

​

​

—

​

Repayment of FHLB borrowings

​

 

(4,450,000)

​

 

(13,000)

​

Common stock issuance

​

​

647

​

​

705

​

Common stock repurchases

​

 

(7,022)

​

 

(118,383)

​

Dividends paid

​

 

(76,907)

​

 

(70,931)

​

Stock options exercised

​

 

1,173

​

 

737

​

Net cash provided by (used in) financing activities

​

 

735,043

​

 

(9,286)

​

Net increase (decrease) in cash and cash equivalents

​

 

201,186

​

 

(1,900,565)

​

Cash and cash equivalents at beginning of period

​

 

1,312,563

​

 

6,721,571

​

Cash and cash equivalents at end of period

​

$

1,513,749

​

$

4,821,006

​

Supplemental Disclosures:

​

​

​

​

​

\

​

Cash Flow Information:

​

​

​

​

​

​

​

Cash paid for:

​

​

​

​

​

​

​

Interest

​

$

159,883

​

$

19,788

​

Income taxes

​

$

62,170

​

$

28,332

​

Recognition of operating lease assets in exchange for lease liabilities

​

$

—

​

$

12,616

​

Schedule of Noncash Investing Transactions:

​

​

​

​

​

​

​

Acquisitions:

​

​

​

​

​

​

​

Fair value of tangible assets acquired

​

$

—

​

$

3,501,273

​

Other intangible assets acquired

​

 

—

​

 

20,791

​

Liabilities assumed

​

 

—

​

 

3,205,694

​

Net identifiable assets acquired over liabilities assumed

​

 

—

​

 

341,440

​

Common stock issued in acquisition

​

 

—

​

 

659,772

​

Real estate acquired in full or in partial settlement of loans

​

$

3,186

​

$

1,151

​

​

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

​

​

8

Table of Contents 

SouthState Corporation and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

​

​

Note 1 — Basis of Presentation

​

The accompanying unaudited 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 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 six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

​

The consolidated balance sheet at December 31, 2022 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 our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2023, should be referenced when reading these unaudited consolidated financial statements. Unless otherwise mentioned or unless the context requires otherwise, references herein to “SouthState,” the “Company” “we,” “us,” “our” or similar references mean SouthState Corporation and its consolidated subsidiaries. References to the “Bank” or “SouthState Bank” means SouthState Corporation’s wholly owned subsidiary, South State Bank, National Association, a national banking 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.

​

We place non-acquired loans and acquired loans on nonaccrual once reasonable doubt exists about the collectability of all principal and interest due. Generally, this occurs when principal or interest is 90 days or more past due, unless the loan is well secured and 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 charge-off unpaid recourse receivables when they become 90 days past due from the invoice due date and the non-recourse receivables when they become 120 days past due from the statement due date. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or 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 nonaccrual, provided that management expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of delay.

9

Table of Contents 

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

​

Management monitors the held to maturity portfolio to determine whether a valuation account should be 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 how 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, 2022. As of June 30, 2023 and December 31, 2022, the Company had $2.6 billion and $2.7 billion, respectively, of held to maturity securities and no related valuation account.

The Company follows its nonaccrual policy by reversing interest income in the income statement when the Company determines the interest for held to maturity securities is uncollectible. Therefore, management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the investment securities and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2023 and December 31, 2022, the accrued interest receivables for all investment securities recorded in Other Assets were $25.8 million and $28.2 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 to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. 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 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, 2022.

​

As of January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, prospectively that requires the eliminates designation of loans as TDRs. 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. Longstanding TDR accounting rules were replaced as of January 1, 2023 with ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (See Note 3 — Recent Accounting and Regulatory Pronouncements). In accordance with the adoption of ASU 2022-02, any 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.

​

​

​

10

Table of Contents 

Effective January 1, 2023, the ACL includes expected losses from modifications of receivables to borrowers experiencing financial difficulty. Losses on modifications of 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. The effects of reasonably expected TDRs are no longer considered in the measurement of expected credit losses. Prior to the adoption of ASU No. 2022-02, when determining the contractual term, the Company considered expected prepayments but was precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expected it would execute a TDR with a borrower. In the event of a reasonably expected TDR, the Company factored the reasonably-expected TDR into the expected credit losses estimate. For consumer loans, the point at which a TDR was reasonably expected was when the Company approved the borrower’s application for a modification (i.e., the borrower qualifies for the TDR) or when the Credit Administration department approved loan concessions on substandard loans. For commercial loans, the point at which a TDR was reasonably expected was when the Company approved the loan for modification or when the Credit Administration department approved loan concessions on substandard loans. The Company used a discounted cash flow methodology for a TDR to calculate the effect of the concession provided to the borrower within the ACL.

​

For purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the 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 financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition day, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the unpaid principal balance and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the Provision for Credit Losses in the Consolidated Statements of Net Income. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis.

​

The Company follows its nonaccrual policy by reversing contractual interest income in the income statement 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 June 30, 2023 and December 31, 2022, the accrued interest receivables for loans recorded in Other Assets were $110.4 million and $105.4 million, respectively.

​

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. The expected losses associated with these exposures within the unfunded portion of the expected credit loss are recorded 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 June 30, 2023 and December 31, 2022, the liabilities recorded for expected credit losses on unfunded commitments were $63.4 million and $67.2 million, respectively. The current adjustment to the ACL for unfunded commitments is recognized through the Provision for Credit Losses in the Consolidated Statements of Net 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.

​

​

​

11

Table of Contents 

During 2022, the Company determined the variation margin payments for its interest rate swaps centrally cleared through London Clearing House (“LCH”) and Chicago Mercantile Exchange (“CME”) meet the legal characteristics of daily settlements of the derivatives (settle-to-market) rather than collateral (collateralize-to-market). As a result, the variation margin payment and the related derivative instruments centrally cleared through LCH and CME are considered a single unit of account for accounting and financial reporting purposes. Depending on the net position, the fair value is reported in Derivative Assets or Derivative Liabilities on the Consolidated Balance Sheets, as opposed to interest-earning deposits (restricted cash) within Cash and Cash Equivalents or interest-bearing deposits within Total Deposits. In addition, the expense or income attributable to the variation margin payments for the centrally cleared swaps is reported in Noninterest Income, specifically within Correspondent and Capital Markets Income, as opposed to Interest Income or Interest Expense. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument. As a result of the correction from collateralize-to-market accounting treatment previously applied by the Company to settle-to-market accounting treatment, the prior periods presented herein have been corrected, for what management has concluded to be an immaterial correction.

​

The table below discloses the net change (increase or (decrease)) included in all the Consolidated Statements of Net Income line items in this Form 10-Q, as a result of the change in accounting treatment. There was no impact to Net Income or Shareholders’ Equity as previously reported.

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

Three Months Ended

​

Six Months Ended

​

INCOME STATEMENT

​

June 30, 2022

​

June 30, 2022

​

Interest income:

​

​

​

​

​

​

​

Effect to interest income on federal funds sold and interest-earning

​

​

​

​

​

​

​

deposits with banks

​

$

674

​

$

681

​

Net effect to interest income

​

​

674

​

​

681

​

Effect to interest expense on deposits

​

​

(862)

​

​

(898)

​

Net effect to interest expense

​

​

(862)

​

​

(898)

​

Net effect to net interest income

    

$

1,536

    

$

1,579

​

​

​

​

​

​

​

​

​

Noninterest Income:

​

​

​

​

​

​

​

Effect to correspondent banking and capital market income

​

$

(1,536)

​

$

(1,579)

​

Net effect to noninterest income

​

$

(1,536)

​

$

(1,579)

​

Net effect to net income

​

$

—

​

$

—

​

​

Note 3 — Recent Accounting and Regulatory Pronouncements

​

Accounting Standards Adopted

In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the long-standing accounting guidance for Troubled Debt Restructurings (“TDRs”) by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors, as it is no longer meaningful due to the introduction of Topic 326, which requires an entity to consider lifetime expected credit losses on loans when establishing an allowance for credit losses. Thus, most losses that would have been realized for a TDR under Subtopic 310-40 are now captured by the accounting required under Topic 326. The amendments in this ASU also require that an entity disclose current-period gross write offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses Measured at Amortized Cost. The Company adopted ASU No. 2022-02 effective January 1, 2023. We elected to apply a prospective transition method, which applies only to modifications occurring after the adoption date. For loans meeting the Bank’s materiality criteria, which includes loans in excess of $250,000, an assessment of whether a borrower is experiencing financial difficulty is made on the date of the modification. On the transition date, the former TDR loans as of December 31, 2022 were designated as individually evaluated loans on January 1, 2023 and retained the allowance for credit losses allocated to these loans at the adoption date as the credit risk of these did not change. Aside from the changes to the disclosures required by ASU No. 2022-02, the ASU did not have a material impact on our consolidated financial statements.

​

​

12

Table of Contents 

In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848 – Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequently expanded the scope of ASU No. 2020-04 with the issuance of ASU No. 2021-01 and extended the sunset date to December 31, 2024 with ASU No. 2022-06. This update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that will be discontinued. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features. The amendments in this update were effective for all entities as of March 12, 2020 and may be applied through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 which clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2022-06 extended the effective date through December 31, 2024. The amendments are effective as of March 12, 2020 through December 31, 2024 and can be adopted at the instrument level on an ongoing basis. Management adopted these optional expedients beginning April 1, 2023 to coincide with the transition and modification of our LIBOR-exposed instruments. Most of the loan modifications met the requirements of these practical expedients, as most were subject to the Adjustable Interest Rate (LIBOR) Act which permits a replacement index with a spread adjustment. These modifications did not have a material impact on the consolidated financial statements.

​

Issued But Not Yet Adopted Accounting Standards

​

In March 2023, FASB issued ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The Proportional Amortization method was introduced by ASU No. 2014-01, but limited this amortization method to investments in low-income housing tax credit structures. The amendments in ASU 2023-02 will allow entities the option to elect whether they account for tax equity investments using the proportional amortization method if certain conditions are met, regardless of the program from which the income tax credits are received. The election would be on a program-by-program basis. The ASU would also require disclosures to be transparent about an entity’s investments that generate income tax credits and other income tax benefits. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years with early adoption permitted. The Company maintains investments in low-income housing tax structures and will evaluate whether it will change its current accounting treatment for low-income housing tax credits. The Company does not anticipate this ASU will have a material impact on its financial statements.

​

Note 4 — Mergers and Acquisitions

​

Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or “ACBI”)

​

On March 1, 2022, the Company acquired all of the outstanding common stock of Atlantic Capital in a stock transaction. Upon the terms and subject to the conditions set forth therein, Atlantic Capital merged with and into the Company, with the Company continuing as the surviving corporation in the merger. Immediately following the merger, Atlantic Capital’s wholly owned banking subsidiary, Atlantic Capital Bank, N.A. (“ACB”) merged with and into the Bank, which continues as the surviving bank. Shareholders of Atlantic Capital received 0.36 shares of the Company’s common stock for each share of Atlantic Capital common stock they owned. In total, the purchase price for Atlantic Capital was $657.8 million.

​

In the acquisition, the Company acquired $2.4 billion of loans, including PPP loans, at fair value, net of $54.3 million, or 2.24%, estimated discount to the outstanding principal balance, representing 10.0% of the Company’s total loans at December 31, 2021. Of the total loans acquired, management identified $137.9 million that had more than insignificantly deteriorated since origination and were thus determined to be PCD loans.

​

During the three and six months ended June 30, 2023, the Company incurred approximately $1.0 million and $2.4 million, respectively, of acquisition costs related to this transaction. During three and six months ended June 30, 2022, the Company incurred approximately $2.2 million and $7.9 million, respectively, of acquisition costs related to this transaction. These acquisition costs are reported in Merger and Branch Consolidation Related Expenses on the Company’s Consolidated Statements of Net Income.

​

13

Table of Contents 

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The Company recognized goodwill on this acquisition of $342.0 million. The goodwill was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Initial

​

Subsequent

​

​

​

​

​

As Recorded

​

Fair Value

​

Fair Value

​

As Recorded by

​

(Dollars in thousands)

    

by Atlantic Capital

    

Adjustments

    

Adjustments

​

the Company

 

Assets

​

​

    

​

​

    

​

​

​

​

​

    

​

Cash and cash equivalents

​

$

250,134

​

$

24

(a)

$

—

​

$

250,158

​

Investment securities

​

​

717,332

​

​

(13,622)

(b)

​

—

​

​

703,710

​

Loans, net of allowance and mark

​

 

2,394,256

​

 

(18,964)

(c)

​

(5,614)

(c)

 

2,369,678

​

Premises and equipment

​

 

16,892

​

 

2,608

(d)

​

—

​

 

19,500

​

Intangible assets

​

​

22,572

​

​

(1,781)

(e)

​

—

​

​

20,791

​

Bank owned life insurance

​

​

74,613

​

​

—

​

​

—

​

​

74,613

​

Deferred tax asset

​

​

30,231

​

​

2,273

(f)

​

(1,025)

(f)

​

31,479

​

Other assets

​

 

45,274

​

 

(1,277)

(g)

​

7,557

(g)

 

51,554

​

Total assets

​

$

3,551,304

​

$

(30,739)

​

$

918

​

$

3,521,483

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Liabilities

​

 

​

​

 

​

​

​

​

​

 

​

​

Deposits:

​

 

​

​

 

​

​

​

​

​

 

​

​

Noninterest-bearing

​

$

1,411,671

​

$

—

​

$

—

​

$

1,411,671

​

Interest-bearing

​

 

1,616,970

​

 

—

​

​

—

​

 

1,616,970

​

Total deposits

​

 

3,028,641

​

 

—

​

​

—

​

 

3,028,641

​

Federal funds purchased and securities sold under agreements to repurchase

​

​

50,000

​

​

—

​

​

—

​

​

50,000

​

Other borrowings

​

​

74,131

​

​

4,286

(h)

​

—

​

​

78,417

​

Other liabilities

​

 

50,711

​

 

(2,075)

(i)

​

—

​

 

48,636

​

Total liabilities

​

​

3,203,483

​

​

2,211

​

​

—

​

​

3,205,694

​

Net identifiable assets acquired over (under) liabilities assumed

​

​

347,821

​

​

(32,950)

​

​

918

​

​

315,789

​

Goodwill

​

 

—

​

 

342,939

​

​

(918)

​

 

342,021

​

Net assets acquired over liabilities assumed

​

$

347,821

​

$

309,989

​

$

—

​

$

657,810

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consideration:

​

​

​

​

​

​

​

​

​

​

​

​

​

SouthState Corporation common shares issued

​

​

​

​

​

​

​

​

​

​

​

7,330,803

​

Purchase price per share of the Company's common stock

​

​

​

​

​

​

​

​

​

​

$

90.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Company common stock issued ($659,772) and cash exchanged for fractional shares ($19)

​

​

​

​

​

​

​

​

​

​

$

659,791

​

Stock option conversion

​

​

​

​

​

​

​

​

​

​

​

1,135

​

Restricted stock unit conversion

​

​

​

​

​

​

​

​

​

​

​

2,870

​

Restricted stock awards conversion (unvested awards)

​

​

​

​

​

​

​

​

​

​

​

(5,986)

​

Fair value of total consideration transferred

​

​

​

​

​

​

​

​

​

​

$

657,810

​

Explanation of fair value adjustments

(a)— Represents an adjustment to record time deposits with financial institutions at fair value (premium).

​

(b)— Represents the reversal of Atlantic Capital's existing fair value adjustments of $17.2 million and the adjustment to record securities at fair value (discount) totaling $30.9 million (includes reclassification of all securities held as HTM to AFS totaling $237.6 million).

​

(c)— Represents approximately 1.40%, or $34.0 million, net credit discount of the loan portfolio and 2.24% total net discount, or $54.3 million, including non-credit discount, based on a third-party valuation. Also, includes a reversal of Atlantic Capital's ending ACL of $22.1 million and $7.6 million of existing Atlantic Capital’s deferred fees and costs.

​

(d)— Represents the preliminary fair value adjustments of $2.6 million on fixed assets and leased assets.

​

(e)— Represents approximately $17.5 million, or 0.63%, of CDI amount and $3.2 million for SBA servicing asset based on a third-party valuation. Atlantic Capital’s pre-merger goodwill and servicing asset of $19.9 million and $2.6 million, respectively, were written-off.

​

(f)— Represents deferred tax asset related to fair value adjustments with marginal tax rate of 23.9%, which includes an adjustment from Atlantic Capital’s effective tax rate to the Company’s effective tax rate. The difference in effective tax rates relates to state income taxes.

​

(g)— Represents the fair value adjustment (decrease) for low-income housing investments of $1.1 million, write-off of prepaid assets of $233,000, adjustments to receivables of $154,000 and fair value adjustment for Small Business Investment Company (“SBIC”) investments of $7.4 million.

​

(h)— Represents the reversal of the existing Atlantic Capital’s issuance costs on subordinated debt of $0.9 million and recording the fair value adjustment (premium) of $3.4 million, based on a third-party valuation.

​

(i)— Represents the reversal of $2.8 million of unfunded commitment liability at purchase date and the fair value adjustment to increase lease liabilities associated with rental facilities totaling $1.4 million. Also includes the reversal of uncertain tax liability of $0.7 million.

​

​

14

Table of Contents 

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

 

June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government agencies

​

$

197,265

​

$

—

​

$

(29,352)

​

$

167,913

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,514,472

​

​

—

​

​

(253,666)

​

​

1,260,806

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

460,574

​

​

—

​

​

(72,157)

​

​

388,417

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

357,815

​

​

—

​

​

(73,410)

​

​

284,405

​

Small Business Administration loan-backed securities

​

​

55,029

​

​

—

​

​

(12,056)

​

​

42,973

​

​

​

$

2,585,155

​

$

—

​

$

(440,641)

​

$

2,144,514

​

December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government agencies

​

$

197,262

​

$

—

​

$

(29,787)

​

$

167,475

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,591,646

​

​

—

​

​

(255,093)

​

​

1,336,553

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

474,660

​

​

—

​

​

(69,664)

​

​

404,996

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

362,586

​

​

—

​

​

(66,304)

​

​

296,282

​

Small Business Administration loan-backed securities

​

​

57,087

​

​

—

​

​

(12,225)

​

​

44,862

​

​

​

$

2,683,241

​

$

—

​

$

(433,073)

​

$

2,250,168

​

​

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

 

June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

223,658

​

$

—

​

$

(3,745)

​

$

219,913

​

U.S. Government agencies

​

​

246,030

​

​

—

​

​

(27,685)

​

​

218,345

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

 

1,903,472

​

 

—

​

 

(299,102)

​

 

1,604,370

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

666,198

​

​

—

​

​

(106,422)

​

​

559,776

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,173,907

​

​

—

​

​

(211,413)

​

​

962,494

​

State and municipal obligations

​

 

1,135,189

​

 

3

​

 

(180,737)

​

 

954,455

​

Small Business Administration loan-backed securities

​

 

451,564

​

 

157

​

 

(47,162)

​

 

404,559

​

Corporate securities

​

​

30,558

​

​

—

​

​

(5,136)

​

​

25,422

​

​

​

$

5,830,576

​

$

160

​

$

(881,402)

​

$

4,949,334

​

December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

272,416

​

$

—

​

$

(6,778)

​

$

265,638

​

U.S. Government agencies

​

​

245,972

​

​

—

​

​

(26,884)

​

​

219,088

​

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

​

 

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,996,405

​

 

—

​

 

(298,052)

​

 

1,698,353

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

708,337

​

​

—

​

​

(107,292)

​

​

601,045

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,196,700

​

​

2,542

​

​

(198,844)

​

​

1,000,398

​

State and municipal obligations

​

​

1,269,525

​

 

1,210

​

 

(205,883)

​

 

1,064,852

​

Small Business Administration loan-backed securities

​

 

491,203

​

 

302

​

 

(46,695)

​

 

444,810

​

Corporate securities

​

 

35,583

​

​

—

​

​

(2,945)

​

​

32,638

​

​

​

$

6,216,141

​

$

4,054

​

$

(893,373)

​

$

5,326,822

​

​

During the six months ended June 30, 2023, there were gross gains of $1.3 million and gross losses of $1.3 million, a net gain of $45,000, realized from the sale of available for sale securities. There were no sales during the three months ended June 30, 2023. During the three and six months ended June 30, 2022, there were no realized gains or losses from the sale of available for sale securities. During the three months ended March 31, 2022, the Company sold securities totaling $414.4 million that were legacy Atlantic Capital securities. These securities were marked to fair value at merger and therefore resulted in no gain or loss on sale.

​

15

Table of Contents 

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

​

​

​

​

​

​

​

​

Carrying

 

(Dollars in thousands)

    

Value

 

June 30, 2023:

​

​

​

​

Federal Home Loan Bank stock

​

$

32,085

​

Federal Reserve Bank stock

​

​

150,261

​

Investment in unconsolidated subsidiaries

​

 

3,563

​

Other nonmarketable investment securities

​

 

10,819

​

​

​

$

196,728

​

December 31, 2022:

​

​

​

​

Federal Home Loan Bank stock

​

$

15,085

​

Federal Reserve Bank stock

​

​

150,261

​

Investment in unconsolidated subsidiaries

​

 

3,563

​

Other nonmarketable investment securities

​

 

10,808

​

​

​

$

179,717

​

​

Our 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 June 30, 2023, we determined that there was no impairment on other investment securities.

The amortized cost and fair value of debt securities at June 30, 2023, 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.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

    

$

50,000

​

$

48,185

    

$

231,970

    

$

228,385

​

Due after one year through five years

​

 

51,034

​

 

45,228

​

 

301,127

​

 

283,616

​

Due after five years through ten years

​

 

369,168

​

 

320,965

​

 

1,263,193

​

 

1,075,431

​

Due after ten years

​

 

2,114,953

​

 

1,730,136

​

 

4,034,286

​

 

3,361,902

​

​

​

$

2,585,155

​

$

2,144,514

​

$

5,830,576

​

$

4,949,334

​

​

​

16

Table of Contents 

Information pertaining to our securities with gross unrealized losses at June 30, 2023 and December 31, 2022, 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 Unrealized

​

Fair

​

Gross Unrealized

​

Fair

 

(Dollars in thousands)

    

Losses

    

Value

    

Losses

    

Value

 

June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities Held to Maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government agencies

​

$

—

​

$

—

​

$

29,352

​

$

167,913

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

​

—

​

​

253,666

​

​

1,260,806

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,549

​

 

44,665

​

 

70,608

​

 

343,752

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

​

—

​

​

73,410

​

​

284,405

​

Small Business Administration loan-backed securities

​

​

—

​

​

—

​

​

12,056

​

​

42,973

​

​

​

$

1,549

​

$

44,665

​

$

439,092

​

$

2,099,849

​

Securities Available for Sale

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

—

​

$

—

​

$

3,745

​

$

219,913

​

U.S. Government agencies

​

​

560

​

​

24,440

​

​

27,126

​

​

193,905

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,252

​

​

29,385

​

​

297,850

​

​

1,574,985

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

3,230

​

 

53,808

​

 

103,192

​

 

505,968

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

 

7,479

​

​

71,072

​

​

203,933

​

​

891,422

​

State and municipal obligations

​

 

1,400

​

​

32,141

​

​

179,337

​

​

919,535

​

Small Business Administration loan-backed securities

​

 

240

​

​

93,998

​

​

46,922

​

​

283,088

​

Corporate securities

​

​

1,059

​

​

5,439

​

​

4,077

​

​

19,983

​

​

​

$

15,220

​

$

310,283

​

$

866,182

​

$

4,608,799

​

December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities Held to Maturity

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government agencies

​

$

5,514

​

$

78,833

​

$

24,273

​

$

88,642

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

65,181

​

​

513,086

​

​

189,912

​

​

823,467

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

30,284

​

 

277,868

​

 

39,380

​

 

127,128

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

14,318

​

​

82,895

​

​

51,986

​

​

213,387

​

Small Business Administration loan-backed securities

​

​

—

​

​

—

​

​

12,225

​

​

44,862

​

​

​

$

115,297

​

$

952,682

​

$

317,776

​

$

1,297,486

​

Securities Available for Sale

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

6,778

​

$

265,638

​

$

—

​

$

—

​

U.S. Government agencies

​

​

8,193

​

​

138,807

​

​

18,691

​

​

80,281

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

42,767

​

​

459,773

​

​

255,285

​

​

1,238,580

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

21,450

​

 

274,082

​

 

85,842

​

 

326,963

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

17,156

​

​

206,228

​

​

181,688

​

​

767,002

​

State and municipal obligations

​

​

97,084

​

​

616,631

​

​

108,799

​

​

391,848

​

Small Business Administration loan-backed securities

​

​

2,152

​

​

92,535

​

​

44,543

​

​

264,933

​

Corporate securities

​

 

2,209

​

​

28,374

​

​

736

​

​

4,264

​

​

​

$

197,789

​

$

2,082,068

​

$

695,584

​

$

3,073,871

​

​

The Company’s evaluation methodology for securities impairment is disclosed in Note 3 — Securities, under “Investment Securities” section, of our Annual Report on Form 10-K for the year ended December 31, 2022. All debt securities in an unrealized loss position as of June 30, 2023 continue to perform as scheduled and we do not believe there is a credit loss or a provision for credit losses is necessary. We do not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that we will be required to sell the debt securities. See Note 2 — Summary of Significant Accounting Policies for further discussion.

​

Management continues 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 its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

17

Table of Contents 

​

At June 30, 2023, investment securities with a market value of $2.6 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 21 — Short-Term Borrowings, under the “Securities Sold Under Agreements to Repurchase (“Repurchase agreements”)” section). The carrying value total of $2.6 billion investment securities pledged was comprised of $1.8 billion pledged to secure public funds deposits, $716.3 million pledged to secure FHLB advances and $108.3 million pledged to secure interest rate swap positions with correspondents. At December 31, 2022, investment securities with a market value of $2.6 billion were pledged to secure public funds deposits and for other purposes required and permitted by law. The total carrying value of $2.6 billion investment securities pledged was comprised of $1.9 billion pledged to secure public funds deposits, $596.1 million pledged to secure FHLB advances, and $114.9 million pledged to secure interest rate swap positions with correspondents.

​

At June 30, 2023 and December 31, 2022, trading securities, at estimated fair value, were as follows:

​

​

​

​

​

​

​

​

​

​

    

June 30,

​

December 31,

​

(Dollars in thousands)

    

2023

 

2022

​

U.S. Government agencies

​

$

11,049

​

$

11,190

​

Residential mortgage pass-through securities issued or guaranteed by U.S.

​

​

​

​

​

​

​

government agencies or sponsored enterprises

​

​

8,265

​

​

—

​

Other residential mortgage issued or guaranteed by U.S. government

​

 

​

​

 

​

​

agencies or sponsored enterprises

​

 

3,645

​

 

—

​

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

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

11,705

​

​

4,589

​

State and municipal obligations

​

​

20,298

​

​

13,993

​

Other debt securities

​

​

1,618

​

​

1,491

​

​

​

$

56,580

​

$

31,263

​

​

Net losses on trading securities for the three and six months ended June 30, 2023 and 2022 were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended June 30,

​

Six Months Ended June 30,

​

(Dollars in thousands)

    

2023

 

2022

​

2023

​

2022

​

Net gains (losses) on sales transaction

​

$

7

​

$

(380)

​

$

(40)

​

$

(1,620)

​

Net mark to mark losses

​

​

(195)

​

​

(458)

​

​

(201)

​

​

(2,434)

​

Net losses on trading securities

​

$

(188)

​

$

(838)

​

$

(241)

​

$

(4,054)

​

​

Note 6 — Loans

​

The following is a summary of total loans:

​

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

(Dollars in thousands)

    

2023

    

2022

    

Loans:

​

​

    

​

​

    

​

Construction and land development (1)

​

$

2,817,125

​

$

2,860,360

​

Commercial non-owner occupied

​

 

8,476,236

​

 

8,072,959

​

Commercial owner occupied real estate

​

 

5,585,951

​

 

5,460,193

​

Consumer owner occupied (2)

​

 

5,927,781

​

 

5,162,042

​

Home equity loans

​

 

1,347,714

​

 

1,313,168

​

Commercial and industrial

​

 

5,378,294

​

 

5,313,483

​

Other income producing property

​

 

711,712

​

 

696,242

​

Consumer

​

 

1,285,478

​

 

1,278,426

​

Other loans

​

 

6,494

​

 

20,989

​

Total loans

​

 

31,536,785

​

 

30,177,862

​

Less allowance for credit losses

​

 

(427,392)

​

 

(356,444)

​

Loans, net

​

$

31,109,393

​

$

29,821,418

​

(1)Construction and land development includes loans for both commercial construction and development, as well as loans for 1-4 family 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 property with a business intent.

The above table reflects the loan portfolio at the amortized cost basis for the periods June 30, 2023 and December 31, 2022, to include net deferred costs of $61.2 million compared to net deferred fees of $49.7 million, respectively, and unamortized discount related to loans acquired of $59.3 million and $72.1 million, respectively. Accrued interest receivables of $110.4 million and $105.4 million, respectively, are accounted for separately and reported in other assets for the periods June 30, 2023 and December 31, 2022.

18

Table of Contents 

The Company purchased loans through its acquisition of Atlantic Capital, for which there was, at acquisition, evidence of more than an insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:

​

​

​

​

​

​

(Dollars in thousands)

​

March 1, 2022

​

Book value of acquired loans at acquisition

​

$

137,874

​

Allowance for credit losses at acquisition

​

 

(13,758)

​

Non-credit discount at acquisition

​

 

(5,943)

​

Carrying value or book value of acquired loans at acquisition

​

$

118,173

​

​

As part of the ongoing monitoring of the credit quality of 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.

​

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

​

●Pass—These loans range from minimal credit risk to average, however, still acceptable credit risk.
●Special 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 credit position at some future date.
●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—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 property with a business intent.

​

19

Table of Contents 

The following tables present the credit risk profile by risk grade of commercial loans by origination year as of June 30, 2023 and December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

​

Amortized Cost Basis by Origination Year

As of June 30, 2023

​

2023

​

2022

​

2021

​

2020

​

2019

​

Prior

​

Revolving

​

Total

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

218,442

​

$

922,947

​

$

564,722

​

$

50,133

​

$

13,914

​

$

30,228

​

$

63,747

​

$

1,864,133

Special mention

​

​

—

​

​

10,424

​

​

1,162

​

​

13

​

​

—

​

​

490

​

​

—

​

​

12,089

Substandard

​

​

1,654

​

​

1,364

​

​

—

​

​

253

​

​

1,312

​

​

7,936

​

​

—

​

​

12,519

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

5

​

​

—

​

​

5

Total Construction and land development

​

$

220,096

​

$

934,735

​

$

565,884

​

$

50,399

​

$

15,226

​

$

38,659

​

$

63,747

​

$

1,888,746

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

2

​

$

—

​

$

2

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

531,832

​

$

2,383,472

​

$

1,997,313

​

$

704,995

​

$

804,870

​

$

1,728,824

​

$

79,251

​

$

8,230,557

Special mention

​

​

23,012

​

​

10,493

​

​

682

​

​

44,468

​

​

12,518

​

​

59,635

​

​

93

​

​

150,901

Substandard

​

​

6,111

​

​

5,683

​

​

13,147

​

​

4,574

​

​

30,978

​

​

34,284

​

​

—

​

​

94,777

Doubtful

​

​

—

​

​

—

​

​

1

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1

Total Commercial non-owner occupied

​

$

560,955

​

$

2,399,648

​

$

2,011,143

​

$

754,037

​

$

848,366

​

$

1,822,743

​

$

79,344

​

$

8,476,236

Commercial non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

51

​

$

—

​

$

—

​

$

—

​

$

—

​

$

51

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Owner Occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

330,520

​

$

1,047,572

​

$

1,134,877

​

$

682,805

​

$

693,419

​

$

1,346,100

​

$

80,999

​

$

5,316,292

Special mention

​

​

936

​

​

31,639

​

​

22,812

​

​

14,094

​

​

10,094

​

​

28,564

​

​

381

​

​

108,520

Substandard

​

​

8,750

​

​

15,769

​

​

31,741

​

​

18,982

​

​

16,778

​

​

68,684

​

​

430

​

​

161,134

Doubtful

​

​

—

​

​

—

​

​

—

​

​

1

​

​

—

​

​

4

​

​

—

​

​

5

Total commercial owner occupied

​

$

340,206

​

$

1,094,980

​

$

1,189,430

​

$

715,882

​

$

720,291

​

$

1,443,352

​

$

81,810

​

$

5,585,951

Commercial owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

35

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

35

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

674,204

​

$

1,269,467

​

$

774,899

​

$

439,202

​

$

217,999

​

$

484,451

​

$

1,338,102

​

$

5,198,324

Special mention

​

​

8,534

​

​

11,437

​

​

3,965

​

​

914

​

​

2,539

​

​

993

​

​

13,775

​

​

42,157

Substandard

​

​

3,694

​

​

8,324

​

​

24,301

​

​

5,557

​

​

6,242

​

​

15,208

​

​

74,329

​

​

137,655

Doubtful

​

​

57

​

​

2

​

​

81

​

​

1

​

​

—

​

​

15

​

​

2

​

​

158

Total commercial and industrial

​

$

686,489

​

$

1,289,230

​

$

803,246

​

$

445,674

​

$

226,780

​

$

500,667

​

$

1,426,208

​

$

5,378,294

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

967

​

$

1,348

​

$

2,959

​

$

38

​

$

250

​

$

402

​

$

329

​

$

6,293

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

39,690

​

$

157,778

​

$

104,488

​

$

57,141

​

$

43,710

​

$

128,364

​

$

44,450

​

$

575,621

Special mention

​

​

76

​

​

591

​

​

796

​

​

78

​

​

300

​

​

2,706

​

​

1,478

​

​

6,025

Substandard

​

​

287

​

​

659

​

​

1,910

​

​

273

​

​

553

​

​

6,964

​

​

—

​

​

10,646

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

5

​

​

—

​

​

5

Total other income producing property

​

$

40,053

​

$

159,028

​

$

107,194

​

$

57,492

​

$

44,563

​

$

138,039

​

$

45,928

​

$

592,297

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

5,519

​

$

4,664

​

$

2,923

​

$

1,475

​

$

347

​

$

452

​

$

19,455

​

$

34,835

Special mention

​

​

95

​

​

521

​

​

19

​

​

129

​

​

277

​

​

—

​

​

—

​

​

1,041

Substandard

​

​

—

​

​

2

​

​

—

​

​

930

​

​

1,587

​

​

187

​

​

150

​

​

2,856

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1

​

​

—

​

​

1

Total Consumer owner occupied

​

$

5,614

​

$

5,187

​

$

2,942

​

$

2,534

​

$

2,211

​

$

640

​

$

19,605

​

$

38,733

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

6,494

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

6,494

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Total other loans

​

$

6,494

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

6,494

Other loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Commercial Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

1,806,701

​

$

5,785,900

​

$

4,579,222

​

$

1,935,751

​

$

1,774,259

​

$

3,718,419

​

$

1,626,004

​

$

21,226,256

Special mention

​

​

32,653

​

​

65,105

​

​

29,436

​

​

59,696

​

​

25,728

​

​

92,388

​

​

15,727

​

​

320,733

Substandard

​

​

20,496

​

​

31,801

​

​

71,099

​

​

30,569

​

​

57,450

​

​

133,263

​

​

74,909

​

​

419,587

Doubtful

​

​

57

​

​

2

​

​

82

​

​

2

​

​

—

​

​

30

​

​

2

​

​

175

Total Commercial Loans

​

$

1,859,907

​

$

5,882,808

​

$

4,679,839

​

$

2,026,018

​

$

1,857,437

​

$

3,944,100

​

$

1,716,642

​

$

21,966,751

Total Commercial Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

967

​

$

1,383

​

$

3,010

​

$

38

​

$

250

​

$

404

​

$

329

​

$

6,381

​

20

Table of Contents 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

​

Amortized Cost Basis by Origination Year

As of December 31, 2022

​

2022

​

2021

​

2020

​

2019

​

2018

​

Prior

​

Revolving

​

Total

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

875,751

​

$

742,985

​

$

134,996

​

$

63,439

​

$

14,521

​

$

29,442

​

$

65,656

​

$

1,926,790

Special mention

​

​

1,643

​

​

988

​

​

268

​

​

76

​

​

7,219

​

​

2,068

​

​

—

​

​

12,262

Substandard

​

​

214

​

​

10,409

​

​

11

​

​

2,326

​

​

—

​

​

4,282

​

​

—

​

​

17,242

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

6

​

​

—

​

​

6

Total Construction and land development

​

$

877,608

​

$

754,382

​

$

135,275

​

$

65,841

​

$

21,740

​

$

35,798

​

$

65,656

​

$

1,956,300

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

2,245,943

​

$

1,849,079

​

$

816,791

​

$

959,707

​

$

506,350

​

$

1,417,397

​

$

108,759

​

$

7,904,026

Special mention

​

​

7,579

​

​

4,225

​

​

936

​

​

11,036

​

​

24,067

​

​

32,110

​

​

5,000

​

​

84,953

Substandard

​

​

13,256

​

​

25,557

​

​

609

​

​

9,383

​

​

6,472

​

​

26,366

​

​

2,257

​

​

83,900

Doubtful

​

​

—

​

​

1

​

​

—

​

​

79

​

​

—

​

​

—

​

​

—

​

​

80

Total Commercial non-owner occupied

​

$

2,266,778

​

$

1,878,862

​

$

818,336

​

$

980,205

​

$

536,889

​

$

1,475,873

​

$

116,016

​

$

8,072,959

Commercial non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

8

​

$

—

​

$

—

​

$

—

​

$

—

​

$

360

​

$

—

​

$

368

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Owner Occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

1,046,562

​

$

1,136,289

​

$

725,040

​

$

709,669

​

$

446,497

​

$

1,080,522

​

$

75,506

​

$

5,220,085

Special mention

​

​

3,620

​

​

25,263

​

​

3,383

​

​

7,934

​

​

7,160

​

​

34,724

​

​

1,294

​

​

83,378

Substandard

​

​

12,861

​

​

34,210

​

​

19,962

​

​

16,502

​

​

9,487

​

​

62,808

​

​

895

​

​

156,725

Doubtful

​

​

—

​

​

—

​

​

1

​

​

—

​

​

—

​

​

4

​

​

—

​

​

5

Total commercial owner occupied

​

$

1,063,043

​

$

1,195,762

​

$

748,386

​

$

734,105

​

$

463,144

​

$

1,178,058

​

$

77,695

​

$

5,460,193

Commercial owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

​

—

​

​

—

​

​

—

​

​

1,143

​

​

—

​

​

833

​

​

—

​

​

1,976

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

1,566,203

​

$

895,368

​

$

506,655

​

$

274,446

​

$

212,522

​

$

333,286

​

$

1,386,678

​

$

5,175,158

Special mention

​

​

5,885

​

​

3,782

​

​

3,401

​

​

1,859

​

​

3,378

​

​

1,316

​

​

24,347

​

​

43,968

Substandard

​

​

6,308

​

​

27,974

​

​

4,770

​

​

6,591

​

​

6,783

​

​

8,476

​

​

32,876

​

​

93,778

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

155

​

​

422

​

​

2

​

​

579

Total commercial and industrial

​

$

1,578,396

​

$

927,124

​

$

514,826

​

$

282,896

​

$

222,838

​

$

343,500

​

$

1,443,903

​

$

5,313,483

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

​

4

​

​

2,825

​

​

198

​

​

630

​

​

2,214

​

​

2,589

​

​

1,742

​

​

10,202

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

149,793

​

$

92,887

​

$

60,473

​

$

46,189

​

$

47,155

​

$

107,436

​

$

46,179

​

$

550,112

Special mention

​

​

952

​

​

957

​

​

1,257

​

​

378

​

​

190

​

​

3,652

​

​

2,328

​

​

9,714

Substandard

​

​

876

​

​

359

​

​

1,281

​

​

300

​

​

214

​

​

11,214

​

​

1,065

​

​

15,309

Doubtful

​

​

401

​

​

—

​

​

—

​

​

—

​

​

—

​

​

136

​

​

—

​

​

537

Total other income producing property

​

$

152,022

​

$

94,203

​

$

63,011

​

$

46,867

​

$

47,559

​

$

122,438

​

$

49,572

​

$

575,672

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

46

​

$

50

​

$

96

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

5,947

​

$

3,124

​

$

1,811

​

$

418

​

$

68

​

$

332

​

$

15,910

​

$

27,610

Special mention

​

​

537

​

​

20

​

​

136

​

​

284

​

​

—

​

​

—

​

​

66

​

​

1,043

Substandard

​

​

13

​

​

95

​

​

12

​

​

1,614

​

​

—

​

​

202

​

​

151

​

​

2,087

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1

​

​

—

​

​

—

​

​

1

Total Consumer owner occupied

​

$

6,497

​

$

3,239

​

$

1,959

​

$

2,316

​

$

69

​

$

534

​

$

16,127

​

$

30,741

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

20,989

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

20,989

Special mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Total other loans

​

$

20,989

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

20,989

Other loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Commercial Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Risk rating:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

5,911,188

​

$

4,719,732

​

$

2,245,766

​

$

2,053,868

​

$

1,227,113

​

$

2,968,415

​

$

1,698,688

​

$

20,824,770

Special mention

​

​

20,216

​

​

35,235

​

​

9,381

​

​

21,567

​

​

42,014

​

​

73,870

​

​

33,035

​

​

235,318

Substandard

​

​

33,528

​

​

98,604

​

​

26,645

​

​

36,716

​

​

22,956

​

​

113,348

​

​

37,244

​

​

369,041

Doubtful

​

​

401

​

​

1

​

​

1

​

​

79

​

​

156

​

​

568

​

​

2

​

​

1,208

Total Commercial Loans

​

$

5,965,333

​

$

4,853,572

​

$

2,281,793

​

$

2,112,230

​

$

1,292,239

​

$

3,156,201

​

$

1,768,969

​

$

21,430,337

Total Commercial Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

12

​

$

2,825

​

$

198

​

$

1,773

​

$

2,214

​

$

3,828

​

$

1,792

​

$

12,642

​

21

Table of Contents 

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 properties and lots.

The following table presents the credit risk profile by past due status of consumer loans by origination year as of June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

Amortized Cost Basis by Origination Year

As of June 30, 2023

​

2023

​

2022

​

2021

​

2020

​

2019

​

Prior

​

Revolving

​

Total

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

609,226

​

$

1,836,525

​

$

1,598,865

​

$

642,978

​

$

303,557

​

$

883,000

​

$

—

​

$

5,874,151

30 days past due

​

​

—

​

​

1,351

​

​

1,346

​

​

727

​

​

344

​

​

1,651

​

​

1

​

​

5,420

60 days past due

​

​

—

​

​

466

​

​

864

​

​

164

​

​

53

​

​

1,499

​

​

—

​

​

3,046

90 days past due

​

​

—

​

​

1,378

​

​

—

​

​

821

​

​

512

​

​

3,720

​

​

—

​

​

6,431

Total Consumer owner occupied

​

$

609,226

​

$

1,839,720

​

$

1,601,075

​

$

644,690

​

$

304,466

​

$

889,870

​

$

1

​

$

5,889,048

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

37

​

$

—

​

$

—

​

$

—

​

$

2

​

$

—

​

$

39

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Home equity loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

3,686

​

$

6,269

​

$

4,853

​

$

2,958

​

$

1,212

​

$

15,534

​

$

1,308,808

​

$

1,343,320

30 days past due

​

​

—

​

​

—

​

​

156

​

​

43

​

​

89

​

​

425

​

​

1,539

​

​

2,252

60 days past due

​

​

—

​

​

40

​

​

—

​

​

—

​

​

—

​

​

507

​

​

731

​

​

1,278

90 days past due

​

​

42

​

​

49

​

​

—

​

​

15

​

​

1

​

​

230

​

​

527

​

​

864

Total Home equity loans

​

$

3,728

​

$

6,358

​

$

5,009

​

$

3,016

​

$

1,302

​

$

16,696

​

$

1,311,605

​

$

1,347,714

Home equity loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

39

​

$

—

​

$

—

​

$

—

​

$

39

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

202,695

​

$

355,302

​

$

170,088

​

$

90,851

​

$

71,344

​

$

162,334

​

$

204,891

​

$

1,257,505

30 days past due

​

​

27

​

​

545

​

​

304

​

​

18

​

​

39

​

​

1,061

​

​

13,579

​

​

15,573

60 days past due

​

​

1

​

​

93

​

​

124

​

​

168

​

​

99

​

​

737

​

​

8,021

​

​

9,243

90 days past due

​

​

1

​

​

100

​

​

141

​

​

28

​

​

70

​

​

1,038

​

​

1,779

​

​

3,157

Total consumer

​

$

202,724

​

$

356,040

​

$

170,657

​

$

91,065

​

$

71,552

​

$

165,170

​

$

228,270

​

$

1,285,478

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

64

​

$

883

​

$

259

​

$

157

​

$

153

​

$

357

​

$

3,873

​

$

5,746

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

62,286

​

$

600,901

​

$

208,596

​

$

29,686

​

$

9,897

​

$

16,777

​

$

—

​

$

928,143

30 days past due

​

​

3

​

​

—

​

​

—

​

​

—

​

​

—

​

​

167

​

​

—

​

​

170

60 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

65

​

​

—

​

​

65

90 days past due

​

​

—

​

​

—

​

​

—

​

​

1

​

​

—

​

​

—

​

​

—

​

​

1

Total Construction and land development

​

$

62,289

​

$

600,901

​

$

208,596

​

$

29,687

​

$

9,897

​

$

17,009

​

$

—

​

$

928,379

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

6,239

​

$

45,046

​

$

19,131

​

$

4,759

​

$

2,578

​

$

41,060

​

$

286

​

$

119,099

30 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

61

​

​

—

​

​

61

60 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

90 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

255

​

​

—

​

​

255

Total other income producing property

​

$

6,239

​

$

45,046

​

$

19,131

​

$

4,759

​

$

2,578

​

$

41,376

​

$

286

​

$

119,415

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Consumer Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

884,132

​

$

2,844,043

​

$

2,001,533

​

$

771,232

​

$

388,588

​

$

1,118,705

​

$

1,513,985

​

$

9,522,218

30 days past due

​

​

30

​

​

1,896

​

​

1,806

​

​

788

​

​

472

​

​

3,365

​

​

15,119

​

​

23,476

60 days past due

​

​

1

​

​

599

​

​

988

​

​

332

​

​

152

​

​

2,808

​

​

8,752

​

​

13,632

90 days past due

​

​

43

​

​

1,527

​

​

141

​

​

865

​

​

583

​

​

5,243

​

​

2,306

​

​

10,708

Total Consumer Loans

​

$

884,206

​

$

2,848,065

​

$

2,004,468

​

$

773,217

​

$

389,795

​

$

1,130,121

​

$

1,540,162

​

$

9,570,034

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

64

​

$

920

​

$

259

​

$

196

​

$

153

​

$

359

​

$

3,873

​

$

5,824

The following table presents total loans by origination year as of June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

Amortized Cost Basis by Origination Year

As of June 30, 2023

​

2023

​

2022

​

2021

​

2020

​

2019

​

Prior

​

Revolving

​

Total

Total Loans

​

$

2,744,113

​

$

8,730,873

​

$

6,684,307

​

$

2,799,235

​

$

2,247,232

​

$

5,074,221

​

$

3,256,804

​

$

31,536,785

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

66

​

$

3,268

​

$

3,269

​

$

234

​

$

403

​

$

763

​

$

4,202

​

$

12,205

22

Table of Contents 

The following table presents the credit risk profile by past due status of consumer loans by origination year as of December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

Amortized Cost Basis by Origination Year

As of December 31, 2022

​

2022

​

2021

​

2020

​

2019

​

2018

​

Prior

​

Revolving

​

Total

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

1,695,454

​

$

1,467,080

​

$

657,005

​

$

315,458

​

$

187,580

​

$

792,572

​

$

—

​

$

5,115,149

30 days past due

​

​

1,316

​

​

1,254

​

​

1,681

​

​

664

​

​

272

​

​

2,028

​

​

—

​

​

7,215

60 days past due

​

​

255

​

​

337

​

​

579

​

​

—

​

​

242

​

​

1,650

​

​

—

​

​

3,063

90 days past due

​

​

—

​

​

944

​

​

776

​

​

454

​

​

664

​

​

3,036

​

​

—

​

​

5,874

Total Consumer owner occupied

​

$

1,697,025

​

$

1,469,615

​

$

660,041

​

$

316,576

​

$

188,758

​

$

799,286

​

$

—

​

$

5,131,301

Consumer owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

25

​

$

—

​

$

—

​

$

6

​

$

23

​

$

66

​

$

—

​

$

120

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Home equity loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

5,921

​

$

5,231

​

$

3,282

​

$

1,560

​

$

1,955

​

$

17,941

​

$

1,272,848

​

$

1,308,738

30 days past due

​

​

—

​

​

—

​

​

155

​

​

77

​

​

418

​

​

422

​

​

1,586

​

​

2,658

60 days past due

​

​

—

​

​

—

​

​

19

​

​

36

​

​

70

​

​

26

​

​

540

​

​

691

90 days past due

​

​

—

​

​

—

​

​

60

​

​

87

​

​

—

​

​

611

​

​

323

​

​

1,081

Total Home equity loans

​

$

5,921

​

$

5,231

​

$

3,516

​

$

1,760

​

$

2,443

​

$

19,000

​

$

1,275,297

​

$

1,313,168

Home equity loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

19

​

$

—

​

$

280

​

$

146

​

$

445

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

407,825

​

$

206,003

​

$

111,210

​

$

86,008

​

$

44,303

​

$

141,053

​

$

248,314

​

$

1,244,716

30 days past due

​

​

718

​

​

194

​

​

78

​

​

174

​

​

63

​

​

1,255

​

​

17,471

​

​

19,953

60 days past due

​

​

55

​

​

103

​

​

107

​

​

36

​

​

144

​

​

557

​

​

9,836

​

​

10,838

90 days past due

​

​

126

​

​

60

​

​

58

​

​

66

​

​

165

​

​

1,660

​

​

784

​

​

2,919

Total consumer

​

$

408,724

​

$

206,360

​

$

111,453

​

$

86,284

​

$

44,675

​

$

144,525

​

$

276,405

​

$

1,278,426

Consumer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

254

​

$

653

​

$

337

​

$

265

​

$

62

​

$

664

​

$

7,979

​

$

10,214

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

466,475

​

$

351,485

​

$

50,472

​

$

14,053

​

$

7,006

​

$

13,588

​

$

379

​

$

903,458

30 days past due

​

​

2

​

​

—

​

​

—

​

​

57

​

​

23

​

​

43

​

​

—

​

​

125

60 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

90 days past due

​

​

—

​

​

—

​

​

436

​

​

—

​

​

—

​

​

41

​

​

—

​

​

477

Total Construction and land development

​

$

466,477

​

$

351,485

​

$

50,908

​

$

14,110

​

$

7,029

​

$

13,672

​

$

379

​

$

904,060

Construction and land development

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

21

​

$

—

​

$

—

​

$

4

​

$

—

​

$

25

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

45,717

​

$

21,421

​

$

4,937

​

$

2,663

​

$

4,322

​

$

40,680

​

$

624

​

$

120,364

30 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

62

​

​

—

​

​

62

60 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

23

​

​

—

​

​

23

90 days past due

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

121

​

​

—

​

​

121

Total other income producing property

​

$

45,717

​

$

21,421

​

$

4,937

​

$

2,663

​

$

4,322

​

$

40,886

​

$

624

​

$

120,570

Other income producing property

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Consumer Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Days past due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current

​

$

2,621,392

​

$

2,051,220

​

$

826,906

​

$

419,742

​

$

245,166

​

$

1,005,834

​

$

1,522,165

​

$

8,692,425

30 days past due

​

​

2,036

​

​

1,448

​

​

1,914

​

​

972

​

​

776

​

​

3,810

​

​

19,057

​

​

30,013

60 days past due

​

​

310

​

​

440

​

​

705

​

​

72

​

​

456

​

​

2,256

​

​

10,376

​

​

14,615

90 days past due

​

​

126

​

​

1,004

​

​

1,330

​

​

607

​

​

829

​

​

5,469

​

​

1,107

​

​

10,472

Total Consumer Loans

​

$

2,623,864

​

$

2,054,112

​

$

830,855

​

$

421,393

​

$

247,227

​

$

1,017,369

​

$

1,552,705

​

$

8,747,525

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

279

​

$

653

​

$

358

​

$

290

​

$

85

​

$

1,014

​

$

8,125

​

$

10,804

The following table presents total loans by origination year as of  December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans

(Dollars in thousands)

​

Amortized Cost Basis by Origination Year

As of December 31, 2022

​

2022

​

2021

​

2020

​

2019

​

2018

​

Prior

​

Revolving

​

Total

Total Loans

​

$

8,589,197

​

$

6,907,684

​

$

3,112,648

​

$

2,533,623

​

$

1,539,466

​

$

4,173,570

​

$

3,321,674

​

$

30,177,862

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Current-period gross charge-offs

​

$

291

​

$

3,478

​

$

556

​

$

2,063

​

$

2,299

​

$

4,842

​

$

9,917

​

$

23,446

23

Table of Contents 

The following table presents an aging analysis of past due accruing loans, segregated by 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

June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

$

936

​

$

105

​

$

217

​

$

1,258

​

$

2,815,523

​

$

344

​

$

2,817,125

Commercial non-owner occupied

​

 

1,075

​

 

109

​

 

245

​

 

1,429

​

 

8,450,916

​

 

23,891

​

 

8,476,236

Commercial owner occupied

​

 

7,104

​

​

1,426

​

 

1,262

​

 

9,792

​

 

5,527,546

​

 

48,613

​

 

5,585,951

Consumer owner occupied

​

 

3,727

​

 

2,052

​

 

—

​

 

5,779

​

 

5,902,112

​

 

19,890

​

 

5,927,781

Home equity loans

​

 

1,876

​

 

595

​

 

—

​

 

2,471

​

 

1,340,536

​

 

4,707

​

 

1,347,714

Commercial and industrial

​

 

26,794

​

 

7,006

​

 

2,466

​

 

36,266

​

 

5,282,651

​

 

59,377

​

 

5,378,294

Other income producing property

​

 

1,713

​

 

—

​

 

—

​

 

1,713

​

 

706,203

​

 

3,796

​

 

711,712

Consumer

​

 

15,406

​

 

9,055

​

 

1

​

 

24,462

​

 

1,256,128

​

 

4,888

​

 

1,285,478

Other loans

​

 

—

​

 

—

​

 

—

​

 

—

​

 

6,494

​

 

—

​

 

6,494

​

​

$

58,631

​

$

20,348

​

$

4,191

​

$

83,170

​

$

31,288,109

​

$

165,506

​

$

31,536,785

December 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

$

2,146

​

$

3,653

​

$

—

​

$

5,799

​

$

2,853,734

​

$

827

​

$

2,860,360

Commercial non-owner occupied

​

 

1,158

​

 

978

​

 

77

​

 

2,213

​

 

8,050,321

​

 

20,425

​

 

8,072,959

Commercial owner occupied

​

 

10,748

​

​

2,059

​

 

2,231

​

 

15,038

​

 

5,410,066

​

 

35,089

​

 

5,460,193

Consumer owner occupied

​

​

6,001

​

 

744

​

 

40

​

 

6,785

​

 

5,137,950

​

 

17,307

​

 

5,162,042

Home equity loans

​

 

2,527

​

 

361

​

 

—

​

 

2,888

​

 

1,303,964

​

 

6,316

​

 

1,313,168

Commercial and industrial

​

 

24,500

​

 

11,677

​

 

1,704

​

 

37,881

​

 

5,258,473

​

 

17,129

​

 

5,313,483

Other income producing property

​

 

1,623

​

 

1,480

​

 

298

​

 

3,401

​

 

690,107

​

 

2,734

​

 

696,242

Consumer

​

 

19,713

​

 

10,655

​

 

—

​

 

30,368

​

 

1,243,660

​

 

4,398

​

 

1,278,426

Other loans

​

 

—

​

 

—

​

 

—

​

 

—

​

 

20,989

​

 

—

​

 

20,989

​

​

$

68,416

​

$

31,607

​

$

4,350

​

$

104,373

​

$

29,969,264

​

$

104,225

​

$

30,177,862

The following table is a summary of information pertaining to nonaccrual loans by class, including loans modified for borrowers with financial difficulty as of June 30, 2023 and the information pertaining to nonaccrual loans by class, including restructured loans as of December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

Greater than

​

Non-accrual

​

December 31,

​

​

(Dollars in thousands)

​

2023

​

90 Days Accruing(1)

    

with no allowance(1)

 

2022

    

    

Construction and land development

​

$

344

​

$

217

​

$

7

​

$

827

​

​

Commercial non-owner occupied

​

 

23,891

​

​

245

​

 

14,391

​

 

20,425

​

​

Commercial owner occupied real estate

​

 

48,613

​

​

1,262

​

 

15,057

​

 

35,089

​

​

Consumer owner occupied

​

 

19,890

​

​

—

​

 

—

​

 

17,307

​

​

Home equity loans

​

 

4,707

​

​

—

​

 

—

​

 

6,316

​

​

Commercial and industrial

​

 

59,377

​

​

2,466

​

 

35,603

​

 

17,129

​

​

Other income producing property

​

 

3,796

​

​

—

​

 

—

​

 

2,734

​

​

Consumer

​

 

4,888

​

​

1

​

 

—

​

 

4,398

​

​

Total loans on nonaccrual status

​

$

165,506

​

$

4,191

​

$

65,058

​

$

104,225

​

​

(1)Greater than 90 days accruing and non-accrual with no allowance loans at June 30, 2023.

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 discussion on individually evaluated loans.

The following is a summary of collateral dependent loans, by type of collateral, and the extent to which they are collateralized during the period:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

Collateral

​

​

December 31,

​

Collateral

​

​

(Dollars in thousands)

​

2023

    

Coverage

%

​

2022

    

Coverage

%

​

Commercial owner occupied real estate

​

​

​

​

 

​

​

​

 

​

​

 

​

​

​

Industrial

​

$

15,728

​

$

20,637

131%

​

$

—

​

$

—

​

​

Other

​

​

10,546

​

​

21,784

207%

​

​

14,638

​

​

38,900

266%

​

Commercial non-owner occupied real estate

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

Retail

​

​

3,327

​

​

4,950

149%

​

​

—

​

​

—

​

​

Other

​

​

13,451

​

​

27,922

208%

​

​

6,450

​

​

10,900

169%

​

Commercial and industrial

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

50,907

​

​

51,443

101%

​

​

4,808

​

​

5,591

116%

​

Home equity loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential 1-4 family dwelling

​

​

—

​

​

—

​

​

​

1,523

​

​

1,671

110%

​

Total collateral dependent loans

​

$

93,959

​

$

126,736

​

​

$

27,419

​

$

57,062

​

​

​

24

Table of Contents 

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 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 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 significant changes above in collateral percentage are due to appraisal value updates or changes in the number of loans within the asset class and collateral type. Overall collateral dependent loans increased $66.5 million during the six months ended June 30, 2023.

​

Loans on nonaccrual status at the date of modification are initially classified as nonaccrual. Loans on accruing status at the date of modification are initially classified as accruing 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 modification date if reasonable doubt exists as to the collection of interest or principal under the modification agreement. Nonaccrual loans are returned to accruing status when there is economic substance to the 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). Refer to See Note 2 — Summary of Significant Accounting Policies for further detailed discussion on loan modified to a borrower experiencing financial difficulty and the losses from modifications of receivables to borrowers experiencing financial difficulty.

​

The following tables present loans designated as modifications made to borrowers experiencing financial difficulty during three and six months ended June 30, 2023 resulting from the adoption of ASU 2022-02, segregated by type of modification and asset class, and indicating the financial effect of the modifications. The amortized cost balance for the modified loans presented below exclude accrued interest receivable of approximately $68,000 as of June 30, 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30,

​

​

​

2023

​

​

​

​

​

​

​

Increase in

​

​

​

Amortized

​

% of Total

​

Weighted Average

​

(Dollars in thousands)

​

Cost

​

Asset Class

​

Life of Loan

​

Term extension

​

​

​

​

​

​

​

​

​

Construction and land development

​

$

1,255

​

$

0.04%

​

24 months

​

Commercial non-owner occupied

​

​

343

​

​

0.00%

​

60 months

​

Commercial owner occupied real estate

​

​

7,732

​

​

0.14%

​

22 months

​

Commercial and industrial

​

​

1,787

​

​

0.03%

​

6 months

​

Total term extensions

​

$

11,117

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

​

​

​

2023

​

​

​

​

​

​

​

Increase in

​

​

​

Amortized

​

% of Total

​

Weighted Average

​

(Dollars in thousands)

​

Cost

​

Asset Class

​

Life of Loan

​

Term extension

​

​

​

​

​

​

​

​

​

Construction and land development

​

$

1,512

​

$

0.05%

​

22 months

​

Commercial non-owner occupied

​

​

343

​

​

0.00%

​

60 months

​

Commercial owner occupied real estate

​

​

8,096

​

​

0.14%

​

22 months

​

Consumer owner occupied

​

​

281

​

​

0.02%

​

6 months

​

Commercial and industrial

​

​

2,700

​

​

0.05%

​

7 months

​

Total term extensions

​

$

12,932

​

​

​

​

​

​

​

​

​

25

Table of Contents 

There were no combination – term extension and interest rate reduction loans during the first quarter of 2023.

​

​

​

​

​

​

​

​

​

​

​

​

Three and Six Months Ended June 30,

​

​

​

2023

​

​

​

​

​

Reduction in Weighted

​

Increase in

​

​

​

Amortized

​

Average Contractual

​

Weighted Average

​

(Dollars in thousands)

​

Cost

​

Interest Rate

​

Life of Loan

​

Combination- Term Extension and Interest Rate Reduction

​

​

​

​

​

​

​

​

Consumer owner occupied

​

$

259

​

3.63 to 3.00%

​

20 months

​

Total

​

$

259

​

​

​

​

​

​

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 June 30, 2023, the Company had $4.3 million remaining in commitments to lend additional funds on loans to borrowers experiencing financial difficulty and modified during the current reporting period.

​

The following table presents loans designated as TDRs segregated by class and type of concession that were restructured, for the comparative period, prior to the adoption of ASU 2022-02. There were no loans restructured as TDRs during the three months ending June 30, 2022.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

​

​

​

​

​

​

2022

​

​

​

​

​

Pre-Modification

​

Post-Modification

​

​

​

Number

​

Amortized

​

Amortized

​

(Dollars in thousands)

​

of loans

​

Cost

​

Cost

​

Interest rate modification

​

​

​

​

​

​

​

​

​

Commercial non-owner occupied

​

1

​

$

182

​

$

182

​

Commercial owner occupied

​

2

​

​

262

​

​

262

​

Consumer owner occupied

​

1

​

​

97

​

​

97

​

Commercial and industrial

​

4

​

​

434

​

​

434

​

Other income producing property

​

2

​

​

115

​

​

115

​

Total interest rate modifications

​

10

​

$

1,090

​

$

1,090

​

Term modification

​

​

​

​

​

​

​

​

​

Construction and land development

​

1

​

$

137

​

$

137

​

Commercial owner occupied

​

2

​

​

2,327

​

​

2,327

​

Total term modifications

​

3

​

$

2,464

​

$

2,464

​

​

​

13

​

$

3,554

​

$

3,554

​

​

At June 30, 2022, the balance of accruing TDRs was $11.2 million. The Company had $579,000 remaining availability under commitments to lend additional funds on restructured loans at June 30, 2022. The amount of specific reserve associated with restructured loans was $8.2 million at June 30, 2022.

​

The following table presents the changes in status of loans modified within the previous six months to borrowers experiencing financial difficulty, as of June 30, 2023, by type of modification. There were no subsequent defaults.

​

​

​

​

​

​

​

​

​

​

​

​

​

Paying Under

​

Converted to

​

Foreclosures

​

​

​

Restructured Terms

​

Nonaccrual

​

and Defaults

​

​

​

Amortized

​

Amortized

​

Amortized

​

(Dollars in thousands)

​

Cost

​

Cost

​

Cost

​

Term extension

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

$

1,512

​

$

—

​

$

—

​

Commercial non-owner occupied

​

​

343

​

​

—

​

​

—

​

Commercial owner occupied real estate

​

​

8,096

​

​

—

​

​

—

​

Consumer owner occupied

​

​

540

​

​

—

​

​

—

​

Commercial and industrial

​

​

2,700

​

​

—

​

​

—

​

Total term extensions

​

$

13,191

​

$

—

​

$

—

​

​

​

26

Table of Contents 

The following table presents the changes in status of TDR loans within the previous twelve months as of June 30, 2022 by type of concession, for the comparative period, prior to the adoption of ASU 2022-02. There were no subsequent defaults that resulted in a change to reserves on the individually evaluated loan.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Paying Under

​

Converted to

​

Foreclosures and

 

​

​

Restructured Terms

​

Nonaccrual

​

Defaults

 

​

​

Number

​

Recorded

​

Number

​

Recorded

​

Number

​

Recorded

 

(Dollars in thousands)

​

of Loans

​

Investment

​

of Loans

​

Investment

​

of Loans

​

Investment

 

Interest rate modification

    

12

    

$

1,354

    

—

    

$

—

    

—

    

$

—

​

Term modification

 

4

​

 

2,768

 

—

​

 

—

 

—

​

 

—

​

​

 

16

​

$

4,122

 

—

​

$

—

 

—

​

$

—

​

​

The following table depicts the performance of loans modified within the previous six months to borrowers experiencing financial difficulty, as of June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Payment Status (Amortized Cost Basis)

​

​

​

​

​

30-89 Days

​

90+ Days

​

(Dollars in thousands)

​

Current

​

Past Due

​

Past Due

​

Construction and land development

​

$

1,512

​

$

—

​

$

—

​

Commercial non-owner occupied

​

​

343

​

​

—

​

​

—

​

Commercial owner occupied real estate

​

​

8,096

​

​

—

​

​

—

​

Consumer owner occupied

​

​

540

​

​

—

​

​

—

​

Commercial and industrial

​

​

2,700

​

​

—

​

​

—

​

Total

​

$

13,191

​

$

—

​

$

—

​

​

Note 7 — Allowance for Credit Losses (ACL)

See 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 allowance for credit losses.

The following tables present a disaggregated analysis of activity in the allowance for credit losses.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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 June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

Charge-offs

​

 

(37)

​

 

—

​

 

—

​

 

—

​

 

(2)

​

 

(3,017)

​

 

—

​

 

—

​

 

(35)

​

​

—

​

​

(4,487)

​

 

(7,578)

Recoveries

​

 

302

​

 

3

​

 

532

​

 

22

​

 

198

​

 

520

​

 

—

​

 

—

​

 

93

​

​

334

​

​

2,264

​

 

4,268

Net (charge offs) recoveries

​

​

265

​

 

3

​

 

532

​

 

22

​

 

196

​

 

(2,497)

​

 

—

​

 

—

​

 

58

​

​

334

​

​

(2,223)

​

​

(3,310)

Provision (recovery) (1)

​

 

3,853

​

 

40

​

 

(638)

​

 

(329)

​

 

49

​

 

3,755

​

 

4,260

​

 

(134)

​

 

13,160

​

​

32,462

​

​

3,579

​

 

60,057

Balance at end of period June 30, 2023

​

$

81,469

​

$

392

​

$

14,212

​

$

8,869

​

$

55,314

​

$

24,577

​

$

9,767

​

$

745

​

$

70,759

​

$

115,269

​

$

46,019

​

$

427,392

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative allowance

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Collectively evaluated

​

$

82,205

​

$

393

​

$

12,083

​

$

8,779

​

$

84,827

​

$

24,577

​

$

9,680

​

$

670

​

$

62,998

​

$

112,563

​

$

36,783

​

$

435,558

Individually evaluated

​

​

174

​

​

—

​

​

2,331

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

6,936

​

​

1,723

​

​

5,100

​

​

16,264

Total quantitative allowance

​

​

82,379

​

​

393

​

​

14,414

​

​

8,779

​

​

84,827

​

​

24,577

​

​

9,680

​

​

670

​

​

69,934

​

​

114,286

​

​

41,883

​

​

451,822

Qualitative allowance

​

​

(910)

​

​

(1)

​

​

(202)

​

​

90

​

​

(29,513)

​

​

—

​

​

87

​

​

75

​

​

825

​

​

983

​

​

4,136

​

​

(24,430)

Balance at end of period June 30, 2023

​

$

81,469

​

$

392

​

$

14,212

​

$

8,869

​

$

55,314

​

$

24,577

​

$

9,767

​

$

745

​

$

70,759

​

$

115,269

​

$

46,019

​

$

427,392

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at end of period March 31, 2022

​

$

46,002

​

$

586

​

$

13,671

​

$

5,616

​

$

25,358

​

$

21,899

​

$

3,903

​

$

607

​

$

49,094

​

$

96,360

​

$

37,300

​

$

300,396

Allowance Adjustment – FMV for ACBI merger

​

​

727

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

930

​

​

—

​

​

2,883

​

​

4,540

Adjusted CECL balance

​

​

46,729

​

​

586

​

​

13,671

​

​

5,616

​

​

25,358

​

​

21,899

​

​

3,903

​

​

607

​

​

50,024

​

​

96,360

​

​

40,183

​

​

304,936

Charge-offs

​

 

(61)

​

 

—

​

 

(203)

​

 

—

​

 

—

​

 

(2,124)

​

 

—

​

 

—

​

 

(78)

​

​

(360)

​

​

(3,337)

​

 

(6,163)

Recoveries

​

 

361

​

 

110

​

 

395

​

 

2

​

 

410

​

 

660

​

 

—

​

 

—

​

 

94

​

​

304

​

​

1,488

​

 

3,824

Net (charge offs) recoveries

​

​

300

​

​

110

​

​

192

​

​

2

​

​

410

​

​

(1,464)

​

​

—

​

​

—

​

​

16

​

​

(56)

​

​

(1,849)

​

​

(2,339)

Provision (recovery) (1)

​

 

8,678

​

 

(163)

​

 

3,055

​

 

1,947

​

 

1,962

​

 

4,317

​

 

(1,445)

​

 

96

​

 

14,648

​

​

(11,135)

​

​

(4,849)

​

 

17,111

Balance at end of period June 30, 2022

​

$

55,707

​

$

533

​

$

16,918

​

$

7,565

​

$

27,730

​

$

24,752

​

$

2,458

​

$

703

​

$

64,688

​

$

85,169

​

$

33,485

​

$

319,708

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quantitative allowance

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Collectively evaluated

​

$

55,203

​

$

533

​

$

13,488

​

$

7,565

​

$

21,572

​

$

24,752

​

$

2,458

​

$

703

​

$

42,294

​

$

63,666

​

$

26,203

​

$

258,437

Individually evaluated

​

​

479

​

​

—

​

​

3,418

​

​

—

​

​

865

​

​

—

​

​

—

​

​

—

​

​

5,588

​

​

140

​

​

6,442

​

​

16,932

Total quantitative allowance

​

​

55,682

​

​

533

​

​

16,906

​

​

7,565

​

​

22,437

​

​

24,752

​

​

2,458

​

​

703

​

​

47,882

​

​

63,806

​

​

32,645

​

​

275,369

Qualitative allowance

​

​

25

​

​

—

​

​

12

​

​

—

​

​

5,293

​

​

—

​

​

—

​

​

—

​

​

16,806

​

​

21,363

​

​

840

​

​

44,339

Balance at end of period June 30, 2022

​

$

55,707

​

$

533

​

$

16,918

​

$

7,565

​

$

27,730

​

$

24,752

​

$

2,458

​

$

703

​

$

64,688

​

$

85,169

​

$

33,485

​

$

319,708

(1)A negative provision for credit losses of $21.7 million was recorded during the second quarter of 2023, compared to a provision for credit losses of $2.2 million recorded during the second quarter of 2022 for the allowance for credit losses for unfunded commitments that is not included in the above table.

​

27

Table of Contents 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

Six Months Ended June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at end of period December 31, 2022

​

$

72,188

​

$

405

​

$

14,886

​

$

8,974

​

$

45,410

​

$

22,767

​

$

3,684

​

$

849

​

$

58,083

​

$

78,485

​

$

50,713

​

$

356,444

Charge-offs

​

 

(39)

​

 

—

​

 

(39)

​

 

—

​

 

(2)

​

 

(5,746)

​

 

—

​

 

—

​

 

(35)

​

​

(51)

​

​

(6,293)

​

 

(12,205)

Recoveries

​

 

596

​

 

8

​

 

777

​

 

94

​

 

456

​

 

1,104

​

 

—

​

 

—

​

 

386

​

​

440

​

​

3,996

​

 

7,857

Net (charge offs) recoveries

​

​

557

​

​

8

​

​

738

​

​

94

​

​

454

​

​

(4,642)

​

​

—

​

​

—

​

​

351

​

​

389

​

​

(2,297)

​

​

(4,348)

Provision (benefit) (1)

​

 

8,724

​

 

(21)

​

 

(1,412)

​

 

(199)

​

 

9,450

​

 

6,452

​

 

6,083

​

 

(104)

​

 

12,325

​

​

36,395

​

​

(2,397)

​

 

75,296

Balance at end of period June 30, 2023

​

$

81,469

​

$

392

​

$

14,212

​

$

8,869

​

$

55,314

​

$

24,577

​

$

9,767

​

$

745

​

$

70,759

​

$

115,269

​

$

46,019

​

$

427,392

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Allowance for credit losses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance at end of period December 31, 2021

​

$

47,036

​

$

611

​

$

13,325

​

$

4,997

​

$

37,593

​

$

23,149

​

$

4,921

​

$

565

​

$

61,794

​

$

79,649

​

$

28,167

​

$

301,807

Initial Allowance for PCD loans acquired during period

​

​

811

​

​

—

​

​

—

​

​

—

​

​

86

​

​

—

​

​

—

​

​

—

​

​

2,409

​

​

—

​

​

10,452

​

​

13,758

Initial Allowance for Non PCD loans acquired during period

​

​

352

​

​

26

​

​

132

​

​

2

​

​

1,887

​

​

51

​

​

426

​

​

—

​

​

2,519

​

​

2,697

​

​

5,605

​

​

13,697

Charge-offs

​

 

(119)

​

 

(19)

​

 

(421)

​

 

—

​

 

(4)

​

 

(4,785)

​

 

—

​

 

—

​

 

(449)

​

​

(360)

​

​

(5,496)

​

 

(11,653)

Recoveries

​

 

755

​

 

165

​

 

652

​

 

5

​

 

644

​

 

1,192

​

 

—

​

 

—

​

 

408

​

​

373

​

​

2,797

​

 

6,991

Net (charge offs) recoveries

​

​

636

​

​

146

​

​

231

​

​

5

​

​

640

​

​

(3,593)

​

​

—

​

​

—

​

​

(41)

​

​

13

​

​

(2,699)

​

​

(4,662)

Provision (benefit) (1)

​

 

6,872

​

 

(250)

​

 

3,230

​

 

2,561

​

 

(12,476)

​

 

5,145

​

 

(2,889)

​

 

138

​

 

(1,993)

​

​

2,810

​

​

(8,040)

​

 

(4,892)

Balance at end of period June 30, 2022

​

$

55,707

​

$

533

​

$

16,918

​

$

7,565

​

$

27,730

​

$

24,752

​

$

2,458

​

$

703

​

$

64,688

​

$

85,169

​

$

33,485

​

$

319,708

(1)A negative provision for credit losses of $3.8 million was recorded during the first six months of 2023, compared to a provision for credit losses of $2.0 million during the first six months of 2022 for the allowance for credit losses for unfunded commitments that is not included in the above table.

Note 8 — Other Real Estate Owned and Bank Premises Held for Sale

​

The following is a summary of information pertaining to OREO and Bank Premises Held for Sale:

​

​

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

​

OREO

​

Bank Properties Held for Sale

​

Total

Balance, December 31, 2022

    

$

1,023

​

$

17,754

​

$

18,777

Additions, net

​

​

3,186

​

​

—

​

​

3,186

Write-downs

​

​

—

​

​

(1,231)

​

​

(1,231)

Sold

​

​

(3,129)

​

​

(3,051)

​

​

(6,180)

Balance, June 30, 2023

​

$

1,080

​

$

13,472

​

$

14,552

​

At June 30, 2023, there were a total of five properties included in OREO compared to six properties at December 31, 2022. At June 30, 2023, there were a total of 13 properties included in bank premises held for sale which compares to 17 properties included in premises held for sale, at December 31, 2022. At June 30, 2023, we had $342,000 in residential real estate included in OREO and $3.2 million in residential real estate consumer mortgage loans in the process of foreclosure.

Note 9 — Leases

​

As of June 30, 2023 and December 31, 2022, we had operating right-of-use (“ROU”) assets of $106.7 million and $108.0 million, respectively, and operating lease liabilities of $114.6 million and $115.6 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 21 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.

​

28

Table of Contents 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

(Dollars in thousands)

​

June 30,

​

June 30,

 

​

​

    

2023

2022

    

2023

2022

 

 

Lease Cost Components:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortization of ROU assets – finance leases

​

$

117

​

$

117

​

$

233

​

$

233

​

​

Interest on lease liabilities – finance leases

​

​

10

​

​

12

​

​

21

​

​

25

​

​

Operating lease cost (cost resulting from lease payments)

​

​

4,278

​

​

4,536

​

​

8,518

​

​

8,869

​

​

Short-term lease cost

​

​

109

​

​

231

​

​

215

​

​

374

​

​

Variable lease cost (cost excluded from lease payments)

​

 

840

​

 

761

​

 

1,475

​

 

1,198

​

​

Total lease cost

​

$

5,354

​

$

5,657

​

$

10,462

​

$

10,699

​

​

Supplemental Cash Flow and Other Information Related to Leases:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Finance lease – operating cash flows

​

$

10

​

$

12

​

$

21

​

$

25

​

​

Finance lease – financing cash flows

​

​

110

​

​

108

​

​

220

​

​

216

​

​

Operating lease – operating cash flows (fixed payments)

​

​

4,154

​

​

4,444

​

​

8,250

​

​

8,626

​

​

Operating lease – operating cash flows (net change asset/liability)

​

​

(3,321)

​

​

(3,545)

​

​

(6,608)

​

​

(6,848)

​

​

New ROU assets – operating leases

​

​

701

​

​

188

​

​

701

​

​

12,616

​

​

New ROU assets – finance leases

​

​

—

​

​

—

​

​

—

​

​

—

​

​

Weighted – average remaining lease term (years) – finance leases

​

​

​

​

​

​

​

​

4.93

​

​

5.92

​

​

Weighted – average remaining lease term (years) – operating leases

​

 

​

​

​

​

​

 

9.63

​

 

10.11

​

​

Weighted – average discount rate - finance leases

​

​

​

​

​

​

​

​

1.7%

​

​

1.7%

​

​

Weighted – average discount rate - operating leases

​

 

​

​

 

​

​

 

3.0%

​

 

3.0%

​

​

​

​

 

​

​

 

​

​

 

​

​

 

​

​

​

Operating lease payments due:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2023 (excluding the quarter ended June 30, 2023)

​

​

​

​

​

​

​

$

8,411

​

​

​

​

​

2024

​

​

​

​

​

​

​

​

15,784

​

​

​

​

​

2025

​

​

​

​

​

​

​

​

14,435

​

​

​

​

​

2026

​

​

​

​

​

​

​

​

14,062

​

​

​

​

​

2027

​

​

​

​

​

​

​

​

13,122

​

​

​

​

​

Thereafter

​

​

​

​

​

​

​

​

68,760

​

​

​

​

​

Total undiscounted cash flows

​

​

​

​

​

​

​

​

134,574

​

​

​

​

​

Discount on cash flows

​

​

​

​

​

​

​

​

(20,014)

​

​

​

​

​

Total operating lease liabilities

​

​

​

​

​

​

​

$

114,560

​

​

​

​

​

​

As of June 30, 2023, 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. As of June 30, 2023, 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 June 30, 2023, we had no additional operating leases that have not yet commenced.

Note 10 — Deposits

​

Our total deposits are comprised of the following:

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

(Dollars in thousands)

    

2023

    

2022

    

Noninterest-bearing checking

​

$

11,489,483

​

$

13,168,656

​

Interest-bearing checking

​

 

8,185,609

​

 

8,955,519

​

Savings

​

 

2,931,320

​

 

3,464,351

​

Money market

​

 

9,710,032

​

 

8,342,111

​

Time deposits

​

​

4,425,434

​

​

2,419,986

​

Total deposits

​

$

36,741,878

​

$

36,350,623

​

​

At June 30, 2023 and December 31, 2022, we had $850.2 million and $464.9 million in certificates of deposits greater than $250,000, respectively.

​

​

29

Table of Contents 

Note 11 — Retirement Plans

​

The Company sponsors an employees’ savings plan under the provisions of the Internal Revenue Code Section 401(k). Electing employees are eligible to participate in the employees’ savings plan after attaining age 21. 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 received a 100% match of their 401(k) plan contribution from the Company, up to 4% of their salary. We expensed $4.2 million and $8.8 million, respectively, for the three and six months ended June 30, 2023 and $4.1 million and $8.1 million, respectively, for the three and six months ended June 30, 2022 related to the Company’s savings plan.

​

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 12 — Earnings Per Share

​

Basic earnings per share is calculated by dividing net income by the weighted-average shares of common stock outstanding during each period, excluding non-vested restricted shares. Our diluted earnings per share 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 stock units. Stock options and unvested restricted stock units are considered common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30,

​

June 30,

​

(Dollars and shares in thousands, except for per share amounts)

    

2023

    

2022

    

2023

    

2022

 

Basic earnings per common share:

​

​

    

​

​

    

​

​

    

​

​

    

​

Net income

​

$

123,447

​

$

119,175

​

$

263,373

​

$

219,504

​

Weighted-average basic common shares

​

​

76,058

​

​

75,461

​

​

75,981

​

​

73,465

​

Basic earnings per common share

​

$

1.62

​

$

1.58

​

$

3.47

​

$

2.99

​

Diluted earnings per common share:

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

$

123,447

​

$

119,175

​

$

263,373

​

$

219,504

​

Weighted-average basic common shares

​

​

76,058

​

​

75,461

​

​

75,981

​

​

73,465

​

Effect of dilutive securities

​

​

360

​

​

633

​

​

413

​

​

639

​

Weighted-average dilutive shares

​

​

76,418

​

​

76,094

​

​

76,394

​

​

74,104

​

Diluted earnings per common share

​

$

1.62

​

$

1.57

​

$

3.45

​

$

2.96

​

​

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 June 30,

​

Six Months Ended June 30,

​

​

​

    

2023

    

2022

    

2023

    

2022

 

​

Number of shares

​

​

​

​

​

58,247

​

​

​

​

​

57,169

​

​

​

    

​

57,169

​

​

​

​

​

57,169

​

    

Range of exercise prices

​

$

69.48

to

$

91.35

​

$

87.30

to

$

91.35

​

$

87.30

to

$

91.35

​

$

87.30

to

$

91.35

​

​

​

​

Note 13 — Share-Based Compensation

​

Our 2004, 2012, 2019 and 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 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.

​

​

30

Table of Contents 

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 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, 2012 or 2019 plans after January 26, 2012, February 1, 2019, and October 29, 2020, respectively, and the plans are closed other than for any options still unexercised and outstanding. The 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 2,072,245 shares registered under the 2020 plan.

Activity in the Company’s stock option plans is summarized in the following table.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted

​

​

​

​

​

​

​

Weighted

​

Average

​

Aggregate

​

​

​

​

​

Average

​

Remaining

​

Intrinsic

​

​

    

Shares

    

Price

    

(Yrs.)

    

(000’s)

 

Outstanding at January 1, 2023

​

161,832

​

$

66.20

​

​

​

​

​

​

Exercised

​

(19,011)

​

 

51.01

​

​

​

 

​

​

Expired

​

(1,967)

​

​

28.30

​

​

​

 

​

​

Outstanding at June 30, 2023

​

140,854

​

 

68.78

​

2.80

​

$

1,034

​

Exercisable at June 30, 2023

​

140,854

​

​

68.78

​

2.80

​

$

1,034

​

​

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. There have been no stock options issued during the first six months of 2023. Because all outstanding stock options had vested as of December 31, 2022, there was no unrecognized compensation cost related to nonvested stock option grants under the plans or fair value of shares vested during the six months ended June 30, 2023. The intrinsic value of stock option shares exercised for the six months ended June 30, 2023 was $510,000.

​

Restricted Stock

​

From time-to-time, we grant shares of restricted stock to key employees. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to increases in the value of our stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. 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 generally vest ratably over a two to 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 employees 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.

​

Nonvested restricted stock for 2023 is summarized in the following table.

​

​

​

​

​

​

​

​

​

    

​

    

Weighted-

 

​

​

​

​

Average

 

​

​

​

​

Grant-Date

 

Restricted Stock

​

Shares

​

Fair Value

 

Nonvested at January 1, 2023

 

50,506

​

$

89.12

​

Vested

 

(20,849)

​

 

90.00

​

Forfeited

 

(2,353)

​

 

90.00

​

Nonvested at June 30, 2023

 

27,304

​

$

88.37

​

​

As of June 30, 2023, there was $1.2 million 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 0.84 years as of June 30, 2023. The total fair value of shares vested during the six months ended June 30, 2023 was $1.6

31

Table of Contents 

million.

Restricted Stock Units (“RSUs”)

​

From time-to-time, we also grant performance RSUs and time-vested RSUs to key employees, and time-vested RSUs to non-employee directors. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to our performance. Some performance RSU grants contain a three-year performance period while others contain a one to two-year performance period and a time-vested requirement (generally two to four years from the grant date). The 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. Due to the merger with CenterState on June 7, 2020, all legacy and 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 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 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. We recognize expense on a straight-line basis typically over the performance or time-vesting periods based upon the probable performance target, as applicable, that will be met.

Outstanding RSUs at target for the six months ended June 30, 2023 is summarized in the following table.

​

​

​

​

​

​

​

​

​

    

​

    

Weighted-

 

​

​

​

​

Average

 

​

​

​

​

Grant-Date

 

Restricted Stock Units

​

Shares

​

Fair Value

 

Outstanding at January 1, 2023

 

940,512

​

$

73.82

​

Granted

 

371,821

​

 

74.90

​

Vested

​

(358,784)

​

​

71.93

​

Forfeited

​

(9,577)

​

​

75.99

​

Outstanding at June 30, 2023

 

943,972

​

$

74.94

​

​

The nonvested shares of 943,972 at June 30, 2023 includes 147,955 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 2021, 2022 and 2023 Long Term Incentive performance-based RSU grants, an additional 148,607 shares in total may be issued by the Company at the end of the three-year performance periods.

As of June 30, 2023, there was $34.9 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 1.25 years as of June 30, 2023. The total fair value of RSUs vested and released during the six months ended June 30, 2023 was $25.8 million.

Note 14 — Commitments and Contingent Liabilities

​

In the normal course of business, we make various commitments and 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 June 30, 2023, commitments to extend credit and standby letters of credit totaled $11.1 billion. As of June 30, 2023, the liability recorded for expected credit losses on unfunded commitments, excluding unconditionally cancellable exposures and letters of credit, was $63.4 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.

​

We have been named as defendant in various legal actions, arising from its normal business activities, in which damages in various amounts are claimed. We are also exposed to litigation risk related to the prior business activities of banks acquired through whole bank acquisitions. Although the amount of any ultimate liability with respect to such

32

Table of Contents 

matters cannot be determined, in the opinion of management, as of June 30, 2023, any such liability is not expected to have a material effect on our consolidated financial statements.

In May 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a notice of proposed rulemaking to implement a special assessment, in connection with the systemic risk determination announced in March 2023, to recover the cost associated with protecting uninsured depositors following the recent bank failures. The FDIC is proposing to collect the special assessment at the base at an annual rate of approximately 12.5 basis points of the Company’s uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion, over eight quarterly assessment periods, beginning after the first quarter 2024. We expect the FDIC will enact a special deposit insurance assessment in the second half of 2023 that will significantly increase our FDIC deposit insurance costs. Based on the current proposal, the Company estimates our total cost to be a quarterly special assessment of $2.8 million, or $22.7 million for the two-year special assessment period, which would be recognized at the time the final rule is adopted. The total cost and timing is subject to change prior to any final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits.

Note 15 — Fair Value

​

GAAP defines fair value and establishes a framework for measuring and disclosing 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 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, 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.

​

A description of valuation methodologies used for assets recorded at fair value is disclosed in Note 25 — Fair Value of our Annual Report on Form 10-K for the year ended December 31, 2022.

​

​

33

Table of Contents 

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

​

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring 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)

June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

Assets

​

​

​

​

​

​

​

​

​

​

​

​

Derivative financial instruments

​

$

174,480

​

$

—

​

$

174,480

​

$

—

Loans held for sale

​

 

42,951

​

 

—

​

 

42,951

​

 

—

Trading securities

​

 

56,580

​

 

—

​

 

56,580

​

 

—

Securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

​

219,913

​

​

—

​

​

219,913

​

​

—

U.S. Government agencies

​

​

218,345

​

​

—

​

​

218,345

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,604,370

​

​

—

​

​

1,604,370

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

559,776

​

​

—

​

​

559,776

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

962,494

​

​

—

​

​

962,494

​

​

—

State and municipal obligations

​

 

954,455

​

 

—

​

 

954,455

​

 

—

Small Business Administration loan-backed securities

​

 

404,559

​

 

—

​

 

404,559

​

 

—

Corporate securities

​

​

25,422

​

​

—

​

​

25,422

​

​

—

Total securities available for sale

​

 

4,949,334

​

 

—

​

 

4,949,334

​

 

—

Mortgage servicing rights

​

 

87,539

​

 

—

​

 

—

​

 

87,539

SBA servicing asset

​

​

6,202

​

​

—

​

​

—

​

​

6,202

​

​

$

5,317,086

​

$

—

​

$

5,223,345

​

$

93,741

Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

Derivative financial instruments

​

$

975,717

​

$

—

​

$

975,717

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

Assets

​

​

​

​

​

​

​

​

​

​

​

​

Derivative financial instruments

​

$

211,016

​

$

—

​

$

211,016

​

$

—

Loans held for sale

​

 

28,968

​

 

—

​

 

28,968

​

 

—

Trading securities

​

 

31,263

​

 

—

​

 

31,263

​

 

—

Securities available for sale:

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

​

265,638

​

​

—

​

​

265,638

​

​

—

U.S. Government agencies

​

​

219,088

​

​

—

​

​

219,088

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,698,353

​

​

—

​

​

1,698,353

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

601,045

​

​

—

​

​

601,045

​

​

—

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

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,000,398

​

​

—

​

​

1,000,398

​

​

—

State and municipal obligations

​

 

1,064,852

​

 

—

​

 

1,064,852

​

 

—

Small Business Administration loan-backed securities

​

 

444,810

​

 

—

​

 

444,810

​

 

—

Corporate securities

​

 

32,638

​

 

—

​

 

32,638

​

 

—

Total securities available for sale

​

 

5,326,822

​

 

—

​

 

5,326,822

​

 

—

Mortgage servicing rights

​

 

86,610

​

 

—

​

 

—

​

 

86,610

SBA servicing asset

​

​

6,068

​

​

—

​

​

—

​

​

6,068

​

​

$

5,690,747

​

$

—

​

$

5,598,069

​

$

92,678

Liabilities

​

​

​

​

​

​

​

​

​

​

​

​

Derivative financial instruments

​

$

1,034,143

​

$

—

​

$

1,034,143

​

$

—

​

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 was able to achieve effective economic hedges on mortgage loans held for sale without the time and expense needed to manage a hedge accounting program.

​

34

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.

​

​

​

​

​

​

​

​

​

​

    

June 30,

​

December 31,

​

(Dollars in thousands)

    

2023

 

2022

​

Fair value

​

$

42,951

​

$

28,968

​

Unpaid principal balance

​

​

41,855

​

​

27,937

​

Fair value less aggregated unpaid principal balance

​

$

1,096

​

$

1,031

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30,

​

Six Months Ended June 30,

​

​

​

(Dollars in thousands)

​

2023

​

2022

    

2023

​

2022

​

Income Statement Location

​

Mortgage loans held for sale

​

$

75

​

$

570

​

$

66

​

$

(5,456)

​

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 six months ended June 30, 2023. A reconciliation of the beginning and ending balances of Level 3 assets and liabilities recorded at fair value on a recurring basis for the six months ended June 30, 2023 is as follows:

​

​

​

​

​

​

(Dollars in thousands)

    

MSRs

 

Fair value, January 1, 2023

​

$

86,610

​

Servicing assets that resulted from transfers of financial assets

​

 

4,034

​

Changes in fair value due to valuation inputs or assumptions

​

 

688

​

Changes in fair value due to decay

​

 

(3,793)

​

Fair value, June 30, 2023

​

$

87,539

​

​

In 2022, the Company elected to prospectively apply fair value accounting to the Company’s SBA servicing asset, which is considered a Level 3 asset. A reconciliation of the beginning and ending balances of the SBA servicing asset recorded at fair value on a recurring basis for the period ending June 30, 2023 is as follows:

​

​

​

​

​

​

(Dollars in thousands)

    

SBA Servicing Asset

 

Fair value, January 1, 2023

​

$

6,068

​

Servicing assets that resulted from transfers of financial assets

​

​

631

​

Changes in fair value due to decay

​

​

(931)

​

Changes in fair value due to valuation inputs or assumptions

​

​

434

​

Fair value, June 30, 2023

​

$

6,202

​

​

There were no unrealized losses included in accumulated other comprehensive income related to Level 3 financial assets and liabilities at June 30, 2023.

​

​

35

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)

 

June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

OREO

​

$

1,080

​

$

—

​

$

—

​

$

1,080

​

Bank properties held for sale

​

​

13,472

​

​

—

​

 

—

​

​

13,472

​

Individually evaluated loans

​

 

84,099

​

 

—

​

 

—

​

 

84,099

​

December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

OREO

​

$

1,023

​

$

—

​

$

—

​

$

1,023

​

Bank properties held for sale

​

​

17,754

​

​

—

​

 

—

​

​

17,754

​

Individually evaluated loans

​

 

20,802

​

 

—

​

 

—

​

 

20,802

​

​

Quantitative Information about Level 3 Fair Value Measurement

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted Average

​

​

​

​

​

​

June 30,

​

December 31,

​

    

Valuation Technique

    

Unobservable Input

    

2023

    

2022

Nonrecurring measurements:

​

​

​

​

​

​

​

​

​

​

Individually evaluated loans

 

Discounted appraisals and discounted cash flows

 

Collateral discounts

​

15

%

​

31

%

OREO and Bank properties held for sale

 

Discounted appraisals

 

Collateral discounts and estimated costs to sell

​

23

%

​

16

%

​

Fair Value of Financial Instruments

​

We used the following methods and assumptions in estimating 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 are based on pertinent information available to management as of June 30, 2023 and December 31, 2022. 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.

​

Methods and assumptions 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 the year ended December 31, 2022.

​

​

36

Table of Contents 

The estimated fair value, and related carrying amount, of our financial instruments are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Carrying

    

Fair

    

​

​

    

​

​

    

​

​

 

(Dollars in thousands)

​

Amount

​

Value

​

Level 1

​

Level 2

​

Level 3

 

June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

1,513,749

​

$

1,513,749

​

$

1,513,749

​

$

—

​

$

—

​

Trading securities

​

​

56,580

​

​

56,580

​

​

—

​

​

56,580

​

​

—

​

Investment securities

​

 

7,731,217

​

 

7,290,576

​

 

196,728

​

 

7,093,848

​

 

—

​

Loans held for sale

​

​

42,951

​

​

42,951

​

​

—

​

​

42,951

​

​

—

​

Loans, net of allowance for credit losses

​

 

31,109,393

​

 

30,184,857

​

 

—

​

 

—

​

 

30,184,857

​

Accrued interest receivable

​

 

137,230

​

 

137,230

​

 

—

​

 

26,346

​

 

110,884

​

Mortgage servicing rights

​

 

87,539

​

 

87,539

​

 

—

​

 

—

​

 

87,539

​

SBA servicing asset

​

​

6,202

​

​

6,202

​

​

—

​

​

—

​

​

6,202

​

Interest rate swap – non-designated hedge

​

 

173,248

​

 

173,248

​

 

—

​

 

173,248

​

 

—

​

Other derivative financial instruments (mortgage banking related)

​

 

1,232

​

 

1,232

​

 

—

​

 

1,232

​

 

—

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-bearing

​

​

11,489,483

​

 

11,489,483

​

 

—

​

 

11,489,483

​

 

—

​

Interest-bearing other than time deposits

​

​

20,826,961

​

​

20,826,961

​

​

—

​

​

20,826,961

​

​

—

​

Time deposits

​

​

4,425,434

​

​

4,351,601

​

​

—

​

​

4,351,601

​

​

—

​

Federal funds purchased and securities sold under agreements to repurchase

​

 

581,446

​

 

581,446

​

 

—

​

 

581,446

​

 

—

​

Corporate and subordinated debentures

​

​

392,090

​

​

385,920

​

​

—

​

 

385,920

​

 

—

​

Other borrowings

​

 

400,000

​

 

400,000

​

 

—

​

 

400,000

​

 

—

​

Accrued interest payable

​

 

31,791

​

 

31,791

​

 

—

​

 

31,791

​

 

—

​

Interest rate swap – non-designated hedge

​

 

974,549

​

 

974,549

​

 

—

​

 

974,549

​

 

—

​

Other derivative financial instruments (mortgage banking related)

​

 

1,168

​

 

1,168

​

 

—

​

 

1,168

​

 

—

​

Off balance sheet financial instruments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commitments to extend credit

​

 

—

​

 

(328,875)

​

 

—

​

 

(328,875)

​

 

—

​

December 31, 2022

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Financial assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

1,312,563

​

$

1,312,563

​

$

1,312,563

​

$

—

​

$

—

​

Trading securities

​

​

31,263

​

​

31,263

​

​

—

​

​

31,263

​

​

—

​

Investment securities

​

 

8,189,780

​

 

7,756,707

​

 

179,717

​

 

7,576,990

​

 

—

​

Loans held for sale

​

​

28,968

​

​

28,968

​

​

—

​

​

28,968

​

​

—

​

Loans, net of allowance for credit losses

​

 

29,821,418

​

 

29,329,499

​

 

—

​

 

—

​

 

29,329,499

​

Accrued interest receivable

​

 

134,594

​

 

134,594

​

 

—

​

 

28,449

​

 

106,145

​

Mortgage servicing rights

​

 

86,610

​

 

86,610

​

 

—

​

 

—

​

 

86,610

​

SBA servicing asset

​

​

6,068

​

​

—

​

​

—

​

​

—

​

​

6,068

​

Interest rate swap – non-designated hedge

​

 

210,216

​

 

210,216

​

 

—

​

 

210,216

​

 

—

​

Other derivative financial instruments (mortgage banking related)

​

 

800

​

 

800

​

 

—

​

 

800

​

 

—

​

Financial liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest-bearing

​

​

13,168,656

​

 

13,168,656

​

 

—

​

 

13,168,656

​

 

—

​

Interest-bearing other than time deposits

​

​

20,761,981

​

​

20,761,981

​

​

—

​

​

20,761,981

​

​

—

​

Time deposits

​

​

2,419,986

​

​

2,333,764

​

​

—

​

​

2,333,764

​

​

—

​

Federal funds purchased and securities sold under agreements to repurchase

​

 

556,417

​

 

556,417

​

 

—

​

 

556,417

​

 

—

​

Corporate and subordinated debentures

​

 

392,275

​

 

377,360

​

 

—

​

 

377,360

​

 

—

​

Accrued interest payable

​

 

6,218

​

 

6,218

​

 

—

​

 

3,345

​

 

—

​

Interest rate swap – non-designated hedge

​

 

1,033,980

​

 

1,033,980

​

 

—

​

 

1,033,980

​

 

—

​

Other derivative financial instruments (mortgage banking related)

​

​

163

​

​

163

​

 

—

​

 

163

​

 

—

​

Off balance sheet financial instruments:

​

 

​

​

 

​

​

​

​

​

​

​

​

​

​

​

Commitments to extend credit

​

​

—

​

 

(184,801)

​

 

—

​

 

(184,801)

​

 

—

​

​

​

​

​

37

Table of Contents 

Note 16 — Accumulated Other Comprehensive Loss

​

The changes in each component of accumulated other comprehensive loss, net of tax, were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Gains and 

​

​

​

​

​

Benefit

​

(Losses) on Securities

​

​

​

(Dollars in thousands)

​

Plans

​

Available for Sale

​

Total

Three Months Ended June 30, 2023

​

​

​

​

​

​

​

​

​

Balance at March 31, 2023

​

$

(673)

​

$

(613,111)

​

$

(613,784)

Other comprehensive loss before reclassifications

​

 

—

​

 

(48,614)

​

 

(48,614)

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

—

​

 

—

Net comprehensive loss

​

 

—

​

 

(48,614)

​

 

(48,614)

Balance at June 30, 2023

​

$

(673)

​

$

(661,725)

​

$

(662,398)

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2022

​

​

​

​

​

​

​

​

​

Balance at March 31, 2022

​

$

57

​

$

(294,013)

​

$

(293,956)

Other comprehensive loss before reclassifications

​

 

—

​

 

(196,928)

​

​

(196,928)

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

—

​

 

—

Net comprehensive loss

​

 

—

​

 

(196,928)

​

 

(196,928)

Balance at June 30, 2022

​

$

57

​

$

(490,941)

​

$

(490,884)

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2023

​

​

​

​

​

​

​

​

​

Balance at December 31, 2022

​

$

(673)

​

$

(676,415)

​

$

(677,088)

Other comprehensive income before reclassifications

​

​

—

​

​

14,723

​

​

14,723

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

(33)

​

 

(33)

Net comprehensive income

​

 

—

​

 

14,690

​

 

14,690

Balance at June 30, 2023

​

$

(673)

​

$

(661,725)

​

$

(662,398)

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2022

​

​

​

​

​

​

​

​

​

Balance at December 31, 2021

​

$

57

​

$

(21,203)

​

$

(21,146)

Other comprehensive loss before reclassifications

​

 

—

​

 

(469,738)

​

 

(469,738)

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

—

​

 

—

Net comprehensive loss

​

 

—

​

 

(469,738)

​

 

(469,738)

Balance at June 30, 2022

​

$

57

​

$

(490,941)

​

$

(490,884)

​

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 June 30,

​

For the Six Months Ended June 30,

​

​

Accumulated Other Comprehensive Income (Loss) Component

    

2023

    

2022

    

2023

    

2022

    

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)

​

$

—

​

​

​

​

​

38

Table of Contents 

Note 17 — Derivative Financial Instruments

​

The Company uses certain derivative instruments to meet the needs of customers as well as to manage the interest rate risk associated with certain transactions. The following table summarizes the derivative financial instruments used by the Company:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

​

​

​

December 31, 2022

​

​

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

​

$

12,078

​

$

422

​

$

—

​

$

12,289

​

$

414

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Not designated hedges of interest rate risk:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Customer related interest rate contracts:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Matched interest rate swaps with borrowers

​

Other Assets and Other Liabilities

​

​

10,832,049

​

​

16,235

​

​

974,495

​

​

10,480,171

​

​

8,539

​

​

1,033,980

Matched interest rate swaps with counterparty

​

Other Assets and Other Liabilities

​

​

10,744,034

​

​

156,591

​

​

54

​

​

10,400,733

​

​

201,263

​

​

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Not designated hedges of interest rate risk – mortgage banking activities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Contracts used to hedge mortgage servicing rights

​

Other Liabilities

​

​

63,000

​

​

—

​

​

1,168

​

​

35,000

​

​

—

​

​

163

Contracts used to hedge mortgage pipeline

​

Other Assets

​

​

108,000

​

​

1,232

​

​

—

​

​

51,000

​

​

800

​

​

—

Total derivatives

​

​

​

$

21,759,161

​

$

174,480

​

$

975,717

​

$

20,979,193

​

$

211,016

​

$

1,034,143

​

Cash Flow Hedge of Interest Rate Risk

The Company is exposed to interest rate risk in the course of its business operations and manages a portion of this risk through the use of derivative financial instruments, in the form of interest rate swaps. We account for interest rate swaps that are classified as cash flow hedges on the balance sheet at fair value. We had no cash flow hedges as of June 30, 2023 and December 31, 2022. For more information regarding the fair value of our derivative financial instruments, see Note 15 — Fair Value to these financial statements.

The Company did not maintain any cash flow hedges on the balance sheet throughout the six months ended June 30, 2023 and year ended December 31, 2022 (See Note 16—Accumulated Other Comprehensive Income (Loss) for activity in accumulated comprehensive income (loss) and the amounts reclassified into earnings). With the Company not maintaining any cash flow hedges at June 30, 2023 and December 31, 2022, there was no collateral pledged.

Balance Sheet Fair Value Hedge

​

As of June 30, 2023 and December 31, 2022, the Company maintained loan swaps, with an aggregate notional amount of $12.1 million and $12.3 million, respectively, accounted for as fair value hedges. This derivative protects us from interest rate risk caused by changes in the LIBOR 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 position of the hedge with the offset recorded in loans.

Non-designated Hedges of Interest Rate Risk

​

Customer Swap

​

The Company maintains interest rate swap contracts with customers that are classified as non-designated hedges and are not speculative in nature. These agreements are designed to convert customer’s variable rate loans with the Company to fixed rate. These interest rate swaps are executed with loan customers to facilitate a respective risk management strategy and allow the customer to pay a fixed rate of interest to the Company. These interest rate swaps are simultaneously hedged by executing offsetting interest rate swaps with 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 floating rate based on one month LIBOR plus credit spread, with payments being calculated on the notional amount. During the second quarter of 2023, the Company transitioned the majority of these interest rate swap contracts to SOFR as the reference rate. For discussion related to reference rate reform, please refer to Accounting Standards Adopted within Note 3— Recent Accounting and Regulatory Pronouncements. The interest rate swaps are settled monthly with varying maturities.

39

Table of Contents 

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 June 30, 2023 and December 31, 2022, the interest rate swaps had an aggregate notional amount of approximately $21.6 billion and $20.9 billion, respectively. At June 30, 2023, the fair value of the interest rate swap derivatives are recorded in Other Assets at $172.8 billion and in other liabilities at $974.5 billion. The fair value of derivative assets at June 30, 2023 was reduced by $801.9 million in variation margin payments applicable to swaps centrally cleared through LCH and CME. At December 31, 2022, the fair value of the interest rate swap derivatives was recorded in Other Assets at $209.8 million and Other Liabilities at $1.0 billion. The fair value of derivative assets at December 31, 2022 was reduced by $824.3 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 Consolidated Statements of Net Income. There was a net loss of $84,000 and a net gain of $12,000 recorded on these derivatives for the three and six months ended June 30, 2023, respectively. There was a net gain of $68,000 and $110,000 recorded on these derivatives for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, we provided $266.3 million of cash collateral on the counterparty, which is included in Cash and Cash Equivalents on the Consolidated Balance Sheets as Deposits in Other Financial Institutions (Restricted Cash). We also provided $108.3 million in investment securities at market value as collateral on the counterparty, which is included in Investment Securities – Available for Sale. Counterparties provided $110.3 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.

​

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. At June 30, 2023 and December 31, 2022, there were no outstanding contracts or agreements related to foreign currency. If there were foreign currency contracts outstanding at June 30, 2023, 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 and six months ended June 30, 2023 and 2022.

​

Mortgage Banking

​

The Company also has derivatives contracts that are not classified as accounting hedges to mitigate risks related to the Company’s 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 of Net Income in 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 do not represent amounts to be exchanged between the parties and are not a measure of financial risk. On June 30, 2023, we had derivative financial instruments outstanding with notional amounts totaling $63.0 million related to MSRs, compared to $35.0 million on December 31, 2022. The estimated net fair value of the open contracts related to the MSRs was recorded as a loss of $1.2 million at June 30, 2023, compared to a loss of $163,000 at December 31, 2022.

40

Table of Contents 

Mortgage Pipeline

​

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

​

​

​

​

​

​

​

​

​

(Dollars in thousands)

    

June 30, 2023

    

December 31, 2022

 

Mortgage loan pipeline

​

$

99,826

​

$

40,850

​

Expected closures

​

 

89,037

​

 

37,210

​

Fair value of mortgage loan pipeline commitments

​

 

909

​

 

524

​

Forward sales commitments

​

 

108,000

​

 

51,000

​

Fair value of forward commitments

​

 

323

​

 

276

​

​

Note 18 — 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.

​

Under current regulations, the Company and the Bank are subject to a minimum ratio of common equity Tier 1 capital (“CET1”) to risk-weighted assets of 4.5% and a minimum required ratio of Tier 1 capital to risk-weighted assets of 6%. The minimum required leverage ratio is 4%. The minimum required total capital to risk-weighted assets ratio is 8%.

​

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 CET1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer became fully phased-in on January 1, 2019 and consists of an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets.

​

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 each of the three risk-based regulatory capital ratios (CET1, Tier 1 capital and total capital) and for the leverage ratio.

​

​

41

Table of Contents 

The following table presents actual and required capital ratios as of June 30, 2023 and December 31, 2022 for the Company and the Bank under the current capital rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

Required to be

 

​

​

​

​

​

​

​

Minimum Capital

 

Considered Well

 

​

​

Actual

​

Required – Basel III

​

Capitalized

​

(Dollars in thousands)

    

Amount

    

Ratio

    

Capital Amount

    

Ratio

    

Capital Amount

    

Ratio

 

June 30, 2023:

​

​

    

​

    

​

​

    

​

    

​

​

    

​

    

​

Common equity Tier 1 to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

$

3,988,474

 

11.25

%  

$

2,481,341

​

7.00

%  

$

2,304,102

 

6.50

%  

SouthState Bank (the Bank)

​

 

4,263,578

 

12.04

%  

 

2,478,512

​

7.00

%  

 

2,301,475

 

6.50

%  

Tier 1 capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

3,988,474

 

11.25

%  

 

3,013,057

​

8.50

%  

 

2,835,818

 

8.00

%  

SouthState Bank (the Bank)

​

 

4,263,578

 

12.04

%  

 

3,009,621

​

8.50

%  

 

2,832,585

 

8.00

%  

Total capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

4,779,816

 

13.48

%  

 

3,722,011

​

10.50

%  

 

3,544,772

 

10.00

%  

SouthState Bank (the Bank)

​

 

4,664,919

 

13.18

%  

 

3,717,767

​

10.50

%  

 

3,540,731

 

10.00

%  

Tier 1 capital to average assets (leverage ratio):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

3,988,474

 

9.17

%  

 

1,739,845

​

4.00

%  

 

2,174,806

 

5.00

%  

SouthState Bank (the Bank)

​

 

4,263,578

 

9.81

%  

 

1,739,082

​

4.00

%  

 

2,173,853

 

5.00

%  

December 31, 2022:

​

​

    

​

    

​

​

    

​

    

​

​

    

​

    

​

Common equity Tier 1 to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

$

3,788,106

 

10.96

%  

$

2,420,417

​

7.00

%  

$

2,247,530

 

6.50

%  

SouthState Bank (the Bank)

​

 

4,074,045

 

11.80

%  

 

2,417,133

​

7.00

%  

 

2,244,481

 

6.50

%  

Tier 1 capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

3,788,106

 

10.96

%  

 

2,939,077

​

8.50

%  

 

2,766,190

 

8.00

%  

SouthState Bank (the Bank)

​

 

4,074,045

 

11.80

%  

 

2,935,090

​

8.50

%  

 

2,762,438

 

8.00

%  

Total capital to risk-weighted assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

4,485,397

 

12.97

%  

 

3,630,625

​

10.50

%  

 

3,457,738

 

10.00

%  

SouthState Bank (the Bank)

​

 

4,381,336

 

12.69

%  

 

3,625,700

​

10.50

%  

 

3,453,047

 

10.00

%  

Tier 1 capital to average assets (leverage ratio):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consolidated

​

 

3,788,106

 

8.72

%  

 

1,736,991

​

4.00

%  

 

2,171,239

 

5.00

%  

SouthState Bank (the Bank)

​

 

4,074,045

 

9.39

%  

 

1,736,330

​

4.00

%  

 

2,170,412

 

5.00

%  

​

As of June 30, 2023 and December 31, 2022, 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.

​

In accordance with ASU No. 2016-13, the Company applied the provisions of the standard using the modified retrospective method as a cumulative-effect adjustment to retained earnings. Related to the implementation of ASU 2016-13, 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 50% being phased out in 2023.

Note 19 — Goodwill and Other Intangible Assets

​

The carrying amount of goodwill was $1.9 billion at June 30, 2023 and December 31, 2022. 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.

​

42

Table of Contents 

The Company last completed its annual valuation of the carrying value of its goodwill as of October 31, 2022 and determined there was no goodwill impairment. In between annual impairment analyses, we monitor for any triggering events that may impact the Company’s goodwill.

​

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

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

(Dollars in thousands)

    

2023

    

2022

 

Gross carrying amount

​

$

275,002

​

$

274,869

​

Accumulated amortization

​

 

(172,746)

​

 

(158,419)

​

​

​

$

102,256

​

$

116,450

​

​

Amortization expense totaled $7.0 million and $14.3 million, for the three and six months ended June 30, 2023, compared to $8.8 million and $17.3 million for the three and six months ended June 30, 2022.  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.  

​

In early 2022 and in connection with the SBA servicing asset acquired through the Atlantic Capital acquisition, which was recorded at fair value on acquisition date, the Company elected to prospectively apply 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 change in accounting treatment, the Company will no longer amortize the SBA servicing asset and therefore excluded the SBA servicing asset from the future amortization expense table presented below.  The fair value of the SBA servicing asset was $6.2 million and $6.1 million, respectively million, at June 30, 2023 and December 31, 2022.

 ​

Estimated amortization expense for other intangibles, excluding the SBA servicing assets, for each of the next five quarters and thereafter is as follows:

​

​

​

​

​

​

(Dollars in thousands)

​

​

​

​

Quarter ending:

    

​

    

 

September 30, 2023

​

$

6,615

​

December 31, 2023

​

 

6,615

​

March 31, 2024

​

 

6,003

​

June 30, 2024

​

 

5,739

​

September 30, 2024

​

​

5,327

​

Thereafter

​

 

65,756

​

​

​

$

96,055

​

​

Note 20 — Mortgage Loan Servicing, Origination, and Loans Held for Sale

​

The portfolio of residential mortgages serviced for others, which is not included in the accompanying Consolidated Balance Sheets the portfolio of residential mortgages serviced for others, was $6.6 billion, as of June 30, 2023 and December 31, 2022. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts and disbursing payments to investors. The amount of contractually specified servicing fees we earned during the three and six months ended June 30, 2023 and June 30, 2022 were $4.2 million, $8.3 million, $4.1 million, and $7.9 million, respectively. Servicing fees are recorded in Mortgage Banking Income in our Consolidated Statements of Income.

​

At June 30, 2023 and December 31, 2022, MSRs were $87.5 million and $86.6 million on our Consolidated Balance Sheets, respectively. MSRs are recorded at fair value with changes in fair value recorded as a component of Mortgage Banking Income in the Consolidated Statements of Net Income. The market value adjustments related to MSRs recorded in Mortgage Banking Income for the three and six months ended June 30, 2023 and June 30, 2022 were gains of $2.0 million and $688,000, compared with gains of $2.8 million and $15.6 million, respectively. The Company has used various free standing derivative instruments to mitigate the income statement effect of changes in fair value resulting from changes in market value adjustments, in addition to changes in valuation inputs and assumptions related to MSRs.

​

​

43

Table of Contents 

See Note 15 — 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

    

Six Months Ended

​

    

(Dollars in thousands)

    

June 30, 2023

    

June 30, 2022

    

June 30, 2023

    

June 30, 2022

 

​

Increase in fair value of MSRs

​

$

1,977

​

$

2,786

​

$

688

​

$

15,613

​

​

Decay of MSRs

​

 

(2,385)

​

 

(3,292)

​

 

(3,793)

​

 

(5,521)

​

​

Loss related to derivatives

​

​

(2,264)

​

​

(2,553)

​

​

(2,119)

​

​

(14,391)

​

​

Net effect on Consolidated Statements of Net Income

​

$

(2,672)

​

$

(3,059)

​

$

(5,224)

​

$

(4,299)

​

​

​

The fair value of MSRs is highly sensitive to changes in assumptions and 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 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 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 applied at a different time. See Note 15 — Fair Value for additional information regarding fair value.

​

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

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

​

December 31,

​

(Dollars in thousands)

    

2023

   

    

2022

   

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

​

​

8.24

years

​

​

8.37

years  

Constant Prepayment rate (CPR)

​

​

6.6

%  

​

​

6.4

%  

Weighted average discount rate

​

​

10.3

%  

​

​

10.0

%  

Effect on fair value due to change in interest rates

​

​

​

​

​

​

​

​

25 basis point increase

​

$

866

​

​

$

774

​

50 basis point increase

​

​

1,571

​

​

​

1,428

​

25 basis point decrease

​

​

(1,029)

​

​

​

(902)

​

50 basis point decrease

​

​

(2,203)

​

​

​

(1,938)

​

​

The sensitivity calculations above are hypothetical and should not be considered predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. The effects of an adverse variation in a particular assumption on the fair value of the MSRs as disclosed in the table above is calculated without changing any other assumptions. In reality, changes in one factor may result in adjusting other factors, which may magnify or contract the effects of the change.

​

Whole loan sales were $249.3 million and $408.7 million for the three and six months ended June 30, 2023, compared to $449.9 million and $1.2 billion for the three and six months ended June 30, 2022. For the three and six months ended June 30, 2023, $201.1 million and $324.1 million, or 80.7% and 79.3%, respectively, were sold with the servicing rights retained by the Company, compared to $352.3 million and $882.9 million, or 78.3% and 76.7%, respectively, for the three and six months ended June 30, 2022.

​

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, 2022. 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 six months ended June 30, 2023 and 2022 were $975,000 and $3,907,000 respectively. There were no material loss reimbursement and settlement claims paid in the six months ended June 30, 2023 and 2022.

​

44

Table of Contents 

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. Loans held for sale were $43.0 million and $29.0 million at June 30, 2023 and December 31, 2022, respectively. Please see Note 15 — Fair Value, under the “Fair Value Option”, section in this Quarterly Report on Form 10-Q for summary of the fair value and the unpaid principal balance of loans held for sale and the changes in fair value of these loans.

Note 21 — Short-Term Borrowings

Securities Sold Under Agreements to Repurchase (“Repurchase agreements”)

​

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 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 to repurchase on the consolidated balance sheets. At June 30, 2023 and December 31, 2022, our repurchase agreements totaled $334.5 million and $342.8 million, respectively. All of our repurchase agreements were overnight or continuous (until-further-notice) agreements at June 30, 2023 and December 31, 2022. These borrowings were collateralized with government, government-sponsored enterprise, or state and political subdivision-issued securities with a market value of $420.0 million and $443.2 million at June 30, 2023 and December 31, 2022, respectively. Declines in the value of the collateral would require us to increase the amounts of securities pledged.

​

Federal Funds Purchased

​

Federal funds purchased are generally overnight daily borrowings with no defined maturity date. At June 30, 2023 and December 31, 2022, our federal funds purchased totaled $246.9 million and $213.6 million, respectively.

​

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

​

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 June 30, 2023, the Company had $400.0 million in outstanding FHLB borrowings with a weighted average interest rate of 5.32%. As of December 31, 2022, there were no outstanding FHLB borrowings. Net eligible loans of the Company pledged via a blanket lien to the FHLB for advances and letters of credit at June 30, 2023, were approximately $7.8 billion in loan collateral value and investment securities and cash pledged were approximately $613.5 million in collateral value. This allows the Company a total borrowing capacity at the FHLB of approximately $7.8 billion. After accounting for letters of credit totaling $2.1 million and $400.0 million of FHLB advances, the Company had unused net credit available with the FHLB in the amount of approximately $7.4 billion at June 30, 2023. The Company also has a total borrowing capacity at the FRB of $2.4 billion at June 30, 2023 secured by a blanket lien on $2.4 billion in collateral value in net eligible loans of the Company. The Company had no outstanding borrowings with the FRB at June 30, 2023 or December 31, 2022.

Note 22 — Stock Repurchase Program

On April 27, 2022, the Company’s Board of Directors approved a stock repurchase program (“2022 Stock Repurchase Program”) authorizing the Company to repurchase up to 3,750,000 of the Company’s common shares along with the remaining authorized shares of 370,021 from the Company’s 2021 stock repurchase program (“2021 Stock Repurchase Plan”) for a total authorization of 4,120,021 shares. The Company did not repurchase any shares through the 2022 Stock Repurchase Program during 2022 or during the six months ended June 30, 2023. During the six months ended June 30, 2022, before the approval of the 2022 Stock Repurchase Program, the Company repurchased a total of 1,312,038 shares at a weighted average price of $83.99 per share pursuant to the 2021 Stock Repurchase Plan, including a total of 300,000 shares at a weighted average price of $79.15 per share during the second quarter of 2022.

​

45

Table of Contents 

Note 23 — Subsequent Events

​

On July 27, 2023, the Company announced that the Board of Directors of the Company increased its quarterly cash dividend on its common stock from $0.50 per share to $0.52 per share. The dividend is payable on August 18, 2023 to shareholders of record as of August 11, 2023.

​

​

​

​

​

​

​

46

Table of Contents 

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 (“MD&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, 2022. Results for the three and six months ended June 30, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or any future period.

​

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

​

SouthState is a financial holding company headquartered in 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 Bank. The Bank operates SouthState|Duncan-Williams, a registered broker-dealer headquartered in Memphis, Tennessee that serves primarily institutional clients across the U.S. in the fixed income business. The Bank also operates SouthState Advisory, Inc., a wholly owned registered investment advisor, and CBI Holding Company, LLC (“CBI”), which in turn owns Corporate Billing, a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers nationwide. The holding company also owns SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b) of the U.S. Tax Code.

​

At June 30, 2023, we had approximately $44.9 billion in assets and 5,162 full-time equivalent employees. Through our Bank branches, ATMs and online banking platforms, we provide our customers with 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 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-secured (mortgage) loans, personal use loans, home improvement loans, automobile loans, manufactured housing loans, boat loans, credit cards, letters of credit, home equity lines of credit, 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 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 acquisitions of select financial institutions, or branches in certain market areas.

​

The following discussion describes our results of operations for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 and also analyzes our financial condition as of June 30, 2023 as compared to December 31, 2022. 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.

47

Table of Contents 

Of course, there are risks inherent in all loans, as such, we maintain an 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 credit losses against our operating earnings. In the following 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 sections also 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.

Recent Events

Regulatory Considerations

​

In response to the recent bank failures, the FDIC approved a notice of proposed rulemaking to implement a special assessment to recover the losses to the FDIC’s Deposit Insurance Fund. The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods beginning with the first quarterly assessment period of 2024. Under the proposal, the base for the special assessment will be equal to an insured depository institution’s (IDI’s) estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. Under the current FDIC proposal, the Company estimates the special assessment will equate to a quarterly special assessment of $2.8 million, or $22.7 million for the two-year special assessment period, which would be recognized at the time the final rule is adopted. The special assessment rate is subject to change prior to any final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits.

​

Liquidity and Capital

​

During 2023, the financial markets experienced some volatility in response to a small number of regional bank failures resulting from deposit runs generally related to high concentrations in particular customer segments, high levels of uninsured deposits and failures in interest rate risk management.

​

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. At June 30, 2023, we had $36.7 billion in total deposits, of which approximately 71% were insured or collateralized. Our deposit base is comprised of 1.5 million accounts with an average deposit size of $25,000. Our top 10 and 20 deposit relationships represent 3% and 4%, respectively, of total deposits.

​

In addition to deposits, we have other contingency funding sources available to the Bank. At June 30, 2023, our Bank had a total FHLB credit facility of $7.8 billion, with $400.0 million in FHLB advances and $2.1 million in FHLB letters of credit outstanding at quarter-end, leaving $7.4 billion in availability on the FHLB credit facility. In addition, our Bank had $2.4 billion of credit available at the Federal Reserve Bank’s discount window and total federal funds credit lines of $300.0 million 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 $5.5 billion as of June 30, 2023. The Bank had $1.2 billion of outstanding brokered deposits at the end of the quarter leaving $4.3 billion in available capacity. All of these resources would provide an additional $14.1 billion in funding if the Bank needed additional liquidity. In addition, the Bank also has $4.1 billion in unpledged securities at June 30, 2023 that can be pledged to obtain additional funds, if necessary. The Company has a $100.0 million unsecured line of credit with U.S. Bank National Association with no balance outstanding at June 30, 2023. We believe that our liquidity position continues to be adequate and readily available.

​

48

Table of Contents 

In addition to adequate liquidity, the Company and Bank are considered well capitalized by all regulatory capital standards as it was significantly above the required capital levels as of June 30, 2023. The Company’s tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 9.17%, 11.25% and 13.48%, respectively, at June 30, 2023. The Bank’s Tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 9.81%, 12.04% and 13.18%, respectively, at June 30, 2023. 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 June 30, 2023 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.

Critical Accounting Policies

​

Our consolidated financial statements are prepared based on the application of 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 affected by management’s application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying value of assets and 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. 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 consolidated financial statements in this Quarterly Report on Form 10-Q and in Note 1 — Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2022.

Results of Operations

​

Overview

​

We reported consolidated net income of $123.4 million, or diluted earnings per share (“EPS”) of $1.62, for the second quarter of 2023 as compared to consolidated net income of $119.2 million, or diluted EPS of $1.57, in the comparable period of 2022, a 3.6% increase in consolidated net income and a 3.2% increase in diluted EPS. During the six months ended June 30, 2023, we reported consolidated net income of $263.4 million, or diluted earnings per share (“EPS”) of $1.62, as compared to consolidated net income of $219.5 million, or diluted EPS of $2.96, in the comparable period of 2022, a 20.0% increase in consolidated net income and a 16.4% increase in diluted EPS. The $4.3 million increase in consolidated net income for the second quarter of 2023 compared to the same period of 2022 was the net result of the following items:

​

●A $151.7 million increase in interest income, resulting from a $147.4 million increase in interest income from loans, a $1.8 million increase in interest income from investment securities and a $2.5 million increase in interest income from federal funds sold and securities purchased under agreements to resell and interest-bearing deposits. These increases were due to the increase in yields in all categories of interest-earning assets in the current rising rate environment as the Federal Reserve Bank has raised it federal funds rate 500 basis points in 2022 and the first six months of 2023. The increase in interest income is also due to the increase in the average balance of loans of $4.0 billion through organic loan growth;
●A $105.8 million increase in interest expense, which resulted from a $95.9 million increase in interest expense from deposits, a $2.7 million increase in interest expense in federal funds purchased and securities sold under agreements to repurchase, and a $7.2 million increase in interest expense from corporate and subordinated debentures and other borrowings. These increases in expense resulted mainly from an increase in costs of all categories of interest-bearing liabilities as interest rates have increased in 2022 and 2023. The increase in average cost of interest-bearing liabilities was particularly felt in 2023 with the stress in financial markets and liquidity as the average cost of interest-bearing liabilities increased 133 basis points compared to the fourth quarter of 2022;

​

49

Table of Contents 

●A $19.0 million increase in the provision for allowance for credit losses, as the Company recorded provision for credit losses of $38.4 million during the second quarter of 2023 while recording a provision for credit losses of $19.3 million in the second quarter of 2022. In the second quarter of 2023, we recorded a higher provision for credit losses as economic forecasts reflected the continued stress of inflation and rising interest rates that began in 2022;
●A $9.5 million decrease in noninterest income, primarily from a decline in mortgage banking income of $1.1 million, correspondent banking and capital market income of $6.9 million and SBA income of $1.5 million. (See Noninterest Income section on page 56 for further discussion);
●An $11.5 million increase in noninterest expense, which resulted primarily from an increase in salaries and employee benefits of $10.3 million, in FDIC assessment and other regulatory charges of $4.5 million and in other noninterest expense of $2.2 million driven by an increase in business development and staff related expense of $1.8 million, an increase in expense related to our earnings credit program for certain deposit accounts of $1.8 million partially offset by a decline in check and digital fraud charges of $1.2 million. These increases were offset by declines in merger, branch consolidation and severance related expense of $3.6 million and amortization of intangibles of $1.8 million (See Noninterest Expense section on page 58 for further discussion; and
●A $1.6 million increase in the provision for income taxes primarily due to the change in pretax book income between the two quarters. The Company recorded pretax book income of $157.9 million in the second quarter of 2023 compared to pretax book income of $152.1 million in the second quarter of 2022. Our effective tax rate was 21.84% for the three months ended June 30, 2023 compared to 21.66% for the three months ended June 30, 2022.

​

Our quarterly efficiency ratio improved to 53.6% in the second quarter of 2023 compared to 54.9% in the second quarter of 2022. The improvement in the efficiency ratio compared to the second quarter of 2022 was the result of the 8.6% increase in the total of tax-equivalent net interest income and noninterest income being greater than the increase in noninterest expense (excluding amortization of intangibles) of 6.0%. The increase in income was mainly due to a 14.0% increase in tax-equivalent net interest income reflective of the rising rate environment where our interest-earning assets repriced more quickly than our interest-bearing liabilities.

​

Basic and diluted EPS were $1.62 for the second quarter of 2023, compared to $1.58 and $1.57, respectively for the second quarter of 2022. The increase in basic and diluted EPS was due to a 3.6% increase in net income in the second quarter of 2023 compared to the same period in 2022, partially offset by an increase in average basic common shares of 0.8%. The increase in net income was mainly due to the increase in net interest income resulting from the rising rate environment in the second quarter of 2023 compared to the second quarter of 2022.

Selected Figures and Ratios

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

 

​

​

June 30,

​

June 30,

 

(Dollars in thousands)

    

2023

    

2022

​

2023

    

2022

 

Return on average assets (annualized)

 

​

1.11

%  

​

1.05

%

​

1.20

%  

​

1.00

%

Return on average equity (annualized)

 

​

9.34

%  

​

9.36

%

​

10.14

%  

​

8.81

%

Return on average tangible equity (annualized)*

 

​

15.81

%  

​

16.59

%

​

17.27

%  

​

15.28

%

Dividend payout ratio

 

​

30.75

%

​

31.03

%

​

28.81

%

​

32.26

%

Equity to assets ratio

 

​

11.77

%  

​

11.01

%

​

11.77

%  

​

11.01

%

Average shareholders’ equity

​

$

5,301,697

​

$

5,109,325

​

$

5,239,717

​

$

5,023,721

​

*   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 June 30, 2023, the return on average assets increased compared to the same period in 2022.  This increase was primarily due to the increase in net income of $4.3 million, or 3.6%, which was mainly attributable to higher net interest income of $45.9 million due to the increase in the yield on interest-earning assets in the rising rate environment.  Average assets decreased for the three months ended June 30, 2023 from the same period in 2022 by $948.6 million, or 2.1%, as cash and cash equivalents declined $4.0 billion and investment securities declined $886.1 million as liquidity has tightened in 2023.  For the six months ended June 30, 2023, the return on average assets increased primarily due to the increase in net income of $43.9 million, or 20.0%.

​

50

Table of Contents 

●For the three months ended June 30, 2023, the return on average equity and the return on average tangible equity declined compared to the same periods in 2022.  These decreases were primarily due to the increase in net income of 3.6% and net income adjusted for the amortization of intangibles of 2.3% being lower than the increase in equity of 3.8% and tangible equity of 7.3%.  For the six months ended June 30, 2023, the return on average equity and the return on average tangible equity increased primarily due to the increase in net income of $43.9 million, or 20.0% being greater than the increase in equity of $216.0 million, or 4.3%.
●Equity to assets ratios was 11.77% for the quarter ended June 30, 2023, a decrease of 0.76% from June 30, 2022, which was due to the increase in total equity of 5.0% resulting from the net income earned during the last twelve months along with a decline in total assets of 1.8% from June 30, 2022.
●Dividend payout ratios were 30.75% and 28.81% for the three and six month periods ending June 30, 2023, respectively, and 31.03% and 32.26% for the three and six month periods ending June 30, 2022, respectively. The decrease in the dividend payout ratio for the three months period ending June 30, 2023 was due the 3.6% increase in net income while total dividends paid during the current quarter increased 2.6% compared to the same period in 2022. The dividend payout ratio for the six months period ending June 30, 2023 decreased due to a higher increase in net income of 20.0% compared to an increase in dividend paid per share of 7.2% when compared to the same period in 2022.

Net Interest Income and Margin

​

Non-Tax Equivalent (“TE”) net interest income increased $45.9 million, or 14.5%, to $361.7 million in the second quarter of 2023 compared to $315.8 million in the same period in 2022. Interest-earning assets averaged $40.1 billion during the three months period ended June 30, 2023 compared to $40.9 billion for the same period in 2022, a decrease of $771.5 million, or 1.9%. Interest-bearing liabilities averaged $26.0 billion during the three months period ended June 30, 2023 compared to $25.5 billion for the same period in 2022, an increase of $481.1 billion, or 1.9%. Non-Tax Equivalent (“TE”) net interest income increased $165.7 million, or 28.7%, to $743.0 million in the six months ended June 30, 2023 compared to $577.3 million in the same period in 2022. Interest-earning assets averaged $39.8 billion during the six months period ended June 30, 2023 compared to $39.7 billion for the same period in 2022, a slight increase of $32.1 million, or 0.1%. Interest-bearing liabilities averaged $25.3 billion during the six months period ended June 30, 2023 compared to $25.2 billion for the same period in 2022, an increase of $124.4 million, or 0.5%.

​

The Federal Reserve continued to raise rates in 2023 with three increases of 25 basis points, the most recent in early May 2023, resulting in a range of 5.00% to 5.25% at June 30, 2023. As a result, the Company operated under an increasing rate environment for the first six months of 2023 while it operated under a comparatively lower rate environment in the first six months of 2022. Some key highlights are outlined below:

​

●Non-TE and TE net interest margin increased by 52 basis points and 50 basis points, respectively, in the second quarter of 2023 compared to the same quarter of 2022. The increase in the yield on interest earning assets of 158 basis points, which was offset by the increase in the cost of interest-bearing liabilities of 162 basis points. In the rising rate environment in 2022 and 2023, the net interest margin increased due to the higher yielding balance of average interest-earning assets of $40.1 billion repricing during the period in comparison to the average balance of interest-bearing liabilities of $26.0 billion.
oNon-TE yield on interest-earning assets for the second quarter of 2023 increased 158 basis points to 4.78% from the comparable period in 2022, primarily due to an increase in yields on all interest-earning assets as the Federal Reserve Bank raised interest rates 500 basis points starting late in first quarter of 2022. The increases in interest rates, in combination with the increase in the average balance of the higher yielding loan portfolio of $4.0 billion, along with the decline in the average balances of lower yielding interest-earning deposits and federal funds sold of $3.9 billion and investment securities of $886.1 million, affected the overall yield increase between the comparable periods.

​

51

Table of Contents 

oThe average cost of interest-bearing liabilities for the second quarter of 2023 increased 162 basis points from the same period in 2022. This increase was driven by the effects from the rising rate environment on the repricing of all deposit accounts, federal funds purchased and securities purchased with agreement to repurchase, trust preferred corporate debt and other borrowings. The average cost of interest-bearing deposits increased 156 basis points as the increase occurred in all deposit categories. The average cost of federal funds purchased and securities purchased with agreements to repurchase increased 218 basis points while the average cost of corporate and subordinated debentures increased 119 basis points. Other borrowings, consisting of FHLB advances had an average cost of 5.22% during the second quarter of 2023. The increase in overall average cost of interest-bearing liabilities was also due to the decrease in the average balance of lower costing transaction and money market deposit accounts, along with savings deposit accounts, while the higher costing certificates and other time deposits and other borrowings increased compared to the same period a year ago. Our overall cost of funds, including noninterest-bearing deposits, was 1.23% for the three months ended June 30, 2023 compared to 0.11% for the three months ended June 30, 2022.

​

The tables below summarize the analysis of changes in interest income and interest expense for the three and six months ended June 30, 2023 and 2022 and net interest margin on a tax equivalent basis:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

June 30, 2023

​

June 30, 2022

​

​

Average

​

Interest

​

Average

​

Average

​

Interest

​

Average

​

​

Balance

​

Earned/Paid

​

Yield/Rate

​

Balance

​

Earned/Paid

​

Yield/Rate

​

Interest-Earning Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Federal funds sold and interest-earning deposits with banks

$

947,526

​

$

11,858

​

5.02

%

​

$

4,809,521

​

$

9,309

​

0.78

%

​

Investment securities (taxable) (1)

​

7,187,390

​

​

41,254

​

2.30

%

​

​

7,950,894

​

​

38,948

​

1.96

%

​

Investment securities (tax-exempt) (1)

​

806,940

​

​

5,586

​

2.78

%

​

​

929,525

​

​

6,076

​

2.62

%

​

Loans held for sale

​

36,114

​

​

568

​

6.31

%

​

​

76,567

​

​

791

​

4.14

%

​

Acquired loans, net

​

6,759,859

​

​

102,446

​

6.08

%

​

​

9,079,664

​

​

105,950

​

4.68

%

​

Non-acquired loans

​

24,390,007

​

​

316,341

​

5.20

%

​

​

18,053,194

​

​

165,259

​

3.67

%

​

Total interest-earning assets

​

40,127,836

​

​

478,053

​

4.78

%

​

​

40,899,365

​

​

326,333

​

3.20

%

​

Noninterest-Earning Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

470,209

​

​

​

​

​

​

​

​

609,803

​

​

​

​

​

​

​

Other assets

​

4,401,003

​

​

​

​

​

​

​

​

4,368,501

​

​

​

​

​

​

​

Allowance for credit losses

​

(370,924)

​

​

​

​

​

​

​

​

(300,927)

​

​

​

​

​

​

​

Total noninterest-earning assets

​

4,500,288

​

​

​

​

​

​

​

​

4,677,377

​

​

​

​

​

​

​

Total Assets

$

44,628,124

​

​

​

​

​

​

​

$

45,576,742

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-Bearing Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Transaction and money market accounts

$

17,222,660

​

$

65,717

​

1.53

%

​

$

18,045,842

​

$

2,974

​

0.07

%

​

Savings deposits

​

3,031,153

​

​

1,951

​

0.26

%

​

​

3,548,192

​

​

143

​

0.02

%

​

Certificates and other time deposits

​

4,328,388

​

​

33,119

​

3.07

%

​

​

2,776,478

​

​

1,797

​

0.26

%

​

Federal funds purchased

​

215,085

​

​

2,690

​

5.02

%

​

​

333,326

​

​

628

​

0.76

%

​

Securities sold with agreements to repurchase

​

330,118

​

​

845

​

1.03

%

​

​

403,008

​

​

153

​

0.15

%

​

Corporate and subordinated debentures

​

392,144

​

​

5,823

​

5.96

%

​

​

405,241

​

​

4,823

​

4.77

%

​

Other borrowings

​

473,626

​

​

6,165

​

5.22

%

​

​

—

​

​

—

​

—

%

​

Total interest-bearing liabilities

​

25,993,174

​

​

116,310

​

1.79

%

​

​

25,512,087

​

​

10,518

​

0.17

%

​

Noninterest-Bearing Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Demand deposits

​

11,939,022

​

​

​

​

​

​

​

​

13,882,304

​

​

​

​

​

​

​

Other liabilities

​

1,394,231

​

​

​

​

​

​

​

​

1,073,026

​

​

​

​

​

​

​

Total noninterest-bearing liabilities (“Non-IBL”)

​

13,333,253

​

​

​

​

​

​

​

​

14,955,330

​

​

​

​

​

​

​

Shareholders’ equity

​

5,301,697

​

​

​

​

​

​

​

​

5,109,325

​

​

​

​

​

​

​

Total Non-IBL and shareholders’ equity

​

18,634,950

​

​

​

​

​

​

​

​

20,064,655

​

​

​

​

​

​

​

Total Liabilities and Shareholders’ Equity

$

44,628,124

​

​

​

​

​

​

​

$

45,576,742

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net Interest Income and Margin (Non-Tax Equivalent)

​

​

​

$

361,743

​

3.62

%

​

​

​

​

$

315,815

​

3.10

%

​

Net Interest Margin (Tax Equivalent)

​

​

​

​

​

​

3.62

%

​

​

​

​

​

​

​

3.12

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Deposit Cost (without debt and other borrowings)

​

​

​

​

​

​

1.11

%

​

​

​

​

​

​

​

0.05

%

​

Overall Cost of Funds (including demand deposits)

​

​

​

​

​

​

1.23

%

​

​

​

​

​

​

​

0.11

%

​

​

​

52

Table of Contents 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

June 30, 2023

​

June 30, 2022

​

​

Average

​

Interest

​

Average

​

Average

​

Interest

​

Average

​

​

Balance

​

Earned/Paid

​

Yield/Rate

​

Balance

​

Earned/Paid

​

Yield/Rate

​

Interest-Earning Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Federal funds sold and interest-earning deposits with banks

$

853,903

​

$

20,779

​

4.91

%

​

$

5,260,149

​

$

12,168

​

0.47

%

​

Investment securities (taxable) (1)

​

7,251,296

​

​

82,819

​

2.30

%

​

​

7,535,701

​

​

69,068

​

1.85

%

​

Investment securities (tax-exempt) (1)

​

861,502

​

​

12,144

​

2.84

%

​

​

854,871

​

​

9,951

​

2.35

%

​

Loans held for sale

​

29,655

​

​

970

​

6.60

%

​

​

93,460

​

​

1,661

​

3.58

%

​

Acquired loans, net

​

6,958,595

​

​

207,851

​

6.02

%

​

​

8,756,492

​

​

196,512

​

4.53

%

​

Non-acquired loans

​

23,815,623

​

​

603,899

​

5.11

%

​

​

17,237,788

​

​

307,444

​

3.60

%

​

Total interest-earning assets

​

39,770,574

​

​

928,462

​

4.71

%

​

​

39,738,461

​

​

596,804

​

3.03

%

​

Noninterest-Earning Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from banks

​

491,715

​

​

​

​

​

​

​

​

591,386

​

​

​

​

​

​

​

Other assets

​

4,469,132

​

​

​

​

​

​

​

​

4,224,289

​

​

​

​

​

​

​

Allowance for credit losses

​

(363,673)

​

​

​

​

​

​

​

​

(304,757)

​

​

​

​

​

​

​

Total noninterest-earning assets

​

4,597,174

​

​

​

​

​

​

​

​

4,510,918

​

​

​

​

​

​

​

Total Assets

$

44,367,748

​

​

​

​

​

​

​

$

44,249,379

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-Bearing Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Transaction and money market accounts

$

17,049,745

​

$

106,232

​

1.26

%

​

$

17,760,409

​

$

5,155

​

0.06

%

​

Savings deposits

​

3,163,949

​

​

3,707

​

0.24

%

​

​

3,478,548

​

​

273

​

0.02

%

​

Certificates and other time deposits

​

3,724,725

​

​

46,790

​

2.53

%

​

​

2,812,454

​

​

4,078

​

0.29

%

​

Federal funds purchased

​

204,232

​

​

4,877

​

4.82

%

​

​

344,053

​

​

739

​

0.43

%

​

Securities sold with agreements to repurchase

​

351,721

​

​

1,511

​

0.87

%

​

​

420,536

​

​

311

​

0.15

%

​

Corporate and subordinated debentures

​

392,191

​

​

11,558

​

5.94

%

​

​

379,828

​

​

8,916

​

4.73

%

​

Other borrowings

​

433,702

​

​

10,781

​

5.01

%

​

​

—

​

​

—

​

—

%

​

Total interest-bearing liabilities

​

25,320,265

​

​

185,456

​

1.48

%

​

​

25,195,828

​

​

19,472

​

0.16

%

​

Noninterest-Bearing Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Demand deposits

​

12,352,722

​

​

​

​

​

​

​

​

13,078,631

​

​

​

​

​

​

​

Other liabilities

​

1,455,044

​

​

​

​

​

​

​

​

951,199

​

​

​

​

​

​

​

Total noninterest-bearing liabilities (“Non-IBL”)

​

13,807,766

​

​

​

​

​

​

​

​

14,029,830

​

​

​

​

​

​

​

Shareholders’ equity

​

5,239,717

​

​

​

​

​

​

​

​

5,023,721

​

​

​

​

​

​

​

Total Non-IBL and shareholders’ equity

​

19,047,483

​

​

​

​

​

​

​

​

19,053,551

​

​

​

​

​

​

​

Total Liabilities and Shareholders’ Equity

$

44,367,748

​

​

​

​

​

​

​

$

44,249,379

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net Interest Income and Margin (Non-Tax Equivalent)

​

​

​

$

743,006

​

3.77

%

​

​

​

​

$

577,332

​

2.93

%

​

Net Interest Margin (Tax Equivalent)

​

​

​

​

​

​

3.78

%

​

​

​

​

​

​

​

2.95

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total deposit cost (without debt and other borrowings)

​

​

​

​

​

​

0.87

%

​

​

​

​

​

​

​

0.05

%

​

Overall Cost of Funds (including demand deposits)

​

​

​

​

​

​

0.99

%

​

​

​

​

​

​

​

0.10

%

​

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

Investment Securities

​

The yield and interest earned on investment securities increased in the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022. The average balance of investment securities decreased $886.1 million and $277.8 million, respectively, for the three and six months ended June 30, 2023 from the comparable periods in 2022. The yield on the investment securities increased 32 basis points and 46 basis points, respectively, during the three and six months ended June 30, 2023 compared to the same periods in 2022. While the Bank decreased the size of its investment securities portfolio, the yield on the investment securities increased as a result of the higher interest rates in the three and six months ended June 30, 2023, leading to higher interest earned in 2023.

​

53

Table of Contents 

Loans

​

Interest earned on loans held for investment increased $147.6 million, to $418.8 million and increased $307.8 million to $811.8 million, respectively, in the three and six months ended June 30, 2023 from the comparable periods in 2022. Interest earned on loans held for investment included loan accretion income recognized during the three and six months ended June 30, 2023 and 2022 of $5.5 million, $12.9 million, and $12.8 million, $19.5 million, respectively, a decrease of $7.3 million and a decrease of $6.6 million, respectively. Some key highlights for the quarter ended June 30, 2023 are outlined below:

●Our non-TE yield on total loans increased 138 basis points in the second quarter of 2023 compared to the same period in 2022 due to a 140 basis-point increase in the yield on the acquired loan portfolio and a 153 basis-point increase in the yield on the non-acquired loan portfolio. These increases in both portfolios were due to the rising rate environment.
oThe yield on the acquired loan portfolio increased from 4.68% in the second quarter of 2022 to 6.08% in the same period in 2023. Interest income on the acquired loan portfolio declined $3.5 million.
◾The yield increased 140 basis points from the second quarter of 2022 due to the rising rate environment during 2022 and 2023 as the Federal Reserve increased interest rates 500 basis points.
◾Interest income on acquired loans decreased by $3.5 million, due to a decrease in the average balance of $2.3 billion. The decrease in average balance was mainly related to the impact from the paydowns and pay-offs of loans along with renewals of acquired loans that were moved to our non-acquired loan portfolio
oThe yield on the non-acquired loan portfolio increased 153 basis points to 5.20% in the second quarter of 2023 compared to 3.67% in the same period in 2022. Interest income on the non-acquired loan portfolio increased $151.1 million during the same period.
◾The yield and interest income on non-acquired loans increased due to the rising rate environment during 2022 and 2023. Both new loans and renewal have repriced in a much higher rate environment resulting in a higher yield.
◾For the non-acquired loans, interest income also increased due to an increase in the average loan balance of $6.3 billion in the second quarter of 2023 compared to the same period in 2022, primarily through organic loan growth and renewals of acquired loans that are moved to our non-acquired loan portfolio.

​

Interest-Bearing Liabilities

​

The quarter-to-date average balance of interest-bearing liabilities increased $481.1 billion, or 1.9%, in the second quarter of 2023 compared to the same period in 2022. Overall cost of funds, including demand deposits, increased by 112 basis points to 1.23% in the second quarter of 2023, compared to the same period in 2022. Some key highlights for the quarter ended June 30, 2023 compared to the same period in 2022 include:

​

●The cost of interest-bearing deposits was 1.64% for the second quarter of 2023 compared to 0.08% for the same period in 2022.
oInterest expense on interest-bearing deposits increased by $95.9 million in the second quarter of 2023 compared to the same period in 2022 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 $62.7 million, $1.8 million, and $31.3 million, respectively. The increase in the cost and interest expense was due to the repricing of deposits in the rising rate environment in 2022 and 2023.

​

54

Table of Contents 

oThe average balance of interest-bearing deposits increased by $211.7 million as certificate and other time deposits increased by $1.6 billion, offset by a decrease in interest-bearing transaction accounts and money market accounts and savings accounts of $1.3 billion. For the second quarter of 2023, the average balance of brokered deposits increased to $1.3 billion from $150.0 million for the same quarter in 2022. As customers moved funds from lower costing interest-bearing transaction accounts (excluding money market accounts) and savings accounts, seeking higher yields in the rising rate environment, the Company increased its balance in higher costing brokered time deposits, in-market time deposits and money market accounts starting in the first quarter of 2023. This shift from the lower costing interest-bearing transaction accounts and savings accounts to the higher costing time deposits and money market accounts increased both the overall cost of deposits and interest expense. Overall, interest-bearing deposits had been slower to reprice in the rising rate environment, however, the cost increased significantly in the first six months of 2023.
●The cost on the corporate and subordinated debt increased by 119 basis points to 5.96% for the three months ended June 30, 2023 compared to the same period in 2023, driven by the effects from the rising rate environment on the repricing of variable rate trust preferred corporate debt.
oThe interest expense from corporate and subordinated debt increased $1.0 million during the second quarter of 2023 compared to the same period in 2022.
oThe average balance of corporate and subordinated debt decreased by $13.1 million due to the redemption of $13.0 million of subordinated debentures in late June 2022.
●The cost of repurchase agreements was 1.03% for the second quarter of 2023 compared to 0.15% for the same period in 2022. The increase in cost was due to the rising interest rate environment.
●The cost of federal funds purchased increased 426 basis points due to the rising rate environment. Although the average balance decreased by $118.2 million, the interest expense increased $2.1 million as the rate increased.
●The cost of other borrowings, consisting of FHLB advances, for the three months ended June 30, 2023 was 5.22% and interest expense was $6.2 million. The Bank had $400 million outstanding in FHLB advances at June 30, 2023 with an average balance of $473.6 million during the quarter. There were no outstanding balances in other borrowings during the second quarter of 2022. The Company borrowed short-term FHLB advances in 2023 to provide liquidity with the turmoil in the financial markets in 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, 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 $1.9 billion, or 14.0%, to $11.9 billion in the second quarter of 2023 compared to $13.9 billion during the same period in 2022. Actual noninterest-bearing deposits declined $1.7 billion from December 31, 2022. This decline was due to both the rising rate environment as customers seek higher yields, in addition to some customers spreading deposit funds amongst institutions to achieve full deposit insurance coverage.

​

​

55

Table of Contents 

Noninterest Income

​

Noninterest income provides us with additional revenues that are significant sources of income. For the three months ended June 30, 2023 and 2022, noninterest income comprised 17.6%, and 21.6%, respectively, of total net interest income and noninterest income. For the six months ended June 30, 2023 and 2022, noninterest income comprised 16.7%, and 23.0%, respectively, of total net interest income and noninterest income.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30,

​

June 30,

​

(Dollars in thousands)

    

2023

    

2022

    

2023

    

2022

 

Service charges on deposit accounts

​

$

22,257

​

$

21,142

​

$

42,868

​

$

40,036

​

Debit, prepaid, ATM and merchant card related income

​

 

10,844

​

 

11,720

​

 

20,092

​

 

20,835

​

Mortgage banking income

​

 

4,354

​

 

5,480

​

 

8,686

​

 

16,074

​

Trust and investment services income

​

 

9,823

​

 

9,831

​

 

19,760

​

 

19,549

​

Correspondent banking and capital market income

​

​

19,187

​

​

26,068

​

​

32,781

​

​

54,019

​

Securities gains, net

​

 

—

​

 

—

​

 

45

​

 

—

​

SBA income

​

 

2,885

​

 

4,343

​

 

6,607

​

 

7,524

​

Bank owned life insurance income

​

​

6,271

​

​

6,246

​

​

13,084

​

​

11,506

​

Other

​

 

1,593

​

 

1,926

​

 

4,646

​

 

3,260

​

Total noninterest income

​

$

77,214

​

$

86,756

​

$

148,569

​

$

172,803

​

Noninterest income decreased by $9.5 million, or 11.0%, during the second quarter of 2023 compared to the same period in 2022. This quarterly change in total noninterest income resulted from the following:

​

●Correspondent banking and capital markets income in the second quarter of 2023 decreased by $6.9 million, or 26.4%, compared to the same quarter in 2022. The decline was due to the expense attributable to the variation margin payments for centrally cleared swaps, along with lower commissions and fees earned on fixed income security sales of $5.1 million during the second quarter of 2023 as the volume in sales declined compared to the same quarter of 2022. We recorded an expense of $8.5 million related to variation margin payments in the second quarter of 2023 compared to an expense of $1.5 million in the second quarter of 2022. The rise in interest rates increased our expense related to variation margin as it led to an increase in the value of our centrally cleared interest rate swaps with LCH and CME. The increase in value of our centrally cleared interest rate swaps increased daily settlements by LCH and CME with the Company, which resulted in an overall increase in our expense. These declines were partially offset by an increase in income derived from the ARC hedging program of $4.8 million during the second quarter of 2023 compared to the same quarter in 2022. This increase was due to more activity and volume in 2023 as the Bank’s commercial loan customers try to lock in a fixed loan rates in the rising rate environment.
●SBA income, including the impact from the change to fair value accounting prospectively applied beginning with the period ending June 30, 2022, decreased by $1.5 million, or 33.6% compared to the second quarter of 2022.  SBA income includes changes in fair value of the servicing asset, loan servicing fees and gains on sale of SBA loans.  The decrease in the second quarter of 2023 compared to the comparable period in 2022 was attributable to a decrease in the fair value of the SBA servicing asset of $1.5 million.  
●Mortgage banking income decreased by $1.1 million, or 20.5%, during the current quarter compared to the same period of the prior year, which was comprised of a $1.6 million, or 35.9%, decrease in secondary market mortgage income, slightly offset by a $477,000, or 46.9%, increase in mortgage servicing related income, net of the hedge. Mortgage production declined from $1.4 billion in the second quarter of 2022 to $696 million in the second quarter of 2023, while the Company allocated a higher percentage of its mortgage production to the secondary market compared to the same quarter in 2022. The allocation of mortgage production to the secondary market increased from 27% in the second quarter of 2022 to 38% in the second 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 quarter to quarter. The decline in mortgage production in 2023 was mainly due to the rise in interest rates which resulted in an overall decrease in mortgage banking income.
oThe decrease in mortgage income from the secondary market was comprised of a $3.8 million decline in gain on sale of mortgage loans, which is net of the commission expense related to mortgage production, offset by a $2.1 million increase in the change in fair value of the pipeline, loans held for sale and MBS forward trades. Mortgage commission expense was $2.3 million during the second quarter of 2023 compared to $3.1 million during the comparable period in 2022.

​

56

Table of Contents 

oThe increase in mortgage servicing related income, net of the hedge, in the second quarter of 2023 was due to a $387,000 increase in the change in fair value of the MSR including decay and a $90,000 increase from servicing fee income. The increase in fair value of the MSR was primarily due to a $907,000 decline in MSR decay and an increase in gains on the MSR hedge of $289,000, offset by a decrease in the change in fair value from interest rates of $809,000.
●Debit, ATM, prepaid and merchant card related income was lower by $876,000, or 7.5%, in the second quarter of 2023 compared to the same quarter in 2022. The decrease in debit, ATM, prepaid and merchant card related income was driven by a decrease in debit/ATM fee income, net of card expense, of $793,000 due mainly to higher card expense of $1.0 million.
●Service charges on deposit accounts were higher by $1.1 million, or 5.3%, in the second quarter of 2023 compared to the same period in 2022. This increase mainly consisted of an increase in service charge account maintenance fees of $766,000 and in other retail fees of $359,000 including wire transfer fees and check sales commissions.

​

Noninterest income decreased by $24.2 million, or 14.0%, during the six months ended June 30, 2023 compared to the same period in 2022. This change in total noninterest income resulted from the following:

​

●Correspondent banking and capital markets income for 2023 decreased by $21.2 million compared to 2022 primarily due to an increase in expense attributable to the variation margin payments for centrally cleared swaps of $15.3 million and lower commissions and fees earned on fixed income security sales of $9.2 million during 2023 as the volume in sales declined from 2022. We recorded an expense of $16.9 million related to variation margin payments in 2023 compared to an expense of $1.6 million in 2022.
●Mortgage banking income decreased by $7.4 million, or 46.0%, which was comprised of a $6.8 million, or 54.9%, decrease from mortgage income in the secondary market and a $553,000, or 15.3%, decrease from mortgage servicing related income, net of the hedge. Mortgage production declined from $2.7 billion in the first half of 2022 to $1.3 billion in the second half of 2023 with the rise in mortgage rates in 2022 and 2023. During the current year, the Company also allocated a lower percentage of its mortgage production and pipeline to the secondary market compared to 2022. Both the reduction in mortgage production and the lower allocation to the secondary market resulted in lower mortgage income from the secondary market in 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 quarter to quarter.
oDuring the first six months of 2023, mortgage income from the secondary market comprised of a $15.7 million decline in gain on sale of mortgage loans, which is net of the commission expense related to mortgage production, offset by an $8.8 million increase in the change in fair value of the pipeline, loans held for sale and MBS forward trades. Mortgage commission expense was $3.6 million during the six months ended June 30, 2023 compared to $8.9 million during the comparable period in 2022.
oThe decrease in mortgage servicing related income, net of the hedge, in the six months ended June 30, 2023 was due to a $925,000 decrease in the change in fair value of the MSR, including decay, slightly offset by a $372,000 increase from servicing fee income. The decrease in fair value of the MSR was due to a $14.9 million decrease in the change in fair value from interest rates, offset by a $1.7 million decline in MSR decay and a $12.3 million increase in gains on the MSR hedge.
●SBA income, including the impact from the change to fair value accounting, decreased by $917,000, or 12.2% in 2023 compared to 2022. The decrease was attributable to a decrease in the change in fair value of the SBA servicing asset of $1.0 million and in gains on sale of SBA loans of $240,000, partially offset by an increase in SBA servicing fee income of $366,000.  
●Debit, prepaid, ATM and merchant card related income was lower by $743,000, or 3.6%, in 2023 compared to 2022. The decrease in debit, ATM, prepaid and merchant card related income was driven by a decrease in debit/ATM fee income, net of card expense, of $852,000 due mainly to higher card expense of $1.8 million.
●Service charges on deposit accounts were higher in 2023 by $2.8 million, or 7.1%, compared to 2022, due primarily to the increase in customers and activity, partially through the Atlantic Capital merger completed during the first quarter of 2022. The increase was mainly attributable to a $2.6 million increase in service charge account maintenance fees in 2023 compared to 2022.
●Bank owned life insurance income increased $1.6 million, or 13.7%, in 2023 compared to 2022. This increase was due to the purchase of $91.9 million of new policies since March of 2022 and the addition of $74.6 million in BOLI resulting from the acquisition of Atlantic Capital in the first quarter of 2022.

​

57

Table of Contents 

●Other income increased by $1.4 million, or 42.5%, in 2023 compared to 2022. This increase was primarily due to income of $960,000 from a legal settlement recorded during the first quarter of 2023 and an increase in income from prepaid cards of $403,000 along with the Company showing a gain in sale of fixed assets of $89,000 in 2023 compared to a loss of $247,000 in 2022. These increases were partially offset by a decline in income from SBIC partnerships of $622,000.

Noninterest Expense

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

​

June 30,

​

June 30,

​

(Dollars in thousands)

    

2023

    

2022

    

2023

    

2022

    

Salaries and employee benefits

​

$

147,342

​

$

137,037

​

$

291,402

​

$

274,710

​

Occupancy expense

​

 

22,196

​

 

22,759

​

 

43,729

​

 

44,599

​

Information services expense

​

 

21,119

​

 

19,947

​

 

41,044

​

 

39,140

​

OREO expense and loan related expense

​

 

(14)

​

 

(3)

​

 

155

​

 

(241)

​

Amortization of intangibles

​

 

7,028

​

 

8,847

​

 

14,327

​

 

17,341

​

Business development and staff related expense

​

 

6,672

​

 

4,916

​

 

12,629

​

 

9,192

​

Supplies and printing

​

 

853

​

 

676

​

 

1,737

​

 

1,278

​

Postage expense

​

​

1,701

​

​

1,724

​

​

3,457

​

​

3,311

​

Professional fees

​

 

4,364

​

 

4,331

​

 

8,066

​

 

8,080

​

FDIC assessment and other regulatory charges

​

 

9,819

​

 

5,332

​

 

16,113

​

 

10,144

​

Advertising and marketing

​

 

1,521

​

 

2,286

​

 

3,639

​

 

4,049

​

Merger, branch consolidation and severance related expense

​

 

1,808

​

 

5,390

​

 

11,220

​

 

15,666

​

Other

​

 

18,217

​

 

17,927

​

 

35,613

​

 

32,500

​

Total noninterest expense

​

$

242,626

​

$

231,169

​

$

483,131

​

$

459,769

​

Noninterest expense increased by $11.5 million, or 5.0%, in the second quarter of 2023 as compared to the same period in 2022. The quarterly increase in total noninterest expense primarily resulted from the following:

​

●Salaries and employee benefits increased $10.3 million, or 7.5%, in the second quarter of 2023 compared to the same period in 2022. The increase was primarily due to an increase in salaries of $9.2 million which included annual salary increases of $5.1 million and a decline in total deferred loan costs of $4.1 million. The reduction in deferred loan costs was driven by lower loan production. The overall increase in salaries and employee benefits was also due to an increase in incentives of $1.4 million and employee benefits of $743,000. These increases were partially offset by a reduction in commissions of $1.3 million mainly related to a decline in commission expense related to the Correspondent Banking Division.
●FDIC assessment and other regulatory charges increased $4.5 million, or 84.2%, in the second quarter of 2023 compared to the same period in 2022. This increase was primarily due to an increase in the FDIC assessment rate in 2023 to bring the overall FDIC fund to 1.35x total deposit by the end of 2028. The increase also reflects changes in the Company’s size and complexity, along with the resulting effects in the Company’s liquidity compared to the second quarter of 2022.
●Business development and staff related expense increased $1.8 million, or 35.7%, in the second quarter of 2023 compared to the same period in 2022. This increase was mainly due to an increase in employee expenses including employee travel expense, convention and meeting expense, and recruitment and relocation costs associated with the Company investing in new talent.
●Information services expense increased $1.2 million, or 5.9% in the second quarter of 2023 compared to the same period in 2022.  The increase was due to additional cost associated with the Company updating systems as it grows in size and complexity.
●Merger, branch consolidation and severance related expense decreased $3.6 million, or 66.5%, in the second quarter of 2023 compared to the same period in 2022. The decrease was due to lower merger expense pertaining to previous acquisitions totaling $2.9 million and in branch consolidation expense of $682,000.
●Amortization of intangibles, which is related to the Company’s prior mergers, decreased $1.8 million, or 20.6%.

​

​

58

Table of Contents 

Noninterest expense increased by $23.4 million, or 5.1%, during the six months ended June 30, 2023 compared to the same period in 2022. The categories and explanations for the fluctuations year-to-date, except the items discussed below, are similar to the ones noted above in the quarterly comparison.

●Merger, branch consolidation and severance related expense decreased by $4.4 million, or 28.4%, compared to the six months ended June 30, 2022. The decrease was primarily due to a $11.1 million decrease in merger expense pertaining to expenses related to the Atlantic Capital and CenterState mergers. Branch consolidation related expense decreased $1.3 million in 2023 compared to 2022. These decreases were offset by severance related payments totaling $8.1 million related to restructuring costs recorded in March 2023. The restructuring costs include 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.
●Other noninterest expense increased $3.1 million, or 9.6%, compared to the six months ended June 30, 2023. This increase was mainly attributable to a $3.8 million increase in earnings credit expense to Homeowners Association (“HOA”) customers and a $2.1 million increase in state franchise and occupation tax payments. The Bank provides a credit to HOA customers based on the average deposit balances held that reduces fees for other services provided. This increase was due to having a full six months’ expense in 2023 as this line of business was acquired through the Atlantic Capital transaction completed on March 1, 2022, along with growth in the business since the acquisition. The tax payment increase was mainly attributable to occupancy tax payments made to the state of Georgia, as the Company expanded its presence in the state through the acquisition of Atlantic Capital, along with increases in other franchise taxes paid to states. These increases were partially offset by a decrease in fraud, digital banking and miscellaneous operational charge-off related expenses totaling approximately $2.7 million.

Income Tax Expense

​

Our effective tax rate was 21.84% for the three months ended June 30, 2023 compared to 21.66% for the three months ended June 30, 2022. The increase in the effective rate for the quarter, when compared to the same period in the prior year, is mostly driven by an increase in pretax income, disallowed interest expense, disallowed executive compensation, and non-deductible FDIC premiums, partially offset by an increase in tax-exempt interest income and non-deductible merger expenses associated with the Atlantic Capital transaction that closed during the first quarter of 2022.

​

Our effective tax rate for the first six months of the year was 21.84% compared to 21.47% for the first six months of 2022. The increase in the year-to-date effective tax rate compared to the same period of 2022 was driven by an increase in pretax book income, non-deductible FDIC premiums, disallowed executive compensation, and disallowed interest expense, partially offset by an increase in tax-exempt interest income and an increase in federal tax credits available.

​

​

59

Table of Contents 

Analysis of Financial Condition

Summary

Our total assets increased approximately $1.0 billion, or 2.3%, from December 31, 2022 to June 30, 2023, to approximately $44.9 billion. Within total assets, loans (excluding changes in the allowance for credit losses) increased $1.4 billion, or 4.5%, and cash and cash equivalents increased $201.2 million, or 15.3%, while investment securities decreased $458.6 million, or 5.6%, during the period. Within total liabilities, deposit growth was $391.3 million, or 1.1%, and federal funds purchased and securities sold under agreements to repurchased increased $25.0 million, or 4.5%. Total borrowings including corporate and subordinated debentures increased $399.8 million, or 101.9%. Total shareholder’s equity increased $215.1 million, or 4.2%. During the first half of 2023, the Company took in net $400 million in short-term FHLB borrowings and $1.0 billion in brokered time deposits to increase our liquidity. The increase in FHLB borrowings and brokered time deposits contributed to the increase in cash and cash equivalents. The increase in loans was due to normal organic growth. Deposit increase was due to growth in time deposits of $2.0 billion, including $1.0 billion in brokered time deposits, and in money market accounts of $1.4 billion in the current year, which replaced declines in noninterest-bearing, interest-bearing checking and savings accounts of $1.7 billion, $769.9 million and $533.0 million, respectively. Our loan to deposit ratio was 86% and 83% at June 30, 2023 and December 31, 2022, respectively, while our percentage of noninterest-bearing deposit accounts to total deposits was 31% and 36%, respectively at June 30, 2023 and December 31, 2022.

Investment Securities

​

We use investment securities, our second largest category of earning assets, to generate interest income, provide liquidity, fund loan demand or deposit liquidation, and pledge as collateral for public funds deposits, repurchase agreements, derivative exposures and to augment borrowing capacity at the Federal Reserve Bank of Atlanta, and the Federal Home Loan Bank of Atlanta.  At June 30, 2023, investment securities totaled $7.7 billion, compared to $8.2 billion at December 31, 2022, a decrease of $458.6 million, or 5.6%. At June 30, 2023, approximately 64.0% of the investment portfolio was classified as available for sale, approximately 33.4% was classified as held to maturity and approximately 2.6% was classified as other investments. During the six months ended June 30, 2023, we purchased $163.6 million of capital stock with the Federal Home Loan Bank classified as other investment securities on the balance sheet of which we sold back $146.6 million. The net increase to the capital stock holding for the Federal Home Loan Bank of Atlanta of $17.0 million during the quarter was due to the increase in Federal Home Loan Bank borrowings. During the six months ended June 30, 2023, we purchased $3.2 million of available for sale securities. There were no purchases of held to maturity securities during 2023. These purchases were offset by maturities, paydowns, sales and calls of investment securities totaling $623.3 million. Net amortization of premiums was $10.2 million in the first six months of 2023.

​

At June 30, 2023, the unrealized net loss of the available for sale securities portfolio was $881.2 million, or 15.1%, below its amortized cost basis, compared to an unrealized net loss of $889.3 million, or 14.3%, at December 31, 2022. At June 30, 2023, the unrealized net loss of the held to maturity securities portfolio was $440.6 million, or 17.0%, below its amortized cost basis, compared to an unrealized net loss of $433.1 million, or 16.1%, at December 31, 2022.

​

​

60

Table of Contents 

The following is the combined amortized cost and fair value of investment securities available for sale and held for maturity, aggregated by credit quality indicator:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

    

​

    

    

​

    

​

    

    

​

    

    

​

 

​

​

Amortized

​

Fair

​

Unrealized

​

​

​

​

​

​

 

(Dollars in thousands)

​

Cost

​

Value

​

Net Loss

​

AAA – A

​

Not Rated

 

June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

223,658

​

$

219,913

​

$

(3,745)

​

$

223,658

​

$

—

​

U.S. Government agencies

​

​

443,295

​

​

386,258

​

​

(57,037)

​

​

443,295

​

​

—

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises*

​

​

3,417,944

​

​

2,865,176

​

​

(552,768)

​

​

95

​

​

3,417,849

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises*

​

​

1,126,772

​

​

948,193

​

​

(178,579)

​

​

—

​

​

1,126,772

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises*

​

 

1,531,722

​

​

1,246,899

​

​

(284,823)

​

​

16,838

​

 

1,514,884

​

State and municipal obligations

​

 

1,135,189

​

​

954,455

​

​

(180,734)

​

​

1,135,189

​

 

—

​

Small Business Administration loan-backed securities

​

 

506,593

​

​

447,532

​

​

(59,061)

​

​

506,593

​

 

—

​

Corporate securities

​

​

30,558

​

​

25,422

​

​

(5,136)

​

​

—

​

​

30,558

​

​

​

$

8,415,731

​

$

7,093,848

​

$

(1,321,883)

​

$

2,325,668

​

$

6,090,063

​

* Agency mortgage-backed securities (“MBS”), agency collateralized mortgage-obligations (“CMO”) and agency commercial mortgage-backed securities (“CMBS”) are guaranteed by the issuing government-sponsored enterprise (“GSE”) as to the timely payments of principal and interest. Except for Government National Mortgage Association 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 June 30, 2023, we had 1,245 investment securities (including both available for sale and held to maturity) in an unrealized loss position, which totaled $1.3 billion. At December 31, 2022, we had 1,311 investment securities (including both available for sale and held to maturity) in an unrealized loss position, which totaled $1.3 billion. The total number of investment securities with an unrealized loss position decreased by 66 securities, while the total dollar amount of the unrealized loss decreased by $4.4 million. The level of unrealized losses within the Company available for sale and held to maturity securities portfolios is due to the overall increase in short and long-term interest rates in 2022 and 2023.

​

All investment securities in an unrealized loss position as of June 30, 2023 continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability and intent to hold these securities within the portfolio until 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. 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 our securities 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 credit losses related to investment securities could impact cash flow, tangible capital or liquidity. See Note 2 — Summary of Significant Accounting Policies and Note 5 — 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. 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.

​

​

61

Table of Contents 

The following table presents a summary of our investment portfolio by contractual maturity and related yield as of June 30, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

$

50,000

​

2.05

%  

$

14,365

​

2.32

​

$

107,900

​

1.62

%  

$

25,000

​

2.20

%  

$

197,265

​

1.86

%  

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

—

​

​

—

​

—

​

​

201,088

​

1.99

​

​

1,313,384

​

1.77

​

​

1,514,472

​

1.80

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

—

​

​

—

​

—

​

​

—

​

—

​

​

460,574

​

2.50

​

​

460,574

​

2.50

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

—

​

​

36,669

​

0.94

​

​

60,180

​

1.13

​

​

260,966

​

1.62

​

​

357,815

​

1.47

​

Small Business Administration loan-backed securities

​

​

—

​

—

​

​

—

​

—

​

​

—

​

—

​

​

55,029

​

1.28

​

​

55,029

 

1.28

​

Total held to maturity

​

$

50,000

 

2.05

%  

$

51,034

 

1.33

%  

$

369,168

 

1.74

%  

$

2,114,953

 

1.90

%  

$

2,585,155

 

1.87

%

Available for Sale (fair value)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government treasuries

​

$

196,083

​

1.74

%  

$

23,830

​

2.05

%  

$

—

​

—

%  

$

—

​

—

%  

$

219,913

​

1.77

%

U.S. Government agencies

​

​

29,223

​

2.58

​

​

92,770

​

2.65

​

​

96,352

​

1.68

​

​

—

​

—

​

​

218,345

 

2.17

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

197

​

—

​

​

2,542

​

2.32

​

​

155,733

​

2.27

​

​

1,445,898

​

1.94

​

​

1,604,370

​

1.97

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

—

​

—

​

​

10,735

​

2.51

​

​

14,609

​

2.29

​

​

534,432

​

2.20

​

​

559,776

​

2.21

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

4

​

5.75

​

​

103,245

​

2.48

​

​

551,131

​

1.89

​

​

308,114

​

1.77

​

​

962,494

​

1.91

​

State and municipal obligations

​

 

997

​

3.12

%  

 

27,468

​

3.38

​

 

92,724

​

2.66

​

 

833,266

​

2.62

​

 

954,455

 

2.65

​

Small Business Administration loan-backed securities

​

 

1,881

​

—

​

 

23,025

​

3.95

​

 

140,166

​

4.01

​

 

239,487

​

2.87

​

 

404,559

 

3.30

​

Corporate securities

​

 

—

​

—

​

 

—

​

—

​

 

24,717

​

3.98

​

 

705

​

4.50

​

 

25,422

 

4.00

​

Total available for sale

​

$

228,385

​

1.85

%  

$

283,615

​

2.70

%  

$

1,075,432

​

2.32

%  

$

3,361,902

​

2.20

%  

$

4,949,334

​

2.23

%

Total other investments

​

$

—

​

—

%  

$

—

​

—

%  

$

—

​

—

%  

$

196,728

​

3.79

%  

$

196,728

 

3.79

%

Total investment securities

​

$

278,385

 

1.89

%  

$

334,649

 

2.50

%  

$

1,444,600

 

2.17

%  

$

5,673,583

 

—

%  

$

7,731,217

 

2.22

%

Percent of total

​

 

4

%  

​

​

 

4

%  

​

​

 

19

%  

​

​

 

73

%  

​

​

​

​

​

​

​

Cumulative percent of total

​

 

4

%  

​

​

 

8

%  

​

​

 

27

%  

​

​

 

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 86.2% 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 or Bank Term Funding Program. Approximately 13.4% 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 99.1% of the municipal bond portfolio has ratings in the Double A or Triple A category.

​

Through June 30, 2023, we sold approximately $125.3 million of municipal securities given advantageous market conditions. The primary rationale for the sale was to reduce municipal and portfolio duration/price risk at an opportune moment in fixed income markets. As of June 30, 2023, the portfolio had an effective duration of 5.65 years. Our target for effective duration is 3 to 5 years. The portfolio duration is currently outside of the target range due to portfolio repositioning and extension in the mortgage-backed securities due to the historic rise in rates. We continue to monitor duration risk and seek to align actual duration with the target range.

​

​

62

Table of Contents 

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

December 31, 2022

​

(Dollars in thousands, duration in years)

    

Amount

    

Duration

    

Amount

    

Duration

​

Held to Maturity (amortized cost)

​

​

​

​

​

​

​

​

​

​

​

U.S. Government agencies

​

$

197,265

​

5.39

​

$

197,262

​

5.81

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,514,472

​

6.00

​

​

1,591,646

​

6.13

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

460,574

​

6.74

​

​

474,660

​

6.52

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

357,815

​

4.45

​

​

362,586

​

5.00

​

Small Business Administration loan-backed securities

​

​

55,029

​

6.99

​

​

57,087

​

6.76

​

Total held to maturity

​

$

2,585,155

​

5.89

​

$

2,683,241

​

6.04

​

Available for Sale (fair value)

​

​

​

​

​

​

​

​

​

​

​

U.S. Treasuries

​

$

219,913

​

0.47

​

$

265,638

​

0.87

​

U.S. Government agencies

​

​

218,345

​

3.84

​

​

219,088

​

4.27

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

1,604,370

​

5.69

​

​

1,698,353

​

5.80

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

559,776

​

6.16

​

​

601,045

​

5.95

​

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

​

​

​

​

​

​

​

​

​

​

​

agencies or sponsored enterprises

​

​

962,494

​

3.97

​

​

1,000,398

​

4.34

​

State and municipal obligations

​

 

954,455

 

8.79

​

 

1,064,852

​

8.74

​

Small Business Administration loan-backed securities

​

 

404,559

​

3.75

​

 

444,810

​

3.55

​

Corporate securities

​

 

25,422

​

3.02

​

 

32,638

​

2.94

​

Total available for sale

​

$

4,949,334

​

5.55

​

$

5,326,822

​

5.66

​

Other Investments

​

Other investment securities include primarily our investments in FHLB and FRB stock with 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 June 30, 2023, we determined that there was no impairment on our other investment securities. As of June 30, 2023, other investment securities represented approximately $196.7 million, or 0.44% of total assets, and primarily consists of FHLB and FRB stock which totals $182.3 million, or 0.41% of total assets. There were no gains or losses on the sales of these securities for three and six months ended June 30, 2023 and 2022, respectively.

Trading Securities

​

We have a trading portfolio associated with our Correspondent Bank 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 Correspondent Banking and Capital Market Income in our Consolidated Statements of Net Income. Securities purchased for this portfolio have primarily been municipal bonds, treasuries and mortgage-backed agency securities, which are held for short periods of time and totaled $56.6 million and $31.3 million, respectively, at June 30, 2023 and December 31, 2022.

Loans Held for Sale

​

The balance of mortgage loans held for sale increased $14.0 million from December 31, 2022 to $43.0 million at June 30, 2023. Mortgage production in the second quarter of $696 million remained flat when compared to the fourth quarter of 2022 mortgage production of $693 million. However, the percentage of mortgage production sold into the secondary market increased in the second quarter of 2023 to 38% from 19% in the fourth quarter of 2022. This increase in the allocation of mortgage production into the secondary market caused mortgage loans held for sale to increase at period end. 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.

​

​

63

Table of Contents 

Loans

​

The following table presents a summary of the loan portfolio by category (excludes loans held for sale):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LOAN PORTFOLIO (ENDING BALANCE)

June 30,

​

% of

​

December 31,

​

% of

​

(Dollars in thousands)

2023

    

Total

​

2022

    

Total

​

Acquired loans:

​

​

​

​

​

​

​

​

​

​

Acquired - non-purchased credit deteriorated loans:

​

​

​

​

​

​

​

​

​

​

Construction and land development

$

208,929

​

0.7

%  

$

258,481

​

0.9

%  

Commercial non-owner occupied

​

1,825,025

​

5.8

%  

​

1,991,947

​

6.6

%  

Commercial owner occupied real estate

​

1,211,938

​

3.8

%  

​

1,332,942

​

4.4

%  

Consumer owner occupied

​

535,100

​

1.7

%  

​

586,252

​

1.9

%  

Home equity loans

​

263,528

​

0.8

%  

​

316,019

​

1.1

%  

Commercial and industrial

​

969,125

​

3.1

%  

​

1,128,280

​

3.7

%  

Other income producing property

​

172,837

​

0.5

%  

​

195,265

​

0.7

%  

Consumer non real estate

​

89,204

​

0.3

%  

​

133,679

​

0.4

%  

Other

​

227

​

—

%  

​

227

​

—

%  

Total acquired - non-purchased credit deteriorated loans

​

5,275,913

​

16.7

%  

​

5,943,092

​

19.7

%  

Acquired - purchased credit deteriorated loans (PCD):

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

20,210

​

0.1

%  

​

46,464

​

0.2

%  

Commercial non-owner occupied

​

497,045

​

1.6

%  

​

553,058

​

1.8

%  

Commercial owner occupied real estate

​

412,045

​

1.3

%  

​

435,650

​

1.4

%  

Consumer owner occupied

​

182,849

​

0.6

%  

​

194,779

​

0.7

%  

Home equity loans

​

31,128

​

0.1

%  

​

38,961

​

0.1

%  

Commercial and industrial

​

51,716

​

0.2

%  

​

66,891

​

0.2

%  

Other income producing property

​

39,482

​

0.1

%  

​

52,827

​

0.2

%  

Consumer non real estate

​

35,508

​

0.1

%  

​

41,101

​

0.1

%  

Total acquired - purchased credit deteriorated loans (PCD)

​

1,269,983

​

4.1

%  

​

1,429,731

​

4.7

%  

Total acquired loans

​

6,545,896

​

20.8

%  

​

7,372,823

​

24.4

%  

Non-acquired loans:

​

​

​

​

​

​

​

​

​

​

Construction and land development

​

2,587,986

​

8.2

%  

​

2,555,415

​

8.5

%  

Commercial non-owner occupied

​

6,154,166

​

19.5

%  

​

5,527,954

​

18.3

%  

Commercial owner occupied real estate

​

3,961,968

​

12.6

%  

​

3,691,601

​

12.2

%  

Consumer owner occupied

​

5,209,832

​

16.5

%  

​

4,381,011

​

14.5

%  

Home equity loans

​

1,053,058

​

3.3

%  

​

958,188

​

3.2

%  

Commercial and industrial

​

4,357,453

​

13.8

%  

​

4,118,312

​

13.6

%  

Other income producing property

​

499,393

​

1.6

%  

​

448,150

​

1.5

%  

Consumer non real estate

​

1,160,766

​

3.7

%  

​

1,103,646

​

3.7

%  

Other

​

6,267

​

—

%  

​

20,762

​

0.1

%  

Total non-acquired loans

​

24,990,889

​

79.2

%  

​

22,805,039

​

75.6

%  

Total loans (net of unearned income)

$

31,536,785

​

100.0

%  

$

30,177,862

​

100.0

%  

Total loans, net of deferred loan costs and fees (excluding mortgage loans held for sale), increased by $1.4 billion, or 9.1% annualized, to $31.5 billion at June 30, 2023 compared to December 31, 2022. Our non-acquired loan portfolio increased by $2.2 billion, or 19.3% annualized, driven by organic growth. Consumer owner occupied loans, commercial non-owner occupied loans, commercial owner occupied real estate, commercial and industrial loans and home equity loans led the way with $828.8 million, $626.2 million, $270.4 million, $239.1 million and $94.9 million in year-to-date loan growth, respectively, or 38.2%, 22.8%, 14.8%, 11.7% and 20.0% annualized growth, respectively. The acquired loan portfolio decreased by $826.9 million, or 22.6% 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 with $222.9 million, $174.3 million and $144.6 million in year-to-date loan decrease. Acquired loans as a percentage of total loans decreased to 20.8% and non-acquired loans as a percentage of the overall portfolio increased to 79.2% at June 30, 2023. This compares to acquired loans as a percentage of total loans of 24.4% and non-acquired loans as a percentage of total loans of 75.6% at December 31, 2022.

​

64

Table of Contents 

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, 2022 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, 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 and more severe scenario, depending on the circumstances and economic outlook. For the quarter ending June 30, 2023, 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 unchanged from 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 still showed resilience and actual loan losses remain at low levels, significant, abrupt downward shifts in the forecasted commercial real estate price index elevated modeled expected losses for the Commercial Real Estate and Commercial Construction and Development, which excludes Residential Construction, loan segments. The Company determined that increases to expected loss rates for the completed Commercial Real Estate portfolios were appropriate, but the modeled expected loss rate for the Commercial Construction and Development portfolio needed a qualitative adjustment given the mix of our current portfolio composition compared to the historical composition utilized in our model. The resulting provision was approximately $38.4 million during the second quarter of 2023.

​

Longstanding TDR accounting rules were replaced with ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (See Note 3 — Recent Accounting and Regulatory Pronouncements). The Company adopted the retirement of TDR guidance, effective January 1, 2023. Please see Note 2 — Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of how we determine expected losses from modifications of receivables to borrowers experiencing financial difficulty.

​

65

Table of Contents 

Atlantic Capital was acquired and merged with and into the Bank on March 1, 2022, requiring that a closing date ACL be prepared for Atlantic Capital on a standalone basis and that the acquired portfolio be included in the Bank’s first quarter ACL. Atlantic Capital’s loans represented approximately 8% of the total Bank’s portfolio at March 31, 2022. Given the relative size and complexity of the acquired portfolio, similarities of the loan characteristics, and similar loss history to the existing portfolio, reserve calculations were performed using the Bank's existing CECL model, loan segmentation, and forecast weighting as the first quarter end reserve. As a result of the merger with Atlantic Capital on March 1, 2022, the Company identified approximately $137.9 million of loans as PCD. The acquisition date ACL totaled $27.5 million, consisting of a non-PCD pooled reserve of $13.7 million, PCD pooled reserve of $5.7 million, and PCD individually evaluated reserve of $8.1 million. It represented about 8% of the combined Bank’s ACL reserve at March 31, 2022. The acquisition date reserve for unfunded commitments totaled $3.4 million, or 11% of the combined Bank’s total at March 31, 2022.

​

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, 2022 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 June 30, 2023, the balance of the ACL was $427.4 million or 1.36% of total loans. The ACL increased $56.8 million from the balance of $370.6 million recorded at March 31, 2023. This increase during the second quarter of 2023 included $60.1 million of provision for credit losses, in addition to $3.3 million in net charge-offs. During the first six months of 2023, the Company recorded $75.3 million of provision for credit losses along with net charge-offs of $4.3 million. During the three and six months ended June 30, 2023, the Company recorded a provision for credit losses based on loan growth and continued uncertainty around economic recession risks.

​

At June 30, 2023, the Company had a reserve on unfunded commitments of $63.4 million, which was recorded as a liability on the Balance Sheet, compared to $85.1 million at March 31, 2023 and $67.2 million at December 31, 2022. During the three and six months ended June 30, 2023, the Company recorded a decrease in the reserve for unfunded commitments of $21.7 million and $3.8 million, respectively. For the prior comparative period, the Company recorded a provision for credit losses on unfunded commitments of $2.1 million and $2.0 million, respectively, during three and six months ended June 30, 2022. The Company did not have an allowance for credit losses or record a provision for credit losses on investment securities or other financial asset during the first six months of 2023.

​

The ACL provides 2.52 times coverage of nonperforming loans at June 30, 2023. Net charge-offs to total average loans during three and six months ended June 30, 2023 were 0.04% and 0.03%, respectively, compared to 0.03% and 0.04%, respectively, during the three and six months ended June 30, 2022. We continued to show solid and stable asset quality numbers and ratios as of June 30, 2023.

The following table presents a summary of the allowance for credit losses by loan segment, for the six months ended June 30, 2023.

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

(Dollars in thousands)

    

Amount

    

%*

    

Residential Mortgage Senior

​

$

81,469

 

20.4

%  

​

Residential Mortgage Junior

​

 

392

 

0.0

%  

​

Revolving Mortgage

​

 

14,212

 

4.5

%  

​

Residential Construction

​

 

8,869

 

2.8

%  

​

Other Construction and Development

​

 

55,314

 

6.1

%  

​

Consumer

​

 

24,577

 

4.0

%  

​

Multifamily

​

​

9,767

​

2.8

%  

​

Municipal

​

​

745

​

2.3

%  

​

Owner Occupied Commercial Real Estate

​

​

70,759

​

17.7

%  

​

Non-Owner Occupied Commercial Real Estate

​

​

115,269

​

24.3

%  

​

Commercial and Industrial

​

 

46,019

 

15.1

%  

​

Total

​

$

427,392

 

100.0

%  

    

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

​

66

Table of Contents 

The following table presents a summary of net charge off ratios (annualized) by loan segment, for the three and six months ended June 30, 2023 and 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

June 30, 2023

​

June 30, 2022

(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

​

$

265

​

$

6,261,400

​

0.02

%  

​

$

300

​

$

4,479,609

​

0.03

%  

Residential Mortgage Junior

​

 

3

​

 

11,290

​

0.11

%  

​

 

110

​

 

14,091

​

3.13

%  

Revolving Mortgage

​

 

532

​

 

1,410,768

​

0.15

%  

​

 

192

​

 

1,265,219

​

0.06

%  

Residential Construction

​

 

22

​

 

873,295

​

0.01

%  

​

 

2

​

 

712,162

​

—

%  

Other Construction and Development

​

 

196

​

 

1,889,613

​

0.04

%  

​

 

410

​

 

1,670,919

​

0.10

%  

Consumer

​

 

(2,497)

​

 

1,267,823

​

(0.79)

%  

​

 

(1,464)

​

 

1,173,468

​

(0.50)

%  

Multifamily

​

​

—

​

​

841,501

​

—

%  

​

​

—

​

​

570,479

​

—

%  

Municipal

​

​

—

​

​

732,666

​

—

%  

​

​

—

​

​

671,057

​

—

%  

Owner Occupied Commercial Real Estate

​

​

58

​

​

5,559,762

​

—

%  

​

​

16

​

​

5,391,531

​

—

%  

Non-Owner Occupied Commercial Real Estate

​

​

334

​

​

7,566,746

​

0.02

%  

​

​

(56)

​

​

6,980,378

​

—

%  

Commercial and Industrial

​

 

(2,223)

​

 

4,735,002

​

(0.19)

%  

​

 

(1,849)

​

 

4,203,945

​

(0.18)

%  

Total

​

$

(3,310)

​

$

31,149,866

​

(0.04)

%  

    

$

(2,339)

​

$

27,132,858

​

(0.03)

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

June 30, 2023

​

June 30, 2022

(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

​

$

557

​

$

6,050,441

​

0.02

%  

​

$

636

​

$

4,349,847

​

0.03

%  

Residential Mortgage Junior

​

 

8

​

 

11,801

​

0.14

%  

​

 

146

​

 

14,131

​

2.08

%  

Revolving Mortgage

​

 

738

​

 

1,397,477

​

0.11

%  

​

 

231

​

 

1,254,439

​

0.04

%  

Residential Construction

​

 

94

​

 

871,178

​

0.02

%  

​

 

5

​

 

686,144

​

—

%  

Other Construction and Development

​

 

454

​

 

1,912,617

​

0.05

%  

​

 

640

​

 

1,568,921

​

0.08

%  

Consumer

​

 

(4,642)

​

 

1,264,717

​

(0.74)

%  

​

 

(3,593)

​

 

1,078,208

​

(0.67)

%  

Multifamily

​

​

—

​

​

796,291

​

—

%  

​

​

—

​

​

526,836

​

—

%  

Municipal

​

​

—

​

​

724,862

​

—

%  

​

​

—

​

​

660,457

​

—

%  

Owner Occupied Commercial Real Estate

​

​

351

​

​

5,518,458

​

0.01

%  

​

​

(41)

​

​

5,230,546

​

—

%  

Non-Owner Occupied Commercial Real Estate

​

​

389

​

​

7,497,055

​

0.01

%  

​

​

13

​

​

6,724,210

​

—

%  

Commercial and Industrial

​

 

(2,297)

​

 

4,729,321

​

(0.10)

%  

​

 

(2,699)

​

 

3,900,541

​

(0.14)

%  

Total

​

$

(4,348)

​

$

30,774,218

​

(0.03)

%  

    

$

(4,662)

​

$

25,994,280

​

(0.04)

%  

​

​

67

Table of Contents 

The following tables present summary of ACL for the three and six months ended June 30, 2023 and 2022:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30,

 

​

​

2023

​

2022

 

​

    

Non-PCD

​

PCD

    

​

​

Non-PCD

​

PCD

    

​

 

(Dollars in thousands)

    

Loans

​

Loans

    

Total

​

Loans

​

Loans

    

Total

 

Balance at beginning of period

​

$

327,915

​

$

42,730

​

$

370,645

​

$

227,829

​

$

72,567

​

$

300,396

​

ACL - PCD loans for ACBI merger

​

​

—

​

​

—

​

​

—

​

​

—

​

​

4,540

​

​

4,540

​

Loans charged-off

​

 

(7,516)

​

 

(62)

​

 

(7,578)

​

 

(3,852)

​

 

(2,311)

​

 

(6,163)

​

Recoveries of loans previously charged off

​

 

2,850

​

 

1,418

​

 

4,268

​

 

2,354

​

 

1,470

​

 

3,824

​

Net (charge-offs) recoveries

​

 

(4,666)

​

 

1,356

​

 

(3,310)

​

 

(1,498)

​

 

(841)

​

 

(2,339)

​

(Recovery) provision for credit losses

​

 

61,047

​

 

(990)

​

 

60,057

​

 

31,097

​

 

(13,986)

​

 

17,111

​

Balance at end of period

​

$

384,296

​

$

43,096

​

$

427,392

​

$

257,428

​

$

62,280

​

$

319,708

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total loans, net of unearned income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At period end

​

$

31,536,785

​

​

​

​

​

​

​

$

27,935,266

​

​

​

​

​

​

​

Average

​

 

31,149,866

​

​

​

​

​

​

​

 

27,132,858

​

​

​

​

​

​

​

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

​

 

0.04

​

%  

​

​

​

​

​

 

0.03

​

%  

​

​

​

​

​

Allowance for credit losses as a percentage of period end loans

​

 

1.36

​

%  

​

​

​

​

​

 

1.14

​

%  

​

​

​

​

​

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

​

 

251.86

​

%  

​

​

​

​

​

 

355.11

​

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

 

​

​

2023

​

2022

 

​

    

Non-PCD

​

PCD

    

​

​

​

Non-PCD

​

PCD

    

​

​

 

(Dollars in thousands)

    

Loans

​

Loans

    

Total

​

Loans

​

Loans

    

Total

 

Allowance for credit losses at January 1

​

$

309,606

​

$

46,838

​

$

356,444

​

$

225,227

​

$

76,580

​

$

301,807

​

ACL - PCD loans for ACBI merger

​

​

—

​

​

—

​

​

—

​

​

—

​

​

13,758

​

​

13,758

​

Loans charged-off

​

 

(12,032)

​

 

(173)

​

 

(12,205)

​

 

(7,976)

​

 

(3,677)

​

 

(11,653)

​

Recoveries of loans previously charged off

​

 

5,177

​

 

2,680

​

 

7,857

​

 

4,643

​

 

2,348

​

 

6,991

​

Net (charge-offs) recoveries

​

 

(6,855)

​

 

2,507

​

 

(4,348)

​

 

(3,333)

​

 

(1,329)

​

 

(4,662)

​

Initial provision for credit losses - ACBI

​

​

—

​

​

—

​

​

—

​

​

13,697

​

​

—

​

​

13,697

​

(Recovery) provision for credit losses

​

 

81,545

​

 

(6,249)

​

 

75,296

​

 

21,837

​

 

(26,729)

​

 

(4,892)

​

Balance at end of period

​

$

384,296

​

$

43,096

​

$

427,392

​

$

257,428

​

$

62,280

​

$

319,708

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total loans, net of unearned income:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

At period end

​

$

31,536,785

​

​

​

​

​

​

​

$

27,935,266

​

​

​

​

​

​

​

Average

​

 

30,774,218

​

​

​

​

​

​

​

 

25,994,280

​

​

​

​

​

​

​

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

​

 

0.03

​

%  

​

​

​

​

​

 

0.04

​

%  

​

​

​

​

​

Allowance for credit losses as a percentage of period end loans

​

 

1.36

​

%  

​

​

​

​

​

 

1.14

​

%  

​

​

​

​

​

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

​

 

251.86

​

%  

​

​

​

​

​

 

355.11

​

%  

​

​

​

​

​

​

​

68

Table of Contents 

Nonperforming Assets (“NPAs”)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

June 30,

 

March 31,

    

December 31,

    

September 30,

    

June 30,

    

(Dollars in thousands)

​

2023

 

2023

​

2022

​

2022

​

2022

​

Non-acquired:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonaccrual loans

​

$

104,491

​

$

67,894

​

$

40,517

​

$

30,076

​

$

20,383

​

Accruing loans past due 90 days or more

​

 

3,620

​

 

2,667

​

 

2,358

​

 

2,358

​

 

1,371

​

Restructured loans - nonaccrual

​

 

281

​

 

282

​

 

4,154

​

 

4,298

​

 

333

​

Total non-acquired nonperforming loans

​

 

108,392

​

 

70,843

​

 

47,029

​

 

36,732

​

 

22,087

​

Other real estate owned (“OREO”) (1) (6)

​

 

118

​

 

58

​

 

141

​

 

58

​

 

—

​

Other nonperforming assets (2)

​

 

109

​

 

129

​

 

104

​

 

56

​

 

93

​

Total non-acquired nonperforming assets

​

 

108,619

​

 

71,030

​

 

47,274

​

 

36,846

​

 

22,180

​

Acquired:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonaccrual loans (3)

​

 

59,821

​

 

51,650

​

 

55,808

​

 

58,064

​

 

60,897

​

Accruing loans past due 90 days or more

​

 

571

​

 

983

​

 

1,992

​

 

1,430

​

 

4,418

​

Restructured loans - nonaccrual

​

​

913

​

​

1,144

​

​

3,746

​

​

3,802

​

​

2,629

​

Total acquired nonperforming loans

​

 

61,305

​

 

53,777

​

 

61,546

​

 

63,296

​

 

67,944

​

Acquired OREO (1) (7)

​

 

962

​

 

3,415

​

 

882

​

 

2,102

​

 

1,431

​

Other acquired nonperforming assets (2)

​

 

19

​

 

31

​

 

40

​

 

132

​

 

146

​

Total acquired nonperforming assets

​

 

62,286

​

 

57,223

​

 

62,468

​

 

65,530

​

 

69,521

​

Total nonperforming assets

​

$

170,905

​

$

128,253

​

$

109,742

​

$

102,376

​

$

91,701

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Excluding Acquired Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

 

0.43

% 

 

0.30

% 

 

0.21

% 

 

0.18

% 

 

0.11

% 

Total nonperforming assets as a percentage of total assets (5)

​

 

0.24

% 

 

0.16

% 

 

0.11

% 

 

0.08

% 

 

0.05

% 

Nonperforming loans as a percentage of period end loans (4)

​

 

0.43

% 

 

0.30

% 

 

0.21

% 

 

0.18

% 

 

0.11

% 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Including Acquired Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

 

0.54

% 

 

0.42

% 

 

0.36

% 

 

0.35

% 

 

0.33

% 

Total nonperforming assets as a percentage of total assets (5)

​

 

0.38

% 

 

0.29

% 

 

0.25

% 

 

0.23

% 

 

0.20

% 

Nonperforming loans as a percentage of period end loans (4)

​

 

0.54

% 

 

0.41

% 

 

0.36

% 

 

0.35

% 

 

0.32

% 

(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 premises held for sale of $10.0 million, $13.3 million, $14.3 million, $21.2 million, and $1.4 million as of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, and June 30, 2022, respectively, that is now separately disclosed on the balance sheet.
(7)Excludes acquired bank premises held for sale of $3.4 million, $3.4 million, $3.4 million, $3.9 million, and $4.2 million as of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, respectively, that is now separately disclosed on the balance sheet.

Total nonperforming assets were $170.9 million, or 0.54% of total loans and repossessed assets, at June 30, 2023, an increase of $61.2 million, or 55.7%, from December 31, 2022. Total nonperforming loans were $169.7 million, or 0.54%, of total loans, at June 30, 2023, an increase of $61.1 million, or 56.3%, from December 31, 2022. Non-acquired nonperforming loans increased by $61.4 million from December 31, 2022. The increase in non-acquired nonperforming loans was driven primarily by an increase in commercial nonaccrual loans of $59.6 million, an increase in consumer nonaccrual loans of $4.4 million, an increase in accruing loans past due 90 days or more of $1.3 million, offset by a decrease in restructured nonaccrual loans of $3.9 million. The increase in commercial nonaccrual loans at June 30, 2023 was primarily due to three commercial and industrial relationships totaling $38.8 million, one commercial owner occupied relationship totaling $11.2 million, one commercial owner occupied loan totaling $3.3 million, and one commercial non owner occupied loan totaling $3.3 million. Acquired nonperforming loans decreased $0.2 million from December 31, 2022. The decrease in the acquired nonperforming loan balances was due to a decrease in consumer nonaccrual loans of $3.7 million, a decrease in restructured nonaccrual loans of $2.8 million, a decline in accruing loans past due 90 days or more of $1.4 million, offset by an increase in commercial nonaccrual loans of $7.7 million. The decline in restructured nonaccrual loans over both the nonacquired and acquired loan portfolios was due to the adoption of ASU 2022-02 effective January 1, 2023, which extinguishes the former troubled debt restructuring (TDR) guidance and issues new requirements for determining modified loans to borrowers experiencing financial difficulty.

​

69

Table of Contents 

At June 30, 2023, OREO totaled $1.1 million, which included $118,000 in non-acquired OREO and $1.0 million in acquired OREO. Total OREO increased $57,000 from December 31, 2022. At June 30, 2023, non-acquired OREO consisted of two properties with an average value of $59,000. This compared to three properties with an average value of $47,000 at December 31, 2022. During the second quarter of 2023, we added two new properties into non-acquired OREO with an aggregate value of $118,000, while selling two properties during the quarter with an aggregate value of $58,000. At June 30, 2023, acquired OREO consisted of three properties with an average value of $321,000, compared to three properties with an average value of $294,000 at December 31, 2022. In the second quarter of 2023, one new property was transferred to acquired OREO with an value of $242,000, while selling two properties with an aggregate value of $2.7 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, Interest on Layers’ Trust Accounts (“IOLTA”), and Market Rate checking accounts.

​

Total interest-bearing deposits increased $2.1 billion or 18.0% annualized to $25.3 billion at June 30, 2023 from $23.2 billion at December 31, 2022. This increase was mainly driven by growth in time deposits of $2.0 billion including an increase in brokered time deposits of $1.0 billion. During the six months ended June 30, 2023, core deposits decreased $1.6 billion. These funds exclude certificates of deposits and other time deposits and are normally lower cost funds. Core deposits declined as customers moved their funds seeking higher yields as interest rates have risen along with some business customers moving funds for deposit insurance purposes. Federal funds purchased related to the correspondent bank division and repurchase agreements were $581.4 million at June 30, 2023, up $25.0 million from December 31, 2022. Other borrowings, consisting of FHLB borrowings, increased to $400 million during the six months period ended June 30, 2023. The Company had no FHLB borrowings outstanding at December 31, 2022. Corporate and subordinated debentures declined by $185,000 to $392.1 million. Some key highlights are outlined below:

●The increase in interest-bearing deposits from December 31, 2022 was driven by an increase in time deposits of $2.0 billion, including an increase in brokered time deposits of $1.0 billion and an increase in money market accounts of $1.4 billion. These increases were partially offset by declines in interest bearing checking deposits of $769.9 million and savings deposits of $533.0 million. As customers moved funds from interest bearing checking and savings accounts, seeking higher yields in the rising rate environment and deposit insurance coverage, the Company increased its balance in brokered time deposits and in-market time deposits along with higher yielding money market accounts during the first half of 2023. The Company raised interest rates on most interest-bearing deposit products (in particular money market accounts and time deposit specials) during 2023 due to competitive pressures to retain deposits. Average interest-bearing deposits increased $211.7 million to $24.6 billion during the quarter ended June 30, 2023 compared to the same period in 2022. For more information on the composition of our total deposits, see Note 10 – Deposits in this Quarterly Report on Form 10-Q.
●Other borrowings, consisting of FHLB borrowings, increased to $400 million during the six months period ended June 30, 2023. The Company borrowed funds from the FHLB to provide excess liquidity during 2023. The Company paid down $500 million, on a net basis, in FHLB borrowing during the second quarter of 2023 from $900 million at March 31, 2023 as the financial markets stabilized and the stress on liquidity declined.

Noninterest-Bearing Deposits

​

Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. At June 30, 2023, the period end balance of noninterest-bearing deposits was $11.5 billion compared to $13.2 billion at December 31, 2022. Average noninterest-bearing deposits were $11.9 billion for the second quarter of 2023 compared to $13.9 billion for the second quarter of 2022. The decrease in period end and average noninterest bearing deposits was mainly due to customers seeking both higher yields in the rising rate environment and deposit insurance coverage amid the financial turmoil during 2023.

​

70

Table of Contents 

Uninsured Deposits

At June 30, 2023 and December 31, 2022, the Company had approximately $12.5 billion and $14.1 billion, respectively, in estimated uninsured deposits. The amounts above are estimates and are based on the same methodologies and assumptions used for the Bank’s regulatory reporting requirements issued by the FDIC for the FFIEC 041, also referred to as the Call Report.

​

The following table provides a maturity distribution of uninsured time deposits for the next twelve months as of June 30, 2023 and December 31, 2022:

​

​

​

​

​

​

​

​

​

​

​

​

June 30,

​

December 31,

​

​

​

(Dollars in thousands)

    

2023

    

2022

    

% Change

 

Within three months

​

$

105,971

​

$

57,302

 

84.9

%

After three through six months

​

 

129,190

​

 

71,261

 

81.3

%

After six through twelve months

​

 

176,785

​

 

91,785

 

92.6

%

After twelve months

​

 

54,835

​

 

42,361

 

29.4

%

​

​

$

466,781

​

$

262,709

 

77.7

%

Capital Resources

​

Our ongoing capital requirements have been met primarily through retained earnings, less the payment of cash dividends. As of June 30, 2023, shareholders’ equity was $5.3 billion, an increase of $215.1 million, or 4.2%, from December 31, 2022.

The following table shows the changes in shareholders’ equity during 2023:

​

​

​

​

Total shareholders' equity at December 31, 2022

    

$

5,074,927

Net income

​

​

263,373

Dividends paid on common shares ($1.00 per share)

​

​

(75,874)

Dividends paid on restricted stock units

​

​

(1,033)

Net increase in market value of securities available for sale, net of deferred taxes

​

​

14,690

Stock options exercised

​

​

1,173

Employee stock purchases

​

​

647

Equity based compensation

​

​

19,129

Common stock repurchased - equity plans

​

​

(7,022)

Total shareholders' equity at June 30, 2023

​

$

5,290,010

In January 2021, the Board of Directors of the Company approved the 2021 Stock Repurchase Plan, which authorized the Company to repurchase 3,500,000 common shares. During the first quarter of 2022, we repurchased 1,012,038 shares, at an average price of $85.43 per share (excluding cost of commissions) for a total of $86.5 million under the 2021 Stock Repurchase Plan.

In April 2022, the Company’s Board of Directors approved a new stock repurchase program (“2022 Stock Repurchase Program”) authorizing the Company to repurchase up to 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 did not repurchase any shares through the 2022 Stock Repurchase Program during 2023 or 2022. 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, and the availability of alternative investment opportunities.

We are 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.

​

Specifically, we are required to maintain the following minimum capital ratios:

●a CET1, risk-based capital ratio of 4.5%;
●a Tier 1 risk-based capital ratio of 6%;
●a total risk-based capital ratio of 8%; and
●a leverage ratio of 4%.

71

Table of Contents 

Under the current capital rules, Tier 1 capital includes two components: CET1 capital and additional Tier 1 capital. The highest form of capital, CET1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, otherwise referred to as AOCI, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock and Tier 1 minority interests. Tier 2 capital generally includes the allowance for loan losses up to 1.25% of risk-weighted assets, qualifying preferred stock, subordinated debt, trust preferred securities and qualifying tier 2 minority interests, less any deductions in Tier 2 instruments of an unconsolidated financial institution. AOCI is presumptively included in CET1 capital and often would operate to reduce this category of capital. When the current capital rules were first implemented, the Bank exercised its one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of much of this treatment of AOCI, allowing us to retain our pre-existing treatment for AOCI.

In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a banking organization must maintain a “capital conservation buffer” on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital), resulting in the following effective minimum capital plus capital conservation buffer ratios: (i) a CET1 capital ratio of 7.0%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%.

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 each of the three risk-based regulatory capital ratios (CET1, Tier 1 capital and total capital) and for the leverage ratio.

​

The federal banking agencies revised their regulatory capital rules to (i) address the implementation of CECL; (ii) provide an optional three-year phase-in period for the adoption date adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations that are subject to stress testing. CECL became effective for us on January 1, 2020 and the Company applied the provisions of the standard using the modified retrospective method as a cumulative-effect adjustment to retained earnings. Related to the implementation of ASU 2016-13, we 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 on regulatory capital from ASU 2016-13 at adoption, the Company initially elected the option for recognizing the adoption date effects on the Company’s regulatory capital calculations over a three-year phase-in.

​

In response to the COVID-19 pandemic in 2020, the federal banking agencies issued a final rule for additional transitional relief to regulatory capital related to the impact of the adoption of CECL. The Company chose the five-year transition method and is deferring the recognition of the effects from the adoption date and the CECL difference for the first two years of application. The modified CECL transitional amount was fixed as of December 31, 2021, and that amount began the three-year phase out in the first quarter of 2022 with 50% being phased out in 2023.

​

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

​

​

​

​

​

​

​

​

​

​

​

​

Well-Capitalized

​

​

June 30,

​

​

December 31,

​

​

​

Minimums

​

​

2023

​

​

2022

​

SouthState Corporation:

​

​

​

​

​

​

​

​

​

Common equity Tier 1 risk-based capital

​

N/A

​

​

11.25

%  

​

10.96

%  

Tier 1 risk-based capital

   

6.00

%  

  

11.25

%  

  

10.96

%  

Total risk-based capital

​

10.00

%  

​

13.48

%  

​

12.97

%  

Tier 1 leverage

​

N/A

​

​

9.17

%  

​

8.72

%  

​

​

​

​

​

​

​

​

​

​

SouthState Bank:

​

​

​

​

​

​

​

​

​

Common equity Tier 1 risk-based capital

​

6.50

%  

​

12.04

%  

​

11.80

%  

Tier 1 risk-based capital

​

8.00

%  

​

12.04

%  

​

11.80

%  

Total risk-based capital

​

10.00

%  

​

13.18

%  

​

12.69

%  

Tier 1 leverage

​

5.00

%  

​

9.81

%  

​

9.39

%  

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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 compared to December 31, 2022. These ratios increased mainly due to net income during 2023 of $263.4 million. Tier 1 capital increased 5.3% and 4.7% at both the Company and Bank, respectively, with the increase in equity from net income. Total risk-based capital increased 6.6% and 6.5% at both the Company and Bank, respectively, with the increase in equity from net income along with the increase in the allowance for credit losses and unfunded commitments. Both regulatory risk-based assets and quarterly average assets remained reasonably flat compared to the fourth quarter with average assets for the Company and Bank increasing 0.2% and risk-based assets increasing 3.1%. Our capital ratios are currently well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification. Should the Company need to sell its available for sale and held to maturity securities for liquidity purposes and recognize the unrealized losses as of June 30, 2023 through earnings, all else equal, our capital ratios would remain well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification.

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 Liability Management Committee (“ALCO”) is charged with the responsibility of monitoring policies 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.

​

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 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 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.

Our non-acquired loan portfolio increased by approximately $2.2 billion, or approximately 19.3% annualized, compared to the balance at December 31, 2022. The increase from December 31, 2022 was mainly related to organic growth and renewals on acquired loans. The acquired loan portfolio decreased by $826.9 million from the balance at December 31, 2022 through principal paydowns, charge-offs, foreclosures and renewals of acquired loans.

Our investment securities portfolio (excluding trading securities) decreased $458.6 million compared to the balance at December 31, 2022. The decrease in investment securities from December 31, 2022 was a result of maturities, calls, sales and paydowns of investment securities totaling $623.3 million as well as a reduction from the net amortization of premiums of $10.2 million. This decrease was partially offset by purchases of available for sale investment securities totaling $3.2 million and FHLB stock of $163.6 million, as well as an increase in the market value of the available for sale investment securities portfolio of $8.1 million. There were no purchases of held to maturity securities during the quarter. Total cash and cash equivalents were $1.5 billion at June 30, 2023 as compared to $1.3 billion at December 31, 2022. This increase was due to the Company increasing its brokered time deposits by $1.0 billion and borrowing $400 million in FHLB borrowings during 2023 to increase liquidity as customers moved funds from noninterest bearing checking, interest bearing checking and savings accounts, seeking higher yields in the rising rate environment and deposit insurance coverage.

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At June 30, 2023 and December 31, 2022, we had $1.2 billion and $150.0 million of traditional, out–of-market brokered deposits, respectively. At June 30, 2023 and December 31, 2022, we had $1.6 billion and $637.0 million, respectively, of reciprocal deposits. Total deposits were $36.7 billion at June 30, 2023, an increase of $391.3 million from $36.4 billion at December 31, 2022. This increase was driven by an increase in time deposits of $2.0 billion including an increase in brokered time deposits of $1.0 billion and an increase in money market accounts of $1.4 billion. These increases in deposits were partially offset by declines in noninterest bearing deposits of $1.7 billion, in interest bearing checking deposits of $769.9 million and savings deposits of $533.0 million. As customers moved funds from noninterest bearing checking, interest bearing checking and savings accounts, seeking higher yields in the rising rate environment and deposit insurance coverage, the Company’s balance in higher costing in-market time deposits and brokered time deposits and in money market deposit accounts. The Company raised interest rates on most interest-bearing deposit products (in particular time deposit specials and money market accounts) during the 2023 due to competitive pressures to retain deposits. Total corporate and subordinated debentures and other borrowings at June 30, 2023 were $792.1 million and consisted of trust preferred securities and subordinated debentures of $392.1 million and FHLB borrowings of $400.0 million. The Company borrowed $4.1 billion during the 2023 and repaid $3.7 billion in FHLB borrowings to increase liquidity. The Company reduced its period end FHLB borrowing by $500 million during the second quarter of 2023 from $900 million at March 31, 2023 as the financial markets stabilized and the stress on liquidity declined. Total short-term borrowings at June 30, 2023 were $581.4 million, consisting of $246.9 million in federal funds purchased and $334.5 million in securities sold under agreements to repurchase. 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 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.

​

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 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. The Bank may also access funds through the Federal Reserve Bank Term Funding Program.  At June 30, 2023, our Bank had a total FHLB credit facility of $7.8 billion, with $400.0 million in FHLB advances and $2.1 million FHLB letters of credit outstanding at quarter-end, leaving $7.4 billion in availability on the FHLB credit facility.  At June 30, 2023, our Bank had $2.4 billion of credit available at the Federal Reserve Bank’s discount window and federal funds credit lines of $300.0 million 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 $5.5 billion at June 30, 2023. The Bank had $1.2 billion of outstanding brokered deposits at the end of the quarter leaving $4.3 billion in available capacity. All of these resources would provide an additional $14.1 billion in funding if we needed additional liquidity. The Bank also has $4.1 billion in unpledged securities at June 30, 2023 that can be pledge to attain additional funds if necessary. We can also consider actions such as deposit promotions to increase core deposits. The Company has a $100.0 million unsecured line of credit with U.S. Bank National Association with no balance outstanding at June 30, 2023. We believe that our liquidity position continues to be adequate and readily available.

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Our contingency funding plan describes several potential stages based on stressed liquidity levels. Liquidity key risk indicators are reported to the Board of Directors on a quarterly basis. We maintain various wholesale sources of funding. If our deposit retention efforts were to be unsuccessful, we would 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. This could increase our cost of funds, impacting our net interest margin and net interest 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. 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.

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.

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 take into account 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 28—Derivative Financial Instruments in the consolidated financial statements.

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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 June 30, 2023, the Company did not have such agreements. For additional information on these derivatives refer to Note 28—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.

During the second quarter of 2022, management revised its deposit beta assumptions higher due to the rapid increase in interest rates and expected further increases. From the beginning of the upward rate cycle, our deposit costs have increased from five basis points to one hundred twenty-five basis points. During this period, the federal funds rate has increased 500 basis points. Accordingly, our cycle to date beta has been approximately 22.0%. Management recognizes the difficulty using historical data to forecast deposit betas in the current environment. For internal purposes, we are assuming a cumulative upward rate cycle beta of 29.0% with a terminal federal funds rate of 5.50% and a corresponding cumulative rate increase of 525 basis points.

​

The following interest rate risk metrics are derived from analysis using the Moody’s Consensus Scenario published in July 2023 as the Base Case. As of June 30, 2023, the earnings simulations indicated that the year 1 impact of an instantaneous 100 basis point increase / decrease in rates would result in an estimated 1.6% increase (up 100) and 2.2% decrease (down 100) in net interest income.

​

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 June 30, 2023, the percentage change in EVE due to a 100-basis point increase or decrease in interest rates was 1.9% decrease and 0.03% decrease, respectively. The percentage changes in EVE due to a 200-basis point increase or decrease in interest rates were 4.7% decrease and 1.1% 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 June 30, 2023.

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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, except for PPP loans that are not assumed to be replaced. Base Case assumes new and repricing volumes reference forward rates derived from the Moody’s Consensus 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

​

1.6%

​

Up 200 basis points

​

2.8%

​

Down 100 basis points

​

(2.2%)

​

Down 200 basis points

​

(5.1%)

​

LIBOR Transition

​

The publication of all tenors of U.S. dollar LIBOR on a representative basis ceased as of the June 30, 2023. As previously noted, we established a cross-functional LIBOR transition working group that (1) assessed the Company's exposure to LIBOR indexed instruments and the data, systems and processes that were impacted; (2) established a detailed implementation plan; and (3) developed a formal governance structure for the transition. The Company developed and implemented various proactive steps to facilitate the transition on behalf of customers up through June 30, 2023, which included:

​

●The adoption and implementation of fallback provisions that provided for the determination of replacement rates for LIBOR-linked financial products.
●The adoption of new products linked to alternative reference rates, such as adjustable-rate mortgages, consistent with guidance provided by the U.S. regulators, the Alternative Reference Rates Committee, and GSEs.
●The selection of SOFR indices as the replacement indices, and successful completion of systems testing using the SOFR replacement indices.
●Successful transition of Libor-exposed instruments to SOFR and other indices as appropriate for contracts that provided for a specific replacement index other than SOFR.

​

We utilized the provisions of the Adjustable Interest Rate (LIBOR) Act passed by Congress and signed into law by the President in March 2022 for certain contracts referencing LIBOR. The Act provides for the use of SOFR as the replacement index with a spread adjustment when the remaining LIBOR indices are discontinued. The Act applies when there is no contract provision addressing the loss of LIBOR and may be used otherwise as well, provided the contract does not provide for a specific replacement index.

​

In addition, the Company developed and implemented processes to educate client-facing associates and coordinate communications with customers regarding the transition.

​

As of June 30, 2023, the Company’s LIBOR-indexed loans, derivatives, and trust preferred securities have migrated to SOFR and other indices and will reprice by reference to such replacement indices at the next scheduled repricing date. Final validations and other verification tasks will be completed during the third quarter of 2023.

Deposit and Loan Concentrations

​

We have no material concentration of deposits from any single customer or group of customers. We have no significant portion of our loans 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 June 30, 2023, 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. 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 Tier 1 capital plus regulatory adjusted allowance for credit losses of the Company, or $1.1 billion at June 30, 2023. Based on this criteria, we had seven such credit concentrations at June 30, 2023, including loans to lessors of nonresidential buildings (except mini-warehouses) of $6.9 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 lessors of residential buildings (investment properties and multi-family) of $2.1 billion, loans secured by 1st mortgage 1-4 family owner occupied residential property (including condos and home equity lines) of $8.0 billion, loans secured by jumbo (original loans greater than $548,250) of $2.3 billion, and loans secured by business assets including accounts receivable, inventory and equipment of $2.1 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.

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, 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 June 30, 2023 and December 31, 2022, the Bank’s CDL concentration ratio was 59.9% and 64.8%, respectively, and its CRE concentration ratio was 242.3% and 249.0%, respectively. As of June 30, 2023, 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.

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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

​

​

Six Months Ended

 

​

​

​

June 30,

​

​

June 30,

 

​

(Dollars in thousands)

    

2023

    

2022

​

​

2023

    

2022

 

​

Return on average equity (GAAP)

 

​

9.34

%  

​

9.36

%

​

​

10.14

%  

​

8.81

%

​

Effect to adjust for intangible assets

 

​

6.47

%  

​

7.23

%

​

​

7.13

%  

​

6.47

%

​

Return on average tangible equity (non-GAAP)

 

​

15.81

%  

​

16.59

%

​

​

17.27

%  

​

15.28

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Average shareholders’ equity (GAAP)

​

$

5,301,697

​

$

5,109,325

​

​

$

5,239,717

​

$

5,023,721

​

​

Average intangible assets

​

 

(2,029,747)

​

 

(2,060,537)

​

​

 

(2,033,185)

​

 

(1,946,527)

​

​

Adjusted average shareholders’ equity (non-GAAP)

​

$

3,271,950

​

$

3,048,788

​

​

$

3,206,532

​

$

3,077,194

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income (GAAP)

​

$

123,447

​

$

119,175

​

​

$

263,373

​

$

219,504

​

​

Amortization of intangibles

​

 

7,028

​

 

8,847

​

​

 

14,327

​

 

17,341

​

​

Tax effect

​

 

(1,535)

​

 

(1,916)

​

​

 

(3,129)

​

 

(3,723)

​

​

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

​

$

128,940

​

$

126,106

​

​

$

274,571

​

$

233,122

​

​

​

Cautionary Note Regarding Any Forward-Looking Statements

​

Statements included in this report, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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,” “intends,” “estimates,” “strategy,” “plan,” “could,” “potential,” “possible” and variations of such words and similar expressions are intended to identify such forward-looking statements. We caution readers that forward-looking statements are subject to certain risks, uncertainties and 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 assumptions, include, among others, the following:

●Failure to realize cost savings and any revenue synergies from, and to limit liabilities associated with, mergers and acquisitions within the expected time frame, including our acquisition of Atlantic Capital;

Deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;

●Risk related to 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;
●Economic downturn risk, potentially resulting in deterioration in the credit markets, greater than expected noninterest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from inflation, interest rate increases, government or regulatory responses to the current global events, federal spending or spending cuts and/or one or more federal budget-related impasses or actions;
●Interest risk involving the effect of a change in interest rates on our earnings, the market value of our loan and securities portfolios, and the market value of our equity;

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●Risks associated with an anticipated increase in our investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities we desire to acquire are not available on terms acceptable to us;
●Risk associated with unexpected outflows of uninsured deposits may require us to sell investment securities at a loss;
●Risk that 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 traded instruments in “mark-to-market” portfolios;
●Liquidity risk affecting our ability to meet our obligations when they come due;
●Potential deterioration in real estate values;
●Credit risks associated with an obligor’s failure to meet the terms of any contract with the Bank or otherwise fail to perform as agreed under the terms of any loan-related document;
●The risks of fluctuations in the market price of our common stock that may or may not reflect our economic condition or performance;
●Personnel risk, including our inability to attract and retain consumer and commercial bankers to execute on our client-centered, relationship driven banking model;
●Potential deposit attrition, higher than expected costs, customer loss and business disruption associated with merger and acquisition integration, including, without limitation, potential difficulties in maintaining relationships with key personnel;
●Strategic risk resulting from adverse business decisions or improper implementation of business decisions;
●Risks associated with our reliance on models and future updates we make to our models, including the assumptions used by these models;
●Social and governance (“ESG”) risks that could adversely affect our reputation, the trading price of our common stock and/or our business, operations, and earnings;
●Cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;
●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;
●The payment of dividends on our common stock is subject to regulatory supervision as well as the discretion of our Board of Directors, our performance and other factors;
●Compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards;
●Regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and the possibility of changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to loan loss recognition (2016-13 - CECL);
●Risks associated with actual or potential information requesting, investigations or legal proceedings by customers, regulatory agencies or others;
●Reputation risk that adversely affects our earnings or capital arising from negative public opinion including the effects of social media on market perceptions of us and banks generally;
●Noninterest income risk resulting from the effect of regulations that prohibit or restrict the charging of fees on paying overdrafts on ATM and one-time debit card transactions;
●Greater than expected noninterest expenses;
●Operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisition, whether involving stock or cash consideration;
●Ownership dilution risk associated with potential mergers and acquisitions in which our stock may be issued as consideration for an acquired company;
●The impact of competition with other financial service businesses and from nontraditional financial technology companies, including pricing pressures and the resulting impact, including as a result of compression to net interest margin;

​

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●Current or anticipated impact of military conflict, including escalating military tension between Russia and Ukraine, civil unrest, terrorism or other geopolitical events, and related risks that result in loss of consumer confidence and economic disruptions; and
●Transaction risk arising from problems with service or product delivery.

​

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 we file with the SEC. We caution that the foregoing list of risk factors is not exclusive and not to place undue reliance on forward-looking statements.

​

​

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 June 30, 2023 from those disclosures presented in our Annual Report on Form 10-K for the year ended 2022.

​

​

​

Item 4. CONTROLS AND PROCEDURES

​

Evaluation of Disclosure Controls and Procedures

​

SouthState’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of SouthState’s disclosure controls and procedures as of June 30, 2023, in accordance with Rule 13a-15 of the Securities Exchange Act of 1934. We applied our judgment in the process of reviewing these controls and procedures, which, by 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 SouthState’s disclosure controls and procedures as of June 30, 2023, were effective to provide reasonable assurance regarding our 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 three months ended June 30, 2023, that has materially affected, or is likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

​

Item 1. LEGAL PROCEEDINGS

​

As of June 30, 2023 and the date of this Quarterly Report on Form 10-Q, we believe that we are not party to, nor is any of our property the subject of, any pending material legal proceeding other than those that may occur in the ordinary course of our business.

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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, 2022, 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 2. 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, 2022.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

​

(a)Not applicable
(b)Not applicable
(c)Issuer Purchases of Registered Equity Securities:

In April 2022, the Company’s Board of Directors approved a new stock repurchase program (“2022 Stock Repurchase Program”) authorizing the Company to repurchase up to 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 did not repurchase any shares through the 2022 Stock Repurchase Program during 2022 or 2023. Of the 4,120,021 shares authorized under the 2022 Stock Repurchase Program, we may repurchase up to 4,120,021 shares of common stock. 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, and the availability of alternative investment opportunities.

​

The following table reflects share repurchase activity during the second quarter of 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

​

​

    

​

    

(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

 

​

​

​

​

​

​

​

​

​

​

​

​

April 1 ‑ April 30

 

19,265

*

​

$

68.83

 

—

 

4,120,021

​

May 1 - May 31

 

32,517

*

​

 

64.91

 

—

 

4,120,021

​

June 1 - June 30

 

2,422

*

​

 

70.28

 

—

 

4,120,021

​

Total

 

54,204

​

​

​

​

 

—

 

4,120,021

​

*

For the months ended April 30, 2023, May 31, 2023 and June 30, 2023, totals include 19,265, 32,517, and 2,422 shares, respectively, that were repurchased under arrangements, authorized by our stock-based compensation plans and Board of Directors, whereby officers or directors may sell 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 2022 Stock Repurchase Plan to repurchase shares.

Item 3. DEFAULTS UPON SENIOR SECURITIES

​

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

​

Not applicable.

Item 5. OTHER INFORMATION

​

None.

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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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Incorporated by Reference

Exhibit No.

​

Description

​

Form

​

Commission File No.

​

Exhibit

​

Filing Date

​

Filed Herewith

​

​

​

​

​

​

​

​

​

​

​

​

​

3.1

​

Amended and Restated Bylaws of SouthState Corporation dated April 26, 2023

​

​

​

​

​

​

​

​

​

X

​

​

​

​

​

​

​

​

​

​

​

​

​

10.1

​

Separation Agreement between SouthState Corporation and its Subsidiaries and John C. Pollok

​

​

​

​

​

​

​

​

​

X

​

​

​

​

​

​

​

​

​

​

​

​

​

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 June 30, 2023, 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

*     Denotes a management compensatory plan or arrangement.

​

​

​

​

​

​

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SIGNATURES

​

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.

​

​

SOUTHSTATE CORPORATION

​

(Registrant)

​

​

​

​

Date: August 4, 2023

/s/ John C. Corbett

​

John C. Corbett

​

President and Chief Executive Officer

​

(Principal Executive Officer)

​

​

Date: August 4, 2023

/s/ William E. Matthews, V

​

William E. Matthews, V

​

Senior Executive Vice President,

​

Chief Financial Officer

​

(Principal Financial Officer)

​

​

Date: August 4, 2023

/s/ Sara G. Arana

​

Sara G. Arana

​

Senior Vice President and

​

Principal Accounting Officer

​

​

​

​

84

​

​

​

Exhibit 3.1

AMENDED AND RESTATED BYLAWS OF

SOUTHSTATE CORPORATION

(the “Corporation”) (Adopted April 26, 2023) ARTICLE I

MEETINGS OF SHAREHOLDERS

​

1.Annual Meeting. The annual meeting of the shareholders of the Corporation shall be held annually on such day and at such time and place, either within or without South Carolina, as shall be fixed by the Board of Directors (sometimes referred to as the “Board”).

​

2.Special Meetings.

​

(a)Special meetings of the shareholders may be called by (i) the Chief Executive Officer, (ii) the Chairman of the Board of Directors, (iii) a majority of the Board of Directors, or (iv) by the Secretary of the Corporation, following his or her receipt of one or more written demands to call a special meeting of the shareholders in accordance with, and subject to, this Article I, Section 2 from the holders (as of a record date fixed in accordance with Article I, Sections 2(b) and 2(c)) of not less than ten percent (10%) of all of the common shares entitled to vote at such meeting. The place of such meetings shall be designated by the Board of Directors. The notice of a special meeting shall state the purpose or purposes of the special meeting, and the business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the notice. Except in accordance with this Article I, Section 2, shareholders shall not be permitted to propose business to be brought before a special meeting of the shareholders. Shareholders who nominate persons for election to the Board of Directors at a special meeting must also comply with the requirements set forth in Article I, Section 6.

​

(b)No shareholder may demand that the Secretary of the Corporation call a special meeting of the shareholders unless a shareholder of record has first submitted a request in writing that the Board of Directors fix a record date (a “Demand Record Date”) for the purpose of determining the shareholders entitled to demand that the Secretary of the Corporation call such special meeting, which request shall be in proper form and delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation. To be in proper form for purposes of this Article I, Section 2, a request by a shareholder for the Board of Directors to fix a Demand Record Date shall set forth:

​

(i)As to each Requesting Person (as defined below), the Shareholder Information (as defined in Article I, Section 6(a)(ii)(a));

​

(ii)As to the purpose or purposes of the special meeting, (a) a reasonably brief description of the purpose or purposes of the special meeting and the business proposed to be conducted at the special meeting, the reasons for conducting such business at the special meeting and any interest in such business of each Requesting Person, and (b) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Requesting Persons or (y) between or among any Requesting Person and any other person or entity (including their names) in connection with the request for the special meeting or the business proposed to be conducted at the special meeting; and

​

​

​

​

(iii)If directors are proposed to be elected at the special meeting, the Nominee Information (as defined in Article I, Section 6(a)(ii)(c)) and the director questionnaire (as required under Article I, Section 6(c)) for each person whom a Requesting Person expects to nominate for election as a director at the special meeting. For purposes of this Article I, Section 2(b), the term “Requesting Person” shall mean (1) the shareholder making the request to fix a Demand Record Date for the purpose of determining the shareholders entitled to demand that the Secretary of the Corporation call a special meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf such request is made, and (3) any affiliate or associate of such shareholder or beneficial owner.

​

(c)Within ten (10) days after receipt of a request to fix a Demand Record Date in proper form and otherwise in compliance with this Article I, Section 2 from any shareholder of record, the Board of Directors may adopt a resolution fixing a Demand Record Date for the purpose of determining the shareholders entitled to demand that the Secretary of the Corporation call a special meeting, which date shall not precede the date upon which the resolution fixing the Demand Record Date is adopted by the Board of Directors. If no resolution fixing a Demand Record Date has been adopted by the Board of Directors within the ten (10) day period after the date on which such a request to fix a Demand Record Date was received, the Demand Record Date in respect thereof shall be deemed to be the twentieth (20th) day after the date on which such a request is received. Notwithstanding anything in this Article I, Section 2 to the contrary, no Demand Record Date shall be fixed if the Executive Chairman of the Board of Directors determines that the demand or demands that would otherwise be submitted following such Demand Record Date could not comply with the requirements set forth in clauses (ii), (iv), (v) or (vi) of Article I, Section 2(e).

​

(d)Without qualification, a special meeting of the shareholders shall not be called pursuant to Article I, Section 2(a)(iv) unless shareholders of record as of the Demand Record Date who hold, in the aggregate, not less than ten percent (10%) of all of the common shares entitled to vote at such meeting (the “Requisite Percentage”) timely provide one or more demands to call such special meeting in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation. Only shareholders of record on the Demand Record Date shall be entitled to demand that the Secretary of the Corporation call a special meeting of the shareholders pursuant to Article I, Section 2(a)(iv). To be timely, a shareholder’s demand to call a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not later than the sixtieth (60th) day following the Demand Record Date. To be in proper form for purposes of this Article I, Section 2, a demand to call a special meeting shall set forth (i) the business proposed to be conducted at the special meeting or the proposed election of directors at the special meeting, as the case may be, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), if applicable, and (iii) with respect to any shareholder or shareholders submitting a demand to call a special meeting (except for any shareholder that has provided such demand in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) by way of a solicitation statement filed on Schedule 14A) (a “Solicited Shareholder”) the information required to be provided pursuant to this Article I, Section 2 of a Requesting Person. A shareholder may revoke a demand to call a special meeting by written revocation delivered to the Secretary at any time prior to the special meeting. If any such revocation(s) are received by the Secretary after the Secretary’s receipt of written demands from the holders of the Requisite Percentage of shareholders, and as a result of such revocation(s), there no longer are unrevoked demands from the Requisite Percentage of shareholders to call a special meeting, the Board of Directors shall have the discretion to

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2 | Page

​

​

​

determine whether or not to proceed with the special meeting (any such special meeting of the shareholders that has been called may be canceled by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such special meeting of shareholders).

​

(e)The Secretary shall not accept, and shall consider ineffective, a written demand from a shareholder to call a special meeting (i) that does not comply with this Article I, Section 2,

(ii) that relates to an item of business to be transacted at such meeting that is not a proper subject for shareholder action under applicable law, (iii) that includes an item of business to be transacted at such meeting that did not appear on the written request that resulted in the determination of the Demand Record Date, (iv) that relates to an item of business (other than the election of directors) that is identical or substantially similar to an item of business (a “Similar Item”) for which a record date for notice of a shareholder meeting (other than the Demand Record Date) was previously fixed and such demand is delivered between the time beginning on the sixty- first (61st) day after such previous record date and ending on the one- year anniversary of such previous record date, (v) if a Similar Item will be submitted for shareholder approval at any shareholder meeting to be held on or before the ninetieth (90th) day after the Secretary receives such demand, or (vi) if a Similar Item has been presented at the most recent annual meeting or at any special meeting held within one year prior to receipt by the Secretary of such demand to call a special meeting.

​

(f)After receipt of demands in proper form and in accordance with this Article I, Section 2 from a shareholder or shareholders holding the Requisite Percentage, the Board of Directors shall direct the Secretary of the Corporation to duly call, and the Board of Directors shall determine the place, date and time of, a special meeting of shareholders for the purpose or purposes and to conduct the business specified in the demands received by the Corporation. Notwithstanding anything in these Bylaws to the contrary, the Board of Directors may submit its own proposal or proposals for consideration at such a special meeting. The record date for notice and voting for such a special meeting shall be fixed in accordance with Article I, Section 3 of these Bylaws. The Board of Directors shall direct the Corporation to provide written notice of such special meeting to the shareholders in accordance with Article I, Section 3.

​

(g)In connection with a special meeting called in accordance with this Article I, Section 2, the shareholder or shareholders (except for any Solicited Shareholder) who requested that the Board of Directors fix a record date for notice and voting for the special meeting in accordance with this Article I, Section 2 or who delivered a demand to call a special meeting to the Secretary shall further update and supplement the information previously provided to the Corporation in connection with such request or demand, if necessary, so that the information provided or required to be provided in such request or demand pursuant to this Article I, Section 2 shall be true and correct as of the record date for notice of the special meeting and as of the date that is ten (10) business days prior to the special meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the special meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the special meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the special meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the special meeting or any adjournment or postponement thereof); provided, that this Article I,

​

3 | Page

​

​

​

Section 2(g) shall not permit any such shareholder(s) to change any proposed business or nominee (or add any proposed business or nominee), as the case may be.

​

(h)Notwithstanding anything in these Bylaws to the contrary, the Secretary shall not be required to call a special meeting pursuant to this Article I, Section 2 except in accordance with this Article I, Section 2. If the Chairman of the Board of Directors shall determine that any request to fix a record date for notice and voting for the special meeting or demand to call and hold a special meeting was not properly made in accordance with this Article I, Section 2, or shall determine that the shareholder or shareholders requesting that the Board of Directors fix such record date or submitting a demand to call the special meeting have not otherwise complied with this Article I, Section 2, then the Board of Directors shall not be required to fix such record date, the Secretary shall not be required to call the special meeting and the Corporation shall not be required to hold the special meeting. In addition to the requirements of this Article I, Section 2, each Requesting Person shall comply with all requirements of applicable law, including all requirements of the Exchange Act, with respect to any request to fix a record date for notice and voting for the special meeting or demand to call a special meeting.

​

3.Record Date for and Notice of Shareholder Meetings.

​

(a)The Board of Directors, the Chairman of the Board or the Chief Executive Officer or the President of the Corporation may fix the record date to determine the shareholders entitled to notice of a shareholders’ meeting and to vote or take any other action thereat.

​

(b)Written or printed notice stating the place, day, and hour of the meeting, and such other notice as required by the provisions of the South Carolina Business Corporation Act, and in the case of a special meeting, the purpose or purposes for which the meeting is called and the person or persons calling the meeting, shall be communicated by the Corporation to each shareholder of record entitled to vote at the meeting, not less than ten (10) nor more than sixty (60) days before the date of the meeting. If such notice is mailed, it shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at the address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. If at any meeting Bylaws are to be altered, repealed, amended, or adopted, notices or waivers thereof shall so state. A shareholder may waive notice of any meeting, in writing, either before or after the meeting. Any previously scheduled meeting of the shareholders may be postponed, and (unless the Articles of Incorporation otherwise provides) any special meeting of the shareholders called pursuant to Article I, Section 2(a)(i)-(iii) may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of shareholders.

​

4.Quorum Requirements. Absent a provision in the Articles of Incorporation or the South Carolina Business Corporation Act stating otherwise, a majority of the shares entitled to vote shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and the adjournment is for a period of less than thirty (30) days. If the adjournment is for thirty (30) days or more, notice of the adjourned meeting shall be given pursuant to Article I, Section 3 of these Bylaws. When a quorum is present at any meeting, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation or the South Carolina Business Corporation Act requires a greater number of affirmative votes.

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4 | Page

​

​

​

5.Voting and Proxies. Every shareholder entitled to vote at a meeting may do so either in person or by proxy. A shareholder or his agent or attorney in fact may appoint a proxy to vote or otherwise act for him, including giving waivers and consents, by signing an appointment form or by an electronic transmission of appointment. The electronic transmission must contain or be accompanied by sufficient information to determine that the transmission appointing the proxy is authorized. A proxy must have an effective date. If not dated by the person giving the proxy, the effective date of the proxy is the date on which it is received by the person appointed to serve as proxy, and that date must be noted by the appointee on the appointment form. An appointment of a proxy is effective when the appointment form or electronic transmission is received by the Secretary of the meeting or other officer or agent authorized to tabulate votes. Unless a time of expiration is otherwise specified, an appointment of a proxy is valid for eleven months (unless duly revoked earlier).

​

6.Matters Considered at Shareholder Meetings.

​

(a)Annual Meetings of Shareholders.

​

(i)Nominations of persons for election to the Board of Directors and the proposal of other business to be considered by the shareholders may be made at an annual meeting of shareholders (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or the Chairman of the Board or (c) by any shareholder of the Corporation who (1) was a shareholder of record at the time of giving of notice provided for in this Article I, Section 6 and at the time of the annual meeting, (2) is entitled to vote at the meeting and (3) complies with the notice procedures set forth in this Article I, Section 6 (including, without limitation, by providing any updates or supplements at the times and in the forms required by Article I, Section 6(a)(ii)(e)) as to such business or nomination. The foregoing clause (c) shall be the exclusive means for a shareholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting) before an annual meeting of shareholders.

​

(ii)Without qualification, for any nominations or any other business to be properly brought before an annual meeting by a shareholder pursuant to Article I, Section 6(a)(i)(c), the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day and not later than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than one hundred (100) days prior to the date of such annual meeting, then the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

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5 | Page

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​

​

To be in proper form, a shareholder’s notice (whether given pursuant to this Article I, Section 6(a)(ii) or Article I, Section 6(b)) to the Secretary must:

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(a)set forth, as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such shareholder, as they appear on the Corporation’s books, and of such beneficial owner, if any, (2) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such shareholder and such beneficial owner, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such shareholder or such beneficial owner and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such shareholder or such beneficial owner has a right to vote any shares of any security of the Corporation, (D) any short interest in any security of the Corporation (for purposes of this Article I, Section 6(a)(ii) a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Corporation owned beneficially by such shareholder or such beneficial owner that are separated or separable from the underlying shares of the Corporation, (F)any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder or such beneficial owner is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, (G) any performance-related fees (other than an asset- based fee) that such shareholder or such beneficial owner is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such shareholder’s or such beneficial owner’s immediate family sharing the same household (which information shall be supplemented by such shareholder and beneficial owner, if any, not later than ten

(10) days after the record date for the meeting to disclose such ownership as of the record date), (H) any pending or threatened legal proceeding in which such shareholder or such beneficial owner is a party or participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation,

(I) any other material relationship between such shareholder or such beneficial owner, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, and (J) to the extent known to such shareholder or such beneficial owner, the name(s) of any other shareholder(s) of the Corporation (whether holders of record of beneficial owners) that support the business that the shareholder proposes to bring before the meeting or the nominees whom the shareholder proposes to nominate for election or reelection to the Board of Directors, as applicable, (3) a representation of such shareholder and such beneficial owner, if any, that such person (or a qualified

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representative thereof) intends to appear in person at the meeting, and (4) any other information relating to such shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (the disclosures to be made pursuant to the foregoing clauses (1), (2), (3)and (4) are referred to herein as the “Shareholder Information”);

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(b)if the notice relates to any business other than a nomination of a director or directors that the shareholder proposes to bring before the meeting in addition to the information required by Article I, Section 6(a)(ii)(a), set forth (1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder and beneficial owner, if any, in such business and (2) a description of all agreements, arrangements and understandings between such shareholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder;

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(c)in addition to the information required by Article I, Section 6(a)(ii)(a), set forth, as to each person, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors (1) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (2) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (1) and (2) are referred to herein as the “Nominee Information”);

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(d)with respect to each nominee for election or reelection to the Board of Directors, include a completed and signed questionnaire, representation and agreement required by Article I, Section 6(c). The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee; and

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(e)a shareholder giving the notice shall update and supplement its notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 6(a)(ii) shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof); provided, that this Article I, Section 6(a)(ii)(e) shall not permit any such shareholder(s) to change any proposed business or nominee (or add any proposed business or nominee), as the case may be.

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(iii)Notwithstanding anything in the second sentence of Article I, Section 6(a)(ii) to the contrary, in the event that the number of directors to be elected to the Board of Directors at an annual meeting of shareholders is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred (100)days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s notice required by this Article I, Section 6(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

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(b)Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors, or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who (1) is a shareholder of record at the time of giving of notice provided for in this Article I, Section 6(b) and at the time of the special meeting, (2) is entitled to vote at the meeting, and (3) complies with the notice procedures set forth in this Article I, Section 6(b) as to such nomination (including, without limitation, by providing all information required to be provided with respect to such nominating shareholder, including, without limitation, by providing any updates or supplements at the times and in the forms required by Article I, Section 6(a)(ii)(e)). In the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any such shareholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the shareholder’s notice (in proper form) required by Article I, Section 6(a)(ii) with respect to any nomination (including, without limitation, the completed and signed questionnaire, representation and agreement required by Article I, Section 6(c) and the information with respect to such nominating shareholder required by Article I, Section 6(a)(ii)) shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than

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the close of business on the one hundred twentieth (120th) day prior to the date of such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such special meeting or, if the first public announcement of the date of such special meeting is less than one hundred (100) days prior to the date of such special meeting, then the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

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(c)Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of a shareholders of the Corporation for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under this Article I, Section 6) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person: (a) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (c) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

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(d)General.

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(i)Only such persons who are nominated in accordance with the procedures set forth in this Article I, Section 6 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Article I, Section 6. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, the chairman of the meeting shall have the power to determine all matters relating to the conduct of the meeting, including, but not limited to, determining whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Article I, Section 6 and, if any proposed nomination or business is not in compliance with this Article I, Section 6, to declare that such defective proposal or nomination shall be disregarded.

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(ii)For purposes of this Article I, Section 6, a “public announcement” shall mean disclosure in a press release reported by a national news service or in a document

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publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

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(iii)Notwithstanding the foregoing provisions of this Article I, Section 6, all director nominations are subject to any required regulatory approval(s) and to the director qualifications set forth in Article II, Section 2, and a proposed director will not be entitled to vote on any matter or otherwise take any action in the capacity of a director until all required regulatory approvals, if any, have been obtained. In addition, notwithstanding the foregoing provisions of this Article I, Section 6, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Article I, Section 6; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Article I, Section 6(a)(i)(c) or Article I, Section 6(b). Nothing in Article I, Section 6 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

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(iv)Unless otherwise required by law, if the shareholder (or a qualified representative of the shareholder) does not appear at the annual or special meeting of shareholders of the Corporation to present the nomination or proposal in compliance with the shareholder’s representation required by Article I, Section 6(a)(ii)(a)(3), such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes hereof, to be considered a qualified representative of the shareholder, a person must be a duly authorized officer, manager or partner of such shareholder or must be authorized by a writing complying with Article I, Section 5 to act for such shareholder as proxy at the meeting of shareholders, and such person must produce such writing, or a reliable reproduction thereof, at the meeting of shareholders.

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7.Conduct of Meetings.

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(a)Meetings of shareholders shall be presided over by the Chairman of the Board of Directors or, in his absence, by the Vice Chairman or another director or executive officer designated by the Board of Directors. Such person is referred to in these Bylaws as the presiding officer or as the chairman of the meeting. The presiding officer shall determine all questions of order or procedure (and the presiding officer’s rulings shall be final) and may, in his or her discretion, adjourn a meeting of shareholders regardless of whether a quorum is present.

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(b)The Secretary of the Corporation, with the assistance of such agents as may be designated by the Secretary, shall make all determinations of the validity of proxies presented and ballots cast.

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(c)In the event that any person or group other than the Board of Directors hold proxies for more than ten (10) other shareholders, any vote taken with respect to any contested matter, determined to be such by the presiding officer, shall be taken in the following manner:

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(i)Shareholders wishing to vote in person shall obtain ballots from the Secretary and cast their votes. After a period determined to be reasonable by the presiding officer, no further voting in person shall be permitted.

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(ii)Thereafter, persons holding proxies shall obtain a ballot from the Secretary which shall be in a form to permit the votes cast with respect to each appointment of proxy to be identified as such and shall fill out such ballot, and return it together with the original appointments of proxies to the Secretary. After a period determined to be reasonable by the presiding officer, the polls shall be closed and no further voting on the question shall be allowed.

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(iii)If the number of proxies held by persons or groups other than the Board of Directors is high, the presiding officer may, after consultation with the Secretary, adjourn the meeting for up to seventy-two (72) hours, to permit the counting of the votes; provided, however, that the presiding officer may, in his discretion, permit other business, including the casting of other votes, to be transacted prior to any such adjournment.

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ARTICLE II

BOARD OF DIRECTORS

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1.Composition of Board of Directors. The Corporation shall have a Board of Directors consisting of active directors, whose qualifications, election, number, etc. are described and discussed in this Article II and throughout these Bylaws. Whenever the terms “director” or “Board of Directors” or “Board” are used herein or in other corporate documents, the terms shall include active directors only.

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2.Qualification and Election of Active Directors.

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(a)Except for any directors as to whom such age requirement has been waived by the Board of Directors as set forth in this Section 2(a) of Article II, directors must be shareholders, not under twenty-five (25) years of age and not over seventy-two (72) years of age at the time of the shareholders’ meeting at which they are elected by the shareholders. In the event that a director attains age seventy- two (72) during his or her term of office, he or she shall serve until the end of his or her then- current term of office after his or her seventy-second (72nd) birthday. Notwithstanding the foregoing, if the Board of Directors determines that it is in the best interests of the Corporation and its shareholders, the Board of Directors, upon the recommendation of the Governance Committee, may waive the foregoing requirements for one or more directors.

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The terms of all directors shall expire at the next annual meeting of shareholders following their election. Each director, except in the case of his or her death, resignation, removal or disqualification, shall hold office until the expiration of the term for which he or she is elected and thereafter until his or her successor has been elected and qualified or until there is a decrease in the number of directors. Any vacancy occurring in the Board of Directors, including vacancies occurring in the Board by reason of removal with or without cause or increase in membership, shall be filled by appointment by the remaining directors, and any director so appointed shall serve until the next shareholders meeting wherein directors are elected.

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(b)Nomination of Directors. The Board of Directors shall nominate, upon recommendation of the governance committee, the Board’s nominees for the Board of Directors to the

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shareholders. No other person shall be a nominee or be eligible to be a director of the Corporation unless that person shall have first been nominated by a record shareholder of the Corporation in accordance with Article I, Section 6 of these Bylaws.

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3.Number. The maximum number of active directors is fixed by the Articles and may be altered only by amendment thereto, but shall never be less than the number required by law, with the number of directors to be set or changed from time to time within such minimum and maximum range by resolution of a majority of the full Board of Directors.

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4.Meetings. The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual meeting of the shareholders, at which time the officers of the Corporation shall be elected. The Board may also designate more frequent intervals for regular meetings. Special meetings may be called at any time by any one director or any two officers of the Corporation in addition to those parties entitled to call such meetings under South Carolina law.

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5.Notice of Directors’ Meetings. The annual and all regular Board meetings may be held without notice. Special meetings shall be held with not less than one hour notice of such meeting to be given to each director, which notice shall be given on a best efforts basis by those calling the meeting. Notice may be waived in writing before or after a meeting. If the meeting is one at which Bylaws are to be altered, repealed, or adopted both waivers and notices must so state. Notice of a special meeting may be called by the Chairman, the Chief Executive Officer or any three (3) directors. If the notice of the meeting is not given in writing at least two (2) days prior to the meeting no action shall be taken at the meeting unless such action is approved by the affirmative vote of a majority of the entire Board of Directors.

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6.Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. A meeting may be adjourned despite the absence of a quorum, and notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board, unless the vote of a greater number is required by the Articles, these Bylaws, or by the laws of South Carolina.

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7.Appointment of Chairman, Committees.

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The Board shall appoint a Chairman of the Board, based on the recommendation of the Governance and Nominating Committee. The Board of Directors shall, by resolution adopted by a majority of its members, designate such standing committees with designations of authority, as it deems appropriate, which shall include Audit, Risk, Compensation and Governance and Nominating Committees. Nominations to such other committees shall be made to the Board by the Governance and Nominating Committee of the Board after considering the recommendation of the Chairman of the Board.

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8.Powers. In addition to other powers specifically set out herein or that apply under South Carolina or other applicable law, the Board of Directors shall have the power to manage and administer the affairs of the Corporation and to do and perform all lawful acts with respect to the affairs of the Corporation except those that may be specifically reserved to the shareholders under South Carolina or other applicable law.

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9.Contracts with Interested Directors. No contract or other transaction between this Corporation and any other corporation shall be affected by the fact that any director of this Corporation is interested in, or is a director or officer of, such other corporation, and any director, individually or jointly, may

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be a party to, or may be interested in, any contract or transaction of this Corporation or in which this Corporation is interested; and no contract, or other transaction, of this Corporation with any person, firm, or corporation, shall be affected by the fact that any director of this Corporation is a party to, or is interested in, such contract, act, or transaction, or is in any way connected with such person, firm, or corporation, and every person who may become a director of this Corporation is hereby relieved from any liability that might otherwise exist from contracting with the Corporation for the benefit of himself or any firm, association, or corporation in which he may be in any way interested.

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10.Special Considerations by Directors. The directors of this Corporation shall consider all factors they deem relevant in evaluating any proposed tender offer or exchange offer for the Corporation’s stock, any proposed merger or consolidation of the Corporation with or into another corporation and any proposal to purchase or otherwise acquire all of the assets of the Corporation. The directors shall evaluate whether the proposal is in the best interests of the Corporation by considering the best interests of the shareholders and other factors the directors determine to be relevant, including the social, legal and economic effects on employees, customers and the communities served by the Corporation and its subsidiary or subsidiaries. The directors shall evaluate the consideration being offered to the shareholders in relation to the then current market value of the Corporation, the then current market value of shares of the Corporation in a freely negotiated transaction, and the directors’ estimate of the future value of shares of the Corporation as an independent entity.

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11.Election of Directors to Subsidiaries of the Corporation. The Board of Directors of the Corporation shall elect, upon nomination by the executive committee, directors of all wholly owned subsidiary corporations of the Corporation.

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ARTICLE III

OFFICERS

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1.Number. The Corporation shall have a Chief Executive Officer, a President, Chairman of the Board, one or more Vice Presidents, a Secretary, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person. The Chairman of the Board, and any Vice Chairman of the Board, may but need not be an employee of the Corporation.

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2.Election and Term. The officers shall be elected by the Board at its annual meeting. Each officer shall serve until the expiration of the term for which he is elected, and thereafter until his successor has been elected and qualified.

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3.Duties. All officers shall have such authority and perform such duties in the management of the Corporation as are normally incident to their offices and as the Board of Directors may from time to time provide. The Chief Executive Officer of the Corporation shall report to the Board and shall designate and assign the duties of the officers under his or her supervision, at the direction or with the approval of the Board.

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ARTICLE IV

RESIGNATIONS, REMOVALS AND VACANCIES

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1.Resignations. Any officer or director may resign at any time by giving written notice to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its acceptance by the Board of Directors.

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2.Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in any office or directorship for any reason, including removal of an officer or director with or without cause, may be filled by the vote of a majority of the directors then in office, even if less than a quorum exists.

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ARTICLE V

CAPITAL STOCK

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1.Stock Certificates. Unless otherwise decided by the Board of Directors (or by the Chief Executive Officer, if the Board of Directors has authorized the issue of all of the Corporation’s shares without certificates as contemplated by Article V, Section 2 of these Bylaws), every shareholder shall be entitled to a certificate or certificates of capital stock of the Corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the Board of Directors, such certificates shall be signed by the Chief Executive Officer or President and by the Secretary or an Assistant Secretary of the Corporation. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors or an officer of the Corporation shall prescribe.

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2.Shares Without Certificates. The Board of Directors of the Corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates in accord with the provisions of Chapter 8 of Title 36 of the South Carolina Uniform Commercial Code. Within a reasonable time after the issue or transfer of shares without certificates, the Corporation or its designated transfer agent shall send the shareholder a written statement containing the following information: (a) the name of the Corporation and a statement that it is organized under the laws of South Carolina; (b) the name of the person to whom the shares are issued; (c) the number and class of shares and the designation of the series, if any, of the shares; (d) if at such time the Corporation is authorized to issue different classes of shares or different series within a class, a summary of the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series); and (e) if applicable, a conspicuous notation that the shares are subject to a restriction on their transfer.

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3.Registration of the Transfer of Shares. Registration of the transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation (which stock transfer books may be kept by the Corporation or the transfer agent designated by the Corporation to transfer the shares or other agent designated by the Corporation). If a share certificate in registered form is presented to the Corporation with a request to register a transfer of the shares, or an instruction is presented to the Corporation with a request to register the transfer of uncertificated shares, then, subject to applicable law, the Corporation shall register the transfer as requested if: (a) under the terms of the shares the person seeking registration of transfer is eligible to have the shares registered in their name; (b) the indorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person; (c) reasonable assurance is given that the indorsement or instruction is genuine and authorized (without limiting the foregoing, the Corporation or its transfer agent, may require that the indorsement or instruction must have been guaranteed by a commercial bank or brokerage firm that is a member of the Financial Industry Regulatory Authority (FINRA) and reasonable assurance is given that such endorsements are effective); (d) any applicable law relating to the collection of taxes has been complied with; (e) the transfer does not violate any restriction on transfer imposed by the Corporation in accordance with § 36-8-204 of the South Carolina Code; (f) the registered owner has not made a demand that the shares not be transferred, or if such demand has been made, the procedures set forth in § 36-8-403 of the South Carolina Code permit the transfer; and (g) the transfer is in fact rightful or is to a person otherwise entitled to obtain

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the shares as a protected purchaser as defined in § 36-8-303 of the South Carolina Code. A person acting as authenticating trustee, transfer agent, registrar, or other agent for the Corporation in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the Corporation has in regard to those functions.

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4.Control Share Acquisitions. The provisions of § 35-2-100 et seq. of the South Carolina Code shall not apply to control share acquisitions of the shares of any or all of its classes or series of the Corporation.

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ARTICLE VI

ACTION BY CONSENT

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1.Shareholders. Shareholders may act without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon or their attorneys-in- fact or proxy holders. Such consent shall be filed with the Secretary as part of the corporate records.

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2.Directors; Executive Committee. Directors or any executive or other committee can act without a meeting on action taken by a majority thereof, or by a much larger vote as the Articles or Bylaws require, if all directors or committee members execute, before or after the action taken, a written consent thereto and the consent is filed in the records of the Corporation. Action which is permitted to be taken only when authorized at a meeting of the Board or committee, can be taken without a meeting, if before or after the action, all Board or committee members consent thereto in writing and the consent is filed in the minute book of the Board or committee. Such consent shall have the same effect as a vote of the Board for all purposes.

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ARTICLE VII

INDEMNIFICATION

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1.Right to Indemnification. Any person who at any time serves or has served as a director or officer of the Corporation, or who, while serving as a director or officer of the Corporation, serves or has served, at the request of the Corporation, as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a trustee or administrator under an employee benefit plan (whether or not such person continues to serve in such capacity at the time of any indemnification or advancement of expenses pursuant hereto is sought or at the time any proceeding relating thereto exists or is brought), shall have the right to be indemnified by the Corporation (including, for all purposes of this Article VII, any successor of the Corporation by merger or otherwise) to the fullest extent permitted by law against (a) reasonable expenses, including attorneys’ fees, incurred by him in connection with any threatened, pending or completed civil, criminal, administrative, investigative or arbitrative action, suit or proceeding (and any appeal therein), whether or not brought by or on behalf of the Corporation, seeking to hold him liable by reason of the fact that he is or was acting in such capacity, and (b) reasonable payments made by him in satisfaction of any judgment, money decree, fine (including an excise tax assessed with respect to an employee benefit plan), penalty or settlement for which he may have become liable in any such action, suit or proceeding.

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2.Right to Advancement of Expenses. The right to indemnification conferred in this Article VII shall include the right to be paid by the Corporation the reasonable expenses (including attorney’s fees) incurred in defending any such action, suit or proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if required by law, an

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advancement of expenses incurred by a claimant shall be made only if: (a) the claimant furnishes the Corporation with a written affirmation of his good faith belief that he met the standard of conduct required by law; and (b) the claimant furnishes the Corporation with a written undertaking, executed personally on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct.

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3.Payment of Indemnification and Advancement of Expenses. The Board of Directors of the Corporation shall take all such action as may be necessary and appropriate to authorize the Corporation to pay the indemnification and advancement of expenses required by this Article VII, including, without limitation, making a determination that indemnification and/or advancement of expenses is permissible in the circumstances and a good faith evaluation of the manner in which the claimant acted and of the reasonable amount of indemnity or expenses due him. The Board of Directors may appoint a committee or special counsel to make such determination and evaluation. Following any “Change of Control” of the Corporation defined in the Corporation’s 2012 Omnibus Stock and Performance Plan (or any comparable term as defined in any successor to such plan), any determination as to entitlement of indemnification and advancement of expenses under this Article VII shall be made by independent special legal counsel selected in the manner provided in the South Carolina Business Corporation Act.

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4.Right of Indemnitee to Bring Suit. If a claim under this Article VII is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the claimant shall be entitled to be paid also for the expense of prosecuting or defending such suit. In (i) any suit brought by a claimant to enforce a right to indemnification or advancement of expenses hereunder, it shall be a defense that, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the claimant has not met the applicable standard for indemnification and/or advancement of expenses to the fullest extent permitted by law. A determination by the Corporation (including its Board of Directors, any committee of the Board of Directors, independent legal counsel, or the shareholders) that a claimant has not met such applicable standard of conduct shall not create a presumption that the claimant has not met the applicable standard of conduct or, in the case of such a suit brought by a claimant, be a defense to such suit. In any suit brought by a claimant to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the claimant is not entitled to be indemnified, or to such advancement of expenses, under this Article VII or otherwise shall be on the Corporation.

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5.Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under applicable law.

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6.Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VII with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

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7.Binding and Nonexclusive. Any person who at any time after the adoption of this Article VII serves or

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has served in the aforesaid capacity for or on behalf of the Corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, and shall have an express contractual entitlement to, the right of indemnification and advancement of expenses provided herein. Such right shall inure to the benefit of the legal representatives of any such person and shall be exclusive of any other rights to which such person may be entitled apart from the provision of this Article VII. Any amendment or modification of this Article VII or otherwise of these Bylaws that in any way diminishes or adversely affects any rights to indemnification, advancement of expenses or otherwise set forth in this Article VII shall be prospective only and shall not in any way diminish or adversely affect any such rights with respect to any actual or alleged state of facts, occurrence, action or omission occurring prior to the time of such amendment or modification, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such actual or alleged state of facts, occurrence, action or omission, and all of such rights shall continue as to any such person who has ceased to be a director or officer of the Corporation or ceased to serve at the Corporation’s request as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a trustee or administrator under an employee benefit plan, and shall inure to the benefit of such person’s heirs, executors and administrators. If any provision or provisions of this Article VII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VII (including, without limitation, each portion of any paragraph of this Article VII containing any such provision held to be invalid, illegal or unenforceable that is not, itself, held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VII (including, without limitation, each such portion of any paragraph of this Article VII containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

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ARTICLE VIII

EXCLUSIVE FORUM

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Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the South Carolina Business Corporation Act or the Corporation’s Certificate of Incorporation or Bylaws (as either may be amended from time to time), or (iv) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine shall be a state court located within the State of South Carolina (or, if no state court located within the State of South Carolina has jurisdiction, the federal district court for the District of South Carolina).

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ARTICLE IX

AMENDMENT OF BYLAWS

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These Bylaws may be amended, added to, or repealed either by: (1) the affirmative vote of the holders of eighty percent (80%) of the shares entitled to vote, or (2) a majority vote of the entire Board of Directors.

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Exhibit 10.1

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RELEASE AGREEMENT

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THIS RELEASE AGREEMENT (hereinafter “Agreement”) is made and entered into as of April 26, 2023, by and between SouthState Corporation (“SSC”) and SouthState Bank, N.A. (the “Bank”) (SSC and the Bank collectively, the “Company”), on the one hand, and John C. Pollok (the “Executive”), on the other hand. The Company and Executive are sometimes referred to collectively herein as the “Parties.” Any capitalized terms not expressly defined herein have the meanings set forth in the Employment Agreement (as defined below).

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WHEREAS, SSC and the Executive are parties to that Third Amended and Restated Employment and Noncompetition Agreement, dated as of January 25, 2020 (the “Employment Agreement”), pursuant to which the Executive has been serving as a consultant since July 6, 2021;

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WHEREAS, the Executive’s term as a consultant under the Employment Agreement continues until December 31, 2024, but the Executive is ending his service as a consultant and resigning as a member of the Board and the Bank board, effective April 26, 2023 (“Termination Date”);

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NOW, THEREFORE, in consideration of the payments and benefits being provided pursuant to the Employment Agreement (the consideration provided for thereunder) and of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged by the Parties, it is agreed as follows:

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1.In return for the promises of the Executive, which are stated below, and which include a waiver and release of all potential claims, the Company agrees as follows:

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(a)To pay Executive the gross amount of $625,000, which represents the Consulting Fee due under the Employment Agreement for the remaining Consulting Term following the Termination Date.
(b)With respect to any option to purchase shares of SSC common stock, such options shall remain outstanding and exercisable in accordance with the applicable terms and conditions governing such awards.

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None of the foregoing will occur unless and until Executive (i) accepts, executes and returns this Agreement and (ii) does not revoke such acceptance. At the appropriate time, SouthState will issue or cause to be issued the appropriate reporting form to Executive, as required by state law and/or the Internal Revenue Service regarding the benefits in this Section 1.

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2.In exchange for the consideration referenced above, Executive hereby completely, irrevocably, and unconditionally releases and forever discharges the Company, and any of its affiliated companies, any of their predecessor entities, and each and all of their officers, agents, directors, supervisors, employees, representatives, and their successors and assigns, and all persons acting by, through, under, for, or in concert with them, or any of them, in any and all of their capacities (hereinafter individually or collectively, the “Released Parties”), from any and all charges, complaints, claims, demands, actions, causes of action, obligations, judgments, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind or nature whatsoever, known or unknown, suspected or unsuspected (hereinafter referred to as “Claim” or “Claims”) which Executive at any time heretofore had or claimed to have or which Executive may have or claim to have or may in the future have arising out of or regarding events that have occurred as of the Effective Date (defined in Section 3(e)below) of this Agreement, including, without limitation, or in any way related to the Executive’s hire, benefits, employment, termination, or separation from employment with the Company, any of its affiliated companies or any of their predecessor entities, and any actual or alleged act, omission, transaction, practice, conduct, occurrence, or other matter, including, but not limited to:

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(a)any and all claims under Title VII of the Civil Rights Act, as amended, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, as amended, with respect to existing but not prospective claims, the Fair Labor Standards Act, the Equal Pay Act, as amended, the Employee Retirement Income Security Act, as amended (with respect to unvested benefits), the Civil Rights Act of 1991, as amended, 42 U.S.C. Section 1981, the Worker Adjustment and Retraining Notification Act, as amended, the National Labor Relations Act, as amended, the Age Discrimination in Employment Act, as amended (the “ADEA”), the Uniform Services Employment and Reemployment Rights Act, as amended, the Genetic Information Nondiscrimination Act of 2008, all of their respective implementing regulations, and any other federal, state, local, or foreign law (statutory, regulatory, or otherwise) that may be legally waived and released;

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(b)any and all claims for compensation of any type whatsoever, including but not limited to claims for salary, wages, bonuses, commissions, incentive compensation, vacation, personal days, leave (including family or medical leave) and severance that may be legally waived and released, other than any accrued but unpaid base salary and any rights to vested benefits, such as pension or retirement benefits, the rights to which are governed by the terms of the applicable plan documents;

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(c)any and all claims arising under tort, contract, and quasi-contract law, including but not limited to claims of breach of an expressed or implied contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm, wrongful or retaliatory discharge, fraud, defamation, slander, libel, false imprisonment, and negligent or intentional infliction of emotional distress; and

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(d)any and all claims for monetary or equitable relief, including but not limited to attorneys' fees, back pay, front pay, reinstatement, experts’ fees, insurance, medical fees or expenses, costs, and disbursements.

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This general release and waiver of Claims excludes, and the Executive does not waive, release, or discharge: (A) any right to file an administrative charge or complaint with the Equal Employment Opportunity Commission, or other similar federal or state administrative agencies, although the Executive waives any right to monetary relief related to such a charge or administrative complaint;

(B) claims for unemployment benefits and workers’ compensation; (C) indemnification or directors and officers insurance rights the Executive has against the Company; or (D) claims to the Accrued Obligations or relating to the obligations of the Company or its affiliates to Executive under the Employment Agreement or any other plan, policy or arrangement of the Company that, by the applicable terms, are to be performed after the date hereof. If the Executive applies for unemployment benefits, the Company will respond truthfully, completely, and timely to any inquiries by the applicable state agency concerning the Executive's separation from employment.

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3.In further consideration of the payments and benefits provided to the Executive in this Agreement, the Executive hereby irrevocably and unconditionally fully and forever waives, releases, and discharges the Released Parties from any and all Claims, whether known or unknown, from the beginning of time to the date of the Executive’s execution of this Agreement arising under the Age Discrimination in Employment Act (ADEA), as amended, and its implementing regulations. By signing this Agreement, the Executive hereby acknowledges and confirms that:

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(a)by this Agreement, the Executive has been advised in writing of the right to consult with an attorney of the Executive’s choosing and has consulted with such counsel as the Executive believed was necessary before executing this Agreement;

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(b)the Executive knowingly, freely, and voluntarily assents to all of the terms and conditions set out in this Agreement including, without limitation, the waiver, release, and covenants contained in it;

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(c)the Executive is executing this Agreement, including the waiver and release, in exchange for good and valuable consideration in addition to anything of value to which the Executive is otherwise entitled;

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(d)the Executive was given at least twenty-one (21) days to consider the terms of this Agreement and consult with an attorney of the Executive’s choice, although the Executive may sign the Agreement sooner, if desired. Changes to this Agreement, whether material or immaterial, do not restart the running of the twenty-one day period;

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(e)the Executive understands that the Executive has seven (7) days from signing this Agreement (“Revocation Period”) to change his mind and revoke the this Agreement by delivering notice of revocation to Amy Cox, Director of Talent Management, by writing to 2440 Mall Drive Charleston, SC 29406 or by email at Amy.Cox@southstatebank.com, by the end of this seven-day period. Unless revoked, the Agreement will become effective and enforceable on the eighth day after it is executed (“Effective Date”); and;

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(f)the Executive understands that the release contained in this Section does not apply to rights and claims that may arise after the Executive signs this Agreement.

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No benefits contemplated by Section 1 above shall be made to the Executive under this Agreement

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before the Effective Date. If the Executive timely revokes the Agreement, none of the benefits described in Section 1 shall be owed.

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4.The Executive has not filed and agrees not to initiate or cause to be initiated on his behalf, any complaint, charge, Claim or proceeding against the Released Parties before any local, state or federal agency, court or other body (each, individually, a “Proceeding”), and agrees not to participate voluntarily in any Proceeding. The Executive represents and warrants that he has not assigned any of the Claims being released under this Agreement.

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5.The Parties agree that the Employment Agreement is terminated as of the Termination Date, and the Executive resigns as a member of the Board and the Bank board as of the Termination Date.  Notwithstanding, the Executive hereby reaffirms, acknowledges and agrees that he remains subject to the covenants set forth in Sections 8 (Confidential Information) and 9 (Noncompetition and Nonsolicitation) of the Employment Agreement, which are incorporated into this Release by reference. To the extent Executive violates in any material respect the terms of Sections 8 and 9 of the Employment Agreement, in addition to any other remedies available to the Company the Executive shall forfeit on the Executive's own behalf and that of beneficiary(ies) any rights to and interest in any severance or other benefits under the Employment Agreement or other contract the Executive has with the SSC, the Bank, or any of their affiliates.

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6.Nothing in this Agreement or otherwise limits the Executive’s ability to communicate directly with and provide information, including documents, not otherwise protected from disclosure by any applicable law or privilege to the Securities and Exchange Commission (the “SEC”), any other federal, state or local governmental agency or commission (“Government Agency”) or self-regulatory organization regarding possible legal violations, without disclosure to the Company. The Company may not retaliate against the Executive for any of these activities, and nothing in this Agreement requires the Executive to waive any monetary award or other payment that the Executive might become entitled to from the SEC or any other Government Agency or self-regulatory organization. Further, nothing in this Agreement precludes the Executive from filing a charge of discrimination with the Equal Employment Opportunity Commission or a like charge or complaint with a state or local fair employment practice agency. However, once this Agreement becomes effective, the Executive may not receive a monetary award or any other form of personal relief from the Company in connection with any such charge or complaint that the Executive filed or is filed on the Executive’s behalf. Pursuant to the Defend Trade Secrets Act of 2016, the parties hereto acknowledge and agree that the Executive shall not have criminal or civil liability under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (B) solely for the purpose of reporting or investigating a suspected violation of This Agreement shall not in any way be construed as an admission by the Company of any acts of unlawful conduct, wrongdoing or discrimination against Executive, and the Company specifically disclaims any liability to Executive on the part of itself, its employees, or its agents.

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7.This Agreement sets forth the entire agreement between the Company and the Executive pertaining to the subject matter hereof (except as otherwise set forth herein) and fully supersedes any and all prior agreements or understandings among the Company and the Executive pertaining to the subject matter hereof (except as otherwise set forth herein). This Agreement cannot be amended, modified, or supplemented in any respect except by written agreement entered into and signed by the Parties hereto.

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8.This Agreement shall be governed by the laws of the State of South Carolina without giving effect to conflict of laws principles.

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9.The Executive hereby acknowledges that the Executive has read and understands the terms of this Agreement and that the Executive signs it voluntarily and without coercion. The Executive further acknowledges that the Executive was given an opportunity to consider and review this Agreement and the waivers contained in this Agreement, that the Executive has done so and that the waivers made herein are knowing, conscious and with full appreciation that the Executive is forever foreclosed from pursing any of the rights so waived.

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10.The Agreement may be signed in counterparts, and each counterpart shall be considered an original for all purposes.

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PLEASE READ THIS AGREEMENT CAREFULLY;

IT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIM

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date set forth below each party’s signature line.

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SOUTHSTATE CORPORATION

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By:

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Name:

Susan Bagwell

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Title:

Director of Human Resources

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Date:

April 26, 2023

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SOUTHSTATE BANK, N.A.

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By:

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Name:

Susan Bagwell

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Title:

Director of Human Resources

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Date:

April 26, 2023

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Exhibit 31.1

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RULE 13A-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

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I, John C. Corbett, certify that:

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1. I have reviewed this quarterly report on Form 10-Q of SouthState Corporation;

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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Date: August 4, 2023

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/s/ John C. Corbett

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John C. Corbett

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Chief Executive Officer

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(Principal Executive Officer)

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Exhibit 31.2

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RULE 13A-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

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I, William E. Matthews, V, certify that:

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1. I have reviewed this quarterly report on Form 10-Q of SouthState Corporation;

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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Date: August 4, 2023

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/s/ William E. Matthews, V

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William E. Matthews, V

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Senior Executive Vice President,

Chief Financial Officer

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(Principal Financial Officer)

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Exhibit 32

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CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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In connection with the Quarterly Report of SouthState Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. paragraph 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

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1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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Date: August 4, 2023

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/s/ John C. Corbett

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John C. Corbett

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Chief Executive Officer

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(Principal Executive Officer)

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CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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In connection with the Quarterly Report of SouthState Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. paragraph 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

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1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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Date: August 4, 2023

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/s/ William E. Matthews, V

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William E. Matthews, V

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Senior Executive Vice President,

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Chief Financial Officer

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(Principal Financial Officer)

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