SOUTHSTATE CORPORATION
For Immediate Release Media Contact: Donna Pullen (803) 765-4558
Analyst Contact: John Pollok (803) 765-4628
COLUMBIA, S.C.-April 30, 2015-South State Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month period ended March 31, 2015. Highlights of the first quarter 2015 include the following:
Net income available to the common shareholder improved by 12.6% to $23.9 million from 4Q 2014
o Earnings per share (EPS) - diluted was $0.99 compared to $0.88 in 4Q 2014, a 12.5% increase
o Increased dividend paid to common shareholders by 21.1%; or $0.04 per share since 1Q 2014
o Net income available to the common shareholder improved by 51.0% from 1Q 2014
o EPS - diluted was $0.66 in 1Q 2014, a 50.0% increase
Non-acquired loan growth during first quarter was $118.6 million or 13.7% o Commercial non-owner occupied loans grew by $31.1 million or 37.3% o Consumer real estate loans grew by $74.1 million or 27.7%
o Commercial owner occupied loans grew by $17.3 million or 7.6%
Performance ratio improvement 1Q 2015 to 4Q 2014
o Return on average assets improved to 1.23% from 1.07%
o Return on average tangible equity improved to 16.21% from 14.77%
o Efficiency ratio improved to 65.05% from 69.34%
Balance sheet and tangible book value continued to improve from 4Q 2014
o Reduced other borrowings by redeeming Trust Preferred Securities of $46.3 million (7% debt)
o OREO decreased $6.6 million, or 15.5% to $36.1 million, including auction of approximately 70
assets with $4.0 million in carrying value
o Commercial loss share agreement of CBT with FDIC expired March 31, 2015
o Noninterest bearing deposits increased by $117.3 million or 28.6%
o Shareholders' equity exceeded $1.0 billion as equity increased $22.6 million
o Tangible equity to tangible assets improved to 8.39% from 8.28%
Asset quality improvement from 4Q 2014
o Nonperforming assets (NPAs) declined by 9.9%, or $7.9 million, to $71.7 million
o NPAs to total assets improved to 0.89% from 1.02%
o Net charge offs on non-acquired loans declined to negative 0.01% in 1Q 2105 (a net recovery
position) compared to 0.13%
o Net charge offs on acquired non-credit impaired loans increased to 0.56% in 1Q 2015 compared to 0.14%
o Coverage ratio of ALLL on non-acquired non-performing loans remained at 121%
Quarterly Cash DividendThe Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.24 per share payable on its common stock. This per share amount is $0.01 per share, or 4.3% higher than the dividend paid in the immediately preceding quarter and is $0.04 per share, or 20.0%, higher than a year ago. The dividend will be payable on May 29, 2015 to shareholders of record as of May 22, 2015.
Branch Initiatives
The first initiative is to consolidate or sell 14 branches and ATM locations over the next several quarters, subject to regulatory approval. Below is current information about these locations:
$208 million in total deposits with the average deposits per branch being $16 million
(includes two branches that are being sold);
Total cost savings are projected to be $4.5 million per year with the majority of the benefit being realized in compensation expense and net occupancy (starting in 3Q 2015);
One-time costs are expected to be $4.5 million and incurred over the next two quarters;
These costs will be offset by the sale of two branches with total deposits of approximately
$32.0 million, loans of $7.8 million, and fixed assets of $1.4 million, with a gain of approximately $1.1 million;
The deposit premium equals 3.5% for these two locations;
Expect to close this sale in the fourth quarter of 2015.
The second initiative relates to the announcement last week where South State Corporation has entered into a purchase and assumption agreement to acquire 13 former Bank of America branches (12 in South Carolina and 1 in Georgia). Below is current information and expectations related to these locations:
Approximately $580 million in total deposits, $3 million in loans, and $7 million in fixed assets (including 34 ATMs);
Deposit premium equals 5.5%, with the average cost of these deposits totaling 10 basis points;
Modeled 15% deposit runoff;
Over $260 million of deposits are in checking accounts which generate significant fee income;
Transaction is expected to be immediately accretive to EPS and mid-single digit accretive in
2016;
Internal rate of return estimated to be approximately 30%;
Average branch age is approximately 45 years;
Tangible book value earn back is expected within 3.5 years;
Closing is expected in the third quarter of 2015, subject to regulatory approval.
Three Months Ended | |||||
(Dollars in thousands, except per share data) | Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, |
INCOME STATEMENT | 2015 | 2014 | 2014 | 2014 | 2014 |
Interes t income | |||||
Loans , including fees (8) | $ 78,848 | $ 79,893 | $ 78,700 | $ 79,322 | $ 81,959 |
Inves tment s ecurities , federal funds s old and s ecurities | |||||
purchas ed under agreements to res ell | 5,150 | 5,487 | 5,648 | 5,509 | 5,497 |
Total interes t income | 83,998 | 85,380 | 84,348 | 84,831 | 87,456 |
Interes t expens e | |||||
Depos its | 2,003 | 2,246 | 2,395 | 2,261 | 2,401 |
Federal funds purchas ed, s ecurities s old under agreements | |||||
to repurchas e, and other borrowings | 946 | 1,583 | 1,584 | 1,597 | 1,589 |
Total interes t expens e | 2,949 | 3,829 | 3,979 | 3,858 | 3,990 |
Net interes t income | 81,049 | 81,551 | 80,369 | 80,973 | 83,466 |
Provis ion for loan los s es (1) | 818 | 1,481 | 2,091 | 2,169 | 849 |
Net interes t income after provis ion for loan los s es | 80,231 | 80,070 | 78,278 | 78,804 | 82,617 |
Noninteres t income | 26,505 | 25,299 | 24,453 | 24,399 | 20,548 |
Pre-tax operating epens e | 70,485 | 70,077 | 68,212 | 69,379 | 71,431 |
Merger and branding related expens e | -- | 4,599 | 6,846 | 6,510 | 5,985 |
Total noninteres t expens e | 70,485 | 74,676 | 75,058 | 75,889 | 77,416 |
Income before provis ion for income taxes | 36,251 | 30,693 | 27,673 | 27,314 | 25,749 |
Provis ion for income taxes | 12,325 | 9,445 | 8,346 | 9,368 | 8,832 |
Net income | 23,926 | 21,248 | 19,327 | 17,946 | 16,917 |
Preferred s tock dividends | -- | -- | -- | -- | 1,073 |
Net income available to common s hareholders | $ 23,926 | $ 21,248 | $ 19,327 | $ 17,946 | $ 15,844 |
Bas ic earnings per common s hare | $ 1.00 | $ 0.89 | $ 0.81 | $ 0.75 | $ 0.66 |
Diluted earnings per common s hare | $ 0.99 | $ 0.88 | $ 0.80 | $ 0.74 | $ 0.66 |
Operating earnings per common s hare - Bas ic (non-GAAP) (3) | $ 1.00 | $ 1.02 | $ 1.01 | $ 0.93 | $ 0.83 |
Operating earnings per common s hare - Diluted (non-GAAP) (3) | $ 0.99 | $ 1.01 | $ 1.00 | $ 0.92 | $ 0.82 |
Dividends per common s hare | $ 0.23 | $ 0.22 | $ 0.21 | $ 0.20 | $ 0.19 |
Bas ic weighted-average common s hares outs tanding | 23,943,443 | 23,911,515 | 23,898,982 | 23,892,245 | 23,873,178 |
Diluted weighted-average common s hares outs tanding | 24,200,709 | 24,189,289 | 24,160,461 | 24,140,600 | 24,116,174 |
Effective tax rate | 34.00% | 30.77% | 30.16% | 34.30% | 34.30% |
The Company reported consolidated net income available to common shareholders of $23.9 million, or $0.99 per diluted common share for the three-months ended March 31, 2015 up from $21.2 million, or $0.88 per diluted common share for the three-months ended December 31, 2014. The $2.7 million increase was the result of a decline in the provision for loan losses of $663,000, an increase in noninterest income of $1.2 million, lower noninterest expenses of $4.2 million, partially offset by a decrease in net interest income of $502,000 and an increase in the provision for income taxes of $2.9 million. During the quarter, our effective income tax rate returned to a more normalized rate of 34.00% compared to the fourth quarter which was lower due to investment in state tax credits and tax advantaged assets.
"I am pleased with our start to 2015 as we are beginning to see positive impact from our merger completed last year," said Robert R. Hill, Jr., CEO of South State Corporation. "We experienced strong fee income growth and new customer growth. We continue to improve our operating leverage and are making excellent progress with a bank-wide efficiency review. This review, along with our recently announced acquisition, will provide additional momentum toward our longer term earnings goals. We have also experienced meaningful improvement in our performance metrics, with a return on assets of 1.23% and return on tangible equity of 16.21% during the first quarter of 2015. This level of performance has allowed us to announce an additional increase in our cash dividend to $0.24 per share, which is the fifth consecutive quarterly increase."
Quarte r Ending B alance s | |||||
Mar. 31, | De c. 31, | Se p. 30, | Jun. 30, | Mar. 31, | |
B ALANCE SHEET | 2015 | 2014 | 2014 | 2014 | 2014 |
Assets | |||||
Cash and cash equivalents | $ 630,734 | $ 417,869 | $ 503,028 | $ 589,523 | $ 612,615 |
Investment securities: | |||||
Securities held to maturity | 9,659 | 9,659 | 10,389 | 10,389 | 10,891 |
Securities available for sale, at fair value | 808,396 | 806,766 | 805,114 | 795,741 | 793,124 |
Other investments | 9,031 | 10,518 | 10,518 | 10,518 | 10,518 |
Total investment securities | 827,086 | 826,943 | 826,021 | 816,648 | 814,533 |
Loans held for sale | 87,342 | 61,840 | 57,683 | 56,407 | 57,200 |
Loans: | |||||
Acquired credit impaired | 866,504 | 919,402 | 980,492 | 1,047,336 | 1,113,763 |
Acquired non-credit impaired | 1,247,349 | 1,327,999 | 1,377,343 | 1,447,583 | 1,512,201 |
Non-acquired | 3,586,405 | 3,467,826 | 3,304,708 | 3,174,625 | 2,979,958 |
Less allowance for non-acquired loan losses (1) | (33,538) | (34,539) | (34,804) | (35,422) | (34,669) |
Loans, net | 5,666,720 | 5,680,688 | 5,627,739 | 5,634,122 | 5,571,253 |
FDIC receivable for loss share agreements | 16,713 | 22,161 | 30,983 | 43,766 | 60,484 |
Other real estate owned ("OREO") | 36,096 | 42,726 | 51,250 | 53,733 | 64,147 |
Premises and equipment, net | 171,565 | 171,772 | 173,425 | 184,113 | 187,127 |
Bank owned life insurance | 99,751 | 99,140 | 98,505 | 97,933 | 97,314 |
Deferred tax asset | 40,629 | 42,692 | 60,322 | 66,780 | 67,997 |
Mortgage servicing rights | 21,510 | 21,601 | 22,052 | 21,015 | 20,925 |
Core deposit and other intangibles | 47,223 | 49,239 | 51,291 | 53,371 | 57,568 |
Goodwill | 317,688 | 317,688 | 317,688 | 317,688 | 317,688 |
Other assets | 58,525 | 71,868 | 60,101 | 58,587 | 62,124 |
Total assets | $ 8,021,582 | $ 7,826,227 | $ 7,880,088 | $ 7,993,686 | $ 7,990,975 |
Liabilities and Shareholders' Equity | |||||
Deposits: | |||||
Noninterest-bearing | $ 1,757,302 | $ 1,639,953 | $ 1,654,308 | $ 1,623,291 | $ 1,585,055 |
Interest-bearing | 4,876,355 | 4,821,092 | 4,863,920 | 4,952,847 | 5,049,496 |
Total deposits | 6,633,657 | 6,461,045 | 6,518,228 | 6,576,138 | 6,634,551 |
Federal funds purchased and securities | |||||
sold under agreements to repurchase | 276,774 | 221,541 | 231,229 | 280,595 | 254,985 |
Other borrowings | 55,003 | 101,210 | 101,127 | 101,045 | 100,963 |
Other liabilities | 48,584 | 57,511 | 62,509 | 82,890 | 66,313 |
Total liabilities | 7,014,018 | 6,841,307 | 6,913,093 | 7,040,668 | 7,056,812 |
Shareholders' equity: | |||||
Preferred stock - $.01 par value; authorized 10,000,000 shares | -- | -- | -- | -- | -- |
Common stock - $2.50 par value; authorized 40,000,000 shares | 60,392 | 60,377 | 60,338 | 60,325 | 60,296 |
Surplus | 702,648 | 701,764 | 700,579 | 699,324 | 698,079 |
Retained earnings | 241,526 | 223,156 | 207,219 | 192,961 | 179,842 |
Accumulated other comprehensive income (loss) | 2,998 | (377) | (1,141) | 408 | (4,054) |
Total shareholders' equity | 1,007,564 | 984,920 | 966,995 | 953,018 | 934,163 |
Total liabilities and shareholders' equity | $ 8,021,582 | $ 7,826,227 | $ 7,880,088 | $ 7,993,686 | $ 7,990,975 |
Common shares issued and outstanding | 24,156,759 | 24,150,702 | 24,135,220 | 24,130,006 | 24,118,243 |
At March 31, 2015, the Company's total assets were $8.0 billion, up from $7.8 billion at December 31, 2014. Since December 31, 2014, the Company has experienced asset growth primarily in cash and cash equivalents of
$212.9 million; non-acquired loans by $118.6 million and loans held for sale of $25.5 million. During the first quarter of 2015, more of the residential mortgages were refinanced into "loans held for sale" resulting in a higher balance and record mortgage banking income. This growth was mostly offset by acquired loan reductions of
$133.5 million; OREO down by $6.6 million; and FDIC receivable down by $5.4 million. Liabilities increased due to increases in deposits (both noninterest bearing and interest bearing) of $172.6 million and Fed funds
purchased and securities sold under repurchase agreements of $55.2 million. These increases were partially offset by redemption of Trust Preferred Securities in other borrowings of $46.3 million.
The Company's book value per common share increased to $41.71 per share at March 31, 2015, compared to
$40.78 at December 31, 2014. Capital increased by $22.6 million due primarily to net income of $23.9 million, which was offset by the common dividend paid of $5.6 million. Accumulated other comprehensive loss changed
to a comprehensive gain, during the first quarter 2015, with the increased unrealized gains in the AFS securities
portfolio during the quarter of $3.3 million, net of tax. Tangible book value ("TBV") per common share increased by $1.01 per share to $26.60 at March 31, 2015, from $25.59 at December 31, 2014. This increase was primarily the result of the strong net income during the quarter, net of the dividend paid to shareholders. In addition, tangible equity to tangible assets increased to 8.39% at March 31, 2015 up from 8.28% at December 31,
2014 and up 1.05% from March 31, 2014 when the ratio was 7.34%.
The total risk-based capital (RBC) ratio is estimated to be 13.8% down from December 31, 2014 of 14.3%. Tier 1 leverage ratio increased slightly from December 31, 2014 to 9.5%. The decrease in total RBC was driven by the adoption of Basel III and the redemption of $46.3 million of trust preferred securities. These were partially offset by strong net income for the quarter. The Company's capital position remains "well-capitalized" by all measures at March 31, 2015.
"Our quarterly earnings are contributing significantly to our capital position, which now exceeds $1.0 billion in equity," said John C. Pollok, COO and CFO. "The first quarter had several events that should provide ongoing improvement in our operating results including, the redemption of $46.3 million in trust preferred securities, expiration of the commercial loss share agreement of CBT, and the auction of 70 assets in OREO. In addition, the financial impact of the First Financial merger is evident as revenue synergies are being realized post integration."
Quarter Ended | |||||
Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | |
PERFORMANCE RATIOS | 2015 | 2014 | 2014 | 2014 | 2014 |
Return on average as s ets (annualized) | 1.23% | 1.07% | 0.96% | 0.91% | 0.86% |
Operating return on average as s ets (annualized) (non-GAAP) (3) | 1.23% | 1.23% | 1.21% | 1.12% | 1.06% |
Operating return on average equity (annualized) (non-GAAP) (3) | 9.73% | 9.93% | 9.99% | 9.43% | 8.51% |
Return on average tangible common equity (annualized) (non-GAAP) (7) | 16.21% | 14.77% | 13.97% | 13.62% | 12.59% |
Operating return on average tangible common equity (annualized) (non-GAAP) (3) (7) | 16.21% | 16.85% | 17.23% | 16.59% | 15.47% |
Efficiency ratio (tax equivalent) | 65.05% | 69.34% | 70.98% | 71.52% | 73.84% |
Dividend payout ratio (2) | 23.22% | 25.00% | 26.22% | 26.89% | 28.91% |
Book value per common s hare | $ 41.71 | $ 40.78 | $ 40.07 | $ 39.50 | $ 38.73 |
Tangible common equity per common s hare (non-GAAP) (7) | $ 26.60 | $ 25.59 | $ 24.78 | $ 24.12 | $ 23.17 |
CAPITAL RATIOS | |||||
Equity-to-as s ets | 12.56% | 12.58% | 12.27% | 11.92% | 11.69% |
Tangible equity-to-tangible as s ets (non-GAAP) (7) | 8.39% | 8.28% | 7.96% | 7.63% | 7.34% |
Tier 1 common equity (6) | 12.2% | ||||
Tier 1 leverage (6) | 9.5% | 9.4% | 9.1% | 8.9% | 8.6% |
Tier 1 ris k-bas ed capital (6) | 13.1% | 13.5% | 13.2% | 12.9% | 12.7% |
Total ris k-bas ed capital (6) | 13.8% | 14.3% | 14.1% | 13.8% | 13.6% |
OTHER DATA | |||||
Number of branches | 127 | 127 | 127 | 135 | 136 |
Number of employees (full-time equivalent bas is ) | 2,051 | 2,081 | 2,057 | 2,095 | 2,104 |
Ending B alance | |||||
Mar. 31, | De c. 31, | Se p. 30, | Jun. 30, | Mar. 31, | |
(Dollars in thousands) | 2015 | 2014 | 2014 | 2014 | 2014 |
NONPERFORMING ASSETS: | |||||
Non-acquire d | |||||
Non-acquired nonperforming loans | $ 27,574 | $ 28,516 | $ 30,481 | $ 35,313 | $ 37,442 |
Non-acquired OREO and other nonperforming assets | 6,500 | 7,947 | 9,360 | 9,003 | 12,187 |
Total non-acquired nonperforming assets | 34,074 | 36,463 | 39,841 | 44,316 | 49,629 |
Acquire d | |||||
Acquired nonperforming loans | 7,380 | 7,646 | 5,860 | -- | -- |
Acquired OREO and other nonperforming assets | 30,268 | 35,473 | 42,530 | 45,542 | 52,992 |
Total acquired nonperforming assets | 37,648 | 43,119 | 48,390 | 45,542 | 52,992 |
Total nonperforming assets | $ 71,722 | $ 79,582 | $ 88,231 | $ 89,858 | $ 102,621 |
Quarte r Ende d | |||||
Mar. 31, | De c. 31, | Se p. 30, | Jun. 30, | Mar. 31, | |
2015 | 2014 | 2014 | 2014 | 2014 | |
ASSET QUALITY RATIOS: | |||||
Allowance for non-acquired loan losses as a | |||||
percentage of non-acquired loans (1) | 0.94% | 1.00% | 1.05% | 1.12% | 1.16% |
Allowance for non-acquired loan losses as a | |||||
percentage of non-acquired nonperforming loans | 121.63% | 121.12% | 114.18% | 100.31% | 92.59% |
Net charge-offs on non-acquired loans as a percentage of | |||||
average non-acquired loans (annualized) (1) | -0.01% | 0.13% | 0.26% | 0.17% | 0.05% |
Net charge-offs on acquired non-credit impaired loans as a percentage | |||||
of average acquired non-credit impaired loans (annualized) (1) | 0.56% | 0.14% | 0.12% | 0.00% | 0.00% |
Total nonperforming assets as a percentage | |||||
of total assets | 0.89% | 1.02% | 1.12% | 1.12% | 1.28% |
Excluding Acquire d As s e ts | |||||
NPLs as a percentage of period end non-acquired loans (1) | 0.77% | 0.82% | 0.92% | 1.11% | 1.26% |
Total nonperforming assets as a percentage of | |||||
total non-acquired loans and repossessed assets (1) (4) | 0.95% | 1.05% | 1.20% | 1.39% | 1.66% |
Total nonperforming assets as a percentage | |||||
of total assets (5) | 0.42% | 0.47% | 0.51% | 0.55% | 0.62% |
During the first quarter of 2015, overall asset quality continued to improve. Non-acquired NPAs, excluding acquired loans and acquired other real estate owned (OREO), declined by $2.4 million, or 6.6%, to $34.1 million. Non-acquired nonperforming loans decreased by $942,000, or 3.3%, and non-acquired OREO decreased $1.5 million, or 19%. Non-acquired NPAs as a percentage of total non-acquired loans and repossessed assets declined to 0.95% compared to 1.05% in the fourth quarter of 2014. Total NPAs, including acquired NPAs, declined by
$7.9 million, or 9.9% from the fourth quarter 2014 level of $79.6 million to $71.7 million at March 31, 2015.
During the first quarter, the Company reported $7.4 million in nonperforming loans related to "acquired non- credit impaired loans". This was a decrease of $266,000 from the fourth quarter of 2014. Additionally, acquired nonperforming OREO and other assets owned declined by $5.5 million from December 31, 2014.
At March 31, 2015, the allowance for non-acquired loan losses was $33.5 million or 0.94% of non-acquired period-end loans. The current allowance for loan losses provides 1.21 times coverage of period-end non-acquired nonperforming loans the same at December 31, 2014 and up from 0.93 times at March 31, 2014. Net charge-offs (recoveries) within the non-acquired portfolio were ($54,000) for the quarter or -0.01% annualized, down from the fourth quarter of 2014 of $1.1 million or 0.13% annualized, and down from the first quarter of 2014 of
$332,000, or 0.05% annualized. During the first quarter, the allowance for loan losses was reduced by $1.1 million compared to an increase of $875,000 in the fourth quarter of 2014 through the provision for loan losses due to improvements in asset quality in the non-acquired portfolio.
During the quarter, net charge offs related to "acquired non-credit impaired loans" were $1.8 million or 0.56%
annualized, and the Company recorded a provision for loan losses, accordingly. These charge-offs consisted of
several large home equity loans on the coast of South Carolina and other consumer loans. This was higher than the fourth quarter 2014 of $490,000, or 0.14% annualized net charge offs.
Total OREO decreased by $6.6 million during the first quarter to $36.1 million compared to the fourth quarter of
2014 of $42.7 million. This decline was primarily the result of an auction of approximately 70 assets in early February 2015 with a carrying value of approximately $4.0 million. Additionally, a former branch was sold at a loss of approximately $360,000 during the quarter. As a result, our OREO and loan related costs were up
$494,000 during the quarter to $3.0 million compared to the fourth quarter of $2.5 million.
Thre e Months Ende d | |||||||||
March 31, 2015 | De ce mbe r 31, 2014 | March 31, 2014 | |||||||
(Dollars in thousands) | Ave rage | Income / | Yie ld/ | Ave rage | Income / | Yie ld/ | Ave rage | Income / | Yie ld/ |
YIELD ANALYSIS | Balance | Expe ns e | Rate | Balance | Expe ns e | Rate | Balance | Expe ns e | Rate |
Inte re s t-Earning As s e ts : | |||||||||
Federal funds sold, reverse repo, and time deposits | $ 371,226 | $ 411 | 0.45% | $ 381,491 | $ 463 | 0.48% | 365,026 | $ 460 | 0.51% |
Investment securities (taxable) | 674,310 | 3,661 | 2.20% | 675,672 | 3,898 | 2.29% | 651,631 | 3,881 | 2.42% |
Investment securities (tax-exempt) | 140,954 | 1,078 | 3.10% | 143,953 | 1,126 | 3.10% | 149,632 | 1,156 | 3.13% |
Loans held for sale | 54,673 | 413 | 3.06% | 46,540 | 636 | 5.42% | 29,386 | 320 | 4.42% |
Loans | 5,706,831 | 78,435 | 5.57% | 5,681,286 | 79,257 | 5.53% | 5,647,034 | 81,639 | 5.86% |
Total interest-earning assets | 6,947,994 | 83,998 | 4.90% | 6,928,942 | 85,380 | 4.89% | 6,842,709 | 87,456 | 5.18% |
Noninterest-earning assets | 949,207 | 962,967 | 1,117,078 | ||||||
Total As s e ts | $ 7,897,201 | $ 7,891,909 | $ 7,959,787 | ||||||
Inte re s t-Be aring Liabilitie s : | |||||||||
Transaction and money market accounts | $ 2,942,678 | $ 747 | 0.10% | $ 2,911,247 | $ 765 | 0.10% | $ 2,880,128 | $ 813 | 0.11% |
Savings deposits | 664,074 | 110 | 0.07% | 658,664 | 119 | 0.07% | 656,266 | 118 | 0.07% |
Certificates and other time deposits | 1,208,934 | 1,146 | 0.38% | 1,268,408 | 1,362 | 0.43% | 1,496,733 | 1,470 | 0.40% |
Federal funds purchased and repurchase agreements | 279,569 | 96 | 0.14% | 238,842 | 80 | 0.13% | 273,636 | 101 | 0.15% |
Other borrowings | 58,073 | 850 | 5.94% | 101,173 | 1,503 | 5.89% | 101,513 | 1,488 | 5.94% |
Total interest-bearing liabilities | 5,153,328 | 2,949 | 0.23% | 5,178,334 | 3,829 | 0.29% | 5,408,276 | 3,990 | 0.30% |
Noninterest-bearing liabilities | 1,746,400 | 1,737,179 | 1,557,438 | ||||||
Shareholders' equity | 997,473 | 976,396 | 994,073 | ||||||
Total liabilitie s and s hare holde rs ' e quity | $ 7,897,201 | $ 7,891,909 | $ 7,959,787 | ||||||
Ne t inte re s t income and margin (NON-TAX EQUIV.) | $ 81,049 | 4.73% | $ 81,551 | 4.67% | $ 83,466 | 4.95% | |||
Ne t inte re s t margin (TAX EQUIVALENT) | 4.78% | 4.72% | 5.00% | ||||||
Non-taxable equivalent net interest income was $81.0 million for the first quarter of 2015, a net $502,000 decrease from the fourth quarter of 2014, resulting primarily from the following:
1. A $104.7 million decrease in the average balance of acquired loans from the fourth quarter of 2014, coupled with a 25 basis point improvement in the yield resulted in a decline in interest income of $1.6 million. The yield improvement on acquired loans from 7.68% in the fourth quarter of 2014 to 7.93% in the first quarter of 2015 was the result of improved cash flows in certain pools; offset by
2. A $130.2 million increase in the average balance of non-acquired loans which resulted in an increase in interest income of approximately $765,000; with the yield increasing slightly to 4.10% during the first
quarter from 4.08% in the fourth quarter; and
3. The decrease in interest expense from funding sources was $880,000. This decline was primarily the result of the decrease in other borrowings as Trust Preferred Securities of $46.3 million were redeemed in early January 2015 resulting in a decrease of interest expense of $653,000. The expected rate paid on other borrowings should be approximately 4.70%, assuming a similar rate environment as first quarter of
2015. The average balance of certificates of deposit declined $59.5 million and the rate declined by 5 basis points during the quarter resulting in a decrease of interest expense of $216,000.
Tax-equivalent net interest margin increased 6 basis points from the fourth quarter of 2014 and declined by 22 basis points from the first quarter of 2014. The Company's average yield on interest-earning assets increased 1 basis point while the average rate on interest-bearing liabilities decreased 6 basis points from the fourth quarter of
2014. During the first quarter of 2015, the Company's average total assets remained the same as December 31,
2014 at $7.9 billion and average earning assets remained at $6.9 billion. Average interest-bearing liabilities remained the same at $5.2 billion for both first quarter of 2015 and fourth quarter of 2014. Average non-interest bearing demand deposits increased by $9.2 million during the quarter and by $189.0 million from March 31,
2014.
Thre e Months Ende d | |||||
Mar. 31, | De c. 31, | Se p. 30, | Jun. 30, | Mar. 31, | |
(Dollars in thousands) | 2015 | 2014 | 2014 | 2014 | 2014 |
Noninte re s t income : | |||||
Service charges on deposit accounts | $ 8,108 | $ 8,986 | $ 9,126 | $ 9,144 | $ 8,988 |
Bankcard services income | 7,599 | 7,320 | 7,489 | 7,741 | 7,105 |
Mortgage banking income | 6,626 | 4,072 | 4,124 | 4,683 | 3,291 |
Trust and investment services income | 4,934 | 4,499 | 4,490 | 4,812 | 4,543 |
Securities gains, net | -- | -- | (90) | 88 | -- |
Amortization of FDIC indemnification asset | (3,207) | (4,177) | (4,825) | (5,815) | (7,078) |
Recoveries of fully charged off acquired loans | 255 | 1,633 | 1,596 | 1,660 | 1,287 |
Other | 2,190 | 2,966 | 2,543 | 2,086 | 2,412 |
Total noninterest income | $ 26,505 | $ 25,299 | $ 24,453 | $ 24,399 | $ 20,548 |
Noninte re s t e xpe ns e : | |||||
Salaries and employee benefits | $ 40,987 | $ 39,034 | $ 40,029 | $ 40,276 | $ 39,093 |
Net occupancy expense | 5,237 | 5,701 | 5,387 | 5,731 | 5,608 |
Information services expense | 3,958 | 3,724 | 3,417 | 4,279 | 4,398 |
Furniture and equipment expense | 3,145 | 3,100 | 3,166 | 3,264 | 3,744 |
OREO expense and loan related | 3,014 | 2,520 | 3,374 | 1,875 | 4,203 |
Business development and staff related | 2,114 | 1,736 | 1,482 | 1,747 | 1,571 |
Amortization of intangibles | 2,016 | 2,052 | 2,080 | 2,084 | 2,104 |
Bankcard expense | 1,980 | 2,043 | 2,141 | 2,187 | 2,256 |
Supplies, printing and postage expense | 1,612 | 2,074 | 1,681 | 1,599 | 1,583 |
Professional fees | 1,409 | 1,459 | 1,068 | 1,190 | 1,262 |
FDIC assessment and other regulatory charges | 1,184 | 1,321 | 1,268 | 1,267 | 1,576 |
Advertising and marketing | 888 | 1,172 | 837 | 1,054 | 1,007 |
Other operating expenses | 2,941 | 4,141 | 2,282 | 2,826 | 3,026 |
Merger and branding related expense | -- | 4,599 | 6,846 | 6,510 | 5,985 |
Total noninterest expense | $ 70,485 | $ 74,676 | $ 75,058 | $ 75,889 | $ 77,416 |
Noninterest income was higher than the fourth quarter of 2014 by approximately $1.2 million to $26.5 million. The increase was primarily the result of lower amortization of the FDIC indemnification asset by $970,000, with the end of the CBT commercial loss share agreement, and higher mortgage banking income of $2.6 million. These two were partially offset by declines in service charges on deposit accounts of $878,000 due to first quarter seasonality and customer behavior changes; lower recoveries of acquired loans of $1.4 million and lower other revenue of $776,000. We anticipate a significant decline in the amortization of the FDIC indemnification asset in the second quarter of 2015, with the expiration of the CBT commercial loss share agreement (which began in January 2010).
Compared to the first quarter of 2014, noninterest income grew by $6.0 million due primarily to the reduced amortization of the indemnification asset by $3.9 million and improved mortgage banking income of $3.3 million. These increases were partially offset by declines in service charges on deposit accounts of $880,000 and lower recoveries of acquired loans of $1.0 million.
Noninterest expense was $70.5 million in the first quarter of 2015, down from $74.7 million in the fourth quarter of 2014. This decrease from the fourth quarter of 2014 was primarily due to the elimination of merger-branding charges. Salaries and benefits were higher during the quarter by $2.0 million due primarily to payroll taxes (FICA and unemployment started over with the new year); and OREO expense and other loan related were
$494,000 higher due to the auction of 70 assets in February and related loss of approximately $640,000, net of indemnification claims. These increases were mostly offset by improvements in net occupancy, FDIC assessment and other regulatory charges, advertising and marketing, supplies, printing and postage expense, and other expense (led by $859,000 improvement in passive losses from investments for tax credits). Compared to the first quarter of 2014, noninterest expense improved by $6.9 million primarily with the elimination of merger-branding related expense of $6.0 million.
South State Corporation will hold a conference call today, April 30th; at 11 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing 877-506-9272. The number for international participants is 412-380-2004. The conference ID number is
10062894. Participants can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available beginning April 30th by 2:00 p.m. Eastern Time until 9:00 a.m. on May 14th, 2015. To listen to the replay, dial 877-344-7529 or 412-317-0088. The passcode is 10062894.
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South State Corporation is the largest bank holding company headquartered in South Carolina. Founded in 1933, the company's primary subsidiary, South State Bank, has been serving the financial needs of its local communities in 19 South Carolina counties, 12 Georgia counties and 4 North Carolina counties for over 80 years. The bank also operates Minis & Co., Inc. and First Southeast 401K Fiduciaries, Inc., both registered investment advisors; and First Southeast Investor Services, Inc., a limited purpose broker-dealer. South State Corporation has assets of approximately $8.0 billion and its stock is traded under the symbol SSB on the NASDAQ Global Select Market. More information can be found at www.SouthStateBank.com.
Non-GAAP Measures
Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non- GAAP measures provide additional useful information. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial conditi on as reported under GAAP.
Thre e Months Ende d | |||||
(Dollars in thousands, except per share data) | Mar. 31, | De c. 31, | Se p. 30, | Jun. 30, | Mar. 31, |
RECONCILIATION OF NON-GAAP TO GAAP | 2015 | 2014 | 2014 | 2014 | 2014 |
Ope rating Earnings (non-GAAP) (3) | |||||
Net operating earnings available to common shareholders (non-GAAP) | $ 23,926 | $ 24,432 | $ 24,171 | $ 22,165 | $ 19,776 |
Securities (gains) losses, net of tax | -- | -- | (63) | 58 | -- |
Merger and branding related expense, net of tax | -- | (3,184) | (4,781) | (4,277) | (3,932) |
Net income available to common shareholders (GAAP) | $ 23,926 | $ 21,248 | $ 19,327 | $ 17,946 | $ 15,844 |
Ope rating e arnings pe r common s hare - B as ic (3) | |||||
Operating earnings per common share - Basic (non-GAAP) | $ 1.00 | $ 1.02 | $ 1.01 | $ 0.93 | $ 0.83 |
Effect to adjust for merger and branding related expenses | -- | (0.13) | (0.20) | (0.18) | (0.17) |
Earnings per common share - Basic (GAAP) | $ 1.00 | $ 0.89 | $ 0.81 | $ 0.75 | $ 0.66 |
Ope rating e arnings pe r common s hare - Dilute d (3) | |||||
Operating earnings per common share - Diluted (non-GAAP) | $ 0.99 | $ 1.01 | $ 1.00 | $ 0.92 | $ 0.82 |
Effect to adjust for merger and branding related expenses | -- | (0.13) | (0.20) | (0.18) | (0.16) |
Earnings per common share - Diluted (GAAP) | $ 0.99 | $ 0.88 | $ 0.80 | $ 0.74 | $ 0.66 |
Ope rating Re turn of Ave rage As s e ts (3) | |||||
Operating return on average assets (non-GAAP) | 1.23% | 1.23% | 1.21% | 1.12% | 1.06% |
Effect to adjust for merger and branding related expenses | 0.00% | -0.16% | -0.25% | -0.21% | -0.20% |
Return on average assets (GAAP) | 1.23% | 1.07% | 0.96% | 0.91% | 0.86% |
Ope rating Re turn of Ave rage Equity (3) | |||||
Operating return on average equity (non-GAAP) | 9.73% | 9.93% | 9.99% | 9.43% | 8.51% |
Effect to adjust for securities gains (losses) | 0.00% | 0.00% | -0.03% | 0.02% | 0.00% |
Effect to adjust for merger and branding related expenses | 0.00% | -1.30% | -1.97% | -1.82% | -1.61% |
Return on average equity (GAAP) | 9.73% | 8.63% | 7.99% | 7.63% | 6.90% |
Ope rating Re turn on Ave rage Common Tangible Equity (3) (7) | |||||
Operating return on average common tangible equity (non-GAAP) | 16.21% | 16.85% | 17.23% | 16.59% | 15.47% |
Effect to adjust for securities gains (losses) | 0.00% | 0.00% | -0.03% | 0.02% | 0.00% |
Effect to adjust for merger and branding related expenses | 0.00% | -1.29% | -1.98% | -1.82% | -1.71% |
Effect to adjust for intangible assets | -6.48% | -6.93% | -7.24% | -7.17% | -6.87% |
Return on average common equity (GAAP) | 9.73% | 8.63% | 7.99% | 7.63% | 6.89% |
Tangible B ook Value Pe r Common Share (7) | |||||
Tangible book value per common share (non-GAAP) | $ 26.60 | $ 25.59 | $ 24.78 | $ 24.12 | $ 23.17 |
Effect to adjust for intangible assets | 15.11 | 15.19 | 15.29 | 15.38 | 15.56 |
Book value per common share (GAAP) | $ 41.71 | $ 40.78 | $ 40.07 | $ 39.50 | $ 38.73 |
Tangible Equity-to-Tangible As s e ts (7) | |||||
Tangible equity-to-tangible assets (non-GAAP) | 8.39% | 8.28% | 7.96% | 7.63% | 7.34% |
Effect to adjust for intangible assets | 4.17% | 4.30% | 4.31% | 4.29% | 4.35% |
Equity-to-assets (GAAP) | 12.56% | 12.58% | 12.27% | 11.92% | 11.69% |
Footnotes to tables:
(1) Loan data excludes mortgage loans held for sale.
(2) The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period. (3) Operating earnings, operating return on average assets, and operating return on average equity are non-GAAP measures and exclude
the after-tax effect of gains on acquisitions, gains or losses on sales of securities, OTTI, and merger and branding related expense. Management believes that non-GAAP operating measures provide additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of
performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial con dition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. Operating earnings and the related
operating return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branding related expense of $4.6 million, $6.8 million, $6.5 million, and $6.0 million, for the quarters ended December 31, 2 014, September 30, 2014, June 30, 2014, and March 31, 2014, respectively; and (b) securities gains (losses) of ($90,000) and $88,000 for the quarters ended September 30, 2014 and June 30, 2014.
(4) Repossessed assets include OREO and other nonperforming assets.
(5) Calculated by dividing total non-acquired NPAs by total assets.
(6) March 31, 2015 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed. All ratios are rounded down to one decimal point.
(7) The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. The sections titled "Reconciliation of Non-GAAP to GAAP" provide tables that reconcile non- GAAP measures to GAAP.
(8) Includes noncash loan interest income related the discount on acquired performing loans on $1.6 million; $2.3 million; $2.4 million;
$2.2 million; and $3.0 million, respectively during the five quarters above.
Cautionary Statement Regarding Forward Looking Statements
Statements included in this report which are not historical in nature are intended to be, and are hereby identified as, forward looking statements for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934. Forward looking statements generally include words such as "expects," "projects," "anticipates," "believes," "intends," "estimates," "strategy," "plan," "potential," "possible" and other similar expressions. The Company cautions readers that forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materiall y from anticipated results. Such risks and uncertainties, include, among others, the following possibilities: (1) the outcome of any legal proceedings instituted against the Company; (2) credit risks associated with an obligor's failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any loan-related document; (3) interest risk involving the effect of a change in interest rates on the bank's earnings, the market value of the bank's loan and secur ities portfolios, and the market value of the Company's equity; (4) liquidity risk affecting the bank's ability to meet its obligations when they come due; (5) risks associated with an anticipated increase in the Company's investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities the Company desires to acquire are not available on terms acceptable to the Company; (6) price risk focusing on changes in market factors that may affect the value of traded instruments in "mark-to-market" portfolios; (7) transaction risk arising from problems with service or product delivery; (8) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (9) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practice s or ethical standards, including, without limitation, increased capital requirements (including, without limitation, the impact of the capital rules adopted to implement Basel III), Consumer Financial Protection Bureau rules and regulations, and potential changes in accounting principles relating to loan loss recognition; (10) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (11) reputation risk that adversely affects earnings or capital arising from negative public opinion; (12) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (13) cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, subjects the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (14) economic downturn risk potentially resulting in deterioration in the credit markets, greater than expected non-interest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from federal spending cuts and/or one or more federal budget-related impasses or actions; (15) greater than expected noninterest expenses; (16) excessive loan losses; (17) failure to realize synergies and other financial benefits from, and to limit liabilities associated with, mergers and acquisitions within the expected time frame; (18) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with merger and acquisition integration s, and including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related-matters; (19) the risks of fluctuations in market prices for Company common stock that may or may not reflect economic condition or performance of the Company; (20) the payment of dividends on Company common stock is subject to regulatory supervision as well as the discretion of the board of directors of the Company, the Company's performance and other factors; and (21) other risks and uncertainties disclosed in the Company's most recent Annual Report on Form 10 -K filed with the SEC or disclosed in documents filed or furnished by the Company with or to the SEC after the filing of such Annual report on Form 10-K, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward looking statements. The Company undertakes no obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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