SouthState Corp

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes SouthState Corporation and its subsidiary’s results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, and the year ended December 31, 2022 as compared to the year ended December 31, 2021, and also analyzes our financial condition as of December 31, 2023 as compared to December 31, 2022. Like most banking 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 most of which we pay interest. Consequently, one of the key measures of our success is the amount of 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.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes SouthState Corporation and its subsidiary’s results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, and also analyzes our financial condition as of December 31, 2024 as compared to December 31, 2023. Like most banking 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 most of which we pay interest. Consequently, one of the key measures of our success is the amount of 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.

Previous wording

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 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. Corporate Billing’s previous holding company CBI Holding Company, LLC and its subsidiary CBI Real Estate Holding, LLC were merged into Corporate Billing effective November 30, 2023. The holding company also owns SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b) of the U.S. Tax Code. In late 2023, the Bank formed SSB First Street Corporation, an investment subsidiary headquartered in Wilmington, Delaware, to hold tax-exempt municipal investment securities as part of the Bank’s investment portfolio.

Current wording

SouthState Corporation 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 Securities Corp. (“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. The Bank, through its Corporate Billing Division, provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers nationwide. In 2023, the Bank formed SSB First Street Corporation, an investment subsidiary headquartered in Wilmington, Delaware, to hold tax-exempt municipal investment securities as part of the Bank’s investment portfolio. The holding company also owns SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b) of the U.S. Tax Code.

Previous wording

At December 31, 2023, we had $44.9 billion in assets and 5,184 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.

Current wording

At December 31, 2024, we had $46.4 billion in assets and 5,100 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.

Previous wording

We earned net income of $494.3 million, or $6.46 diluted earnings per share (“EPS”), during 2023 compared to net income of $496.0 million, or $6.60 diluted EPS, in 2022. Net income available to the common shareholders was down $1.7 million, or 0.4%, in 2023 compared to 2022. For further discussion of the Company’s results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, and the year ended December 31, 2022 as compared to the year ended December 31, 2021, see Results of Operations section of this MD&A starting on page 66.

Current wording

We earned net income of $534.8 million, or $6.97 diluted earnings per share (“EPS”), during 2024 compared to net income of $494.3 million, or $6.46 diluted EPS, in 2023. Net income available to the common shareholders was up $40.5 million, or 8.2%, in 2024 compared to 2023. For further discussion of the Company’s results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, see Results of Operations section of this MD&A starting on page 68.

Previous wording

At December 31, 2023, we had total assets of approximately $44.9 billion compared to approximately $43.9 billion at December 31, 2022. See the Financial Condition section of this MD&A starting on page 76 for a more detailed description of the change in our balance sheet.

Current wording

At December 31, 2024, we had total assets of approximately $46.4 billion compared to approximately $44.9 billion at December 31, 2023. See the Financial Condition section of this MD&A starting on page 77 for a more detailed description of the change in our balance sheet.

Previous wording

With high inflation and a rising interest rate environment, there was some deterioration in asset quality in 2023. However, our overall asset quality results remained strong during the year. Net charge offs as a percentage of average loans increased to 0.08% compared to 0.02% for the year ended December 31, 2022. The total nonperforming assets (“NPAs”) increased $74.4 million to $184.1 million at December 31, 2023 from $109.7 million at December 31, 2022. Non-acquired NPAs increased $75.2 million to $122.5 million at December 31, 2023 from $47.3 million at December 31, 2022, which was related to an increase in non-acquired nonperforming loans of $74.7 million. Non-acquired OREO and other NPAs increased by $466,000 to $711,000 as of December 31, 2023 compared to $245,000 as of December 31, 2022. Acquired NPAs decreased $827,000 to $61.6 million at December 31, 2023 from $62.5 million at December 31, 2022. Acquired nonperforming loans decreased $617,000 and acquired OREO and other nonperforming assets decreased $210,000. Total NPAs as a percentage of total assets increased 16 basis points to 0.41% at December 31, 2023 compared to 0.25% at December 31, 2022. While net charge-offs totaled $29.1 million, the Company recorded a total of $195.9 million of provision for credit losses for the trailing eight quarters. Our NPA ratios remained historically low.

Current wording

Our overall asset quality results remained strong during the year. Net charge offs as a percentage of average loans decreased to 0.06% compared to 0.08% for the year ended December 31, 2023. The total nonperforming assets (“NPAs”) increased by $29.2 million to $213.4 million at December 31, 2024 from $184.1 million at December 31, 2023. Non-acquired NPAs increased $24.0 million to $146.5 million at December 31, 2024 from $122.5 million at December 31, 2023, which was related to an increase in non-acquired nonperforming loans of $23.5 million. Non-acquired OREO and other NPAs increased by $471,000 to $1.2 million as of December 31, 2024 compared to $711,000 as of December 31, 2023. Acquired NPAs increased $5.3 million to $66.9 million at December 31, 2024 from $61.6 million at December 31, 2023. Acquired nonperforming loans increased $4.4 million and acquired OREO and other nonperforming assets increased $871,000. Total NPAs as a percentage of total assets increased 5 basis points to 0.46% at December 31, 2024 compared to 0.41% at December 31, 2023. We continue to experience solid and stable asset quality numbers and ratios in 2024.

Previous wording

We continue to remain well-capitalized with a total risk-based capital ratio of 14.1% and a Tier 1 leverage ratio of 9.4%, as of December 31, 2023, compared to 13.0% and 8.7%, respectively, at December 31, 2022. The improvement in the total risk-based capital ratio was mainly due to total risk-based capital increasing 11.1% with the increase in equity resulting from net income of $494.3 million recognized in 2023, along with the increase in the allowance for credit losses and unfunded commitments of $126.5 million includable in Tier 2 capital. Total risk-weighted assets increased $807.3 million, or 2.3%, in 2023. The improvement inthe Tier 1 leverage ratio was due to the increase in Tier 1 capital of 9.8%with the increase in equity resulting from net income of $494.3 million recognized in 2023. Regulatory average assets used to calculate the Tier 1 leverage ratio only increased $707.6 million, or 1.6%, in 2023. We believe our current capital ratios position us well to grow both organically and through certain strategic opportunities. For further discussion of the Company’s financial condition as of December 31, 2023 compared to December 31, 2022, see Financial Condition section of this MD&A starting on page 76.

Current wording

We continue to remain well-capitalized with a total risk-based capital ratio of 15.0% and a Tier 1 leverage ratio of 10.0%, as of December 31, 2024, compared to 14.1% and 9.4%, respectively, at December 31, 2023. The improvement in the total risk-based capital ratio was mainly due to total risk-based capital increasing 8.2% with the increase in equity resulting from net income of $534.8 million recognized in 2024, along with the increase in the allowance for credit losses and unfunded commitments of $20.1 million includable in Tier 2 capital. Total risk-weighted assets increased $657.1 million, or 1.9%, in 2024. The improvement inthe Tier 1 leverage ratio was due to the increase in Tier 1 capital of 9.3%with the increase in equity resulting from net income of $534.8 million recognized in 2024. Regulatory average assets used to calculate the Tier 1 leverage ratio increased $1.1 billion, or 2.6%, in 2024. We believe our current capital ratios position us well to grow both organically and through certain strategic opportunities. For further discussion of the Company’s financial condition as of December 31, 2024 compared to December 31, 2023, see Financial Condition section of this MD&A starting on page 77.

Previous wording

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 1 of our audited consolidated financial statements.

Current wording

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 1—Summary of Significant Accounting Policies of our audited consolidated financial statements.

Previous wording

We account for acquisitions under FASB ASC Topic 805,Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, and liabilities assumed, are recorded at fair value. We adopted ASU 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020 which requires us to record purchased financial assets with credit deterioration (PCD assets), defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this method, there is no provision for credit losses affecting net income on acquisition of PCD assets. Changes in estimates of expected credit losses after acquisition are recognized as provision for credit loss expense (or recovery of credit losses) in subsequent periods as they arise. Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration shall be allocated to each individual asset. At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any non-credit discount or premium. The non-credit discount or premium, after the adjustment for the allowance for credit losses, shall be accreted into interest income using the interest method based on the effective interest rate determined after the adjustment for credit losses at the adoption date.

Current wording

We account for acquisitions under FASB ASC Topic 805,Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, and liabilities assumed, are recorded at fair value. ASU 2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires us to record purchased financial assets with credit deterioration (PCD assets), defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this method, there is no provision for credit losses affecting net income on acquisition of PCD assets. Changes in estimates of expected credit losses after acquisition are recognized as provision for credit loss expense (or recovery of credit losses) in subsequent periods as they arise. Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration shall be allocated to each individual asset. At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any non-credit discount or premium. The non-credit discount or premium, after the adjustment for the allowance for credit losses, shall be accreted into interest income using the interest method based on the effective interest rate determined after the adjustment for credit losses at the adoption date.

Previous wording

For further discussion of our loan accounting and acquisitions, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions, Note 4—Loans and Note 5—Allowance for Credit Losses to the audited condensed consolidated financial statements.

Current wording

For further discussion of our loan accounting and acquisitions, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions, Note 4—Loans and Note 5—Allowance for Credit Losses to the audited consolidated financial statements.

Previous wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from the third-party service provider. Changes in the economic forecasts may significantly affect the estimated credit losses which may potentially lead to materially different quantitatively modeled allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables, it is difficult to estimate the impact of a change in any one individual variable on the ACL. SouthState uses a third-party service provider to support the economic forecast assumptions under CECL forecast by providing various levels of economic scenarios. These scenarios are weighted in accordance with management assessment of scenarios as well as expectations of the general market and industry conditions. To illustrate the sensitivity of these scenarios, if a 100% probability weighting was applied to the adverse scenario rather than using the probability-weighted three scenario approach, this would result in an increase in the ACL by approximately $263.8 million. Conversely, if a 100% probability weighting was applied to the upside scenario, this would result in a decrease in the ACL by approximately $137.3 million. The adverse scenario includes assumptions including, but not limited to, an extended shutdown of the federal government, inflation, global events such as the Russian-Ukrainian conflict, tensions between China and Taiwan, tensions in the Middle east, political risks, increased unemployment and the U.S. economy falling into recession in 2024. Conversely, the upside scenario includes assumptions such as a swift resolution of international conflicts, stabilization of consumer confidence, more than full employment, reduced political tensions, resolution of congressional gridlock, and other favorable assumptions. This sensitivity analysis and related impact on the ACL is a hypothetical analysis and is not intended to represent management’s judgments or assumptions of qualitative loss factors that were utilized at December 31, 2023

Current wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from the third-party service provider. Changes in the economic forecasts may significantly affect the estimated credit losses which may potentially lead to materially different quantitatively modeled allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables, it is difficult to estimate the impact of a change in any one individual variable on the ACL. SouthState uses a third-party service provider to support the economic forecast assumptions under CECL forecast by providing various levels of economic scenarios. These scenarios are weighted in accordance with management assessment of scenarios as well as expectations of the general market and industry conditions. To illustrate the sensitivity of these scenarios, if a 100% probability weighting was applied to the adverse scenario rather than using the probability-weighted three scenario approach, this would result in an increase in the ACL by approximately $224 million. Conversely, if a 100% probability weighting was applied to the upside scenario, this would result in a decrease in the ACL by approximately $104 million. The adverse scenario includes assumptions including, but not limited to, rising unemployment consistent with a recession, high levels of inflation and weakened consumer and business spending, elevated interest rates, tightening credit, widening Federal deficit, and continued geopolitical tensions. Conversely, the upside scenario includes assumptions such as a stronger domestic economy, swift resolution of international conflicts and strengthening global economy, more than full employment, reduced political tensions, and other favorable assumptions. This sensitivity analysis and related impact on the ACL is a hypothetical analysis and is not intended to represent management’s judgments at December 31, 2024.

Previous wording

In January 2017, the FASB issued ASU No. 2017-04, which simplified the accounting for goodwill impairment for all entities by requiring impairment charges to be based on Step 1 of the previous accounting guidance’s two-step impairment test under ASC Topic 350. Under the guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminated the requirement to calculate a goodwill impairment charge using Step 2, which involved calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity is able to perform an optional qualitative goodwill impairment assessment before proceeding to the quantitative step of determining whether the reporting unit’s carrying amount exceeds it fair value.

Current wording

Under the ASU Topic 350, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on the difference. The impairment charge will be limited to the amount of goodwill allocated to the reporting unit. An entity is able to perform an optional qualitative goodwill impairment assessment before proceeding to the quantitative step of determining whether the reporting unit’s carrying amount exceeds it fair value.

Previous wording

Consolidated net income available to common shareholders decreased by $1.7 million, or 0.4%, to $494.3 million for the year ended December 31, 2023 compared to $496.0 million for the year ended December 31, 2022 and increased $18.8 million, or 3.9%, compared to $475.5 million in 2021. Below are key highlights of our results of operations during 2023:

Current wording

Consolidated net income available to common shareholders increased by $40.5 million, or 8.2%, to $534.8 million for the year ended December 31, 2024 compared to $494.3 million for the year ended December 31, 2023. Below are key highlights of our results of operations during 2024:

Previous wording

Noninterest income provides us with additional revenues that are significant sources of income. In 2023, 2022, and 2021, noninterest income comprised 16.5%, 18.8%, and 25.5%, respectively, of total net interest income and noninterest income.

Current wording

Noninterest income provides us with additional revenues that are significant sources of income. In 2024, 2023, and 2022, noninterest income comprised 17.6%, 16.5%, and 18.8%, respectively, of total net interest income and noninterest income.

Previous wording

Our noninterest income decreased $22.3 million, or 7.2%, for the year ended December 31, 2023 compared to 2022. This change in total noninterest income resulted from the following:

Current wording

Our noninterest income increased $15.4 million, or 5.4%, for the year ended December 31, 2024 compared to 2023. This change in total noninterest income resulted from the following:

Previous wording

Noninterest expense increased $64.9 million, or 7.0%, for the year ended December 31, 2023 compared to 2022. The change in total noninterest expense resulted from the following:

Current wording

Noninterest expense represents the largest expense category for our company. Noninterest expense increased $6.9 million, or 0.7%, for the year ended December 31, 2024 compared to 2023. The change in total noninterest expense resulted from the following:

Previous wording

Our effective tax rate held consistent at 21.64% at December 31, 2023, mirroring the 21.68% rate for the year-ended December 31, 2022. The slight decrease was due to a slight decrease in pre-tax book income, an increase in tax-exempt income, an increase in federal tax credits, offset partially by an increase in TEFRA interest expense disallowance and an increase in non-deductible FDIC premiums compared to December 31, 2022. For additional information refer to Note 12—Income Taxes in the consolidated financial statements.

Current wording

Our effective tax rate increased to 23.63% at December 31, 2024, compared to 21.64% for the year-ended December 31, 2023. The increase was primarily due to the inclusion of amortization of Low-Income Housing Tax Credit Investments in income tax expense due to the adoption of the proportional amortization method during the first quarter of 2024 as well as an increase in pre-tax income in the current period. This was partially offset by a decrease in non-deductible executive compensation and TEFRA interest expense disallowance compared to December 31, 2023. For additional information refer to Note 11—Income Taxes in the consolidated financial statements.

Previous wording

At December 31, 2022, we had total assets of approximately $43.9 billion, consisting principally of $30.2 billion in total loans, before taking into account the allowance for credit losses of $356.4 million, $8.2 billion in investment securities, $1.3 billion in cash and cash equivalents and $1.9 billion in goodwill. Our liabilities at December 31, 2022 totaled $38.8 billion, consisting principally of deposits of $36.4 billion ($13.2 billion in noninterest-bearing and $23.2 in interest-bearing) and short-term and long-term borrowings of $948.7 million. At December 31, 2022, our shareholders’ equity was $5.1 billion.

Current wording

At December 31, 2024, we had total assets of approximately $46.4 billion, consisting principally of $33.9 billion in total loans, before taking into account the allowance for credit losses of $465.3 million, $6.8 billion in investment securities, $1.4 billion in cash and cash equivalents and $1.9 billion in goodwill. Our liabilities at December 31, 2024 totaled $40.5 billion, consisting principally of deposits of $38.1 billion ($10.2 billion in noninterest-bearing and $27.9 billion in interest-bearing), $879.9 million derivative liabilities and $906.4 million of short-term and long-term borrowings. At December 31, 2024, our shareholders’ equity was $5.9 billion.

Previous wording

At December 31, 2023, we had total assets of approximately $44.9 billion, consisting principally of $32.4 billion in total loans, before taking into account the allowance for credit losses of $456.6 million, $7.5 billion in investment securities, $1.0 billion in cash and cash equivalents and $1.9 billion in goodwill. Our liabilities at December 31, 2023 totaled $39.4 billion, consisting principally of deposits of $37.0 billion ($10.6 billion in noninterest-bearing and $26.4 billion in interest-bearing), $804.5 million derivative liabilities and $981.1 million of short-term and long-term borrowings. At December 31, 2023, our shareholders’ equity was $5.5 billion.

Current wording

At December 31, 2023, we had total assets of approximately $44.9 billion, consisting principally of $32.4 billion in total loans, before taking into account the allowance for credit losses of $456.6 million, $7.5 billion in investment securities, $1.0 billion in cash and cash equivalents and $1.9 billion in goodwill. Our liabilities at December 31, 2023 totaled $39.4 billion, consisting principally of deposits of $37.0 billion ($10.6 billion in noninterest-bearing and $26.4 in interest-bearing) and short-term and long-term borrowings of $881.1 million. At December 31, 2023, our shareholders’ equity was $5.5 billion.

Previous wording

Book value per common share was $72.78 at the end of 2023, an increase from $67.04 at the end of 2022. Book value per common share increased in 2023 as shareholder equity increased by 9.0% while common shares outstanding only increased by 0.4%. The primary reasons for an increase in shareholder’s equity of $458.2 December 31, 2023 were due to net income of $494.3 million and a $94.6 million increase in AOCI related to unrealized gains on available for sale securities and post-retirement benefit plans. These increases were partially offset by declines resulting from dividends paid to shareholders of $154.9 million, common stock repurchased from officers and directors for income taxes owed on their vested shares of restricted stock of $9.3 million, and common stock repurchased in the open market of $6.7 million.

Current wording

Book value per common share was $77.18 at the end of 2024, an increase from $72.78 at the end of 2023. Book value per common share increased in 2024 as shareholder equity increased by 6.5% while common shares outstanding only increased by 0.4%. The primary reasons for an increase in shareholder’s equity of $357.3 December 31, 2024 were due to net income of $534.8 million and a $24.4 million increase in accumulated other comprehensive loss related to unrealized losses on available for sale securities and post-retirement benefit plans. These increases were partially offset by declines in shareholders equity resulting from dividends paid to shareholders of $161.6 million, common stock repurchased from officers and directors for income taxes owed on their vested shares of restricted stock of $8.8 million, and common stock repurchased in the open market of $8.0 million.

Previous wording

Our common equity to assets ratio increased to 12.3% in 2023, compared to 11.6% in 2022. The improvement during 2023 was due to an increase in shareholders’ equity of 9.0%, resulting from the items noted above, while total assets had a moderate increase of 2.2%.

Current wording

Our common equity to assets ratio increased to 12.7% in 2024, compared to 12.3% in 2023. The improvement during 2024 was due to an increase in shareholders’ equity of 6.5%, resulting from the items noted above, while total assets had a moderate increase of 3.3%.

Previous wording

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 Markets Income in our Consolidated Statements of Income. Securities purchased for this portfolio have primarily been municipal bonds, treasuries and mortgage-backed agency securities, which are held for short periods of time and totaled $31.3 million at December 31, 2023 and 2022.

Current wording

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 Markets Income in our Consolidated Statements of Income. Securities purchased for this portfolio have primarily been municipal bonds, treasuries, mortgage-backed agency securities, and SBA securities, which are held for short periods of time and totaled $102.9 million and $31.3 million at December 31, 2024 and 2023, respectively.

Previous wording

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 December 31, 2023 and 2022, investment securities totaled $7.5 billion and $8.2 billion, respectively. For the year ended December 31, 2023, average investment securities were $7.7 billion, or 19.5% of average earning assets, compared with $8.4 billion, or 21.2% of average earning assets for the year ended December 31, 2022. The expected average life of the investment portfolio at December 31, 2023 was approximately 7.87 years, compared with 7.96 years at December 31, 2022. See Note 1**—**Summary of Significant Accounting Policies in the audited consolidated financial statements for our accounting policy on investment securities.

Current wording

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 December 31, 2024 and 2023, investment securities totaled $6.8 billion and $7.5 billion, respectively. For the year ended December 31, 2024, average investment securities were $7.1 billion, or 17.6% of average earning assets, compared with $7.7 billion, or 19.5% of average earning assets for the year ended December 31, 2023. The expected average life of the investment portfolio at December 31, 2024 was approximately 7.73 years, compared with 7.87 years at December 31, 2023. See Note 1**—**Summary of Significant Accounting Policies in the audited consolidated financial statements for our accounting policy on investment securities.

Previous wording

During 2023, our total investment securities decreased $725.9 million, or 8.9%, from December 31, 2022. During 2023, we purchased $307.1 million of securities, $80.4 million classified as available for sale and $226.7 million classified as other investments. These purchases were offset by maturities, paydowns, sales and calls of investment securities totaling $1.1 billion. Net amortization of premiums were $20.1 million for the year ended December 31, 2023. During 2022, the Atlantic Capital acquisition added $691.7 million of investment securities available for sale to our portfolio. We immediately sold $414.4 million in securities, after principal paydowns, and retained $273.7 million in our portfolio. The Atlantic Capital securities retained were mostly state and municipal obligations.

Current wording

During 2024, our total investment securities decreased $665.0 million, or 8.9%, from December 31, 2023. During 2024, we purchased $236.9 million of securities, $96.8 million classified as available for sale and $140.1 million classified as other investments. These purchases were offset by maturities, paydowns, sales and calls of investment securities totaling $886.9 million. Net amortization of premiums were $19.3 million for the year ended December 31, 2024.

Previous wording

At December 31, 2023, the unrealized net loss of the available for sale investment securities portfolio was $776.6 million, or 14.0%, below its amortized cost basis. Comparable valuations at December 31, 2022 reflected an unrealized net loss of the available for sale investment portfolio of $889.3 million, or 14.3%, below its amortized cost basis. The increase in fair value in the available for sale investment portfolio at December 31, 2023 compared to December 31, 2022 was attributable to the Federal Reserve’s decision during their latest policy meeting held in December 2023 to hold the rates steady with indications of potential rate cuts in 2024. At December 31, 2023, the unrealized net loss of the held to maturity investment securities portfolio was $402.7 million, or 16.2%, below its amortized cost basis. At December 31, 2022, the unrealized net loss of the held to maturity investment securities portfolio was $433.1 million, or 16.1%, below its amortized cost basis.

Current wording

At December 31, 2024, the unrealized net loss of the available for sale investment securities portfolio was $808.6 million, or 15.8%, below its amortized cost basis. Comparable valuations at December 31, 2023 reflected an unrealized net loss of the available for sale investment portfolio of $776.6 million, or 14.0%, below its amortized cost basis. The decrease in fair value in the available for sale investment portfolio at December 31, 2024 compared to December 31, 2023 was attributable to principal paydowns, maturities and calls as well as a higher interest rate environment. At December 31, 2024, the unrealized net loss of the held to maturity investment securities portfolio was $420.1 million, or 18.6%, below its amortized cost basis. At December 31, 2023, the unrealized net loss of the held to maturity investment securities portfolio was $402.7 million, or 16.2%, below its amortized cost basis.

Previous wording

As described above, the Company elected to classify some of its securities purchased as held to maturity at the time of purchase. The securities designated as held to maturity are securities the Company does not intend to sell and expects to hold through maturity. The securities consist of $197.3 million of agency securities, $2.2 billion of residential and commercial mortgage-backed securities issued by U.S government agencies or sponsored enterprises and $53.1 million of Small Business Administration loan-backed securities. The following are highlights of our held to maturity portfolio:

Current wording

As described above, the Company elected to classify some of its securities purchased as held to maturity at the time of purchase. The securities designated as held to maturity are securities the Company does not intend to sell and expects to hold through maturity. The securities consist of $147.3 million of agency securities, $2.1 billion of residential and commercial mortgage-backed securities issued by U.S government agencies or sponsored enterprises and $49.8 million of Small Business Administration loan-backed securities. The following are highlights of our held to maturity portfolio:

Previous wording

Securities available for sale consist of debentures of government sponsored entities, state and municipal bonds, residential and commercial mortgage-backed securities issued by U.S government agencies or sponsored enterprises, Small Business Administration loan-backed securities and corporate securities. At December 31, 2023, investment securities with a fair value and amortized cost of $4.8 billion and $5.6 billion, respectively, were classified as available for sale. The adjustment for net unrealized losses of $776.6 million between the carrying value of these securities and their amortized cost has been reflected, net of tax, in the Consolidated Balance Sheet as a component of Accumulated Other Comprehensive Loss. The following are highlights of our available for sale securities:

Current wording

Securities available for sale consist of debentures of government sponsored entities, state and municipal bonds, residential and commercial mortgage-backed securities issued by U.S government agencies or sponsored enterprises, Small Business Administration loan-backed securities and corporate securities. At December 31, 2024, investment securities with a fair value and amortized cost of $4.3 billion and $5.1 billion, respectively, were classified as available for sale. The adjustment for net unrealized losses of $808.6 million between the carrying value of these securities and their amortized cost has been reflected, net of tax, in the Consolidated Balance Sheet as a component of Accumulated Other Comprehensive Loss. The following are highlights of our available for sale securities:

Previous wording

At December 31, 2023, we had 1,232 investment securities (including both available for sale and held to maturity) in an unrealized loss position, which totaled $1.2 billion, compares to 1,311 investment securities in an unrealized loss position, which totaled $1.3 billion at December 31, 2022. See Note 1—Summary of Significant Accounting Policies and Note 3—Investment Securities in the consolidated financial statements for additional information.

Current wording

At December 31, 2024, we had 1,214 investment securities (including both available for sale and held to maturity) in an unrealized loss position, which totaled $1.3 billion, compared to 1,232 investment securities in an unrealized loss position, which totaled $1.2 billion at December 31, 2023. See Note 1—Summary of Significant Accounting Policies and Note 3—Investment Securities in the consolidated financial statements for additional information.

Previous wording

Management evaluates securities for 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 on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. For securities designated as held for sale, credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the extent to which the fair value has been less than cost, (4) our intent to hold the security as well as there being no requirement to sell the security, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third-party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. The Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. Treasury Securities, Agency-Backed Securities including securities issued by Ginnie Mae, Fannie Mae, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. All debt securities in an unrealized loss position as of December 31, 2023 continue to perform as scheduled and we do not believe there is a credit loss or a provision for credit losses is necessary. Also, as part of our evaluation of our intent and ability to hold investments, we consider our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. 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.

Current wording

Management evaluates securities for 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 on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. For securities designated as held for sale, credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the extent to which the fair value has been less than cost, (4) our intent to hold the security as well as there being no requirement to sell the security, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third-party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. The Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. Treasury Securities, Agency-Backed Securities including securities issued by Ginnie Mae, Fannie Mae, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or the credit backing of one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. All debt securities in an unrealized loss position as of December 31, 2024 continue to perform as scheduled and we do not believe there is a credit loss or a provision for credit losses is necessary. Also, as part of our evaluation of our intent and ability to hold investments, we consider our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. 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.

Previous wording

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 December 31, 2023, other investment securities represented approximately $192.0 million, or 0.43% of total assets and primarily consisted of FRB and FHLB stock, which totaled $150.3 million and $22.8 million, respectively. There were no gains or losses on the sales of these securities during 2023 or 2022.

Current wording

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 December 31, 2024, other investment securities represented approximately $223.6 million, or 0.48% of total assets and primarily consisted of FRB and FHLB stock, which totaled $150.3 million and $18.1 million, respectively. There were no gains or losses on the sales of these securities during 2024 or 2023.

Previous wording

Approximately 85.4% 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 14.2% 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 95% of the municipal bond portfolio has ratings in the Double A or Triple A category.

Current wording

Approximately 85.2% 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 14.4% 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 98% of the municipal bond portfolio has ratings in the Double A or Triple A category.

Previous wording

During 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 December 31, 2023, the portfolio had an effective duration of 5.74 years. We continue to monitor duration risk and seek to align actual duration with the target range.

Current wording

As of December 31, 2024, the portfolio had an effective duration of 6.39 years. We continue to monitor duration risk and seek to align actual duration with the target range.

Previous wording

Our loan portfolio remains our largest category of interest-earning assets. At December 31, 2023, total loans, excluding held for sale loans, were $32.4 billion, which was an overall increase of $2.2 billion, or 7.3%, from the balance at the end of 2022. Non-acquired loan growth was $3.7 billion, or 16.1% for 2023, driven by organic growth. The loan growth was made up of a 32.5% increase in consumer real estate loans, a 13.5% increase in non-owner occupied real estate loans (including construction and land development loans), a 9.2% increase in commercial owner occupied real estate loans, a 11.7% increase in commercial and industrial loans, a 5.5% increase in other income producing property and a 1.8% increase in consumer non real estate loans. Total acquired loans decreased by $1.5 billion, or 19.9% from the balance at the end of 2022. The decreasein 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.

Current wording

Our loan portfolio remains our largest category of interest-earning assets. At December 31, 2024, total loans, excluding held for sale loans, were $33.9 billion, which was an overall increase of $1.5 billion, or 4.7%, from the balance at the end of 2023. Non-acquired loan growth was $2.9 billion, or 11.0% for 2024, driven by organic growth and renewals of acquired loans moved to our non-acquired loan portfolio. The loan growth was made up of a 22.2% increase in commercial and industrial loans, a 12.5% increase in commercial owner-occupied real estate loans, a 12.1% increase in consumer real estate loans, and a 7.4% increase in non-owner occupied real estate loans (including construction and land development loans). Total acquired loans decreased by $1.4 billion, or 23.8% from the balance at the end of 2023. The decreasein 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.

Previous wording

Average total loans outstanding during 2023 were $31.4 billion, an increase of $3.9 billion, or 14.4%, over the 2022 average of $27.5 billion. (For further discussion of the Company’s acquired loan accounting, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions, Note 4—Loans and Note 5—Allowance for Credit Losses in the consolidated financial statements.)

Current wording

Average total loans outstanding during 2024 were $33.1 billion, an increase of $1.7 billion, or 5.5%, over the 2023 average of $31.4 billion. (For further discussion of the Company’s acquired loan accounting, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions, Note 4—Loans and Note 5—Allowance for Credit Losses in the consolidated financial statements.)

Previous wording

Total loan interest income, including interest income on held for sale loans, was $1.7 billion in 2023, an increase of $538.4 million, or 45.7%, compared to $1.2 billion in 2022. This increase was mainly due to a 126-basis point increase in the yield on the non-acquired portfolio and a 125-basis point increase in the yield on the acquired portfolio. The yield on the non-acquired loan portfolio increased from 4.03% in 2022 to 5.29% in 2023 and the yield on the acquired loan portfolio increased from 4.85% in 2022 to 6.10% in 2023. The increase in the yields on the non-acquired loan portfolio and the acquired loan portfolio wasdue to the rise in interest rates starting in March 2022. The effects on interest income from the overall increase in theyields on loans was enhanced by a $5.7 billion increase in the average balance of our non-acquired loan portfolio, offset by a $1.8 billion decrease in the average balance of our acquired loan portfolio. The growth in the non-acquired loan portfolio average balance was due to normal organic growth andrenewals of acquired loans. The decline in the acquired loan portfolio was due to paydowns and payoffs, along with renewals of acquired loans that were moved to our non-acquired loan portfolio.

Current wording

Total loan interest income was $1.9 billion in 2024, an increase of $204.8 million, or 11.9%, compared to $1.7 billion in 2023. This increase was due to both an increase in the average balance and an increase in the yield on the total loan portfolio in 2024. The overall average balance in the loan portfolio increased $1.7 billion in 2024. The average balance on the non-acquired loan portfolio increased $3.1 billion, offset by a $1.4 billion decline in the acquired loan portfolio. The growth in the non-acquired loan portfolio average balance was due to normal organic growth and renewals of acquired loans. The decline in the acquired loan portfolio was due to paydowns and payoffs, along with renewals of acquired loans that were moved to our non-acquired loan portfolio. The overall yield on the loan portfolio increased by 33 basis points in 2024. This increase was due to a 43-basis point increase in the yield on the non-acquired portfolio and a 10-basis point increase in the yield on the acquired portfolio. The yield on the non-acquired loan portfolio increased from 5.29% in 2023 to 5.72% in 2024 and the yield on the acquired loan portfolio increased from 6.10% in 2023 to 6.20% in 2024. The increase in the yields on the non-acquired loan portfolio and the acquired loan portfolio wasdue to the repricing of loans in a higher interest rate environment for most of 2024 reflecting the rise in interest rates starting in March 2022 thru August 2023, then remaining unchanged until September 2024 when the rates began to decline.

Previous wording

Total non-acquired nonperforming loans were $121.8 million, or 0.46% of total non-acquired loans, an increase of approximately $74.7 million, or 158.9%, from December 31, 2022. The increase in nonperforming loans was driven primarily by an increase in commercial nonaccrual loans of $59.0 million, an increase in consumer nonaccrual loans of $10.9 million and an increase inaccruing loans past due 90 days or more of $8.9 million, offset by a decrease in restructured nonaccrual loans of $4.1 million. The increase in commercial nonaccrual loans from December 31, 2022, was primarily due to three commercial and industrial relationships totaling $41.4 million, six commercial owner-occupied loans totaling $9.8 million, and three commercial non owner occupied loans totaling $4.2 million. The increase in accruing loans past due 90 days or more are deemed to be low risk and greater than 70% of these loans have been brought current since the year-end 2023. Acquired nonperforming loans were $60.9 million, or 1.03% of total acquired loans, a decrease of $617,000, or 1.0% from December 31, 2022. The decrease in acquired nonperforming loans was mainly driven by a decrease in consumer nonaccrual loans of $3.3 million, a decrease in restructured loans of $2.9 million and a decrease in accruing loans past due 90 days or more of $818,000, offset by an increase in commercial nonaccrual loans of $6.4 million.

Current wording

Total non-acquired nonperforming loans were $145.3 million, or 0.49% of total non-acquired loans, an increase of approximately $23.5 million, or 19.3%, from December 31, 2023. The increase in nonperforming loans was driven primarily by an increase in consumer nonaccrual loans of $21.1 million, an increase in commercial nonaccrual loans of $3.3 million and an increase inmodified loans with borrowers with financial difficulties on nonaccrual of $7.1 million, offset by a decrease in accruing loans past due 90 days or more of $8.0 million. The increase in consumer nonaccrual loans year over year was primarily in first mortgage 1-4 family owner occupied loans. Acquired nonperforming loans were $65.3 million, or 1.45% of total acquired loans, an increase of $4.4, or 7.2% from December 31, 2023. The increase in acquired nonperforming loans was mainly driven by an increase in restructured loans of $5.6 million, offset by a decrease in accruing loans past due 90 days or more of $1.2 million.

Previous wording

The top ten nonaccrual loans at December 31, 2023 totaled $61.3 million and consisted of four loans located in South Carolina, two in North Carolina, three in Georgia, and one in Florida. These loans comprise 36.0% of total nonaccrual loans at December 31, 2023, with around 50% being real estate collateral dependent and the other 50% being non real estate. We currently hold a specific reserve against one of these ten loans, totaling $6.9 million. The remaining nine loans do not carry a specific reserve due to carrying balances being below current collateral values.

Current wording

The top ten nonaccrual loans at December 31, 2024 totaled $69.3 million and consisted of three loans located in South Carolina, three in North Carolina, three in Georgia, and one in Florida. These loans comprise 33.4% of total nonaccrual loans at December 31, 2024, with around 34% being real estate collateral dependent and the other 66% being non real estate. We currently hold a specific reserve against four of these ten loans, totaling $18.5 million. The remaining six loans do not carry a specific reserve due to carrying balances being below current collateral values.

Previous wording

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. As of December 31, 2023, the Bank had a total of $12.1 million loans to borrowers experiencing financial difficulty. Of the $12.1 million, $9.9 million loans were current and $2.2 million loans were 30 to 89 days past due.

Current wording

As of December 31, 2024, the Bank had a total of $36.1 million loans to borrowers experiencing financial difficulty. Of the $36.1 million, $29.3 million loans were current and $6.8 million loans were 30 to 89 days past due.

Previous wording

As stated previously, the ACL reflects management’s estimate of the portion of the amortized cost of loans and unfunded commitments that it does not expect to collect. The Company records loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized.

Current wording

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.

Previous wording

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.

Current wording

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 the unemployment rate, gross domestic product, the path of interest rates, monetary and fiscal policy, inflation, the residential and commercial real estate markets, and global events like the Russian/Ukraine conflict and unrest in middle east, as well as the volatility and magnitude of changes within those scenarios quarter over quarter and consideration of conditions within the Bank’s operating environment and geographic area. Additional forecast scenarios may be weighted along with the baseline forecast to arrive at the final reserve estimate. While periods of relative economic stability should generally lead to stability in forecast scenarios and weightings to estimate credit losses, management considers the alignment of forecast assumptions and weightings in relation to its economic outlook on a quarterly basis, 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 average loss rate within four quarters using a straight-line approach. The Company generally uses an eight-quarter forecast and a four-quarter reversion period.