SouthState Corp
For the period ended Mar 31, 2025. Filed May 2, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 2, 2025
SSB$104.11-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001558370-24-014094
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001558370-25-006162
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 165 previous paragraphs and 165 current paragraphs.
82 unchanged; 62 reworded; 21 added; 20 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 125 previous and 116 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
On January 1, 2025, the Company acquired Independent, a Texas-based corporation, the bank holding company for Independent Bank, in an all-stock transaction. Pursuant to the Agreement dated May 17, 2024, shareholders of Independent received 0.60 shares of the Company’s common stock in exchange for each share of Independent stock resulting in the Company issuing 24,858,731 shares of its common stock. In total, the purchase price for Independent was $2.5 billion.
Current report
Sale-leaseback Transaction
Current report
On January 8, 2025, the Bank entered into an agreement for the purchase and sale of real property (the “Sale Agreement”) with entities affiliated with Blue Owl Real Estate Capital LLC (“Blue Owl”), providing for the sale to entities affiliated with Blue Owl of certain bank branch properties owned and operated by the Bank. The branch properties are located in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia. Under the Sale Agreement, the Bank has agreed, concurrently with the closing of the sale of the branches, to enter into triple net lease agreements (the “Lease Agreements”) with entities affiliated with Blue Owl, pursuant to which the Bank will lease each of the Branches (the “Sale-leaseback Transaction”). The Company completed the Sale-leaseback Transaction on February 28, 2025. See accompanying Note 8 — Leases to our consolidated financial statements.
Current report
Capital Management
Current report
On February 11, 2025, the Company received Federal Reserve Board’s supervisory nonobjection on the 2025 stock repurchase program (the “2025 Repurchase Program”), which was previously approved by the Board of Directors of the Company, contingent upon receipt of such supervisory nonobjection. The 2025 Repurchase Program authorizes the Company to repurchase up to 3,000,000 shares, or up to approximately three percent, of the Company’s outstanding shares of common stock as of January 2, 2025. See accompanying Note 22 — Stock Repurchase Program to our consolidated financial statements.
Current report
Governmental and Regulatory Environment
Current report
It is uncertain how the rapid changes initiated by the Trump Administration will impact our business going forward. These include the impact of tariffs, immigration reform, and changes at the agencies that regulate us, including the modification, rescission, withdrawal or changes to the approach and enforcement of, rules and guidance relating to us.
Current report
Non-Tax Equivalent (“TE”) net interest income increased $200.6 million, or 58.3%, to $544.5 million in the first quarter of 2025 compared to $343.9 million in the same period in 2024, which primarily was due to the acquisition of Independent completed on January 1, 2025. Interest earning assets averaged $57.5 billion during the three months ended March 31, 2025 compared to $40.7 billion for the same period in 2024, an increase of $16.8 billion, or 41.4%. Interest bearing liabilities averaged $40.8 billion during the three months ended March 31, 2025 compared to $27.5 billion for the same period in 2024, an increase of $13.2 billion, or 48.1%.
Current report
The interest earned on investment securities increased by $16.1 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This is a result of the Bank carrying a higher average balance in investment securities along with an increase in the yield on the investment portfolio in 2025 compared to the same period in 2024. The average balance of investment securities for the three months ended March 31, 2025 increased $860.0 million from the comparable period in 2024 due to the Company acquiring $1.6 billion in investment securities through the acquisition of Independent during the quarter. These securities were subsequently sold during the quarter with the proceeds reinvested into purchases of new securities that fit the Company’s investment strategy. The increase in investment securities related to the Independent acquisition was partially offset due to maturities and mortgage paydowns within the AFS and HTM investment portfolios. The yield on the total investment securities increased 55 basis points during the three months ended March 31, 2025 compared to the same period in 2024. This was due to recent purchases, including the reinvestment of the Independent investment portfolio at current market rates. The Company also conducted a securities repositioning during the quarter where it sold approximately $1.8 billion in investment securities at a loss of $228.8 million and used the proceeds to purchase new securities. This securities repositioning improved the yield and risk weightings and shortened the duration of the investment portfolio.
Current report
Segment Reporting
Current report
As discussed in Note 23—Segment Reporting, the Company’s operations are managed and financial performance is evaluated on an organization-wide basis, and the Company’s banking and finance operations are considered by management to constitute one reportable operating segment, the General Banking Unit.
Current report
The Company’s Chief Operating Decision Maker (“CODM”), the Executive Committee, consists of the Company’s senior executive management team, including the Chief Executive Officer, Chief Strategy Officer, President, Chief Financial Officer, Chief Operating Officer, Chief Risk Officer, and other executives. The CODM generally meets monthly to assess performance of the General Banking Unit using a variety of figures, metrics and key performance indicators. In addition to net income and non-Tax Equivalent (“TE”) Net Interest Margin (“NIM”), the CODM considers Pre-Provision Net Revenue (“PPNR”) and TE NIM to make business decisions. The CODM monitors these profitability measures at each meeting, and is regularly featured in various investor presentations, earnings releases, and other internal management reports. These performance and profitability measures influence business decisions and allocation of resources within the General Banking Unit.
Current report
The table below provides PPNR and TE NIM information of the General Banking Unit.
Current report
Pre-Provision Net Revenue and Tax Equivalent Net Interest Margin
Current report
We use investment securities, our second largest category of earning assets, to generate interest income, provide liquidity, fund loan demand or deposit liquidation, and to 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 March 31, 2025, investment securities totaled $8.4 billion, compared to $6.8 billion at December 31, 2024, an increase of $1.6 billion, or 23.5%. During the first quarter of 2025, the Company acquired $1.6 billion in investment securities through the acquisition of Independent. A majority of these securities were subsequently sold during the quarter with the proceeds reinvested into securities that fit the Company’s investment strategy. The Company executed a securities repositioning during the quarter and sold investment securities with a book value of approximately $1.8 billion at a loss of $228.8 million and used the proceeds to purchase new securities. This securities repositioning improved the yield and risk weightings and shortened the duration of the investment portfolio. We purchased $3.3 billion in investment securities during the quarter from reinvesting funds provided by the sales of securities acquired from Independent and reinvesting proceeds from the sale of securities involved in the repositioning strategy. The increases in investment securities from the acquisition and purchases were partially offset as a result of maturities, calls, sales and paydowns of investment securities totaling $3.6 billion and a reduction from the net amortization of premiums of $2.4 million. Of the $3.3 billion in purchases of investment securities during the quarter, $3.2 billion were available-for-sale securities and $115.5 million were other investment securities. There were no purchases of held to maturity securities during the quarter. Other investment securities purchased were mainly related to capital stock with the Federal Home Loan Bank and Federal Reserve Bank. $38.0 million was redeemed by the Federal Home Loan Bank during the first quarter of 2025. The purchases in the Federal Home Loan Bank Stock and Federal Reserve Bank Stock during the quarter were mainly due to stock holding requirements related to the Independent acquisition. At March 31, 2025, approximately 69.7% of the investment portfolio was classified as available for sale, approximately 26.2% was classified as held to maturity and 4.1% was classified as other investments.
Current report
The following table presents a summary of the changes in the ACL, for the three months ended March 31, 2025, and 2024:
Current report
Total interest-bearing deposits increased by $11.7 billion, or 170.4% annualized, to $39.6 billion at March 31, 2025 from $27.9 billion at December 31, 2024. This increase was mainly driven by interest-bearing deposits of $10.8 billion as of March 31, 2025 acquired from Independent on January 1, 2025. Interest-bearing checking accounts increased $3.8 billion during the quarter which was driven by $3.9 billion as of March 31, 2025 in interest-bearing checking accounts acquired in the Independent acquisition. Savings accounts increased by $525.2 million during the quarter which was driven by $475.6 million as of March 31, 2025 in savings accounts acquired in the Independent acquisition. Money market accounts increased $4.4 billion during the quarter which was driven by $3.9 billion as of March 31, 2025 in money market accounts acquired in the Independent acquisition. Money market accounts additionally increased $475.3 million as customers continue to move funds from lower yielding deposit products seeking higher yields in money market accounts. Time deposits increased $3.0 billion during the quarter which was driven by $2.2 billion as of March 31, 2025 in time deposits acquired in the Independent acquisition. The additional growth in time deposits was due to an increase in brokered time deposits of $775.5 million during the quarter. Federal funds purchases related to the Correspondent Banking Division and securities sold under agreements to repurchase were $679.3 million at March 31, 2025, a $164.4 million increase from December 31, 2024. Corporate and subordinated debentures increased by $361.3 million to $752.8 million and was due to $360.5 in corporate and subordinated debentures assumed in the Independent acquisition.
Current report
As noted above, excluding the money market accounts acquired in the Independent acquisition, the Company continued to see higher yielding money market accounts increase during the first quarter of 2025. The Company raised interest rates on most interest-bearing deposit products (in particular money market accounts and time deposit specials) due to competitive pressures to retain deposits. Average interest-bearing deposits increased $12.9 billion to $39.3 billion in the quarter ended March 31, 2025 compared to the same period in 2024. For more information on the composition of our total deposits, see Note 9— Deposits.
Current report
Total cash and cash equivalents were $3.3 billion at March 31, 2025 as compared to $1.4 billion at December 31, 2024. The increase in cash and cash equivalents was primarily due to the cash and cash equivalents acquired in the Independent acquisition of $1.0 billion, the cash received from the sale-leaseback transaction of approximately $456.4 million, an increase in deposits (excluding deposits acquired with Independent) of approximately $68.0 million and an increase in federal funds purchased and securities sold under agreements to repurchase of $164.4 million.
Current report
Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes. We believe that we have adequate sources of liquidity to fund commitments that are drawn upon by the borrowers. In addition to commitments to extend credit, we also issue standby letters of credit, which are assurances to third parties that they will not suffer a loss if our customer fails to meet its contractual obligation to the third-party. Although our experience indicates that many of these standby letters of credit will expire unused, through our various sources of liquidity, we believe that we will have the resources to meet these obligations should the need arise.
Current report
Our contingency funding plan describes several potential stages based on stressed liquidity levels. Liquidity key risk indicators are reported to the Board of Directors on a quarterly basis. As noted previously, we maintain various wholesale sources of funding. If our deposit retention efforts were to be unsuccessful, we would use these alternative sources of funding. Under such circumstances, depending on the external source of funds, our interest cost would vary based on the range of interest rates charged. This could increase our cost of funds, impacting our net interest margin and net interest spread.
Removed paragraphs (20)
Previous report
On May 20, 2024, SouthState and Independent announced that the two companies had entered into an Agreement and Plan of Merger dated May 17, 2024 (“Merger Agreement”), which provides that upon the terms and subject to the conditions set forth in the Merger Agreement, Independent will merge with and into SouthState, with SouthState continuing as the surviving corporation in the merger. Immediately following the merger, Independent’s wholly-owned banking subsidiary, Independent Bank, will merge with and into the Bank, which will continue as the surviving bank in the bank merger. The Merger Agreement was approved by the Boards of Directors of the Company and Independent by the unanimous vote of directors present at the applicable meetings and the shareholders of each of SouthState and Independent. The Merger Agreement is still subject to regulatory approvals and other customary closing conditions.
Previous report
Under the terms of the Merger Agreement, shareholders of Independent will receive 0.60 shares of SouthState’s common stock for each share of Independent common stock they own. The transaction is expected to close during the first quarter of 2025, subject to the satisfaction of customary closing conditions, including receipt of required statutory approvals. At September 30, 2024, Independent reported $18.6 billion in total assets, $14.3 billion in loans and $16.0 billion in deposits.
Previous report
OCC Merger Policy Statement
Previous report
The OCC adopted a final rule amending its procedures for reviewing applications under the Bank Merger Act (“BMA”) and adding a policy statement on the OCC’s substantive approach to evaluating bank mergers under the BMA. The policy statement outlines the general principles the OCC will apply when reviewing bank merger applications and clarifies how the OCC would consider the statutory factors under the BMA. The policy statement identifies certain indicators that are more likely to withstand scrutiny and be approved expeditiously and those that would raise supervisory or regulatory concerns. Indicators generally consistent with timely approval, include, among others, appropriate capital and supervisory ratings, lack of enforcement or fair lending actions, lack of significant CRA or consumer compliance concerns or significant adverse effect on competition, and that the resulting institution would have total assets less than $50 billion. The final rule becomes effective on January 1, 2025. The Company is assessing the rule and its possible impact on the Company’s strategy.
Previous report
CFPB Open Banking Rule
Previous report
Denotes a non-GAAP financial measure. The section titled “Reconciliation of GAAP to non-GAAP” below provides a table that reconciles GAAP measures to non-GAAP measures.
Previous report
Non-Tax Equivalent (“TE”) net interest income decreased $3.9 million, or 1.1%, to $351.5 million in the third quarter of 2024 compared to $355.4 million in the same period in 2023. Interest-earning assets averaged $41.2 billion during the three months period ended September 30, 2024, compared to $40.4 billion for the same period in 2023, an increase of $847.6 million, or 2.1%. Interest-bearing liabilities averaged $28.1 billion during the three months period ended September 30, 2024, compared to $26.5 billion for the same period in 2023, an increase of $1.5 billion, or 5.7%. Non-TE net interest income decreased $52.7 million, or 4.8%, to $1.0 billion in the nine months ended September 30, 2024, compared to $1.1 billion in the same period in 2023. Interest-earning assets averaged $41.0 billion during the nine months ended September 30, 2024, compared to $40.0 billion during the same period in 2023. Interest-bearing liabilities averaged $27.8 billion during the nine months ended September 30, 2024, compared to $25.7 billion for the same period in 2023, an increase of $2.0 billion, or 7.9%.
Previous report
The interest earned on investment securities decreased by $2.2 million and $7.4 million, respectively, in the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023. The average balance of investment securities decreased $550.1 million and $693.5 million, respectively, for the three and nine months ended September 30, 2024, from the comparable periods in 2023. The yield on the investment securities increased 6 basis points and 9 basis points, respectively, during the three and nine months ended September 30, 2024, compared to the same periods in 2023 due to the rising rate environment. While the Bank reduced the size of its investment securities portfolio, the yield on the investment securities increased as the Company reinvested cash flows from securities in a higher interest rates environment in the three and nine months ended September 30, 2024, compared to the same periods in 2023, resulting in a higher yield in 2024.
Previous report
Noninterest income increased by $300,000, or 0.1%, during the nine months ended September 30, 2024, compared to the same period in 2023. This year-to-date change in total noninterest income resulted from the following:
Previous report
Noninterest expense increased by $23.5 million, or 3.3%, during the nine months ended September 30, 2024, compared to the same period in 2023. The categories and explanations for the fluctuations year-to-date, except the items discussed below, are similar to the ones noted above in the quarterly comparison.
Previous report
Our effective tax rate for the first nine months of the year was 23.84% compared to 21.60% for the first nine months of 2023. The increase in the year-to-date effective tax rate compared to the same period of 2023 was primarily driven by amortization of LIHTC investments, an increase in pre-tax book income, a decrease in federal tax credits available in the current period, partially offset by a decrease in disallowed executive compensation and a decrease in disallowed interest expense. In addition, the Company recorded approximately $2.8 million in income tax provision during the first quarter of 2024 related to the revaluation of its deferred income taxes and other tax adjustments.
Previous report
We use investment securities, our second largest category of earning assets, to generate interest income, provide liquidity, fund loan demand or deposit liquidation, and to 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 September 30, 2024, investment securities totaled $7.1 billion, compared to $7.5 billion at December 31, 2023, a decrease of $386.7 million, or 5.2%. At September 30, 2024, approximately 64.5% of the investment portfolio was classified as available for sale, approximately 32.5% was classified as held to maturity and approximately 3.0% was classified as other investments. During the nine months ended September 30, 2024, we purchased $140.1 million of capital stock of the Federal Home Loan Bank of Atlanta classified as other investment securities on the balance sheet of which we sold back $130.6 million. The net increase to the capital stock holding for the Federal Home Loan Bank of Atlanta of $9.5 million during the nine months of 2024 was due to the increase in Federal Home Loan Bank borrowings. During the nine months ended September 30, 2024, the Bank purchased $60.7 million of available for sale securities. There were maturities, paydowns, and calls of investment securities totaling $589.1 million during the nine months ended September 30, 2024. Net amortization of premiums was $14.6 million during the nine months ended September 30, 2024.
Previous report
As discussed in Note 1 - Summary of Significant Accounting Policies, in the second quarter of 2024, updates were made to certain estimates used in the Company’s current expected credit loss model. While the total allowance and coverage of total loans remain the same, reserves at the loan segment level were updated due the expansion of macroeconomic variables. Although portions of the allowance may be allocated to specific loans or pools of loans, the entire allowance is available for any credit that, in management’s judgment, should be charged off.
Previous report
The following tables present summary of ACL for the three and nine months ended September 30, 2024, and 2023:
Previous report
As discussed previously under the “Loans” section in this MD&A, commercial non-owner-occupied loans represented the largest category of the loan portfolio as of September 30, 2024. We continued to experience solid and stable asset quality for these loans as of September 30, 2024, as approximately 0.2% of the total commercial non-owner-occupied loans were on non-accrual. In addition, approximately 5.1% and 2.6% of the total commercial non-owner-occupied loans were classified as substandard and still accruing, and special mention, respectively. The majority of these classified assets are mainly related to debt service coverage policy violations as interest rates have risen. However, most of these loans are still performing, are strongly collateralized and have strong borrowers supporting the loans. For additional information on the Company’s monitoring process for classified loans and a description of the general characteristics of the risk grades, refer to Note 6 — Loans in this Quarterly Report on Form 10-Q.
Previous report
Total interest-bearing deposits increased $862.0 million, or 4.4% annualized, to $27.3 billion at September 30, 2024, from $26.4 billion at December 31, 2023. This increase mainly driven by growth in money market accounts of $1.1 billion, including $174.3 million in reciprocal insured money market deposits and time deposits of $404.7 million. This increase was partially offset by declines in interest-bearing checking accounts of $428.4 million and savings deposits of $189.6 million. Customers continue to move funds from lower yielding deposit products seeking higher yields in money market accounts and time deposits. Federal funds purchased related to the Correspondent Banking Division and securities sold under agreements to repurchase were $538.3 million at September 30, 2024, a $49.1 million increase from December 31, 2023. Other borrowings, consisting of FHLB borrowings, increased to $300.0 million at September 30, 2024 from $100.0 million at December 31, 2023. Corporate and subordinated debentures declined by $278,000 to $391.7 million. Some key highlights are outlined below:
Previous report
In response to the COVID-19 pandemic in 2020, the federal banking agencies issued a final rule for additional transitional relief to regulatory capital related to the impact of the adoption of CECL. The Company chose the five-year transition method and is deferring the recognition of the effects from the adoption date and the CECL difference for the first two years of application. The modified CECL transitional amount was fixed as of December 31, 2021, and that amount began the three-year phase out in the first quarter of 2022 with 25% phased out in 2024. At September 30, 2024, approximately $15.3 million was added to Tier 1 capital at the Company and Bank as a result of the modified CECL transition. Had the Company elected not to apply the modified CECL transitional amount to its Tier 1 capital, the Company and Bank would have still been considered well capitalized as of September 30, 2024.
Previous report
Total cash and cash equivalents were $1.2 billion at September 30, 2024, as compared to $1.0 billion at December 31, 2023. Liquidity tightened starting in 2023 with the rising rate environment and turmoil in the financial markets occurring in early 2023. Competition for in-market deposits has increased throughout 2023 and 2024 resulting in increases in deposit rates to retain local deposits. The Bank supplements its in-market deposits with brokered deposits. While the Bank has a policy limit for brokered time deposits of no more than 15% of total deposits, it has operated well below this policy limit. At September 30, 2024, the percentage of brokered time deposits to total deposits was 2.8% compared to 1.9% at December 31, 2023. During the third quarter of 2024, the Company also borrowed funds from the FHLB on a short-term basis of $300.0 million. The outstanding borrowings from the FHLB were $100.0 million at December 31, 2023. See below for further discussion around brokered deposits and FHLB borrowings.
Previous report
At September 30, 2024, and December 31, 2023, we had $1.1 billion and $719.7 million of traditional, out–of–market brokered time deposits, respectively. At September 30, 2024, and December 31, 2023, we had $2.4 billion and $2.2 billion, respectively, of reciprocal deposits. Total deposits were $37.6 billion at September 30, 2024, an increase of $589.3 million from $37.0 billion at December 31, 2023. This change in deposits from December 31, 2023, was driven byan increase in money market accounts of $1.1 billion, including $174.3 million in reciprocal insured money market deposits and in time deposits of $404.7 million. This increase was partially offset by declines in interest-bearing checking accounts of $428.4 million and savings deposits of $189.6 million. As customers moved funds from noninterest-bearing deposits, interest-bearing checking and savings accounts, seeking higher yields in the rising rate environment, the Company has seen an increase in its balance of higher yielding money market accounts and time deposits during 2024. The Company raised interest rates on most interest-bearing deposit products (in particular money market accounts and time deposit specials) due to competitive pressures to retain deposits.
Previous report
In addition to deposits, we have other primary contingency funding sources available to the Bank. At September 30, 2024, our Bank had a total FHLB credit facility of $6.5 billion, with $300.0 million in FHLB advance outstanding and $2.9 million in FHLB letters of credit outstanding at quarter-end, leaving $6.2 billion in availability on the FHLB credit facility. In addition, our Bank had $1.7 billion of credit available at the Federal Reserve Bank’s discount window and had $2.9 billion in market value of unpledged securities at September 30, 2024, that can be pledged to obtain additional funds, if necessary. All of these resources provide $12.0 billion of additional funding for the Bank.
Reworded paragraphs (62)
Previous wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) relates to the financial statements contained in this Quarterly Report beginning on page 3. For further information, refer to the MD&A appearing in the Annual Report on Form 10-K for the year ended December 31, 2023. Results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results for the year ending December 31, 2024, or any future period.
Current wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) relates to the financial statements contained in this Quarterly Report beginning on page 3. For further information, refer to the MD&A appearing in the Annual Report on Form 10-K for the year ended December 31, 2024. Results for the three months ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future period.
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|DuncanWilliams Securities Corp. (“SouthState|DuncanWilliams”), 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. SSB First Street Corporation, an investment subsidiary of the Bank headquartered in Wilmington, Delaware, holds 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.
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, and Private Capital Management, also a wholly-owned registered investment advisor which it acquired through the Independent acquisition completed on January 1, 2025. 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 September 30, 2024, we had approximately $46.1 billion in assets and 5,144 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 March 31, 2025, we had $65.1 billion in assets and 6,405 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 an eight (8) state footprint in Alabama, Colorado, Florida, Georgia, North Carolina, South Carolina, Texas, 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. As of December 31, 2024, our workforce included employees that are White (70.95%), Black or African American (14.78%), Hispanic (7.78%), Asian (1.95%), Native - American or Alaskan) (0.23%), Native Hawaiian/Pacific Islander (0.17%), Two or more races (2.05%), and Other (2.09%).
Previous wording
We also operate a correspondent banking and capital markets division within our national bank subsidiary, of which the majority of its bond salesmen, traders and operational personnel are housed in facilities located in Atlanta, Georgia, Memphis, Tennessee, Walnut Creek, California, and Birmingham, Alabama. This division’s primary revenue generating activities are related to (i) its capital markets division, which includes commissions earned on fixed income security sales, fees from hedging services, loan brokerage fees, income generated from the purchase of government guaranteed loans and sale of pooled loans, and consulting fees for services related to these activities, and (ii) its correspondent banking division, which includes spread income earned on correspondent bank deposits (i.e., federal funds purchased) and correspondent bank checking account deposits and fees from safe-keeping activities, bond accounting services for correspondents, asset/liability consulting related activities, international wires, and other clearing and corporate checking account services.
Current wording
We also operate a correspondent banking and capital markets division within our national bank subsidiary, of which the majority of its bond salesmen, traders and operational personnel are housed in facilities located in Atlanta, Georgia, Memphis, Tennessee, Walnut Creek, California, and Birmingham, Alabama. This division’s primary revenue generating activities are related to its capital markets division, which includes commissions earned on fixed income security sales, fees from hedging services, loan brokerage fees and consulting fees for services related to these activities; and its correspondent banking division, which includes spread income earned on correspondent bank deposits (i.e., federal funds purchased) and correspondent bank checking account deposits and fees from safe-keeping activities, bond accounting services for correspondents, asset/liability consulting related activities, international wires, and other clearing and corporate checking account services.
Previous wording
The following discussion describes our results of operations for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, and also analyzes our financial condition as of September 30, 2024, as compared to December 31, 2023. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we may pay interest. Consequently, one of the key measures of our success is the amount of our net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.
Current wording
The following discussion describes our results of operations for the quarter ended March 31, 2025, compared to the quarter ended March 31, 2024, and also analyzes our financial condition as of March 31, 2025 as compared to December 31, 2024. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we may pay interest. Consequently, one of the key measures of our success is the amount of our net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.
Previous wording
Independent Bank Group, Inc. (“Independent”) Proposed Merger
Current wording
Independent Bank Group, Inc. (“Independent”) Merger
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 $206.9 million (all other things equal, including no compensating adjustments to qualitative factor adjustments). Conversely, if a 100% probability weighting was applied to the upside scenario, this would result in a decrease in the ACL by approximately $95.8 million. The adverse scenario includes assumptions including, but not limited to, elevated interest rates weakening consumers and public confidence, inflation, the conflict in the Middle East leading to a wider war, tensions between China and Taiwan interrupt trade, 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, 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 September 30, 2024.
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 $246 million. Conversely, if a 100% probability weighting was applied to the upside scenario, this would result in a decrease in the ACL by approximately $118 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 March 31, 2025.
Previous wording
We reported consolidated net income of $143.2 million, or diluted earnings per share (“EPS”) of $1.86, for the third quarter of 2024 as compared to consolidated net income of $124.1 million, or diluted EPS of $1.62, in the comparable period of 2023, a 15.3% increase in consolidated net income and a 14.8% increase in diluted EPS. During the nine months ended September 30, 2024, we reported consolidated net income of $390.6 million, or diluted EPS of $5.09, as compared to consolidated net income of $387.5 million, or diluted EPS of $5.07, in the comparable period of 2023, a 0.8% increase in consolidated net income and a 0.4% increase in diluted EPS. The $19.0 million increase in consolidated net income for the third quarter of 2024 compared to the same period of 2023 was the net result of the following items:
Current wording
We reported consolidated net income of $89.1 million, or diluted earnings per share (“EPS”) of $0.87, for the first quarter of 2025 as compared to consolidated net income of $115.1 million, or diluted EPS of $1.50, in the comparable period of 2024, a 22.6% decrease in consolidated net income and a 42.0% decrease in diluted EPS. The $26.0 million decrease in consolidated net income was the net result of the following items:
Previous wording
Our quarterly efficiency ratio increased to 56.6% in the third quarter of 2024 compared to 54.0% in the third quarter of 2023. The increase in the efficiency ratio compared to the third quarter of 2023 was the result of a 0.5% decrease in the total of tax-equivalent net interest income and noninterest income along with a 4.3% increase in noninterest expense (excluding amortization of intangibles). This decrease was reflective of a 32.8% increase in interest expense as the repricing of interest-bearing liabilities caught up with the repricing of interest-earning assets in 2023 and 2024 resulting from the rising rate environment. The increase in noninterest expense was reflective of a 3.2% increase in salaries and employee benefits, an 8.6% increase in information services expense, and a 1,914.6% increase in merger and branch consolidation related expense mostly related to the proposed merger with Independent.
Current wording
Our quarterly efficiency ratio increased to 61.0% in the first quarter of 2025 compared to 58.5% in the first quarter of 2024. The increase in the efficiency ratio compared to the first quarter of 2024 was the result of a 58.2% increase in noninterest expense (excluding amortization of intangibles) partially offset by 51.8% increase in the total of tax-equivalent net interest income and noninterest income. The overall increase in both noninterest expense and tax-equivalent net interest income and noninterest income was due to the acquisition of Independent in the first quarter of 2025. The higher increase in noninterest expense was mainly due to the $63.5 million increase in merger, branch consolidation, severance related and other restructuring expenses during the first quarter of 2025 compared to the first quarter of 2024.
Previous wording
Basic and diluted EPS were $1.88 and $1.86, respectively, for the third quarter of 2024, compared to $1.63 and $1.62, respectively, for the third quarter of 2023. The increase in basic and diluted EPS was due to a 15.3% increase in net income in the third quarter of 2024 compared to the same period in 2023. The effects from the increase in net income were partially offset by an increase in average basic common shares of 0.2%. The increase in net income in the third quarter of 2024 was mainly attributable to a decrease in provision for credit losses during the third quarter of 2024.
Current wording
Basic and diluted EPS were $0.88 and $0.87, respectively, for the first quarter of 2025, compared to $1.51 and $1.50, respectively, for the first quarter of 2024. The decrease in basic and diluted EPS was due to a 22.6% decrease in net income in the first quarter of 2025 compared to the same period in 2024 along with an increase in average basic common shares of 32.9%. The decrease in net income in the first quarter of 2025 was mainly attributable to the initial provision for credit losses on Non-PCD loan portfolio and unfunded commitments from Independent of $92.1 million, an $63.5 million increase in merger, branch consolidation, severance related and other restructuring expenses and the impact of the deferred tax remeasurement of $5.6 million during the first quarter of 2025. The increase in average basic common shares was mainly due to the issuance of approximately 24.9 million shares of common stock related to the acquisition of Independent in the first quarter of 2025.
Previous wording
The Federal Reserve implemented a 50 basis-point rate cut in mid-September 2024, following a series of rate hikes that began in March 2022, resulting in a target range of 4.75% to 5.00% at September 30, 2024. As the rate reduction occurred toward the end of the third quarter of 2024, the Company operated in a comparatively higher rate environment for majority of the three and nine months ended September 30, 2024, while it operated under a comparatively lower rate environment in the same time periods in 2023. Some key highlights are outlined below:
Current wording
The Federal Reserve implemented a total rate cut of 100 basis-point, beginning with a 50 basis-point reduction in mid-September 2024. This was followed by two additional cuts of 25 basis-point each, one in early November 2024 and the other in mid-December 2024. These rate cuts came after a series of rate hikes that began in March 2022, resulting in a target range of 4.25% to 4.50% at March 31, 2025. As a result, the Company operated in a comparatively lower rate environment for the first quarter of 2025 compared to the first quarter of 2024. Some key highlights are outlined below:
Previous wording
The tables below summarize the analysis of changes in interest income and interest expense for the three and nine months ended September 30, 2024, and 2023 and net interest margin on a tax equivalent basis:
Current wording
The table below summarizes the analysis of changes in interest income and interest expense for the quarter ended March 31, 2025 and 2024 and net interest margin on a tax equivalent basis.
Previous wording
Interest earned on loans held for investment increased $48.1 million to $491.4 million and increased $176.7 million to $1.4 billion, respectively, during the three and nine months ended September 30, 2024, from the comparable periods in 2023. Interest earned on loans held for investment included loan accretion income recognized during the three and nine months ended September 30, 2024, and 2023 of $2.9 million, $11.5 million, $4.1 million and $16.9 million, respectively, a decrease of $1.2 million and $5.4 million, respectively. Some key highlights for the quarter ended September 30, 2024, are outlined below:
Current wording
Interest earned on loans held for investment increased $258.0 million to $721.0 million in the quarter ended March 31, 2025 compared to the same period in 2024. Interest earned on loans held for investment included loan accretion income recognized during the quarters ended March 31, 2025 and 2024 of $61.8 million and $4.3 million, respectively, an increase of $57.5 million. Some key highlights for the quarter ended March 31, 2025 are outlined below:
Previous wording
The quarter-to-date average balance of interest-bearing liabilities increased by $1.5 billion, or 5.7%, in the third quarter of 2024 compared to the same period in 2023. The cost of interest-bearing liabilities increased by 56 basis points to 2.73% and the overall cost of funds, including demand deposits, increased by 47 basis points to 1.99% in the third quarter of 2024, compared to the same period in 2023. Some key highlights for the quarter ended September 30, 2024, compared to the same period in 2023 include:
Current wording
The quarter-to-date average balance of interest-bearing liabilities increased $13.2 billion, or 48.1%, in the first quarter of 2025 compared to the same period in 2024. The cost of interest-bearing liabilities increased by 10 basis points to 2.63% and the overall cost of funds, including demand deposits, increased by 14 basis points to 1.97% in the first quarter of 2025 compared to the same period in 2024. Some key highlights for the quarter ended March 31, 2025 compared to the same period in 2024 include:
Previous wording
Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. Average noninterest-bearing deposits decreased $0.9 billion, or 8.4%, to $10.4 billion in the third quarter of 2024 compared to $11.4 billion during the same period in 2023. The decrease in the average balance of noninterest bearing deposits was due to customers moving funds from noninterest bearing checking accounts to interest bearing checking accounts such as money market and time deposits, seeking higher yields.
Current wording
Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. Average noninterest-bearing deposits increased $3.0 billion, or 28.1%, to $13.5 billion in the first quarter of 2025 compared to $10.5 billion during the same period in 2024. The increase in the average balance of noninterest bearing deposits was primarily due to noninterest-bearing deposit balances assumed from Independent during the first quarter of 2025.
Previous wording
Noninterest income provides us with additional revenues that are significant sources of income. For the three months ended September 30, 2024, and 2023, noninterest income comprised 17.6%, and 17.0%, respectively, of total net interest income and noninterest income. For the nine months ended September 30, 2024, and 2023, noninterest income comprised 17.5%, and 16.8%, respectively, of total net interest income and noninterest income.
Current wording
Noninterest income provides us with additional revenues that are significant sources of income. For the three months ended March 31, 2025 and 2024, noninterest income comprised 13.7% and 17.2%, respectively, of total net interest income and noninterest income.
Previous wording
Noninterest income increased slightly by $2.1 million, or 2.9%, during the third quarter of 2024 compared to the same period in 2023. This quarterly change in total noninterest income resulted from the following:
Current wording
Noninterest income increased by $14.5 million, or 20.3%, during the first quarter of 2025 compared to the same period in 2024. This quarterly change in total noninterest income resulted from the following:
Previous wording
Noninterest expense increased by $8.6 million, or 3.6%, in the third quarter of 2024 as compared to the same period in 2023. The quarterly increase in total noninterest expense primarily resulted from the following:
Current wording
Noninterest expense increased by $159.5 million, or 64.0%, in the first quarter of 2025 compared to the same period in 2024. The quarterly increase in total noninterest expense primarily resulted from the following:
Previous wording
Our effective tax rate was 23.24% for the three months ended September 30, 2024, compared to 21.08% for the three months ended September 30, 2023. The increase in the effective rate for the quarter, when compared to the same period in the prior year, is driven primarily by amortization of LIHTCs now being recorded as part of income tax expense as a result of the adoption of the proportional amortization under ASU 2023-02 effective January 1, 2024, as well as an increase in pre-tax book income and a decrease in disallowed interest expense. This was partially offset by a decrease in disallowed FDIC premiums and an increase in non-deductible merger expenses recorded during the current period.
Current wording
Our effective tax rate was 26.53% for the three months ended March 31, 2025 compared to 25.05% for the three months ended March 31, 2024. The increase in the effective rate for the quarter, when compared to the same period in the prior year, is driven primarily by an increase in non-deductible executive compensation related to the acquisition of Independent, as well as an increase in non-deductible FDIC premiums, an increase in non-deductible merger expense, and one-time expense of $5.6 million related to the remeasurement of the Company’s deferred tax balances resulting from the acquisition of Independent and new blended income tax rate. This was partially offset by an increase in the cash surrender value of BOLI policies, increased tax-exempt interest income, and additional tax benefits associated with the vesting of incentive stock compensation during the first quarter of 2025.
Previous wording
Our total assets increased approximately $1.2 billion, or 2.6%, from December 31, 2023, to September 30, 2024, to approximately $46.1 billion. Within total assets, cash and cash equivalents increased by $213.8 million, or 21.4% and net loans increased $1.1 billion, or 3.6%, while investment securities decreased $386.7 million, or 5.2%, during the period. Within total liabilities, deposits grew $589.3 million, or 1.6%, and federal funds purchased and securities sold under agreements to repurchase increased by $49.1 million, or 10.0%. Total borrowings increased by $199.7 million, or 40.6%. Total shareholder’s equity increased $371.5 million, or 6.7%. The increase in cash and cash equivalents was primarily due to the increase in deposits of $589.3 million, and other borrowings of $199.7 million along with the decline in investments of $386.7 million resulting from maturities and pay downs of mortgage-backed securities. The increase in deposits was mainly attributable to an increase in money market accounts and certificate of deposits. The increase in borrowings was due to a net increase in FHLB advances of $200.0 million compared to December 31, 2023. The increases in funding sources were mostly offset by the increase in loans of $1.2 billion, which was due to normal organic growth. Our loan to deposit ratio was 89% and 87% at September 30, 2024 and December 31, 2023, respectively, while our percentage of noninterest-bearing deposit accounts to total deposits was 28% and 29%, respectively at September 30, 2024, and December 31, 2023.
Current wording
Our total assets increased by approximately $18.8 billion, or 40.4%, from December 31, 2024 to approximately $65.1 billion at March 31, 2025. Within total assets, cash and cash equivalents increased by $1.9 billion, or 137.0% and loans increased by $12.9 billion or 37.9% during the period, while investment securities increased by $1.6 billion, or 23.5%. Within total liabilities, deposits grew $15.3 billion, or 40.1%, and federal funds purchased and securities sold under agreements to repurchase increased by $164.4 million, or 31.9%. Total borrowings increased by $361.3 million, or 92.3%. Total shareholder’s equity increased by $2.7 billion, or 46.4%. The increases in total assets, cash and cash equivalents, investment securities, loans, deposits and equity were all primarily driven by the acquisition of Independent on January 1, 2025. The increase in cash and cash equivalents was also due to the cash received from the sale-leaseback transaction of approximately $456.4 million, an increase in deposits (excluding deposits acquired with Independent) of approximately $68.0 million and an increase in federal funds purchased and securities sold under agreements to repurchase of $164.4 million. The increase in deposits excluding deposits acquired with Independent was mainly from the increases in money market accounts and time deposit accounts. Loans declined $263.2 million during the quarter, excluding the $13.1 billion in loans acquired in the Independent acquisition. Our loan to deposit ratio was 88% and 89% at March 31, 2025 and December 31, 2024, respectively, while our percentage of noninterest-bearing deposit accounts to total deposits was 26% and 27% at March 31, 2025 and December 31, 2024, respectively.
Previous wording
At September 30, 2024, the unrealized net losses of the available for sale securities portfolio was $639.8 million, or 12.3%, below its amortized cost basis, compared to an unrealized net loss of $776.6 million, or 14.0%, at December 31, 2023. At September 30, 2024, the unrealized net loss of the held to maturity securities portfolio was $337.6 million, or 14.7%, below its amortized cost basis, compared to an unrealized net loss of $402.7 million, or 16.2%, at December 31, 2023.
Current wording
At March 31, 2025, the unrealized net loss of the available for sale securities portfolio was $505.1 million, or 7.9%, below its amortized cost basis, compared to an unrealized net loss of $808.6 million, or 15.8%, at December 31, 2024. At March 31, 2025, the unrealized net loss of the held to maturity securities portfolio was $375.5 million, or 17.1%, below its amortized cost basis, compared to an unrealized net loss of $420.1 million, or 18.6%, at December 31, 2024. The decrease in the unrealized net loss in the available for sale investment portfolio of $303.6 was mainly due to the securities repositioning transaction where the Company sold $1.8 billion in securities during the quarter and recognized a loss of $228.8 million. The proceeds from this transaction were reinvested in investment securities at current pricing. The decrease in the unrealized net loss for the held to maturity portfolio of $44.6 during the first three months of 2025 was due to changes in market interest rates during the quarter.
Previous wording
At September 30, 2024, we had 1,204 investment securities including both available for sale and held to maturity, in an unrealized loss position, which totaled $980.6 million. 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. The total number of investment securities with an unrealized loss position decreased, while the total dollar amount of the unrealized loss decreased by $200.6 million. The level of unrealized losses for each period is due to an overall increase in short- and long-term interest rates in 2022 and 2023. The reduction in the unrealized losses in the third quarter of 2024 was due to the Federal Reserve Bank dropping interest rates by 50 basis points during the quarter and the expectation that further rate cuts could come in the fourth quarter of 2024 and into 2025.
Current wording
At March 31, 2025, we had 1,123 investment securities, including both available for sale and held to maturity in an unrealized loss position, which totaled $893.6 million unrealized loss position. 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. The total number of investment securities with an unrealized loss position decreased by 91 securities, while the total dollar amount of the unrealized loss decreased by $335.9 million. The reduction in the number of securities in a loss position and level of unrealized losses during the quarter was mainly due the securities repositioning strategy during the quarter where we sold certain available-for-sale investment securities and recognized the losses and then reinvested the proceeds in investment securities at current market prices. The reduction was also due to changes in interest rate during the quarter.
Previous wording
All investment securities in an unrealized loss position as of September 30, 2024, continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability and intent to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is more likely than not that we will not be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of our securities may be sold or would require a charge to earnings as a provision for credit losses in such periods. Any charges as a provision for credit losses related to investment securities could impact cash flow, tangible capital or liquidity. See Note 2 — Summary of Significant Accounting Policies and Note 5 — Investment Securities for further discussion on the application of ASU 2016-13 on the investment securities portfolio.
Current wording
All investment securities in an unrealized loss position as of March 31, 2025, continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability and intent to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is more likely than not that we will not be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of our securities may be sold or would require a charge to earnings as a provision for credit losses in such periods. Any charges as a provision for credit losses related to investment securities could impact cash flow, tangible capital or liquidity. See Note 2 — Summary of Significant Accounting Policies and Note 5 — Securities for further discussion on the application of ASU 2016-13 on the investment securities portfolio.
Previous wording
As securities held for investment are purchased, they are designated as held to maturity or available for sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Although securities classified as available for sale may be sold from time to time to meet liquidity or other needs, it is not our normal practice to trade this segment of the investment securities portfolio. From time to time, the Bank may execute transactions to reposition the investment portfolio. Such activity has not expanded the broad asset classes used by the Bank. While management generally holds these assets on a long-term basis or until maturity, any short-term investments or securities available for sale could be converted at an earlier point, depending partly on changes in interest rates and alternative investment opportunities.
Current wording
As securities held for investment are purchased, they are designated as held to maturity or available for sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Although securities classified as available for sale may be sold from time to time to meet liquidity or other needs, it is not our normal practice to trade this segment of the investment securities portfolio. From time to time, the Bank may execute transactions to reposition the investment portfolio, as we did during the quarter ended March 31, 2025. Such activity has not expanded the broad asset classes used by the Bank. While management generally holds these assets on a long-term basis or until maturity, any short-term investments or securities available for sale could be converted at an earlier point, depending partly on changes in interest rates and alternative investment opportunities.
Previous 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. 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.
Current wording
Approximately 83.6% (based on amortized cost) of the investment portfolio is comprised of U.S. Treasury securities, U.S. Government agency securities, and U.S. Government Agency Mortgage-backed securities. These securities may be pledged to the Federal Home Loan Bank of Atlanta or the Federal Reserve Bank of Atlanta Discount Window. Approximately 12.2% (based on amortized cost) of the investment portfolio is comprised of municipal securities. A portion of the municipal bond portfolio may be pledged to the Federal Home Loan Bank of Atlanta subject to their credit approval. Approximately 99% of the municipal bond portfolio has ratings in the Double A or Triple A category.
Previous wording
The Company did not sell any securities that are available for sale or held to maturity during the nine months ended September 30, 2024. As of September 30, 2024, the portfolio had an effective duration of 5.89 years. We continue to monitor duration risk and seek to align actual duration with the target range.
Current wording
As of March 31, 2025, the portfolio had an effective duration of 4.77 years. We continue to monitor duration risk and seek to align actual duration with the target range.
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 September 30, 2024, we determined that there was no impairment on our other investment securities. As of September 30, 2024, other investment securities represented approx imately $211.5 million, or 0.46% of total assets, and primarily consists of FHLB and FRB stock which totals $182.6 million, or 0.40% of total assets. There were no gains or losses on the sales of these securities for three and nine months ended September 30, 2024, and 2023, respectively.
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 March 31, 2025, we determined that there was no impairment on our other investment securities. As of March 31, 2025, other investment securities represented approximately $345.7 million, or 0.53% of total assets, and primarily consists of FHLB and FRB stock which totals to approximately $257.7 million, or 0.40% of total assets. There were no gains or losses on the sales of these securities for three months ended March 31, 2025 and 2024, respectively.
Previous wording
We have a trading portfolio associated with our Correspondent Banking Division and the Bank’s subsidiary, SouthState|DuncanWilliams. 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 $87.1 million and $31.3 million, respectively, at September 30, 2024, and December 31, 2023.
Current wording
We have a trading portfolio associated with our Correspondent Banking Division and its subsidiary SouthState|Duncan-Williams. This portfolio is carried at fair value and realized and unrealized gains and losses are included in trading securities revenue, a component of 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 $107.4 million and $102.9 million at March 31, 2025 and December 31, 2024, respectively.
Previous wording
The balance of loans held for sale increased $236.2 million from December 31, 2023, to $287.0 million on September 30, 2024. Loans held for sale at September 30, 2024 consisted of mortgage and SBA loans held for sale. At December 31, 2023 loans held for sale consisted only of mortgage loans held for sale.
Current wording
The balance of loans held for sale increased $78.5 million from December 31, 2024 to $357.9 million at March 31, 2025. Loans held for sale at March 31, 2025 and December 31, 2024 consisted of mortgage and SBA loans held for sale.
Previous wording
During the third quarter of 2024, the Company began purchasing the guaranteed portions of SBA loans from third-party originators with the intent to aggregate the guaranteed portion of the SBA loans into pools with similar characteristics to create a security representing an interest in those pools through the SBA’s fiscal transfer agent. SBA loans held for sale totaled $222.1 million at September 30, 2024. See Note – 20 – SBA Loans Held for Sale for more information. This new activity in SBA loans held for sale was the main reason for the significant increase in loans held for sale during the current period.
Current wording
During the third quarter of 2024, the Company began purchasing the guaranteed portions of SBA loans from third-party originators with the intent to aggregate the guaranteed portion of the SBA loans into pools with similar characteristics to create a security representing an interest in those pools through the SBA’s fiscal transfer agent. SBA loans held for sale totaled $271.1 million at March 31, 2025 compared to $181.3 million at December 31, 2024. See Note 20 — SBA Loans Held for Sale for more information.
Previous wording
Mortgage loans held for sale totaled $64.9 million at September 30, 2024, an increase from $50.9 million at December 31, 2023. Total mortgage production was $506 million in the third quarter of 2024. This compares to $552 million in the second quarter of 2024 and $521 million in the third quarter of 2023. Mortgage production has remained flat in 2024 as mortgage rates have continued to remain high and housing inventory has remained low. The percentage of mortgage production sold into the secondary market decreased slightly in the third quarter of 2024 to 58% from 59% in the second quarter of 2024 but increased from 47% in the third quarter of 2023. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and will fluctuate over time.
Current wording
Mortgage loans held for sale totaled $86.8 million at March 31, 2025, a decrease from $98.1 million at December 31, 2024. Total mortgage production was $459 million in the first quarter of 2025. This compares to $456 million in the fourth quarter of 2024. Mortgage production has remained relatively stable as mortgage rates declined slightly during the quarter. The percentage of mortgage production sold into the secondary market decreased to 56% at March 31, 2025 compared to 60% at December 31, 2024. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and will fluctuate over time.
Previous wording
Total loans, net of deferred loan costs and fees (excluding loans held for sale), increased by $1.2 billion, or 4.8% annualized, to $33.5 billion at September 30, 2024. Our non-acquired loan portfolio increased by $2.2 billion, or 11.1% annualized, mainly driven by organic growth. Commercial non-owner-occupied loans, commercial and industrial loans, consumer owner-occupied loans, commercial owner-occupied real estate, and home equity loans led the way with $1.0 billion, $637.0 million, $605.5 million, $270.2 million and $154.6 million in year-to-date loan growth, respectively, or 21.7%, 18.5%, 13.6%, 9.0% and 18.1% annualized growth, respectively. The acquired loan portfolio decreased by $1.0 billion, or 23.4% annualized. This decline in acquired loans was due to paydowns and payoffs in both the PCD and Non-PCD loan categories along with renewals of acquired loans that were moved to our non-acquired loan portfolio. The main categories that declined were commercial non-owner-occupied loans, commercial owner-occupied loans and commercial and industrial loans, which decreased by $362.6 million, $223.2 million and $210.4 million, respectively, year-to-date. Acquired loans as a percentage of total loans decreased to 14.5% and non-acquired loans as a percentage of the overall portfolio increased to 85.5% at September 30, 2024. This compares to acquired loans as a percentage of total loans of 18.2% and non-acquired loans as a percentage of total loans of 81.8% at December 31, 2023.
Current wording
Total loans, net of deferred loan costs and fees (excluding mortgage loans held for sale), increased by $12.9 billion to $46.8 billion at March 31, 2025. Our non-acquired loan portfolio increased by $642.4 million, or 8.9% annualized, driven by organic growth and the migration of loans from acquired loans as they renew. Commercial non-owner-occupied loans, commercial owner-occupied real estate loans, consumer owner-occupied loans, commercial and industrial loans, home equity loans and construction and land development loans led the way with $307.9 million, $133.1 million, $103.8 million, $102.4 million, $33.7 million and $4.3 million in year-to-date loan growth, respectively, or 16.2%, 11.9%, 6.4%, 7.4%, 10.1% and .8% annualized growth, respectively. The acquired loan portfolio increased by $12.2 billion. This increase in acquired loans was due to the addition of $13.1 billion from the acquisition of Independent, net of offsets from paydowns and payoffs in both the PCD and Non-PCD loan categories along with renewals of acquired loans that were moved to our non-acquired loan portfolio. The main categories that increased were commercial non-owner-occupied loans, commercial and industrial loans, commercial owner-occupied real estate loans, construction and land development loans, consumer owner-occupied loans and other income producing property loans which increased by $5.8 billion, $1.8 billion, $1.6 billion, $1.3 billion, $919.8 million and $687.0 million, respectively, during the quarter. Acquired loans as a percentage of total loans increased to 35.7% and non-acquired loans as a percentage of the overall portfolio decreased to 64.3% at March 31, 2025. This compares to acquired loans as a percentage of total loans of 13.3% and non-acquired loans as a percentage of total loans of 86.7% at December 31, 2024.
Previous wording
Total commercial non-owner-occupied loans of $9.2 billion, approximately 27.6% of the total loans held for investment, was the largest category of the loan portfolio as of September 30, 2024. As of September 30, 2024, approximately 95% of the commercial non-owner-occupied portfolio was located within the Company’s footprint. Of the $9.2 billion, approximately $1.3 billion, or 4% of the total loans, represented our office segment. Approximately 95% of the office segment was located in the Company’s footprint and approximately 10% was located within the metropolitan or central business district. The weighted average Debt Service Coverage (“DSC”) was 1.62x and the loan-to-value was 57%. For additional discussion around classified commercial non-owner-occupied loans, refer to the “Nonperforming Assets” section in this MD&A.
Current wording
Total commercial non-owner-occupied loans of $15.5 billion, approximately 33.2% of the total loans held for investment, was the largest category of the loan portfolio as of March 31, 2025. As of March 31, 2025, approximately 94% of the commercial non-owner-occupied portfolio was located within the Company’s footprint. Of the $15.5 billion, approximately $1.8 billion, or 4% of the total loans, represented our office segment. Approximately 96% of the office segment was located in the Company’s footprint and approximately 5% was located within the metropolitan or central business district.
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 and unrest in middle east, as well as the volatility and magnitude of changes within those scenarios quarter over quarter, and consideration of conditions within the Bank’s operating environment and geographic area. Additional forecast scenarios may be weighted along with the baseline forecast to arrive at the final reserve estimate. While periods of relative economic stability should generally lead to stability in forecast scenarios and weightings to estimate credit losses, periods of instability can likewise require management to adjust the selection of scenarios and weightings, in accordance with the accounting standards. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors within four quarters using a straight-line approach. The Company generally uses an eight-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 gross domestic product growth, monetary and fiscal policy, inflation, supply chain issues and global events like the Russian/Ukraine conflict, unrest in middle east, and changes in global trade policy, 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 an eight-quarter forecast and a four-quarter reversion period.
Previous wording
In spite of the rapid interest rate hikes experienced cycle-to-date, the U.S. has thus far avoided a recession, although an inverted yield curve such as observed in the current interest rate environment often portends a coming recession. Management continues to use a blended forecast scenario of the baseline, upside, and more severe scenario, depending on the circumstances and economic outlook. For the quarter ending September 30, 2024, as well as the prior quarter, management selected a baseline weighting of 40%, a 30% weighting for an upside scenario and a 30% weighting for the more severe scenario. The scenario weightings were unchanged from the prior quarter. Scenario weightings are generally expected to remain stable but are reviewed on a quarterly basis. The scenario weightings reflect continued recognition of downside risks in the economic forecast from persistent levels of inflation, high interest rates, and tightening credit conditions conducive of a mild recession. While employment figures still show resilience and actual loan losses remain at low levels, continued projected borrower weakness related to high interest rates, uncertainty, and lingering chances of an economic downturn continue to moderate optimism in the path of the forecast and kept expected losses mostly flat. A decrease in unfunded commitments primarily in commercial construction drove a provision release of approximately $7.0 million during the third quarter of 2024.
Current wording
In spite of the rapid interest rate hikes experienced cycle-to-date, the U.S. has thus far avoided a recession, although an inverted yield curve such as observed in the current interest rate environment often portends a coming recession. Management continues to use a blended forecast scenario of the baseline, upside, and more severe scenario, depending on the circumstances and economic outlook. For the quarter ending March 31, 2025, management selected a baseline weighting of 40%, a 30% weighting for an upside scenario and a 30% weighting for the more severe scenario. The scenario weightings were unchanged from the prior quarter. Scenario weightings are generally expected to remain stable but are reviewed on a quarterly basis. The scenario weightings reflect continued recognition of downside risks in the economic forecast from persistent levels of inflation, high interest rates, and tightening credit conditions conducive of a mild recession. While employment figures still show resilience and actual loan losses remain at low levels, continued projected borrower weakness related to high interest rates, uncertainty, and lingering chances of an economic downturn continue to moderate optimism in the path of the forecast and kept expected losses mostly flat. The Company recorded a total provision for credit losses of $100.6 million for the first quarter of 2025, which included an initial provision for credit losses of $80.0 million and $12.1 million for Non-PCD loans and unfunded commitments, respectively, acquired from Independent. Excluding this initial provision for balances acquired from Independent, the Company recorded a provision for credit losses of $3.7 million and $4.8 million for funded loans and unfunded commitments, respectively, during the first quarter of 2025.
Previous wording
As of September 30, 2024, the balance of the ACL was $468.0 million or 1.39% of total loans. The ACL decreased $4.3 million from the balance of $472.3 million recorded at June 30, 2024. This decrease during the third quarter of 2024 included $1.8 million in provision for credit losses and $6.1 million in net charge-offs. During the nine months ended September 30,2024, the Company recorded a provision for credit losses based on loan growth and current forecasts applied to our modeling to adequately capture potential economic recessionary risks.
Current wording
As of March 31, 2025, the balance of the ACL was $623.7 million or 1.33% of total loans. The ACL increased $158.4 million from the balance of $465.3 million recorded at December 31, 2024. The net increase during the first quarter of 2025 included an initial provision related to PCD loans acquired from Independent of $118.6 million, an initial provision related to Non-PCD loans acquired from Independent of $80.0 million, a $3.7 million provision for all other loans, and $43.9 million in net charge-offs, which included $39.4 million of acquisition date charge-offs on PCD loans acquired from Independent. During the three months ended March 31, 2025, the Company recorded a provision for credit losses based on loan growth and current forecasts applied to our modeling to adequately capture potential economic recessionary risks.
Previous wording
At September 30, 2024, the Company had a reserve on unfunded commitments of $41.5 million, which was recorded as a liability on the Consolidated Balance Sheet, compared to $50.3 million at June 30, 2024, and $56.3 million at December 31, 2023. During the three and nine months ended September 30, 2024, the Company recorded a decrease in the reserve for unfunded commitments of $8.7 million and $14.8 million, respectively. For the prior comparative period, the Company recorded a decrease in the reserve for unfunded commitments of $1.1 million and $4.9 million, respectively, during three and nine months ended September 30, 2023. The Company did not have an allowance for credit losses or record a provision for credit losses on investment securities or other financial asset during the nine months ended September 30, 2024.
Current wording
At March 31, 2025, the Company had a reserve on unfunded commitments of $62.3 million, which was recorded as a liability on the Consolidated Balance Sheet, compared to $45.3 million at December 31, 2024. During the three months ended March 31, 2025, the Company recorded an increase in the reserve for unfunded commitments of $16.9 million, which was comprised of $12.1 million in the initial provision for unfunded commitments acquired from Independent and $4.8 million for all other unfunded commitments. This amount was recorded in Provision for Credit Losses on the Consolidated Statements of Income. For the comparative period in 2024, the Company had a reserve on unfunded commitments of $53.2 million recorded at March 31, 2024. The Company did not have an allowance for credit losses or record a provision for credit losses on investment securities or other financial assets during the first three months of 2025.
Previous wording
The ACL provides 2.47 times coverage of nonperforming loans at September 30, 2024. Net charge-offs to total average loans during three and nine months ended September 30, 2024, were 0.07% and 0.05%, respectively, compared to net charge-offs to total average loans of 0.16% and 0.08%, respectively, during the three and nine months ended September 30, 2023. We continued to experience solid and stable asset quality numbers and ratios as of September 30, 2024.
Current wording
The ACL provides 2.29 times coverage of nonperforming loans at March 31, 2025. Net charge-offs to the total average loans during the three months ended March 31, 2025 were 0.38%, including the acquisition date charge-offs on PCD loans acquired from Independent, compared to 0.03% during the three months ended March 31, 2024. We continued to experience solid and stable asset quality numbers and ratios as of March 31, 2025.
Previous wording
The following table presents a summary of net charge off ratios (annualized) by loan segment, for the three and nine months ended September 30, 2024, and 2023:
Current wording
The following table presents a summary of net charge-off ratios (annualized) by loan segment, for the quarters ended March 31, 2025 and 2024:
Previous wording
Total nonperforming assets were $191.0 million, or 0.57% of total loans and repossessed assets, at September 30, 2024, an increase of $6.8 million, or 3.7%, from December 31, 2023. Total nonperforming loans were $189.3 million, or 0.56%, of total loans, at September 30, 2024, an increase of $6.5 million, or 3.6%, from December 31, 2023. Non-acquired nonperforming loans decreased by $3.6 million from December 31, 2023. The decrease in non-acquired nonperforming loans was driven primarily by a decrease in commercial nonaccrual loans of $22.2 million, a decrease in accruing loans past due 90 days or more of $4.4 million, offset by an increase in consumer nonaccrual loans of $13.2 million and restructured nonaccrual loans of $9.8 million. The accruing loans past due 90 days or more decreased by $4.4 million at September 30, 2024, compared to December 31, 2023, due primarily to a decrease in accruing loans past due 90 days or more of factored receivables, which are trade credits rather than promissory notes loans that are deemed to be low risk. The increase in restructured nonaccrual loans of $9.8 million was primarily due to two commercial loans that were modified under a term extension agreement. Acquired nonperforming loans increased $10.2 million from December 31, 2023. The increase in the acquired nonperforming loan balances was due primarily to an increase in commercial nonaccrual loans of $4.7 million, an increase in restructured nonaccrual loans of $5.7 million, an increasein consumer nonaccrual loans of $600,000, offset by a decline in accruing loans past due 90 days or more of $800,000.
Current wording
Total nonperforming assets were $280.4 million, or 0.60% of total loans and repossessed assets, at March 31, 2025, an increase of $67.1 million, or 31.4%, from December 31, 2024. Total nonperforming loans were $272.2 million, or 0.58%, of total loans, at March 31, 2025, an increase of $61.6 million, or 31.4%, from December 31, 2024. Non-acquired nonperforming loans increased by $9.7 million from December 31, 2024. The increase in non-acquired nonperforming loans was driven primarily by an increase in commercial nonaccrual loans of $7.6 million, an increase in consumer nonaccrual loans of $1.7 million, and an increase in modified loans to a borrower experiencing financial difficulty of $479,000. Acquired nonperforming loans increased $51.9 million from December 31, 2024. The increase in the acquired nonperforming loan balances was due primarily to an increase in commercial nonaccrual loans of $51.4 million and an increase in accruing loans past due 90 days or more of $537,000. The majority of the increase in acquired commercial nonaccrual loans was due to the addition of $53.7 million in loans acquired in the merger with Independent, offset by a $2.3 million decline in legacy commercial nonaccrual loans. The $53.7 million in loans acquired were primarily commercial real estate and commercial and industrial loans.
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We also operate Corporate Billing, a transaction-based division of the Bank headquartered in Decatur, Alabama, that provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers nationwide.