COLUMBIA, S.C.--(BUSINESS WIRE)--Jul 30, 2018--South State Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and six-month periods ended June 30, 2018. Highlights for the second quarter of 2018 include the following:

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Second quarter 2018 financial results: Net income was $40.5 million, compared with $42.3 million in the first quarter of 2018, a decrease of $1.8 million Diluted EPS of $1.09 compared with $1.15, a decrease of $0.06 Adjusted net income (non-GAAP) was $52.7 million, compared to $51.2 million, a 2.8% increase, or $1.5 million Adjusted diluted EPS (non-GAAP) of $1.43, compared to $1.39, a 2.9% increase There are four specific items to note: (1) completed the system conversion from the Park Sterling (PSTB) merger and closed 10 branches; (2) net loan growth totaled $191.6 million, or 7.2% annualized; (3) total deposits were flat and interest expense increased by $3.1 million; and (4) increased the cash dividend to $0.35 per share, up $0.01 per share over last quarter. Performance ratios second quarter 2018 compared to first quarter 2018 Return on average assets totaled 1.12% compared to 1.19% Adjusted return on average assets (non-GAAP) was 1.45% compared to 1.44% Return on average equity totaled 6.96% compared to 7.41% Return on average tangible equity (non-GAAP) was 13.79% compared to 14.69% Adjusted return on average tangible equity (non-GAAP) increased to 17.68% from 17.60% Efficiency ratio was 65.6% down from 66.7%, due primarily to lower salaries and employee benefits Adjusted efficiency ratio (non-GAAP) was 57.3% an improvement from 60.0% (excluding merger-related and conversion expenses and securities losses (gains)) Balance sheet linked quarter Cash and cash equivalents decreased by $247.7 million Net loan growth for the quarter totaled $191.6 million, or 7.2% annualized, spread across consumer real estate, commercial & industrial, and commercial owner occupied real estate, with limited CRE growth Noninterest bearing deposits increased by $32.0 million, or 4.1% annualized; and interest bearing deposits decreased by $56.8 million, or 2.7% annualized, led by a reduction in brokered deposits of $54.3 million Other borrowings decreased $99.8 million from repayment of FHLB advances during the quarter Shareholders’ equity increased $25.8 million, primarily from net income, net of the dividends paid, of $27.9 million offset by accumulated other comprehensive loss (“AOCI”) of $5.7 million, net of tax, primarily from the available for sale securities portfolio Total equity to total assets increased to 16.12% from 15.81% Tangible equity to tangible assets (non-GAAP) increased to 9.45% from 9.20% Asset quality Nonperforming assets (NPAs) increased by $8.1 million, or 23.9%, to $42.2 million at June 30, 2018, primarily due to properties from branch closures related to the merger with PSTB taken into other real estate owned (OREO), from the level at March 31, 2018, and increased by $7.8 million, or 22.70% from June 30, 2017 NPAs to total assets increased to 0.29% at June 30, 2018, from 0.23% at March 31, 2018 and improved from 0.31% at June 30, 2017 Net charge-offs on non-acquired loans were 0.01% annualized, or $189,000, compared to $367,000, or 0.02% annualized in the first quarter of 2018. Compared to the second quarter of 2017, net charge offs totaled $756,000, or 0.05% annualized. Net charge-offs on acquired non-credit impaired loans were 0.14% annualized, or $1.1 million, compared to 0.02% annualized, or $169,000 in the first quarter of 2018. In the second quarter of 2017, net charge-offs were 0.10% annualized, or $429,000. Coverage ratio of ALLL on non-acquired non-performing loans was 322% at June 30, 2018 compared to 316% at March 31, 2018 and 297% at June 30, 2017.

Quarterly Cash Dividend

The Board of Directors of South State Corporation declared a quarterly cash dividend on July 26, 2018, of $0.35 per share payable on its common stock. This per share amount is higher by $0.01 per share, or 2.9%, compared to last quarter and $0.02 per share, or 6.1%, higher than the same quarter one year ago. The dividend will be payable on August 24, 2018 to shareholders of record as of August 17, 2018.

Durbin Impact

Effective July 1, 2018, the cap on interchange fees under the Durbin amendment will be in effect for the Company. We expect lower interchange income of approximately $8.5 million (pre-tax) during the last half of 2018.

Park Sterling – Fair Value Adjustments

During the second quarter of 2018, the Company adjusted the fair values of certain acquired assets and liabilities. These adjustments are reflected below in the column labeled “6/30/2018 Fair Value Adjustments”. The adjustments include the following:

1. Loans were adjusted to reflect movement between acquired credit impaired (ACI) loan portfolio and acquired noncredit impaired (ANCI) loan portfolio, and the movement in interest rates (from 9/30/2017) between initial fair values and interest rates at November 30, 2017. The fair value adjustment (discount) on these loans totaled $9.1 million, with $2.4 million related to credit and $6.7 million related to noncredit. This resulted in more acquired loan interest income during the second quarter of 2018 of approximately $516,000.

2. Intangible assets (core deposit intangible) increased by $3.3 million from the movement in interest rates, resulting in more amortization expense during the second quarter of 2018 of $321,000.

3. Interest-bearing liabilities (time deposits) fair values were adjusted as well for the movement in interest rates resulting in less premium than originally valued. This resulted in higher interest expense during the second quarter of 2018 of $236,000.

The reduction in net income resulting from all of these adjustments totaled approximately $41,000, pre-tax.

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