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Mergers and Acquisitions | 9 Months Ended
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Sep. 30, 2022
Mergers and Acquisitions |
Mergers and Acquisitions | Note 4 — Mergers and Acquisitions ​ Duncan-Williams, Inc. (“Duncan-Williams”) ​ On February 1, 2021, the Company completed its acquisition of Duncan-Williams, a 52-year-old family- and employee-owned registered broker-dealer, headquartered in Memphis, Tennessee, serving primarily institutional clients across the U.S. in the fixed income business. Duncan-Williams firm became an operating subsidiary of the Bank immediately following the transaction. ​ In total, the purchase price for Duncan-Williams was $48.3 million, including an additional premium of $8.0 million that is payable after three years from the date of acquisition. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The Company recognized goodwill on this acquisition of $15.8 million. The goodwill was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date. ​ Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or “ACBI”) ​ On March 1, 2022, the Company acquired all of the outstanding common stock of Atlantic Capital Bancshares, Inc., a Georgia corporation (“Atlantic Capital” or “ACBI”), in a stock transaction. Upon the terms and subject to the conditions set forth therein, Atlantic Capital merged with and into the Company, with the Company continuing as the surviving corporation in the merger. Immediately following the merger, Atlantic Capital’s wholly owned banking subsidiary, Atlantic Capital Bank, N.A. (“ACB”) merged with and into the Company’s wholly owned banking subsidiary, SouthState Bank, National Association, which continues as the surviving bank in the bank merger by and between SouthState and Atlantic Capital. Shareholders of Atlantic Capital received 0.36 shares of the Company’s common stock for each share of Atlantic Capital common stock they owned. In total, the purchase price for Atlantic Capital was $657.8 million. ​ In the acquisition, the Company acquired $2.4 billion of loans, including PPP loans, at fair value, net of $54.3 million, or 2.24%, estimated discount to the outstanding principal balance, representing 10.0% of the Company’s total loans at December 31, 2021. Of the total loans acquired, Management identified $137.9 million that had more than insignificantly deteriorated since origination and were thus determined to be PCD loans. ​ The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The Company recognized goodwill on this acquisition of $341.4 million. The goodwill was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date. ​ During the three and nine months ended September 30, 2022, the Company incurred approximately $7.1 million and $15.0 million, respectively, of acquisition costs related to this transaction. During the three and nine months ended September 30, 2021, the Company incurred approximately $925,000 of acquisition costs related to this transaction. These acquisition costs are reported in merger and branch consolidation related expenses on the Company’s Condensed Consolidated Statements of Income. ​ The Atlantic Capital transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Initial | ​ | Subsequent | ​ | ​ | ​
​ | ​ | As Recorded | ​ | Fair Value | ​ | Fair Value | ​ | As Recorded by | ​
(Dollars in thousands) |  | by Atlantic Capital |  | Adjustments |  | Adjustments | ​ | the Company |
Assets | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​
Cash and cash equivalents | ​ | $ | 250,134 | ​ | $ | 24 | (a) | $ | — | ​ | $ | 250,158 | ​
Investment securities | ​ | ​ | 717,332 | ​ | ​ | (13,622) | (b) | ​ | — | ​ | ​ | 703,710 | ​
Loans, net of allowance and mark | ​ |  | 2,394,256 | ​ |  | (18,964) | (c) | ​ | (5,614) | (c) |  | 2,369,678 | ​
Premises and equipment | ​ |  | 16,892 | ​ |  | 2,608 | (d) | ​ | — | ​ |  | 19,500 | ​
Intangible assets | ​ | ​ | 22,572 | ​ | ​ | (1,781) | (e) | ​ | — | ​ | ​ | 20,791 | ​
Bank owned life insurance | ​ | ​ | 74,613 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 74,613 | ​
Deferred tax asset | ​ | ​ | 30,231 | ​ | ​ | 2,273 | (f) | ​ | (444) | (f) | ​ | 32,060 | ​
Other assets | ​ |  | 45,274 | ​ |  | (1,277) | (g) | ​ | 7,557 | (g) |  | 51,554 | ​
Total assets | ​ | $ | 3,551,304 | ​ | $ | (30,739) | ​ | $ | 1,499 | ​ | $ | 3,522,064 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​
Deposits: | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​
Noninterest-bearing | ​ | $ | 1,411,671 | ​ | $ | — | ​ | $ | — | ​ | $ | 1,411,671 | ​
Interest-bearing | ​ |  | 1,616,970 | ​ |  | — | ​ | ​ | — | ​ |  | 1,616,970 | ​
Total deposits | ​ |  | 3,028,641 | ​ |  | — | ​ | ​ | — | ​ |  | 3,028,641 | ​
Federal funds purchased and securities sold under agreements to repurchase | ​ | ​ | 50,000 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 50,000 | ​
Other borrowings | ​ | ​ | 74,131 | ​ | ​ | 4,286 | (h) | ​ | — | ​ | ​ | 78,417 | ​
Other liabilities | ​ |  | 50,711 | ​ |  | (2,075) | (i) | ​ | — | ​ |  | 48,636 | ​
Total liabilities | ​ | ​ | 3,203,483 | ​ | ​ | 2,211 | ​ | ​ | — | ​ | ​ | 3,205,694 | ​
Net identifiable assets acquired over (under) liabilities assumed | ​ | ​ | 347,821 | ​ | ​ | (32,950) | ​ | ​ | 1,499 | ​ | ​ | 316,370 | ​
Goodwill | ​ |  | — | ​ |  | 342,939 | ​ | ​ | (1,499) | ​ |  | 341,440 | ​
Net assets acquired over liabilities assumed | ​ | $ | 347,821 | ​ | $ | 309,989 | ​ | $ | — | ​ | $ | 657,810 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Consideration: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
South State Corporation common shares issued | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 7,330,803 | ​
Purchase price per share of the Company's common stock | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 90.00 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Company common stock issued ($659,772) and cash exchanged for fractional shares ($19) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 659,791 | ​
Stock option conversion | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,135 | ​
Restricted stock unit conversion | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 2,870 | ​
Restricted stock awards conversion (unvested awards) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (5,986) | ​
Fair value of total consideration transferred | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 657,810 | ​
Explanation of fair value adjustments (a)— Represents an adjustment to record time deposits with financial institutions at fair value (premium). (b)— Represents the reversal of Atlantic Capital 's existing fair value adjustments of $17.2 million and the adjustment to record securities at fair value (discount) totaling $30.9 million (includes reclassification of all securities held as HTM to AFS totaling $237.6 million). (c)— Represents approximately 1.40%, or $34.0 million, net credit discount of the loan portfolio and 2.24% total net discount, or $54.3 million, including non-credit discount, based on a third-party valuation. Also, includes a reversal of Atlantic Capital's ending allowance for credit losses of $22.1 million and $7.6 million of existing Atlantic Capital’s deferred fees and costs. (d)— Represents the preliminary fair value adjustments of $2.6 million on fixed assets and leased assets. (e)— Represents approximately $17.5 million, or 0.63%, of CDI amount and $3.2 million for SBA servicing asset based on a third-party valuation. Atlantic Capital’s pre-merger goodwill and servicing asset of $19.9 million and $2.6 million, respectively, were written-off. (f)— Represents deferred tax asset related to fair value adjustments with effective tax rate of 24.6%, which includes an adjustment from Atlantic Capital’s effective tax rate to the Company’s effective tax rate. The difference in effective tax rates relates to state income taxes. (g)— Represents the fair value adjustment (decrease) for low-income housing investments of $1.1 million, write-off of prepaid assets of $233,000, adjustments to receivables of $154,000 and fair value adjustment for Small Business Investment Company (“SBIC”) investments of $7.4 million. (h)— Represents the reversal of the existing Atlantic Capital’s issuance costs on subordinated debt of $0.9 million and recording the fair value adjustment (premium) of $3.4 million, based on a third-party valuation. (i)— Represents the reversal of $2.8 million of unfunded commitment liability at purchase date and the fair value adjustment to increase lease liabilities associated with rental facilities totaling $1.4 million. Also includes the reversal of uncertain tax liability of $0.7 million. ​ Comparative and Pro Forma Financial Information for the Atlantic Capital Acquisition ​ Pro-forma data for the three- and nine-month periods ending September 30, 2021 and nine-month period ending September 30, 2022 listed in the table below presents pro-forma information as if the Atlantic Capital acquisition occurred at the beginning of 2021. These results combine the historical results of Atlantic Capital in the Company’s Consolidated Statements of Income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2021. ​ Merger-related costs of $15.0 million from the Atlantic Capital acquisition were incurred during 2022 and were excluded from pro forma information below. Merger-related costs of $925,000 incurred during three and nine months ended September 30, 2021 were also excluded from pro forma information below. No adjustments have been made to reduce the impact of any OREO write downs, investment securities sold or repayment of borrowings recognized by Atlantic Capital in either 2022 or 2021. The core system conversion for the Atlantic Capital merger was completed during third quarter of 2022. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition, which are not reflected in the pro forma amounts below. The total revenues presented below represent pro-forma net interest income plus pro-forma noninterest income: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Pro Forma | ​ | Pro Forma | ​ | Pro Forma | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended | ​ | Nine Months Ended | ​
(Dollars in thousands) | ​ | September 30, 2021 | ​ | September 30, 2022 | ​ | September 30, 2021 | ​
Total revenues (net interest income plus noninterest income) |  | $ | 380,736 |  | $ | 1,200,879 |  | $ | 1,139,741 | ​
Net interest income | ​ | $ | 289,117 | ​ | $ | 945,790 | ​ | $ | 865,671 | ​
Net adjusted income available to the common shareholder | ​ | $ | 140,076 | ​ | $ | 380,588 | ​ | $ | 401,853 | ​
EPS - basic | ​ | $ | 1.81 | ​ | $ | 5.02 | ​ | $ | 5.15 | ​
EPS - diluted | ​ | $ | 1.80 | ​ | $ | 4.98 | ​ | $ | 5.12 | ​
​ The disclosures regarding the results of operations for Atlantic Capital subsequent to the acquisition date are omitted as this information is not practical to obtain. The majority of the fixed costs and purchase accounting entries were booked on the Company’s core system making it impractical to determine Atlantic Capital’s results of operation on a stand-alone basis.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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