[PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements of SouthState Corporation and its subsidiaries, along with management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of SouthState Corporation and its subsidiaries for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, income statements, comprehensive income statements, statements of changes in shareholders' equity, and cash flow statements, along with detailed notes on accounting policies, mergers, and various financial instruments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show an increase in total assets to $44.94 billion at June 30, 2023, from $43.92 billion at December 31, 2022, primarily driven by growth in loans and cash equivalents. Total liabilities also increased, with deposits rising to $36.74 billion, and shareholders' equity saw an increase to $5.29 billion | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $44,940,332 | $43,918,696 | | Total Liabilities | $39,650,322 | $38,843,769 | | Total Shareholders' Equity | $5,290,010 | $5,074,927 | - Total assets increased by approximately **$1.02 billion** (2.3%) from December 31, 2022, to June 30, 2023[7](index=7&type=chunk) - Loans, net, increased to **$31.11 billion** at June 30, 2023, from **$29.82 billion** at December 31, 2022[7](index=7&type=chunk) - Total deposits increased to **$36.74 billion** at June 30, 2023, from **$36.35 billion** at December 31, 2022[7](index=7&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income for the three months ended June 30, 2023, was $123.45 million, a 3.6% increase from $119.18 million in the same period of 2022. For the six months ended June 30, 2023, net income rose 20.0% to $263.37 million from $219.50 million in 2022, driven by significant increases in net interest income, partially offset by higher interest expense and provision for credit losses | Metric (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Interest Income | $478,053 | $326,333 | $928,462 | $596,804 | | Total Interest Expense | $116,310 | $10,518 | $185,456 | $19,472 | | Net Interest Income | $361,743 | $315,815 | $743,006 | $577,332 | | Provision for Credit Losses | $38,389 | $19,286 | $71,480 | $10,837 | | Total Noninterest Income | $77,214 | $86,756 | $148,569 | $172,803 | | Total Noninterest Expense | $242,626 | $231,169 | $483,131 | $459,769 | | Net Income | $123,447 | $119,175 | $263,373 | $219,504 | | Basic EPS | $1.62 | $1.58 | $3.47 | $2.99 | | Diluted EPS | $1.62 | $1.57 | $3.45 | $2.96 | - Net interest income increased by **$45.9 million** (14.5%) for the three months ended June 30, 2023, compared to the same period in 2022[9](index=9&type=chunk) - Provision for credit losses increased significantly to **$38.39 million** for the three months ended June 30, 2023, from **$19.29 million** in the prior year[9](index=9&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported comprehensive income of $74.83 million for the three months ended June 30, 2023, a significant improvement from a comprehensive loss of $77.75 million in the prior year. For the six months ended June 30, 2023, comprehensive income was $278.06 million, reversing a loss of $250.23 million in 2022, primarily due to a reduction in unrealized holding losses on available-for-sale securities | Metric (in thousands) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $123,447 | $119,175 | $263,373 | $219,504 | | Unrealized holding (losses) gains on AFS securities, net of tax | $(48,614) | $(196,928) | $14,690 | $(469,738) | | Comprehensive Income (Loss) | $74,833 | $(77,753) | $278,063 | $(250,234) | - Unrealized holding losses on available-for-sale securities, net of tax, significantly decreased from **$(196.93) million** in Q2 2022 to **$(48.61) million** in Q2 2023[12](index=12&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity increased to $5.29 billion at June 30, 2023, from $5.07 billion at December 31, 2022. This growth was primarily driven by net income of $263.37 million and positive changes in accumulated other comprehensive income, partially offset by cash dividends and common stock repurchases | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Common Stock | $189,990 | $189,261 | | Surplus | $4,228,910 | $4,215,712 | | Retained Earnings | $1,533,508 | $1,347,042 | | Accumulated Other Comprehensive Loss | $(662,398) | $(677,088) | | Total Shareholders' Equity | $5,290,010 | $5,074,927 | - Net income contributed **$263.37 million** to retained earnings for the six months ended June 30, 2023[17](index=17&type=chunk) - Cash dividends declared on common stock totaled **$75.87 million** for the six months ended June 30, 2023[17](index=17&type=chunk) - Common stock repurchases amounted to **$7.02 million** for the six months ended June 30, 2023[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased to $371.66 million for the six months ended June 30, 2023, from $966.46 million in the prior year. Investing activities used $905.51 million, a significant reduction from $2.86 billion used in 2022, while financing activities provided $735.04 million, a substantial increase from a net use of $9.29 million in 2022, primarily due to FHLB borrowings and increased deposits | Metric (in thousands) | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $371,656 | $966,456 | | Net Cash Used in Investing Activities | $(905,513) | $(2,857,735) | | Net Cash Provided by (Used in) Financing Activities | $735,043 | $(9,286) | | Net Increase (Decrease) in Cash and Cash Equivalents | $201,186 | $(1,900,565) | | Cash and Cash Equivalents at End of Period | $1,513,749 | $4,821,006 | - Proceeds from FHLB borrowings totaled **$4.85 billion** for the six months ended June 30, 2023, with repayments of **$4.45 billion**[20](index=20&type=chunk) - Net increase in deposits was **$392.12 million** for the six months ended June 30, 2023[20](index=20&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide essential details on the company's financial reporting, including accounting policies, recent pronouncements, merger impacts, and specific breakdowns of investment securities, loans, credit loss allowances, and other financial instruments. Key updates include the adoption of ASU 2022-02 for credit losses and the LIBOR transition [Note 1 — Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information, including normal recurring accruals. Certain prior period information has been reclassified without impacting net income or equity, and current period results are not necessarily indicative of future performance - Financial statements are unaudited and prepared under GAAP for interim reporting, with all necessary adjustments included[21](index=21&type=chunk) - Prior period reclassifications had no impact on net income or equity[21](index=21&type=chunk) [Note 2 — Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's significant accounting policies, including those for loans, allowance for credit losses (ACL) on investment securities and loans, and reclassification adjustments. It highlights the adoption of ASU 2022-02, which eliminated the Troubled Debt Restructuring (TDR) designation and revised the accounting for modifications to borrowers experiencing financial difficulty - Loans are generally reported at unpaid principal balances, less unearned income and net of deferred fees/costs[24](index=24&type=chunk) - Non-accrual status is generally applied when principal or interest is 90 days or more past due, or earlier if collection is doubtful[25](index=25&type=chunk) - The Company adopted ASU No. 2022-02, eliminating the TDR designation and requiring prospective application for modifications after January 1, 2023[33](index=33&type=chunk) - A correction was made for variation margin payments on interest rate swaps, reclassifying them from collateral to daily settlements, impacting interest income/expense and noninterest income, but with no impact on Net Income or Shareholders' Equity[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3 — Recent Accounting and Regulatory Pronouncements](index=17&type=section&id=Note%203%20%E2%80%94%20Recent%20Accounting%20and%20Regulatory%20Pronouncements) The company adopted ASU No. 2022-02, eliminating TDR accounting and requiring new disclosures for credit losses, with no material impact on financial statements. It also adopted optional expedients for reference rate reform (LIBOR transition) under ASU No. 2020-04, which did not materially impact financial statements. ASU No. 2023-02, regarding tax credit structures, is issued but not yet adopted, and is not anticipated to have a material impact - ASU No. 2022-02, eliminating TDR guidance, was adopted effective January 1, 2023, with prospective transition for modifications[43](index=43&type=chunk) - ASU No. 2020-04 (Reference Rate Reform) expedients were adopted starting April 1, 2023, for LIBOR-exposed instruments, with no material impact[45](index=45&type=chunk) - ASU No. 2023-02 (Investments—Equity Method and Joint Ventures) is effective for fiscal years beginning after December 15, 2023, and is not anticipated to have a material impact[46](index=46&type=chunk) [Note 4 — Mergers and Acquisitions](index=19&type=section&id=Note%204%20%E2%80%94%20Mergers%20and%20Acquisitions) On March 1, 2022, SouthState Corporation acquired Atlantic Capital Bancshares, Inc. for $657.8 million in a stock transaction. The acquisition resulted in $342.0 million in goodwill and the acquisition of $2.4 billion in loans, including $137.9 million identified as purchased credit-deteriorated (PCD) loans. Acquisition costs of $1.0 million and $2.4 million were incurred for the three and six months ended June 30, 2023, respectively - SouthState Corporation acquired Atlantic Capital Bancshares, Inc. on March 1, 2022, for a total purchase price of **$657.8 million**[47](index=47&type=chunk) - The acquisition included **$2.4 billion** of loans, with **$137.9 million** identified as purchased credit-deteriorated (PCD) loans[48](index=48&type=chunk) - Goodwill recognized from the acquisition totaled **$342.0 million**[51](index=51&type=chunk) Acquisition Costs | Period | Acquisition Costs (in thousands) | | :----- | :----------------------------- | | 3 Months Ended Jun 30, 2023 | $1,000 | | 6 Months Ended Jun 30, 2023 | $2,400 | | 3 Months Ended Jun 30, 2022 | $2,200 | | 6 Months Ended Jun 30, 2022 | $7,900 | [Note 5 — Investment Securities](index=22&type=section&id=Note%205%20%E2%80%94%20Investment%20Securities) The company's total investment securities decreased to $7.73 billion at June 30, 2023, from $8.19 billion at December 31, 2022. Held-to-maturity securities had an amortized cost of $2.59 billion with $440.64 million in unrealized losses, while available-for-sale securities had a fair value of $4.95 billion with $881.40 million in unrealized losses. The unrealized losses are primarily due to rising interest rates and are not considered credit-related Investment Securities | Investment Securities (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | Held to Maturity (Amortized Cost) | $2,585,155 | $2,683,241 | | Held to Maturity (Fair Value) | $2,144,514 | $2,250,168 | | Held to Maturity (Unrealized Losses) | $(440,641) | $(433,073) | | Available for Sale (Fair Value) | $4,949,334 | $5,326,822 | | Available for Sale (Unrealized Losses) | $(881,402) | $(893,373) | - Total investment securities decreased by **$458.56 million** (5.6%) from December 31, 2022, to June 30, 2023[7](index=7&type=chunk) - All debt securities in an unrealized loss position are performing as scheduled, and the decline in fair value is not due to credit loss[65](index=65&type=chunk) - Investment securities with a market value of **$2.6 billion** were pledged to secure public funds deposits and for other purposes at June 30, 2023[67](index=67&type=chunk) [Note 6 — Loans](index=26&type=section&id=Note%206%20%E2%80%94%20Loans) Total loans, net of allowance for credit losses, increased to $31.11 billion at June 30, 2023, from $29.82 billion at December 31, 2022. The non-acquired loan portfolio grew significantly, while the acquired loan portfolio decreased due to paydowns and renewals. The credit risk profile of commercial loans is categorized by risk grade, and consumer loans are analyzed by past due status, with an increase in nonaccrual loans Loan Category | Loan Category (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------------- | :------------ | :---------------- | | Total Loans | $31,536,785 | $30,177,862 | | Less Allowance for Credit Losses | $(427,392) | $(356,444) | | Loans, net | $31,109,393 | $29,821,418 | - Non-acquired loans increased by **$2.19 billion** (9.6%) to **$24.99 billion** at June 30, 2023, from **$22.81 billion** at December 31, 2022[69](index=69&type=chunk) - Acquired loans decreased by **$826.93 million** (11.2%) to **$6.55 billion** at June 30, 2023, from **$7.37 billion** at December 31, 2022[69](index=69&type=chunk) - Total nonaccrual loans increased to **$165.51 million** at June 30, 2023, from **$104.23 million** at December 31, 2022[83](index=83&type=chunk) [Note 7 — Allowance for Credit Losses (ACL)](index=41&type=section&id=Note%207%20%E2%80%94%20Allowance%20for%20Credit%20Losses%20%28ACL%29) The Allowance for Credit Losses (ACL) on loans increased to $427.39 million at June 30, 2023, from $356.44 million at December 31, 2022. This increase was primarily due to a $75.30 million provision for credit losses during the six months ended June 30, 2023, reflecting economic forecast uncertainties and loan growth. Net charge-offs for the six months ended June 30, 2023, were $4.35 million ACL Metrics | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | ACL Balance | $427,392 | $356,444 | | Net Charge-offs (6 months) | $(4,348) | N/A | | Provision for Credit Losses (6 months) | $75,296 | N/A | - The ACL increased by **$70.95 million** (19.9%) from December 31, 2022, to June 30, 2023[101](index=101&type=chunk) - The ACL provides **2.52 times** coverage of nonperforming loans at June 30, 2023[270](index=270&type=chunk) - Net charge-offs to total average loans were **0.03%** for the six months ended June 30, 2023[270](index=270&type=chunk) [Note 8 — Other Real Estate Owned and Bank Premises Held for Sale](index=43&type=section&id=Note%208%20%E2%80%94%20Other%20Real%20Estate%20Owned%20and%20Bank%20Premises%20Held%20for%20Sale) Total Other Real Estate Owned (OREO) and Bank Premises Held for Sale decreased to $14.55 million at June 30, 2023, from $18.78 million at December 31, 2022. This reduction was primarily due to sales of properties, partially offset by additions and write-downs OREO and Bank Properties Held for Sale | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | OREO | $1,080 | $1,023 | | Bank Properties Held for Sale | $13,472 | $17,754 | | Total | $14,552 | $18,777 | - Additions to OREO and Bank Premises Held for Sale totaled **$3.19 million**, while sales amounted to **$6.18 million** for the six months ended June 30, 2023[102](index=102&type=chunk) [Note 9 — Leases](index=43&type=section&id=Note%209%20%E2%80%94%20Leases) The company maintains operating right-of-use (ROU) assets of $106.7 million and operating lease liabilities of $114.6 million at June 30, 2023. Total lease cost for the six months ended June 30, 2023, was $10.46 million. The weighted-average remaining lease term for operating leases is 9.63 years, with a weighted-average discount rate of 3.0% Operating Lease Balances | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Operating ROU Assets | $106,700 | $108,000 | | Operating Lease Liabilities | $114,600 | $115,600 | Lease Cost Components | Lease Cost Component (in thousands) | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2023 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Operating Lease Cost | $4,278 | $8,518 | | Short-term Lease Cost | $109 | $215 | | Variable Lease Cost | $840 | $1,475 | | Total Lease Cost | $5,354 | $10,462 | - Weighted-average remaining lease term for operating leases is **9.63 years** (June 30, 2023) and **10.11 years** (December 31, 2022)[104](index=104&type=chunk) [Note 10 — Deposits](index=45&type=section&id=Note%2010%20%E2%80%94%20Deposits) Total deposits increased to $36.74 billion at June 30, 2023, from $36.35 billion at December 31, 2022. This growth was primarily driven by a significant increase in time deposits and money market accounts, which offset declines in noninterest-bearing, interest-bearing checking, and savings deposits as customers sought higher yields Deposit Type | Deposit Type (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Noninterest-bearing checking | $11,489,483 | $13,168,656 | | Interest-bearing checking | $8,185,609 | $8,955,519 | | Savings | $2,931,320 | $3,464,351 | | Money market | $9,710,032 | $8,342,111 | | Time deposits | $4,425,434 | $2,419,986 | | Total deposits | $36,741,878 | $36,350,623 | - Time deposits increased by **$2.01 billion** (83.7%) from December 31, 2022, to June 30, 2023[105](index=105&type=chunk) - Noninterest-bearing checking deposits decreased by **$1.68 billion** (12.7%) over the same period[105](index=105&type=chunk) - Certificates of deposits greater than $250,000 increased to **$850.2 million** at June 30, 2023, from **$464.9 million** at December 31, 2022[105](index=105&type=chunk) [Note 11 — Retirement Plans](index=46&type=section&id=Note%2011%20%E2%80%94%20Retirement%20Plans) The company sponsors a 401(k) savings plan, matching 100% of employee contributions up to 4% of salary. Expenses for the plan were $4.2 million and $8.8 million for the three and six months ended June 30, 2023, respectively, showing a slight increase from the prior year - Employer contributions to the 401(k) plan match **100%** of employee contributions up to **4%** of salary[106](index=106&type=chunk) Retirement Plan Expense | Period | Expense (in thousands) | | :----- | :--------------------- | | 3 Months Ended Jun 30, 2023 | $4,200 | | 6 Months Ended Jun 30, 2023 | $8,800 | | 3 Months Ended Jun 30, 2022 | $4,100 | | 6 Months Ended Jun 30, 2022 | $8,100 | [Note 12 — Earnings Per Share](index=46&type=section&id=Note%2012%20%E2%80%94%20Earnings%20Per%20Share) Basic and diluted earnings per common share increased for both the three and six months ended June 30, 2023, compared to the prior year. Basic EPS for the three months was $1.62 (up from $1.58), and diluted EPS was $1.62 (up from $1.57). For the six months, basic EPS was $3.47 (up from $2.99), and diluted EPS was $3.45 (up from $2.96) Earnings Per Share | Metric | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $1.62 | $1.58 | $3.47 | $2.99 | | Diluted EPS | $1.62 | $1.57 | $3.45 | $2.96 | | Weighted Average Basic Shares | 76,058 | 75,461 | 75,981 | 73,465 | | Weighted Average Dilutive Shares | 76,418 | 76,094 | 76,394 | 74,104 | - The increase in EPS is primarily due to higher net income, partially offset by an increase in weighted average common shares outstanding[212](index=212&type=chunk) [Note 13 — Share-Based Compensation](index=46&type=section&id=Note%2013%20%E2%80%94%20Share-Based%20Compensation) The company uses stock options, restricted stock, and restricted stock units (RSUs) to incentivize key employees and directors. As of June 30, 2023, there were 140,854 stock options outstanding, 27,304 nonvested restricted stock shares, and 943,972 RSUs outstanding. Unrecognized compensation cost for RSUs totaled $34.9 million, expected to be recognized over 1.25 years Share-Based Compensation | Share-Based Compensation | June 30, 2023 | | :----------------------- | :------------ | | Stock Options Outstanding | 140,854 | | Restricted Stock Nonvested | 27,304 | | RSUs Outstanding | 943,972 | - No stock options were granted during the first six months of 2023, and all outstanding options were vested as of December 31, 2022[114](index=114&type=chunk) - Unrecognized compensation cost for nonvested restricted stock was **$1.2 million**, expected to be recognized over **0.84 years**[118](index=118&type=chunk) - Unrecognized compensation cost for nonvested RSUs was **$34.9 million**, expected to be recognized over **1.25 years**[124](index=124&type=chunk) [Note 14 — Commitments and Contingent Liabilities](index=50&type=section&id=Note%2014%20%E2%80%94%20Commitments%20and%20Contingent%20Liabilities) At June 30, 2023, commitments to extend credit and standby letters of credit totaled $11.1 billion, with a recorded liability for expected credit losses on unfunded commitments of $63.4 million. The company is involved in various legal actions, but management does not expect a material effect on consolidated financial statements. A special FDIC assessment is anticipated, estimated at $2.8 million quarterly for two years, totaling $22.7 million - Commitments to extend credit and standby letters of credit totaled **$11.1 billion** at June 30, 2023[125](index=125&type=chunk) - The liability for expected credit losses on unfunded commitments was **$63.4 million** at June 30, 2023[125](index=125&type=chunk) - A special FDIC assessment is estimated at **$2.8 million** quarterly, or **$22.7 million** over two years, to be recognized upon adoption of the final rule[128](index=128&type=chunk) [Note 15 — Fair Value](index=52&type=section&id=Note%2015%20%E2%80%94%20Fair%20Value) The company measures and discloses fair value using a three-tier hierarchy. Assets recorded at fair value on a recurring basis, such as available-for-sale securities and derivatives, primarily use Level 2 inputs. Mortgage servicing rights and SBA servicing assets are classified as Level 3. Loans held for sale are under the fair value option. Nonrecurring fair value measurements apply to OREO, bank properties held for sale, and individually evaluated loans, primarily using Level 3 inputs - Fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), Level 3 (unobservable inputs)[131](index=131&type=chunk) Fair Value Measurements (June 30, 2023) | Asset/Liability (in thousands) | Fair Value (June 30, 2023) | Level 1 | Level 2 | Level 3 | | :----------------------------- | :------------------------- | :------ | :------ | :------ | | Derivative financial instruments (Assets) | $174,480 | $0 | $174,480 | $0 | | Loans held for sale | $42,951 | $0 | $42,951 | $0 | | Trading securities | $56,580 | $0 | $56,580 | $0 | | Securities available for sale | $4,949,334 | $0 | $4,949,334 | $0 | | Mortgage servicing rights | $87,539 | $0 | $0 | $87,539 | | SBA servicing asset | $6,202 | $0 | $0 | $6,202 | | Derivative financial instruments (Liabilities) | $975,717 | $0 | $975,717 | $0 | - Individually evaluated loans, OREO, and bank properties held for sale are measured at fair value on a nonrecurring basis, primarily using Level 3 inputs[139](index=139&type=chunk) [Note 16 — Accumulated Other Comprehensive Loss](index=58&type=section&id=Note%2016%20%E2%80%94%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss (AOCI), net of tax, decreased to $(662.40) million at June 30, 2023, from $(677.09) million at December 31, 2022. This improvement was primarily due to other comprehensive income of $14.69 million for the six months ended June 30, 2023, mainly from changes in unrealized gains/losses on available-for-sale securities AOCI Balance | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | AOCI Balance | $(662,398) | $(677,088) | - Other comprehensive income before reclassifications was **$14.72 million** for the six months ended June 30, 2023[146](index=146&type=chunk) - Net comprehensive income for the six months ended June 30, 2023, was **$14.69 million**, compared to a loss of **$469.74 million** in the prior year[146](index=146&type=chunk) [Note 17 — Derivative Financial Instruments](index=59&type=section&id=Note%2017%20%E2%80%94%20Derivative%20Financial%20Instruments) The company uses various derivative instruments, including interest rate swaps, to manage interest rate risk and for mortgage banking activities. Customer-related interest rate swaps, classified as non-designated hedges, had an aggregate notional amount of $21.6 billion at June 30, 2023. The company transitioned most LIBOR-exposed instruments to SOFR. Derivatives related to MSRs had notional amounts of $63.0 million, and the mortgage pipeline had forward sales commitments of $108.0 million Derivative Financial Instruments | Derivative Type (in thousands) | Notional Amount (Jun 30, 2023) | Fair Value Gain (Jun 30, 2023) | Fair Value Loss (Jun 30, 2023) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Fair value hedge (loan swaps) | $12,078 | $422 | $0 | | Customer related interest rate contracts | $10,832,049 | $16,235 | $974,495 | | Matched interest rate swaps with counterparty | $10,744,034 | $156,591 | $54 | | Contracts to hedge MSRs | $63,000 | $0 | $1,168 | | Contracts to hedge mortgage pipeline | $108,000 | $1,232 | $0 | - The company transitioned the majority of interest rate swap contracts to SOFR as the reference rate during Q2 2023[153](index=153&type=chunk) - Net loss on non-designated hedges of interest rate risk was **$0.084 million** for the three months ended June 30, 2023[155](index=155&type=chunk) [Note 18 — Capital Ratios](index=63&type=section&id=Note%2018%20%E2%80%94%20Capital%20Ratios) Both SouthState Corporation and SouthState Bank maintained capital ratios well above regulatory minimums and the 'well capitalized' thresholds at June 30, 2023. The company's CET1 ratio was 11.25%, Tier 1 capital ratio was 11.25%, Total capital ratio was 13.48%, and Tier 1 leverage ratio was 9.17%. The Bank's ratios were similarly strong, indicating robust capital adequacy Capital Ratios | Capital Ratio | Consolidated (Jun 30, 2023) | Bank (Jun 30, 2023) | Minimum Required (Basel III) | Well Capitalized Minimum | | :-------------------------------- | :-------------------------- | :------------------ | :--------------------------- | :----------------------- | | Common Equity Tier 1 to RWA | 11.25% | 12.04% | 7.00% | 6.50% | | Tier 1 Capital to RWA | 11.25% | 12.04% | 8.50% | 8.00% | | Total Capital to RWA | 13.48% | 13.18% | 10.50% | 10.00% | | Tier 1 Capital to Average Assets (Leverage) | 9.17% | 9.81% | 4.00% | 5.00% | - The company and the Bank are considered 'well capitalized' by all regulatory capital standards[167](index=167&type=chunk) - The company elected the 5-year method for CECL transition, deferring recognition of adoption effects and the CECL difference for the first two years, with a three-year phase-out starting Q1 2022[168](index=168&type=chunk) [Note 19 — Goodwill and Other Intangible Assets](index=64&type=section&id=Note%2019%20%E2%80%94%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill remained at $1.92 billion at June 30, 2023, with no impairment identified in the last annual valuation. Other intangible assets, net of accumulated amortization, decreased to $102.26 million from $116.45 million at December 31, 2022. Amortization expense for other intangibles was $7.0 million and $14.3 million for the three and six months ended June 30, 2023, respectively - Goodwill carrying amount was **$1.92 billion** at June 30, 2023, unchanged from December 31, 2022, with no impairment[169](index=169&type=chunk)[170](index=170&type=chunk) Other Intangible Assets | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Gross Carrying Amount | $275,002 | $274,869 | | Accumulated Amortization | $(172,746) | $(158,419) | | Net Intangible Assets | $102,256 | $116,450 | Amortization Expense | Amortization Expense (in thousands) | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2023 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Amortization of intangibles | $7,028 | $14,327 | - The SBA servicing asset is now accounted for at fair value, with changes recorded in SBA Income, and is excluded from future amortization expense[171](index=171&type=chunk) [Note 20 — Mortgage Loan Servicing, Origination, and Loans Held for Sale](index=66&type=section&id=Note%2020%20%E2%80%94%20Mortgage%20Loan%20Servicing%2C%20Origination%2C%20and%20Loans%20Held%20for%20Sale) The portfolio of residential mortgages serviced for others remained at $6.6 billion at June 30, 2023. Mortgage Servicing Rights (MSRs) increased to $87.5 million from $86.6 million at December 31, 2022, with changes in fair value recorded in Mortgage Banking Income. Whole loan sales decreased significantly, and the percentage of loans sold with servicing rights retained increased. Loans held for sale increased to $43.0 million - Residential mortgages serviced for others totaled **$6.6 billion** at June 30, 2023[173](index=173&type=chunk) Mortgage Servicing Rights | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | MSRs | $87,539 | $86,610 | Whole Loan Sales | Whole Loan Sales (in millions) | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2022 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Sales | $249.3 | $408.7 | $449.9 | $1,200.0 | | Sold with Servicing Retained (%) | 80.7% | 79.3% | 78.3% | 76.7% | - Loans held for sale increased to **$43.0 million** at June 30, 2023, from **$29.0 million** at December 31, 2022[181](index=181&type=chunk) [Note 21 — Short-Term Borrowings](index=70&type=section&id=Note%2021%20%E2%80%94%20Short-Term%20Borrowings) Repurchase agreements totaled $334.5 million at June 30, 2023, collateralized by $420.0 million in securities. Federal funds purchased were $246.9 million. FHLB borrowings increased to $400.0 million at June 30, 2023, from zero at December 31, 2022, with a weighted average interest rate of 5.32%. The company had $7.4 billion in unused FHLB credit and $2.4 billion in FRB borrowing capacity Short-Term Borrowings | Short-Term Borrowing (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Repurchase Agreements | $334,536 | $342,820 | | Federal Funds Purchased | $246,910 | $213,597 | | Other Borrowings (FHLB) | $400,000 | $0 | - FHLB borrowings had a weighted average interest rate of **5.32%** at June 30, 2023[185](index=185&type=chunk) - Unused net credit available with the FHLB was approximately **$7.4 billion** at June 30, 2023[185](index=185&type=chunk) [Note 22 — Stock Repurchase Program](index=70&type=section&id=Note%2022%20%E2%80%94%20Stock%20Repurchase%20Program) The company's Board of Directors approved a 2022 Stock Repurchase Program authorizing the repurchase of up to 4,120,021 common shares. No shares were repurchased under this program during 2022 or the first six months of 2023. However, 1,312,038 shares were repurchased under the 2021 Stock Repurchase Plan during the first six months of 2022 - The 2022 Stock Repurchase Program authorized repurchases of up to **4,120,021** common shares[186](index=186&type=chunk) - No shares were repurchased under the 2022 Stock Repurchase Program during 2022 or the first six months of 2023[186](index=186&type=chunk) - **1,312,038** shares were repurchased under the 2021 Stock Repurchase Plan during the first six months of 2022 at a weighted average price of **$83.99** per share[187](index=187&type=chunk) [Note 23 — Subsequent Events](index=72&type=section&id=Note%2023%20%E2%80%94%20Subsequent%20Events) On July 27, 2023, the Board of Directors increased the quarterly cash dividend on common stock from $0.50 per share to $0.52 per share, payable on August 18, 2023 - Quarterly cash dividend increased from **$0.50** to **$0.52** per share, payable August 18, 2023[188](index=188&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=73&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive analysis of SouthState Corporation's financial condition and operating results. It highlights a 3.6% increase in net income for Q2 2023 and a 20.0% increase for the six months ended June 30, 2023, driven by higher net interest income despite rising interest expenses and credit loss provisions. The company maintained strong liquidity and capital positions, with a focus on organic growth and strategic acquisitions [Overview](index=73&type=section&id=Overview) SouthState Corporation, a financial holding company headquartered in Winter Haven, Florida, provides a wide range of banking services through its Bank and subsidiaries across six states. The company focuses on organic growth supplemented by acquisitions, deriving income primarily from loans and investments, with net interest income being a key measure of success. As of June 30, 2023, total assets were approximately $44.9 billion - SouthState Corporation is a financial holding company offering banking services, brokerage, investment advisory, and factoring services[192](index=192&type=chunk) - As of June 30, 2023, the company had approximately **$44.9 billion** in assets and **5,162** full-time equivalent employees[193](index=193&type=chunk) - The company's growth strategy combines organic growth with selective acquisitions[195](index=195&type=chunk) [Recent Events](index=75&type=section&id=Recent%20Events) Recent events include regulatory considerations for a special FDIC assessment, estimated at $2.8 million quarterly, and a review of liquidity and capital in response to financial market volatility. The company maintains strong liquidity with $36.7 billion in deposits (71% insured/collateralized) and substantial credit facilities, while capital ratios remain well above regulatory minimums, even considering unrealized losses in investment portfolios - FDIC proposed a special assessment of approximately **12.5 basis points** annually on uninsured deposits (excluding first $5 billion), estimated to cost the company **$2.8 million** quarterly[201](index=201&type=chunk) - At June 30, 2023, total deposits were **$36.7 billion**, with approximately **71%** insured or collateralized[203](index=203&type=chunk) - The company had **$7.4 billion** in FHLB credit availability, **$2.4 billion** at the Federal Reserve Bank's discount window, and **$4.3 billion** in brokered deposit capacity at June 30, 2023[204](index=204&type=chunk) Capital Ratios (June 30, 2023) | Capital Ratio (June 30, 2023) | Company | Bank | | :---------------------------- | :------ | :--- | | Tier 1 Leverage Ratio | 9.17% | 9.81% | | CET1 Risk-Based Capital Ratio | 11.25% | 12.04% | | Total Risk-Based Capital Ratio | 13.48% | 13.18% | [Critical Accounting Policies](index=77&type=section&id=Critical%20Accounting%20Policies) The company's financial statements are based on GAAP and banking industry practices, requiring management estimates and judgments that can materially affect reported values. Key policies and recent accounting pronouncements are detailed in the notes to the financial statements - Financial position and results are affected by management's application of accounting policies, including estimates, assumptions, and judgments[207](index=207&type=chunk) - Significant accounting policies and changes are discussed in Note 2 and Note 3 of the financial statements[207](index=207&type=chunk) [Results of Operations](index=77&type=section&id=Results%20of%20Operations) Net income increased by 3.6% for Q2 2023 and 20.0% for the six months ended June 30, 2023, primarily due to a significant rise in net interest income. This was driven by higher yields on interest-earning assets in a rising rate environment, despite increased interest expense on liabilities and a higher provision for credit losses. Noninterest income decreased, while noninterest expense increased due to salaries and regulatory charges Key Financial Metrics | Metric (in millions) | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income | $123.4 | $119.2 | $263.4 | $219.5 | | Diluted EPS | $1.62 | $1.57 | $3.45 | $2.96 | - Net interest income increased by **$45.9 million** (14.5%) in Q2 2023, driven by a **$151.7 million** increase in interest income from loans and investments, partially offset by a **$105.8 million** increase in interest expense[208](index=208&type=chunk) - Provision for credit losses increased by **$19.0 million** in Q2 2023 due to economic forecasts reflecting inflation and rising interest rates[214](index=214&type=chunk) - Noninterest income decreased by **$9.5 million** (11.0%) in Q2 2023, mainly from declines in correspondent banking and capital market income, mortgage banking income, and SBA income[214](index=214&type=chunk) - Noninterest expense increased by **$11.5 million** (5.0%) in Q2 2023, primarily due to higher salaries, FDIC assessments, and business development costs[214](index=214&type=chunk) [Analysis of Financial Condition](index=95&type=section&id=Analysis%20of%20Financial%20Condition) Total assets increased by $1.0 billion to $44.9 billion at June 30, 2023, with loans growing by $1.4 billion and cash equivalents by $201.2 million, while investment securities decreased. Deposit growth was $391.3 million, primarily in time deposits and money market accounts, offsetting declines in noninterest-bearing and lower-cost interest-bearing deposits. Capital resources remained strong, and liquidity was enhanced by FHLB borrowings and brokered deposits - Total assets increased by approximately **$1.0 billion** (2.3%) from December 31, 2022, to June 30, 2023[244](index=244&type=chunk) - Loans (excluding ACL changes) increased by **$1.4 billion** (4.5%), and cash and cash equivalents increased by **$201.2 million** (15.3%)[244](index=244&type=chunk) - Investment securities decreased by **$458.6 million** (5.6%)[244](index=244&type=chunk) - Deposit growth was **$391.3 million** (1.1%), driven by a **$2.0 billion** increase in time deposits (including **$1.0 billion** in brokered time deposits) and a **$1.4 billion** increase in money market accounts[244](index=244&type=chunk) - Noninterest-bearing deposits declined by **$1.7 billion**, and interest-bearing checking and savings accounts declined by **$769.9 million** and **$533.0 million**, respectively[244](index=244&type=chunk) - Total nonperforming assets increased to **$170.9 million** (0.54% of total loans and repossessed assets) at June 30, 2023, from **$109.7 million** (0.36%) at December 31, 2022[280](index=280&type=chunk) - Shareholders' equity increased by **$215.1 million** (4.2%) to **$5.3 billion** at June 30, 2023[289](index=289&type=chunk) - Estimated uninsured deposits were **$12.5 billion** at June 30, 2023, down from **$14.1 billion** at December 31, 2022[287](index=287&type=chunk) [Asset-Liability Management and Market Risk Sensitivity](index=118&type=section&id=Asset-Liability%20Management%20and%20Market%20Risk%20Sensitivity) The company actively manages interest rate risk, including reprice, option, basis, and yield curve risks, using simulation analysis to assess earnings and equity at risk. As of June 30, 2023, a 100-basis point increase in rates would result in an estimated 1.6% increase in net interest income over one year, while a 100-basis point decrease would result in a 2.2% decrease. EVE analysis indicated a 1.9% decrease for a 100-basis point increase and a 0.03% decrease for a 100-basis point decrease - Interest rate risk includes reprice, option, basis, and yield curve risk[314](index=314&type=chunk) - Simulation analysis is used to assess earnings at risk (percentage change in net interest income) and equity at risk (percentage change in net economic value of assets and liabilities)[315](index=315&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) Net Interest Income Sensitivity | Interest Rate Shock | Percentage Change in Net Interest Income over One Year | | :------------------ | :--------------------------------------------------- | | Up 100 basis points | 1.6% | | Up 200 basis points | 2.8% | | Down 100 basis points | (2.2%) | | Down 200 basis points | (5.1%) | - At June 30, 2023, a **100-basis point increase** in interest rates would result in a **1.9% decrease** in EVE, and a **100-basis point decrease** would result in a **0.03% decrease**[327](index=327&type=chunk) [LIBOR Transition](index=122&type=section&id=LIBOR%20Transition) The company successfully transitioned all LIBOR-indexed loans, derivatives, and trust preferred securities to SOFR and other alternative indices by June 30, 2023, utilizing provisions of the Adjustable Interest Rate (LIBOR) Act. This involved proactive client communication, new product adoption, and systems testing - All U.S. dollar LIBOR tenors ceased publication on a representative basis as of June 30, 2023[331](index=331&type=chunk) - The company migrated LIBOR-indexed instruments to SOFR and other indices, leveraging the Adjustable Interest Rate (LIBOR) Act[333](index=333&type=chunk) - Final validations and verification tasks for the LIBOR transition will be completed during Q3 2023[333](index=333&type=chunk) [Deposit and Loan Concentrations](index=122&type=section&id=Deposit%20and%20Loan%20Concentrations) The company has no material concentration of deposits from any single customer or group and avoids significant loan concentrations within a single industry. As of June 30, 2023, there were no aggregated loan concentrations exceeding 10% of total loans to multiple borrowers in similar business activities - No material concentration of deposits from any single customer or group of customers[334](index=334&type=chunk) - No significant portion of loans concentrated within a single industry or group of related industries[334](index=334&type=chunk) [Concentration of Credit Risk](index=124&type=section&id=Concentration%20of%20Credit%20Risk) The company manages credit risk across its diversified loan portfolio, with concentrations defined by regulatory guidelines (25% of Tier 1 capital plus ACL). At June 30, 2023, seven credit concentrations were identified, including loans to lessors of nonresidential buildings ($6.9 billion) and owner-occupied office buildings ($1.9 billion). The Bank's CDL concentration ratio was 59.9% and CRE concentration ratio was 242.3%, both below regulatory guidelines - Credit concentrations exist when amounts loaned to similar business activities exceed **25%** of total Tier 1 capital plus regulatory adjusted ACL, which was **$1.1 billion** at June 30, 2023[338](index=338&type=chunk) - Seven credit concentrations were identified at June 30, 2023, including **$6.9 billion** in loans to lessors of nonresidential buildings and **$8.0 billion** in 1-4 family owner-occupied residential property loans[338](index=338&type=chunk) Concentration Ratios | Concentration Ratio | June 30, 2023 | December 31, 2022 | | :------------------ | :------------ | :---------------- | | CDL Concentration Ratio | 59.9% | 64.8% | | CRE Concentration Ratio | 242.3% | 249.0% | - Both CDL and CRE concentration ratios were below established regulatory guidelines at June 30, 2023[339](index=339&type=chunk) [Reconciliation of GAAP to Non-GAAP](index=125&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP) This section provides a reconciliation of GAAP to non-GAAP financial measures, specifically focusing on the return on average tangible equity. Management uses these non-GAAP measures to offer additional insights into performance and capital, facilitating comparisons within the banking industry and across periods, while cautioning against their use as standalone metrics - Return on average tangible equity is a non-GAAP measure that excludes the effect of average intangible assets and adds back after-tax amortization of intangibles to net income[340](index=340&type=chunk) Return on Equity Metrics | Metric | 3 Months Ended Jun 30, 2023 | 3 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Return on Average Equity (GAAP) | 9.34% | 9.36% | 10.14% | 8.81% | | Return on Average Tangible Equity (Non-GAAP) | 15.81% | 16.59% | 17.27% | 15.28% | [Cautionary Note Regarding Any Forward-Looking Statements](index=125&type=section&id=Cautionary%20Note%20Regarding%20Any%20Forward-Looking%20Statements) This section warns readers that statements not historical in nature are forward-looking and subject to significant risks and uncertainties. These risks include failure to realize merger synergies, deposit attrition, financial industry volatility, economic downturns, interest rate fluctuations, liquidity issues, and regulatory changes. Readers are cautioned against undue reliance on these statements, which are based on current beliefs and expectations and are not updated unless required by law - Forward-looking statements are based on management's beliefs, assumptions, current expectations, estimates, and projections[342](index=342&type=chunk) - Key risks include failure to realize merger synergies, deposit attrition, financial industry volatility, economic downturns, interest rate risk, liquidity risk, and potential deterioration in real estate values[342](index=342&type=chunk)[343](index=343&type=chunk) - The company does not undertake to update or revise any forward-looking statements, except as required by federal securities laws[347](index=347&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=129&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's quantitative and qualitative disclosures about market risk as of June 30, 2023, compared to those presented in the Annual Report on Form 10-K for the year ended 2022 - No material changes in market risk disclosures as of June 30, 2023, compared to the 2022 Annual Report on Form 10-K[349](index=349&type=chunk) [Item 4. Controls and Procedures](index=129&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2023, concluding they were effective in providing reasonable assurance. There were no material changes in internal control over financial reporting during the three months ended June 30, 2023 - Disclosure controls and procedures were evaluated as effective as of June 30, 2023[350](index=350&type=chunk) - No material changes in internal control over financial reporting during the three months ended June 30, 2023[352](index=352&type=chunk) [PART II — OTHER INFORMATION](index=81&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This part covers other information not included in the financial statements, such as legal proceedings, risk factors, unregistered sales of equity securities, and exhibits [Item 1. Legal Proceedings](index=129&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2023, and the report date, the company is not party to any pending material legal proceedings other than those occurring in the ordinary course of business - No pending material legal proceedings other than those in the ordinary course of business as of June 30, 2023[354](index=354&type=chunk) [Item 1A. Risk Factors](index=131&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in Item 1A. of Part I in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors disclosed in the 2022 Annual Report on Form 10-K[356](index=356&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=131&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The 2022 Stock Repurchase Program authorized the repurchase of up to 4,120,021 common shares, but no shares were repurchased under this program during 2022 or 2023. However, 54,204 shares were repurchased in Q2 2023 under stock-based compensation plans for stock option exercises or income taxes on vesting restricted stock - The 2022 Stock Repurchase Program authorized repurchases of up to **4,120,021** common shares[357](index=357&type=chunk) - No shares were repurchased under the 2022 Stock Repurchase Program during 2022 or 2023[357](index=357&type=chunk) Shares Purchased in Q2 2023 | Period (2023) | Total Shares Purchased | | :------------ | :--------------------- | | April 1 - April 30 | 19,265 | | May 1 - May 31 | 32,517 | | June 1 - June 30 | 2,422 | | Total Q2 2023 | 54,204 | - Shares purchased in Q2 2023 were under stock-based compensation plans, not the 2022 Stock Repurchase Plan[358](index=358&type=chunk) [Item 3. Defaults Upon Senior Securities](index=131&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Item 4. Mine Safety Disclosures](index=131&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Item 5. Other Information](index=131&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report under sub-items (a) and (b), and no issuer purchases of registered equity securities to disclose under sub-item (c) [Item 6. Exhibits](index=133&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including amended bylaws, a separation agreement, various certifications (Rule 13a-14(a), Section 1350), and financial statements formatted in iXBRL - Exhibits include Amended and Restated Bylaws, Separation Agreement, Rule 13a-14(a) Certifications, Section 1350 Certifications, and iXBRL formatted financial statements[366](index=366&type=chunk)

Financial Data and Key Metrics Changes - The company set aside $142 million in loan loss reserves, resulting in a total reserve of approximately $500 million, or 156 basis points of loans, up 30 basis points from a year ago [23][45][56] - Net interest income was $362 million, approximately equal to the reported figure for the third quarter of 2022, with a net interest margin (NIM) of 3.62%, down 31 basis points from Q1 [27][36] - The annualized loan growth rate for the first half of 2023 was 9%, with deposits growing at a 3.6% annualized rate [33][57] Business Line Data and Key Metrics Changes - Mortgage and wealth management segments performed solidly, maintaining levels similar to Q1, while non-interest income increased to $77 million, the best quarter since last year's second quarter [28][38] - The company observed a shift in deposits from demand deposit accounts (DDA) to money market accounts and CDs, with DDAs representing 31% of total deposits, down from 34% last quarter [26] Market Data and Key Metrics Changes - The Southeast region continues to show strong population and job growth, driving real estate values and new home construction, with SouthState operating in four of the six fastest-growing states in the country [24][35] - The company noted a mixed shift in deposits, with DDA levels moving towards pre-pandemic levels [26] Company Strategy and Development Direction - The company aims to maintain a conservative approach to loan growth, projecting slower growth in the back half of the year, particularly in residential loans due to higher mortgage rates [9][10][33] - The management emphasized a focus on relationship-based deposit funding and disciplined underwriting in high-growth markets as key strategies for success [44][86] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong capital position and reserves, which provide optionality as the economic cycle evolves [23][45] - The company anticipates that loan yields will continue to increase, driven by the Federal Reserve's rate policies and new loan production [13][14] Other Important Information - The company expects to see slower loan growth in the next couple of quarters, with risk-weighted asset growth anticipated to be lower than in Q2 [51] - Non-interest income was positively impacted by the interest rate swap business, which performed well despite a challenging fixed income environment [38] Q&A Session Summary Question: What are the expectations for loan yields moving into next year? - Management expects loan yields for the total portfolio to end between 5.5% and 5.75% by the end of Q4 2023, with no significant changes to NIM guidance [13][108] Question: How is the company managing deposit costs amid competition? - Management noted that deposit costs have increased but are in line with expectations, with a cumulative deposit beta of 22% this cycle [56][71] Question: What is the outlook for non-interest income? - Non-interest income is expected to stabilize at levels similar to Q1, with the second quarter's performance driven by interest rate swaps [38][76] Question: How does the company view potential M&A opportunities? - Management indicated a preference for partnering with banks that are 10% to one-third of SouthState's size, focusing on high-growth markets [86][96]

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $44.9 billion, driven by growth in net loans and cash, while liabilities rose due to new borrowings Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$44,923,827** | **$43,918,696** | | Total cash and cash equivalents | $1,996,662 | $1,312,563 | | Total investment securities | $8,014,663 | $8,189,780 | | Loans, net | $30,325,497 | $29,821,418 | | Goodwill | $1,923,106 | $1,923,106 | | **Total Liabilities** | **$39,674,823** | **$38,843,769** | | Total deposits | $36,401,592 | $36,350,623 | | Other borrowings | $900,000 | $0 | | **Total Shareholders' Equity** | **$5,249,004** | **$5,074,927** | [Condensed Consolidated Statements of Net Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Net%20Income) Net income for Q1 2023 increased 39.5% year-over-year to $139.9 million due to higher net interest income Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $381,263 | $261,518 | | Provision (recovery) for credit losses | $33,091 | $(8,449) | | Total Noninterest Income | $71,355 | $86,046 | | Total Noninterest Expense | $240,505 | $228,600 | | **Net Income** | **$139,926** | **$100,329** | | **Diluted EPS** | **$1.83** | **$1.39** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed disclosures on accounting policies, acquisitions, financial instruments, and capital adequacy - Effective January 1, 2023, the company **adopted ASU No. 2022-02**, eliminating the Troubled Debt Restructuring (TDR) accounting guidance prospectively without a material impact on financial statements[36](index=36&type=chunk)[45](index=45&type=chunk)[91](index=91&type=chunk) - On March 1, 2022, the company acquired Atlantic Capital Bancshares, Inc for a total purchase price of **$657.8 million** in a stock transaction, resulting in **$342.0 million of goodwill**[53](index=53&type=chunk)[55](index=55&type=chunk) - The company's capital ratios as of March 31, 2023, were **well in excess of the minimum regulatory requirements** to be considered 'well capitalized', with a consolidated Common Equity Tier 1 ratio of **11.13%** against a 7.00% requirement[185](index=185&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, highlighting strong net income and net interest income growth [Results of Operations](index=82&type=section&id=Results%20of%20Operations) Q1 2023 net income rose to $139.9 million, driven by a 117 basis point expansion in net interest margin to 3.92% Q1 2023 vs Q1 2022 Performance Summary | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $139.9M | $100.3M | | Diluted EPS | $1.83 | $1.39 | | Net Interest Income | $381.3M | $261.5M | | Net Interest Margin (Non-TE) | 3.92% | 2.75% | | Provision for Credit Losses | $33.1M | ($8.4M) | | Noninterest Income | $71.4M | $86.0M | | Noninterest Expense | $240.5M | $228.6M | - The yield on interest-earning assets **increased by 180 basis points** year-over-year to 4.64%, while the cost of interest-bearing liabilities rose 99 basis points to 1.14%, demonstrating that assets repriced faster than liabilities[244](index=244&type=chunk)[248](index=248&type=chunk) - Noninterest income **decreased by 17.1% YoY**, primarily due to a $14.4 million decline in correspondent banking and capital markets income and a $6.3 million drop in mortgage banking income[263](index=263&type=chunk) [Analysis of Financial Condition](index=97&type=section&id=Analysis%20of%20Financial%20Condition) Total assets grew to $44.9 billion, with stable deposits but a compositional shift toward time deposits and increased borrowings - Total loans **grew by $518.3 million** during Q1 2023, with the non-acquired portfolio increasing by $945.4 million while the acquired portfolio decreased by $427.1 million[292](index=292&type=chunk) - The investment securities portfolio decreased by $175.1 million to $8.0 billion and had a **total unrealized net loss of $1.2 billion** due to higher interest rates[275](index=275&type=chunk)[276](index=276&type=chunk) - The Allowance for Credit Losses (ACL) increased to $370.6 million, or **1.21% of total loans**, reflecting a more cautious economic outlook[298](index=298&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Nonperforming assets increased to $128.3 million, or **0.42% of total loans** and repossessed assets, up from 0.36% at year-end 2022[317](index=317&type=chunk) [Liquidity and Capital Resources](index=121&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $12.9 billion in available funding and robust capital ratios - The company has access to approximately **$12.9 billion in available liquidity** from sources including the FHLB, Federal Reserve discount window, and brokered deposit capacity[349](index=349&type=chunk) - Estimated **uninsured deposits totaled $12.7 billion** at March 31, 2023, down from $14.1 billion at year-end 2022[326](index=326&type=chunk) - In April 2022, the Board approved a stock repurchase program authorizing the repurchase of up to 4,120,021 shares, with **no shares repurchased** under this program during Q1 2023[331](index=331&type=chunk)[397](index=397&type=chunk) Regulatory Capital Ratios (Consolidated) | Ratio | March 31, 2023 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 | 11.13% | N/A | | Tier 1 Risk-Based Capital | 11.13% | 6.00% | | Total Risk-Based Capital | 13.30% | 10.00% | | Tier 1 Leverage | 9.05% | N/A | [Quantitative and Qualitative Disclosures About Market Risk](index=137&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures were reported from the 2022 Annual Report on Form 10-K - **No material changes** in market risk disclosures were reported for the quarter ended March 31, 2023, compared to the disclosures in the 2022 Form 10-K[390](index=390&type=chunk) [Controls and Procedures](index=137&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of March 31, 2023[391](index=391&type=chunk) - **No material changes** to internal control over financial reporting occurred during the first quarter of 2023[393](index=393&type=chunk) [PART II — OTHER INFORMATION](index=139&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=139&type=section&id=Item%201.%20Legal%20Proceedings) The company is not party to any material legal proceedings outside the ordinary course of business - SouthState is **not party to any material legal proceedings** outside the ordinary course of business as of the report date[394](index=394&type=chunk) [Risk Factors](index=139&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K were reported - **No material changes** to the risk factors disclosed in the 2022 Form 10-K were reported[396](index=396&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=139&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the public program in Q1 2023, though some were acquired for employee tax obligations - The company **did not repurchase any shares** under its publicly announced 2022 Stock Repurchase Program during Q1 2023, with the full authorization of 4,120,021 shares remaining available[397](index=397&type=chunk) - A total of **43,889 shares were repurchased from employees** during Q1 2023 to satisfy tax obligations related to the vesting of stock-based compensation, separate from the public buyback plan[398](index=398&type=chunk) [Exhibits](index=141&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including certifications and interactive data files

SouthState Corporation (NYSE:SSB) Q1 2023 Earnings Conference Call April 28, 2023 9:00 AM ET Company Participants Will Matthews – Chief Financial Officer John Corbett – Chief Executive Officer Steve Young – Chief Strategy Officer Conference Call Participants Catherine Mealor – KBW Kevin Fitzsimmons – D.A. Davidson Stephen Scouten – Piper Sandler Michael Rose – Raymond James Brody Preston – UBS Brandon King – Truist Securities David Bishop – Hovde Group Operator Hello, everyone, and welcome to the SouthState ...

MMA & Savings Time Deposits $30 $6 $ in billions TOTAL LOAN PORTFOLIO Investor CRE 8,703 $ 9.0B $ 1,029,400 Constr., Dev. & Land 4,846 2.7B 567,300 Top 10 Represents ~ 2% of total loans Loan portfolio balances, average balances or percentage exclude loans held for sale and PPP loans (1)~(3) For end note descriptions, see Earnings Presentation End Notes starting on slide 46. LOAN PORTFOLIO – OFFICE EXPOSURE • Office represents 4% of the loan portfolio • Approximately 10% is located within the Central Busines ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2022 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 001-12669 SOUTHSTATE CORPORATION (Exact name of registrant as specified in its charter) South Carolina (State or other jurisdiction o ...

Financial Data and Key Metrics Changes - Total loans grew 19% annualized in the quarter, with C&I loans specifically growing at 27% annualized [4] - Net interest revenue increased with a tax equivalent NIM of 3.99%, up 41 basis points from the third quarter, and core net interest income rose by $36 million [9] - Non-interest income totaled $63 million, down $10 million from Q3, while non-interest expenses were $228 million, slightly up from Q3 [11][12] - For the full year 2022, PPNR per share was up 36% over 2021, with loans growing 17% and deposits decreasing 5% [22] Business Line Data and Key Metrics Changes - Mortgage production fell to approximately $700 million in the quarter, with expectations for 2023 remaining muted across the industry [29] - The $1.3 billion in loan growth was centered in single-family residential, CRE construction, and C&I loans [12] - The company set aside $82 million in loan loss provisions for the year, with only $4 million in charge-offs, indicating strong credit quality [5][21] Market Data and Key Metrics Changes - SouthState operates in four of the six fastest-growing states in the U.S., with Florida being the fastest-growing state last year [6] - The company continues to experience population migration to the South, with two-thirds of the 1.7 million people moving to the South landing in SouthState markets [23] Company Strategy and Development Direction - The company aims for a compounded annual growth rate of 10% across all good aspects of the bank over a cycle [7] - Management believes that the South will outperform other areas of the country regardless of economic direction due to population migration [24] - The company is cautious about M&A activity in 2023, expecting it to pick up towards the end of the year as banks reassess future earnings streams [42][71] Management's Comments on Operating Environment and Future Outlook - Management noted that the economy is slowing, and loan pipelines are shrinking, with expectations for mid-single-digit loan growth in 2023 [31] - The company has a strong balance sheet flexibility with an 83% loan-to-deposit ratio and minimal reliance on wholesale funding [13][22] - Management expressed confidence in credit quality, with minimal net charge-offs and a focus on monitoring economic indicators that could affect future provisioning [60][88] Other Important Information - The company recorded a $3.2 million write-down on MSR assets, leading to negative mortgage division revenue for the quarter [28] - The ending tangible book value per share rose above $40, and the TCE ratio improved approximately 40 basis points to 7.2% [13] Q&A Session Summary Question: What is the outlook for residential mortgage growth? - Management expects residential mortgage growth to align with the rest of the loan book, projecting mid-single-digit growth [17] Question: How does the company view its deposit beta? - The company maintains a low deposit beta of 5% and expects it to remain stable despite industry pressures [39][73] Question: What are the expectations for loan growth funding? - The company anticipates $1.5 billion in loan growth for 2023, utilizing cash from securities runoff and slight increases in deposits [94] Question: How is the company managing credit quality? - Management reported excellent credit results, with minimal charge-offs and a focus on monitoring economic indicators affecting future reserves [60][88] Question: What is the company's strategy regarding M&A? - The company prefers to focus on existing high-growth markets for potential M&A opportunities, with a cautious outlook for 2023 [71]

2 $30 Billion in loans Public Banks 2021 5 $1,403 Loans and deposits as of 12/31/22; excludes $1.9B of loans and $2.5B of deposits from internal accounts and national lines of business Country GDP as of 2022; State GDP as of 3Q22 Sources: S&P Global, International Monetary Fund, US Bureau of Economic Analysis Net Domestic Migration in SouthState Footprint y DISCLAIMER Top 50 16 Greenwich Excellence and Best Brand awards from Coalition Greenwich POSITIONED FOR THE FUTURE IN THE BEST GROWTH MARKETS IN AMERICA ...

Financial Performance - Consolidated net income for Q3 2022 was $133.0 million, an 8.4% increase from $122.8 million in Q3 2021, with diluted EPS rising to $1.75 from $1.74 [242]. - The Company reported a net income of $133.043 million for the three months ended September 30, 2022, compared to $122.788 million for the same period in 2021, reflecting a year-over-year increase of 1.02% [393]. - The return on average tangible equity (non-GAAP) for the nine months ended September 30, 2022, was 17.99%, up from 16.19% in the same period of 2021 [393]. Assets and Liabilities - As of September 30, 2022, SouthState Corporation had approximately $45.2 billion in assets and 5,074 full-time equivalent employees [211]. - Total assets increased by approximately $3.2 billion, or 7.7%, to approximately $45.2 billion from December 31, 2021, to September 30, 2022 [285]. - Total deposits increased to $37.7 billion as of September 30, 2022, up $2.6 billion from $35.1 billion at December 31, 2021, primarily due to $3.0 billion in deposits from the Atlantic Capital transaction [356]. Credit Losses and Provisions - The company recorded a provision for credit losses of approximately $23.9 million during the third quarter of 2022 [220]. - The provision for credit losses increased by $62.8 million, with a provision of $23.9 million recorded in Q3 2022 compared to a release of $38.9 million in Q3 2021 [248]. - As of September 30, 2022, the allowance for credit losses (ACL) was $324.4 million, representing 1.12% of total loans, with an increase of $4.7 million from $319.7 million at June 30, 2022 [317]. Mergers and Acquisitions - The acquisition of Atlantic Capital was completed on March 1, 2022, for a total purchase price of $657.8 million, acquiring $2.4 billion of loans [222][224]. - Goodwill increased to $1.9 billion as of September 30, 2022, following the Atlantic Capital merger, which added $341.4 million in goodwill [234]. - The Company identified approximately $137.9 million of loans as purchased credit-deteriorated (PCD) during the merger with Atlantic Capital, with an allowance for credit losses of $13.8 million on acquisition date [314]. Interest Income and Expenses - Interest income increased by $103.4 million, driven by a $66.8 million rise in loan interest income and a $22.1 million rise in investment securities interest income [242]. - The average cost of interest-bearing liabilities increased by 7 basis points to 0.26% in Q3 2022 compared to Q3 2021 [257]. - The yield on investment securities increased by 55 basis points to 2.00% in Q3 2022, with an average balance increase of $2.6 billion compared to Q3 2021 [260]. Noninterest Income and Expenses - Noninterest income decreased by $9.8 million, primarily due to a $13.3 million drop in mortgage banking income [242]. - Noninterest income decreased by $9.8 million, or 11.3%, in Q3 2022 compared to Q3 2021, primarily driven by an 85.5% decline in mortgage banking income [269]. - Noninterest expense rose by $8.1 million, or 3.5%, in Q3 2022 compared to Q3 2021, with significant contributions from bank-owned life insurance and SBA income increases [277]. Regulatory Changes - The Federal Reserve's recent rule changes regarding debit card transaction processing will affect the company starting July 1, 2023 [227]. - The FDIC's new rule will increase initial base deposit insurance assessment rates by 2 basis points, effective January 1, 2023 [228]. Growth Strategy - The company continues to pursue a growth strategy focused on organic growth and selective acquisitions of financial institutions [213]. - The company operates in a six-state footprint, providing a wide range of financial products and services [211]. Shareholder Equity - Total shareholder's equity increased by $118.2 million, or 2.5%, attributed to the Atlantic Capital acquisition and organic growth [286]. - Shareholders' equity increased by $118.2 million, or 2.5%, to $4.9 billion as of September 30, 2022 [339]. Loan Portfolio - Total loans, net of deferred loan costs and fees, increased by $4.9 billion, or 27.4% annualized, to $28.8 billion at September 30, 2022 [297]. - Non-acquired loans increased by $4.9 billion, or 40.6% annualized, with significant growth in commercial non-owner occupied loans ($1.4 billion) and consumer owner occupied loans ($1.3 billion) [297]. Interest Rate Risk - The earnings simulations indicated that a 100 basis point increase in rates would result in an estimated 2.5% increase in net interest income, while a 100 basis point decrease would lead to a 4.1% decrease [375]. - The company revised its deposit beta assumptions higher due to the rapid increase in interest rates, with the federal funds target rate increasing by 150 basis points during the third quarter of 2022 [374].

Financial Data and Key Metrics Changes - The company reported a significant increase in PPNR per share, up 47% from the same period last year [11] - Net interest margin (NIM) expanded by 43 basis points in Q3, following a 35 basis point increase in Q2, totaling a 78 basis point expansion over two quarters [12][13] - Net interest income reached $358 million, an increase of $44 million from Q2, with core net interest income at $349 million, up $47 million from the prior quarter [24] - Non-interest income decreased by $11 million from Q2, primarily due to declines in correspondent and mortgage revenue [24] Business Line Data and Key Metrics Changes - Total loans grew at an annualized rate of 13%, evenly split between commercial and retail banking [14] - Mortgage production was strong, with nearly $1.1 billion produced in the quarter, but only 22% was sold in the secondary market [25] - Non-interest expense was $227 million, slightly up from Q2, contributing to an efficiency ratio of 50% [27] Market Data and Key Metrics Changes - Average deposit balances declined by approximately 4% annualized, but the company maintained about $2.5 billion in cash and $5.5 billion in available-for-sale securities, representing 18% of the balance sheet [17] - The company experienced minimal impact from Hurricane Ian, with less than 1% of loans in the hardest-hit areas and few requests for payment deferrals [15] Company Strategy and Development Direction - The company is focused on maintaining strong funding, surplus capital, and operating in rapidly growing states, positioning itself well for future challenges [21] - Management emphasized a cautious outlook for 2023, acknowledging potential recession risks while expressing confidence in their operational strategy and market positioning [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current economic environment, characterized by rising interest rates and tightening liquidity, will differentiate bank performance [10] - The company plans to continue delivering exceptional client service and building franchise value, regardless of economic conditions [21] Other Important Information - The company has consolidated several branches, which contributed to the reduction in deposits [19] - The risk-based capital ratios remain strong, with CET1 at 11% and total risk-based capital at 12.9% [30] Q&A Session Summary Question: NIM and Rate Sensitivity - Management discussed expectations for NIM, forecasting it to range between 360 and 380 basis points through the end of 2023 based on deposit size, interest rate forecasts, and deposit beta assumptions [40] Question: Loan Growth and Underwriting - Management indicated that loan pipelines are slowing due to the Fed's rate increases, with expectations for upper single-digit loan growth in Q4 and potential mid-single-digit growth in 2023 [47] Question: Correspondent Business and Fee Income - Management lowered guidance for correspondent fee income to $20 million to $25 million per quarter until the Fed stops raising rates, reflecting challenges in the current interest rate environment [42] Question: Residential Mortgage Production - Management noted that residential mortgage production is expected to be around $4.5 billion for the year, with a shift towards holding more on the balance sheet due to lower gain on sale margins [54] Question: M&A Environment - Management expressed that the M&A environment is expected to be slow in the near term due to current P/E valuations and economic uncertainty, making it a low priority [59]