Market Overview

South State Corporation Reports Third Quarter 2017 Results and Quarterly Cash Dividend

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South State Corporation (NASDAQ:SSB) today released its unaudited
results of operations and other financial information for the
three-month and nine-month period ended September 30, 2017. Highlights
for the third quarter of 2017 include the following:

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http://www.businesswire.com/news/home/20171024005357/en/

  • Net income was $35.0 million for the third quarter of 2017 compared
    to $31.8 million for the second quarter of 2017, an increase of $3.2
    million, or 10.1%, while adjusted net income (non-GAAP) was $35.7
    million in the third quarter of 2017, up $1.1 million, or 3.2%
    increase, compared to $34.6 million for the second quarter of 2017
    • Earnings per share (EPS) – diluted was $1.19 for the third quarter
      of 2017 compared to $1.08 for the second quarter of 2017, a 10.2%
      increase; and
    • Adjusted net income per share (non-GAAP) – diluted was $1.22 for
      the third quarter of 2017 and $1.18 for the second quarter of
      2017, a 3.4% increase
  • Net loan growth for the third quarter of 2017 was $83.9 million, or
    4.1% annualized
  • Performance ratios linked quarter
    • Return on average assets totaled 1.25% compared to 1.15%
    • Adjusted return on average assets (non-GAAP) was 1.28% compared to
      1.25%
    • Return on average tangible equity (non-GAAP) improved to 14.93%
      compared to 14.16%
    • Adjusted return on average tangible equity (non-GAAP) decreased to
      15.21% from 15.34%
    • Efficiency ratio was 59.5% down from 62.8%, due to lower operating
      and merger costs
    • Adjusted efficiency ratio (non-GAAP) was 58.4% down from 59.7%
      (excluding merger-related and conversion expenses and securities
      gains, net)
  • Balance sheet and equity linked quarter
    • Cash and cash equivalents declined by $28.0 million as total loan
      growth outpaced deposit growth
    • Investment securities portfolio decreased by $22.1 million as
      maturities, calls and sales outpaced purchases during the quarter
    • Noninterest bearing deposits decreased by $129.6 million, and
      interest bearing deposits increased by $160.0 million
    • Shareholders' equity increased $27.3 million, with $25.4 million
      coming from quarterly earnings, net of the quarterly dividend.
    • Total equity to total assets improved to 14.62% from 14.39% at
      June 30, 2017
    • Tangible equity to tangible assets (Non-GAAP) increased to 9.36%
      from 9.11%
  • Asset quality linked quarter
    • Nonperforming assets (NPAs) decreased by $891,000, or 2.6%, to
      $33.5 million
    • NPAs to total assets improved to 0.30% from 0.31% in the second
      quarter of 2017
    • Net charge offs on non-acquired loans were 0.04% annualized, or
      $547,000, compared to $756,000, or 0.05% annualized in the second
      quarter of 2017
    • Net charge offs (recoveries) on acquired non-credit impaired loans
      were 0.00%, or ($4,000), compared to 0.10%, or $429,000 in the
      second quarter of 2017
    • Coverage ratio of ALLL on non-acquired non-performing loans
      strengthened to 322.1% from 297.4%

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a
quarterly cash dividend on October 18, 2017, of $0.33 per share payable
on its common stock. This per share amount is the same as last quarter,
and $0.01 per share, or 3.0% higher than the dividend paid a year ago.
The dividend will be payable on November 17, 2017 to shareholders of
record as of November 10, 2017.

Merger with Park Sterling Corporation and $10.0 Billion Impact

During the third quarter of 2017, the Company filed a joint proxy
statement and prospectus for special shareholder meetings which are
scheduled for October 25, 2017, for both companies. As announced
previously, closing of this merger is expected to occur in the fourth
quarter of 2017, with the core system conversion anticipated to be
completed in the first quarter of 2018.

South State crossed $10.0 billion in total assets in January of 2017
with the Southeastern Bank Financial Corporation merger. Beginning in
the first quarter of 2018, our FDIC insurance costs will increase as a
result of having been over $10.0 billion in total assets for four
consecutive quarters. Including the Park Sterling impact, we currently
estimate the added expense to be approximately $500,000 annually.

Effective in July of 2018, the cap on interchange fees under the Durbin
amendment will be in place. Including the Park Sterling impact, we
estimate an annual reduction of interchange fees of approximately $17.0
million pre-tax and $11.0 million after-tax, or $0.30 per share.

Also, as a part of crossing $10.0 billion in total assets, we will
submit our first Dodd-Frank Act Stress Test (DFAST) in July of 2019.

                               

Third Quarter 2017 Financial Performance

 
Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) Sept. 30,       June 30, Mar. 31, Dec. 31, Sept. 30, Sept. 30,
INCOME STATEMENT   2017     2017     2017     2016     2016     2017       2016  
Interest income
Loans, including fees (8) $ 95,864 $ 93,600 $ 91,752 $ 76,709 $ 77,344 $ 281,216 $ 231,752

Investment securities, federal funds sold and securities purchased
under agreements to resell

  8,547     9,179     9,234     5,979     5,937     26,960     18,723  
Total interest income 104,411 102,779 100,986 82,688 83,281 308,176 250,475
Interest expense
Deposits 2,974 2,661 2,497 1,423 1,412 8,132 4,380

Federal funds purchased, securities sold under agreements to
repurchase, and other borrowings

  1,118     1,087     1,127     665     624     3,332     1,849  
Total interest expense   4,092     3,748     3,624     2,088     2,036     11,464     6,229  
Net interest income 100,319 99,031 97,362 80,600 81,245 296,712 244,246
Provision for loan losses   2,062     2,313     3,707     622     912     8,082     6,198  
Net interest income after provision for loan losses   98,257     96,718     93,655     79,978     80,333     288,630     238,048  
Noninterest income   36,040     37,574     36,435     32,831     35,340     110,049     97,499  
Pre-tax operating expense 80,023 82,232 83,699 70,400 72,482 245,954 215,834
Branch consolid./acquisition and merger expense   1,551     4,307     21,024     4,841     709     26,882     3,240  
Total noninterest expense   81,574     86,539     104,723     75,241     73,191     272,836     219,074  
Income before provision for income taxes 52,723 47,753 25,367 37,568 42,482 125,843 116,473
Provision for income taxes   17,677     15,930     7,103     13,391     14,387     40,710     39,368  
Net income $ 35,046   $ 31,823   $ 18,264   $ 24,177   $ 28,095   $ 85,133   $ 77,105  
 
Adjusted net income (non-GAAP) (3)
Net income (GAAP) $ 35,046 $ 31,823 $ 18,264 $ 24,177 $ 28,095 $ 85,133 $ 77,105
Securities gains, net of tax (349 ) (73 ) -- -- -- (422 ) (81 )
FDIC LSA early termination, net of tax -- -- -- -- -- -- 2,938
Branch consolid./acquisition and merger expense   1,031     2,870     15,137     3,814     468     19,038     2,146  
Adjusted net income (non-GAAP) $ 35,728   $ 34,620   $ 33,401   $ 27,991   $ 28,563   $ 103,749   $ 82,108  
 
Basic earnings per common share $ 1.20 $ 1.09 $ 0.63 $ 1.01 $ 1.17 $ 2.92 $ 3.21
Diluted earnings per common share $ 1.19 $ 1.08 $ 0.63 $ 1.00 $ 1.16 $ 2.90 $ 3.18
Adjusted net income per common share - Basic (non-GAAP) (3) $ 1.23 $ 1.19 $ 1.16 $ 1.16 $ 1.19 $ 3.58 $ 3.42
Adjusted net income per common share - Diluted (non-GAAP) (3) $ 1.22 $ 1.18 $ 1.15 $ 1.15 $ 1.18 $ 3.55 $ 3.40
Dividends per common share $ 0.33 $ 0.33 $ 0.33 $ 0.32 $ 0.31 $ 0.99 $ 0.89
Basic weighted-average common shares outstanding 29,114,574 29,094,908 28,891,669 24,035,960 24,016,075 29,023,451 23,988,774
Diluted weighted-average common shares outstanding 29,385,041 29,364,916 29,158,523 24,287,496 24,278,294 29,290,509 24,229,196
Effective tax rate 33.53 % 33.36 % 28.00 % 35.64 % 33.87 % 32.35 % 33.80 %
 

The Company reported consolidated net income of $35.0 million, or $1.19
per diluted common share for the three-months ended September 30, 2017,
a $3.2 million increase from the second quarter of 2017. Interest income
was up $1.6 million from the increase in non-acquired loan interest
income of $4.7 million during the quarter, which was partially offset by
the decline in acquired loan interest income of $2.5 million and
investment securities interest income of $451,000, as both of these
portfolios declined during the quarter. Interest expense increased by
$344,000 primarily in "certificate and other time deposits" category.
Our funding cost was 24 basis points for the third quarter, an increase
of 2 basis points from the second quarter of 2017. Compared to the third
quarter of 2016, our cost of funds increased by 9 basis points which is
primarily the result of the addition of Southeastern Bank Financial
Corporation's ("SBFC" or "Southeastern") balance sheet where the cost of
funds was slightly higher than legacy South State's. The total provision
for loan losses decreased $251,000 compared to the second quarter of
2017. Valuation allowance (impairment) related to acquired loans was
$699,000 higher than second quarter of 2017, provision for loan losses
related to acquired non-credit impaired loans was lower by $433,000, and
the provision for loan losses on non-acquired loans was $517,000 lower
than last quarter primarily related to lower loan growth. Noninterest
income decreased by $1.5 million from mortgage banking income which was
down $1.7 million from the second quarter of 2017. Noninterest expense
decreased by $5.0 million, with 56% of the decrease from lower merger
and conversion cost. The remaining decline was across all operating
categories, except net occupancy.

Income Tax Expense

During the quarter, our effective income tax rate increased slightly to
33.53% from 33.36% in the second quarter of 2017. The year-to-date (YTD)
effective income tax rate was 32.35%, and is expected to increase as we
conclude 2017. The YTD rate for 2016 was 33.80%. This decline in 2017
was primarily related to: (1) excess tax benefit associated with vested
or exercised stock awards included in determination of the effective tax
rate during the year and (2) an increase in tax-exempt income from bank
owned life insurance (BOLI) policies, loans and securities.

"South State produced solid results for the period," said Robert R.
Hill, Jr., CEO of South State Corporation. "This accomplishment reflects
the dedication of our team and the economic strength of the markets we
serve. The performance was marked by a high level of asset quality,
steady loan growth and sound expense management. Our mergers with
Southeastern and with Park Sterling are on track and both add
significant value and great people. We are very well-positioned to
continue to build our company in the Southeast."

                         

Balance Sheet and Capital

 
Ending Balance
Sept. 30,   June 30, Mar. 31, Dec. 31, Sept. 30,
BALANCE SHEET   2017     2017     2017     2016     2016  
Assets
Cash and cash equivalents $ 403,934   $ 431,890   $ 663,126   $ 374,448   $ 507,517  
Investment securities:
Securities held to maturity 3,678 4,166 6,095 6,094 6,851
Securities available for sale, at fair value 1,320,679 1,341,652 1,381,013 999,405 925,374
Other investments   12,439     13,076     13,501     9,482     9,482  
Total investment securities   1,336,796     1,358,894     1,400,609     1,014,981     941,707  
Loans held for sale   46,321     65,995     46,988     50,572     57,052  
Loans:
Acquired credit impaired 578,863 602,481 627,340 602,546 632,617
Acquired non-credit impaired 1,455,555 1,585,981 1,715,642 836,699 885,657
Non-acquired 6,230,327 5,992,393 5,564,307 5,241,041 5,008,113
Less allowance for non-acquired loan losses   (41,541 )   (40,149 )   (38,449 )   (36,960 )   (37,319 )
Loans, net   8,223,204     8,140,706     7,868,840     6,643,326     6,489,068  
Other real estate owned ("OREO") 13,527 14,430 20,007 18,316 22,211
Premises and equipment, net 198,146 201,539 203,505 183,510 179,450
Bank owned life insurance 151,402 150,476 149,562 104,148 103,427
Deferred tax asset 41,664 39,921 43,075 31,123 25,357
Mortgage servicing rights 29,937 29,930 30,063 29,037 23,064
Core deposit and other intangibles 50,472 52,966 55,461 39,848 41,738
Goodwill 597,236 595,817 595,711 338,340 338,340
Other assets   76,471     71,877     73,123     72,943     68,234  
Total assets $ 11,169,110   $ 11,154,441   $ 11,150,070   $ 8,900,592   $ 8,797,165  
 
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 2,505,570 $ 2,635,147 $ 2,599,111 $ 2,199,046 $ 2,176,155
Interest-bearing   6,556,451     6,396,507     6,434,327     5,135,377     5,071,251  
Total deposits   9,062,021     9,031,654     9,033,438     7,334,423     7,247,406  

Federal funds purchased and securities sold under agreements to
repurchase

291,099 334,018 352,431 313,773 305,268
Other borrowings 83,307 98,147 107,988 55,358 55,306
Other liabilities   99,858     85,137     76,313     62,450     65,053  
Total liabilities   9,536,285     9,548,956     9,570,170     7,766,004     7,673,033  
 
Shareholders' equity:
Preferred stock - $.01 par value; authorized 10,000,000 shares -- -- -- -- --
Common stock - $2.50 par value; authorized 40,000,000 shares 73,168 73,148 73,077 60,576 60,523
Surplus 1,136,352 1,134,328 1,132,173 711,307 705,124
Retained earnings 427,093 401,706 379,534 370,916 354,490
Accumulated other comprehensive income (loss)   (3,788 )   (3,697 )   (4,884 )   (8,211 )   3,995  
Total shareholders' equity   1,632,825     1,605,485     1,579,900     1,134,588     1,124,132  
Total liabilities and shareholders' equity $ 11,169,110   $ 11,154,441   $ 11,150,070   $ 8,900,592   $ 8,797,165  
 
Common shares issued and outstanding 29,267,369 29,259,264 29,230,734 24,230,392 24,209,122
 

At September 30, 2017, the Company's total assets were $11.2 billion, an
increase of $2.3 billion from December 31, 2016, and an increase of $2.4
billion from September 30, 2016. Total assets acquired from
Southeastern, including goodwill, totaled $2.1 billion in the first
quarter of 2017. During the third quarter of 2017, cash and cash
equivalents and securities both declined compared to June 30, 2017
balances, and loan growth moderated from the strong second quarter as
loans increased $83.9 million, excluding the allowance for loan losses,
or 4.1% annualized increase. Investment securities decreased $22.1
million and cash and cash equivalents declined by $28.0 million. Other
real estate owned ("OREO") declined by $903,000. The company disposed of
21 properties during the third quarter of 2017, which more than offset
the increases from the transfers in to OREO. Total deposits increased
$30.4 million from June 30, 2017. Fed funds purchased and securities
sold under repurchase agreements decreased by $42.9 million during the
third quarter to $291.1 million.

The Company's book value per common share increased to $55.79 per share
at September 30, 2017, compared to $46.82 at December 31, 2016, and
$46.43 at September 30, 2016. During the third quarter of 2017, capital
increased $27.3 million due to net income of $35.0 million offset by the
common stock dividend paid of $9.7 million. Accumulated other
comprehensive income ("AOCI") decreased $91,000 due primarily to an
unrealized loss in the AFS securities portfolio during the quarter of
$245,000, net of tax. Tangible book value ("TBV") per common share
increased by $0.96 per share to $33.66 at September 30, 2017, compared
to $32.70 at June 30, 2017, and increased by $2.93 per share, or 9.5%,
from $30.73 at September 30, 2016. The quarterly increase of $0.96 per
share in tangible book value primarily the result of (1) earnings per
share, excluding amortization of intangibles, of $1.26, offset by the
dividend paid to shareholders of $0.33 per share; (2) the issuance of
restricted stock and stock related to employee stock purchase plan which
increased tangible book value by $0.07 per share; and (3) offset by an
increase in goodwill related to Southeastern of $1.4 million, net of
tax, or $0.05 per share decline in tangible book value.

"During the third quarter of 2017, tangible book value per share
improved by $0.96 to $33.66 per share, reflective of our strong earnings
of $35.0 million for the quarter," said John C. Pollok, COO and CFO. "In
addition, our return on average assets was 1.25% and our efficiency
ratio dropped to 59.48%, as we have fully realized the expected cost
saves from our merger with Southeastern."

                           
Three Months Ended Nine Months Ended
Sept. 30,       June 30, Mar. 31, Dec. 31, Sept. 30, Sept. 30,       Sept. 30,
PERFORMANCE RATIOS   2017     2017     2017     2016     2016   2017   2016  
Return on average assets (annualized) 1.25 % 1.15 % 0.68 % 1.08 % 1.28 % 1.03 % 1.19 %
Adjusted return on average assets (annualized) (non-GAAP) (3) 1.28 % 1.25 % 1.25 % 1.26 % 1.30 % 1.26 % 1.27 %
Return on average equity (annualized) 8.57 % 7.98 % 4.74 % 8.50 % 10.00 % 7.14 % 9.41 %
Adjusted return on average equity (annualized) (non-GAAP) (3) 8.73 % 8.69 % 8.67 % 9.84 % 10.17 % 8.70 % 10.02 %
Return on average tangible common equity (annualized) (non-GAAP) (7) 14.93 % 14.16 % 8.87 % 13.42 % 15.86 % 12.73 % 15.18 %
Adjusted return on average tangible common equity (annualized)
(non-GAAP) (3) (7)
15.21 % 15.34 % 15.55 % 15.44 % 16.11 % 15.36 % 16.12 %
Efficiency ratio (tax equivalent) 59.48 % 62.80 % 77.51 % 65.82 % 62.30 % 66.54 % 63.62 %
Adjusted efficiency ratio (Non-GAAP) (9) 58.35 % 59.67 % 61.95 % 61.59 % 61.70 % 59.98 % 61.88 %
Dividend payout ratio (2) 27.56 % 30.33 % 52.82 % 32.06 % 26.71 % 34.01 % 27.93 %
Book value per common share $ 55.79 $ 54.87 $ 54.05 $ 46.82 $ 46.43
Tangible common equity per common share (non-GAAP) (7) $ 33.66 $ 32.70 $ 31.77 $ 31.22 $ 30.73
 
CAPITAL RATIOS
Equity-to-assets 14.62 % 14.39 % 14.17 % 12.75 % 12.78 %
Tangible equity-to-tangible assets (non-GAAP) (7) 9.36 % 9.11 % 8.85 % 8.88 % 8.84 %
Tier 1 common equity (6) 12.1 % 11.9 % 11.9 % 11.7 % 11.5 %
Tier 1 leverage (6) 10.3 % 10.1 % 10.0 % 9.9 % 9.7 %
Tier 1 risk-based capital (6) 12.9 % 12.8 % 12.8 % 12.4 % 12.3 %
Total risk-based capital (6) 13.5 % 13.3 % 13.3 % 13.0 % 12.9 %
 
OTHER DATA
Number of branches 129 129 129 118 119
Number of employees (full-time equivalent basis) 2,255 2,261 2,277 2,055 2,039
 
                                 

Asset Quality

 
Ending Balance
Sept. 30,       June 30, Mar. 31, Dec. 31, Sept. 30,
(Dollars in thousands)   2017     2017     2017     2016     2016  
NONPERFORMING ASSETS:
Non-acquired
Non-acquired nonperforming loans $ 12,896 $ 13,499 $ 13,035 $ 14,745 $ 15,010
Non-acquired OREO and other nonperforming assets   6,330     4,633     5,705     3,998     6,614  
Total non-acquired nonperforming assets   19,226     18,132     18,740     18,743     21,624  
Acquired
Acquired nonperforming loans 6,401 5,793 4,950 4,834 4,633
Acquired OREO and other nonperforming assets   7,846     10,439     14,992     15,026     16,279  
Total acquired nonperforming assets   14,247     16,232     19,942     19,860     20,912  
Total nonperforming assets $ 33,473   $ 34,364   $ 38,682   $ 38,603   $ 42,536  
 
Three Months Ended Nine Months Ended
Sept. 30, June 30, Mar. 31, Dec. 30, Sept. 30, Sept. 30, Sept. 30,
  2017     2017     2017     2016     2016   2017   2016  
ASSET QUALITY RATIOS:

Allowance for non-acquired loan losses as a percentage of
non-acquired loans (1)

0.67 % 0.67 % 0.69 % 0.71 % 0.75 % 0.67 % 0.75 %

Allowance for non-acquired loan losses as a percentage of
non-acquired nonperforming loans

322.12 % 297.42 % 294.97 % 250.66 % 248.63 % 322.12 % 248.63 %

Net charge-offs on non-acquired loans as a percentage of average
non-acquired loans (annualized) (1)

0.04 % 0.05 % 0.05 % 0.05 % 0.03 % 0.04 % 0.06 %

Net charge-offs on acquired non-credit impaired loans as a
percentage of average acquired non-credit impaired loans
(annualized) (1)

0.00 % 0.10 % 0.08 % 0.06 % 0.07 % 0.06 % 0.08 %

Total nonperforming assets as a percentage of total assets

0.30 % 0.31 % 0.35 % 0.43 % 0.48 %
Excluding Acquired Assets
NPLs as a percentage of period end non-acquired loans (1) 0.21 % 0.23 % 0.23 % 0.28 % 0.30 %

Total nonperforming assets as a percentage of total non-acquired
loans and repossessed assets (1) (4)

0.31 % 0.30 % 0.34 % 0.36 % 0.43 %

Total nonperforming assets as a percentage of total assets (5)

0.17 % 0.16 % 0.17 % 0.21 % 0.25 %
 

During the third quarter of 2017, overall asset quality continued to
improve as total nonperforming assets were $33.5 million, representing
0.30% of total assets, which decreased from second quarter of 2017
mainly due to the decline in OREO by $903,000. Compared to September 30,
2016, NPAs have declined by $9.1 million, or 21.3%. During the third
quarter of 2017, non-acquired NPAs, excluding acquired loans and
acquired OREO, rose by $1.1 million to $19.2 million. This was the
result of a $1.7 million increase in non-acquired OREO, partially offset
by a $603,000 decrease in non-acquired nonperforming loans for the
quarter.

During the third quarter, the Company reported $6.4 million in
nonperforming loans related to "acquired non-credit impaired loans."
This was an increase of $608,000 from the balance at June 30, 2017,
which was primarily the result of many small balance loans.
Additionally, acquired nonperforming OREO and other assets owned
decreased by $2.6 million from June 30, 2017 and declined by $8.4
million from September 30, 2016.

At September 30, 2017, the allowance for non-acquired loan losses was
$41.5 million, or 0.67%, of non-acquired period-end loans and $40.1
million, or 0.67%, at June 30, 2017 and down from 0.71% at December 31,
2016. The current allowance for loan losses provides 3.22 times coverage
of period-end non-acquired nonperforming loans, up from 2.97 times at
June 30, 2017, and 2.49 times at September 30, 2016. Net charge-offs
within the non-acquired portfolio were $547,000, or 0.04% annualized, in
the third quarter of 2017 compared to $756,000 for the second quarter of
2017, or 0.05% annualized. Third quarter 2016 net charge-offs totaled
$394,000, or 0.03% annualized. The net charge-offs currently being
experienced are primarily from overdraft and ready reserve accounts
within the loan portfolio. During the third quarter of 2017, the
provision for non-acquired loan losses totaled $1.9 million compared to
$2.5 million in the second quarter of 2017, and $775,000 million in the
third quarter of 2016. The decrease in the non-acquired provision for
loan losses in the third quarter of 2017 compared to the second quarter
of 2017 resulted primarily from lower non-acquired loan growth during
the quarter.

Net charge offs (recoveries) related to "acquired non-credit impaired
loans" were ($4,000) or 0.00% annualized, and the Company recorded a
provision for loan losses, accordingly, during the third quarter of
2017. These net charge-offs (recoveries) decreased from $429,000, or
0.10% annualized, in the second quarter of 2017, and from $160,000, or
0.07% annualized in the third quarter of 2016.

The Company recorded net impairment within certain acquired credit
impaired loan pools across all portfolios during the third quarter of
2017. The net impact, which increased the valuation allowance, totaled
$127,000 compared to a reduction of $572,000 during the second quarter
of 2017.

Total OREO decreased to $13.5 million at September 30, 2017, down from
$14.4 million at June 30, 2017. This decrease was the result of the
disposition of 21 properties of both acquired and non-acquired OREO,
partially offset by the transfers in of OREO during the quarter.
Overall, OREO and troubled loan related expense were flat compared to
the second quarter of 2017 at $1.8 million.

                                             

Net Interest Income and Margin

 
Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
(Dollars in thousands) Average       Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
YIELD ANALYSIS Balance Expense Rate Balance Expense Rate Balance Expense Rate
Interest-Earning Assets:
Federal funds sold, reverse repo, and time deposits $ 169,511 $ 581 1.36 % $ 266,672 $ 762 1.15 % $ 354,007 $ 666 0.75 %
Investment securities (taxable) 1,169,451 6,646 2.25 % 1,206,992 7,020 2.33 % 842,128 4,309 2.04 %
Investment securities (tax-exempt) 186,108 1,320 2.81 % 188,496 1,397 2.97 % 122,323 962 3.13 %
Loans held for sale 52,609 503 3.79 % 48,171 460 3.83 % 41,246 350 3.38 %
Loans

 

8,227,544

 

95,361

4.60

%   8,040,180   93,140 4.65 %   6,463,485   76,994 4.74 %
Total interest-earning assets

9,805,223

104,411

4.22

% 9,750,511 102,779 4.23 % 7,823,189 83,281 4.24 %
Noninterest-earning assets  

1,306,130

  1,321,170   931,204
Total Assets $

11,111,353

$ 11,071,681 $ 8,754,393
 
Interest-Bearing Liabilities:
Transaction and money market accounts $ 3,940,519 $ 1,070 0.11 % $ 3,951,515 $ 1,021 0.10 % $ 3,327,790 $ 682 0.08 %
Savings deposits

 

1,373,301

522 0.15 % 1,379,719 526 0.15 % 786,904 121 0.06 %
Certificates and other time deposits 1,058,812 1,382 0.52 % 1,050,225 1,114 0.43 % 942,532 608 0.26 %
Federal funds purchased and repurchase agreements 307,730 276 0.36 % 329,256 240 0.29 % 318,124 137 0.17 %
Other borrowings   92,951   842 3.59 %   106,413   847 3.19 %   55,275   487 3.51 %
Total interest-bearing liabilities

6,773,313

4,092 0.24 % 6,817,128 3,748 0.22 % 5,430,625 2,035 0.15 %
Noninterest-bearing liabilities

2,715,089

2,655,961 2,206,461
Shareholders' equity  

1,622,951

  1,598,592   1,117,307
Total Non-IBL and shareholders' equity  

4,338,040

  4,254,553   3,323,768
Total liabilities and shareholders' equity $

11,111,353

$ 11,071,681 $ 8,754,393
Net interest income and margin (NON-TAX EQUIV.) $

100,319

4.06

% $ 99,031 4.07 % $ 81,246 4.13 %
Net interest margin (TAX EQUIVALENT)

4.11

% 4.13 % 4.18 %
 
Overall Cost of Funds (including demand deposits) 0.17 % 0.16 % 0.11 %
 

Non-taxable equivalent net interest income was $100.3 million for the
third quarter of 2017, a $1.3 million increase from the second quarter
of 2017, resulting from the following:

1. Average balance of non-acquired loans increased by approximately
$347.3 million and resulted in non-acquired loan interest income of
$60.1 million, a $4.7 million increase. The yield on total non-acquired
loans was 3.89% up from 3.85% in the second quarter of 2017. Acquired
loan interest income declined by $2.5 million from the second quarter of
2017, to $35.3 million. The yield on acquired loans for the third
quarter was 6.65% down from 6.69% in the second quarter, and the average
balance declined by $160.0 million. The modest decline in the acquired
loan yield of 4 basis points from the second quarter of 2017, was
primarily the result of the payoffs of acquired credit impaired loans
during the quarter. Any future decline in the acquired loan yield will
be primarily dependent upon the level of loan pay downs and pay-offs
each quarter within the acquired loan portfolio. The third quarter of
2017 total loan yield was 4.60% down from 4.74% in the third quarter of
2016 and from 4.65% in the second quarter of 2017; and

2. Interest expense increased by $344,000 from the second quarter of
2017. This increase was within most categories of funding, except other
borrowings and savings deposits. Total cost of funds on interest-bearing
liabilities was 24 basis points, an increase of 2 basis points from the
second quarter of 2017 and up 9 basis points from the third quarter of
2016. Interest expense was up $2.1 million in the third quarter of 2017
over the third quarter of 2016, due primarily to the merger with SBFC in
January of 2017, which added approximately $1.3 billion in average
interest-bearing liabilities. Rates also increased within each category
of interest-bearing liabilities as competition for deposits is
increasing within our markets.

Tax-equivalent net interest margin decreased 2 basis points from the
second quarter of 2017 and declined by 7 basis points from the third
quarter of 2016. The Company's average yield on interest-earning assets
declined by 1 basis point mainly due to the 4 basis point decrease in
yield on acquired loans and a 9 basis point decrease in the yield on
investment securities, while the average rate on interest-bearing
liabilities increased by 2 basis points in the third quarter of 2017 and
increased by 9 basis points mainly due to the addition of higher
yielding deposits from the merger with SBFC. During the third quarter of
2017, the Company's average total assets remained at $11.1 billion at
September 30, 2017 and June 30, 2017, and up from $8.8 billion at
September 30, 2016. Average earning assets totaled $9.8 billion up $54.7
million compared to the second quarter of 2017, and up $2.0 billion
compared to the third quarter of 2016. Average interest-bearing
liabilities totaled $6.8 billion for both the second and third quarter
of 2017 up from $5.4 billion at the end of the third quarter of 2016.
Average non-interest bearing demand deposits increased by $48.8 million
during the third quarter of 2017, and by $478.9 million from September
30, 2016, due primarily to the merger with SBFC. Including the impact of
noninterest bearing deposits, the Company's cost of funds was 17 basis
points for the third quarter of 2017 compared to 16 basis points in the
second quarter of 2017, and compared to 11 basis points in the third
quarter of 2016.

                           

Noninterest Income and Expense

 
Three Months Ended Nine Months Ended
Sept. 30,       June 30, Mar. 31, Dec. 31, Sept. 30, Sept. 30,       Sept. 30,
(Dollars in thousands)   2017   2017   2017   2016   2016   2017   2016  
Noninterest income:
Fees on deposit accounts $ 22,448 $ 22,155 $ 21,719 $ 20,457 $ 20,776 $ 66,322 $ 62,439
Mortgage banking income 3,446 5,195 5,569 4,443 6,286 14,210 16,104
Trust and investment services income 6,310 6,452 5,941 5,191 4,877 18,703 14,573
Securities gains, net 525 110 -- -- -- 635 122
Amortization of FDIC indemnification asset -- -- -- -- -- -- (5,901 )
Recoveries of fully charged off acquired loans 1,944 2,171 1,532 1,335 2,207 5,647 5,130
Other   1,367   1,491   1,674   1,405   1,194   4,532   5,032  
Total noninterest income $ 36,040 $ 37,574 $ 36,435 $ 32,831 $ 35,340 $ 110,049 $ 97,499  
 
Noninterest expense:
Salaries and employee benefits $ 47,245 $ 47,580 $ 48,886 $ 40,722 $ 41,972 $ 143,711 $ 123,941
Net occupancy expense 6,214 6,048 6,388 5,348 5,464 18,650 16,364
Information services expense 6,003 6,413 6,360 5,196 5,237 18,776 15,353
Furniture and equipment expense 3,751 3,877 3,794 3,246 3,234 11,422 9,157
Bankcard expense 2,748 2,886 2,770 2,864 2,940 8,404 8,859
OREO expense and loan related 1,753 1,753 2,142 1,574 2,085 5,648 4,733
Business development and staff related 1,728 1,958 2,070 1,609 1,698 5,756 5,439
Amortization of intangibles 2,494 2,495 2,507 1,890 1,891 7,496 5,687
Professional fees 1,265 1,599 1,773 2,039 1,758 4,637 4,663
Supplies, printing and postage expense 1,491 1,570 1,654 1,369 1,345 4,715 4,910
FDIC assessment and other regulatory charges 918 989 1,122 734 1,001 3,029 3,162
Advertising and marketing 852 989 559 799 790 2,400 2,293
Other operating expenses 3,561 4,075 3,674 3,010 3,067 11,310 11,273
Merger & branch consolidation expense   1,551   4,307   21,024   4,841   709   26,882   3,240  
Total noninterest expense $ 81,574 $ 86,539 $ 104,723 $ 75,241 $ 73,191 $ 272,836 $ 219,074  
 

Noninterest income totaled $36.0 million during the third quarter of
2017 down $1.5 million from the second quarter of 2017. The decrease was
the result of the following:

  • Lower recoveries on acquired credit impaired loans of $227,000;
  • Higher fees on deposit accounts of $293,000 from higher service
    charges on deposit accounts from NSF fees, however, partially offset
    by lower debit card income;
  • Lower income on trust and investment services of $142,000 from lower
    trust asset management fees;
  • Lower mortgage banking income of $1.7 million from a decline in the
    mortgage pipeline and mortgage production resulting in lower secondary
    mortgage income totaling $1.0 million; and a $694,000 decrease in
    income related to mortgage servicing rights, net of the hedge, related
    to interest rate compression between mortgage rates and treasury
    yields.

Compared to the third quarter of 2016, noninterest income grew by
$700,000 due to the following:

1. $1.4 million improvement in trust and investment services income due
to an increase in business with the SBFC merger,

2. $1.7 million increase in fees on deposit accounts primarily from
bankcard services income with more customers from the merger of SBFC,

3. Increase in cash surrender value of BOLI totaling $314,000, primarily
from the addition of BOLI through the SBFC merger,

4. Securities gains, net totaling $525,000 for the quarter, offset by

5. $263,000 decrease from recoveries on acquired loans, and

6. $2.8 million decline in mortgage banking income due to lower income
from the secondary market of $2.8 million related to the change in fair
value of loans held for sale and the mortgage pipeline.

Noninterest expense was $81.6 million in the third quarter of 2017, a
decrease of $5.0 million from $86.5 million in the second quarter of
2017. Approximately half of the decrease was from lower merger and
conversion related cost of $2.8 million and the other half was from
lower expenses in every category, except net occupancy cost. During the
third quarter of 2017, the merger and conversion related cost totaled
$1.6 million vs. compared to $4.3 million in the second quarter of 2017.

Compared to the third quarter of 2016, noninterest expense was $8.4
million higher. The increase was primarily due to six categories of
expense: (1) merger-related and conversion cost increased $842,000
related to the mergers with Southeastern and Park Sterling, (2) salaries
and benefits increased $5.3 million due to the additional employees from
Southeastern and related benefits and incentives, (3) information
services increased $766,000 due primarily to the branches added from
Southeastern merger, (4) net occupancy and furniture and equipment
expense increased by $750,000 and $517,000, respectively, due to the
addition of branches added from the Southeastern merger, and (5)
amortization of intangibles increased $603,000, from additional core
deposit intangible from the Southeastern merger. These increases were
partially offset by a decrease in OREO and other troubled asset expense
of $332,000.

South State Corporation will hold a conference call today, October 24,
2017 at 10 a.m. Eastern Time, during which management will review
earnings and performance trends. Callers wishing to participate may call
toll-free by dialing 877-506-9272. The number for international
participants is 412-380-2004. The conference ID number is 10112652.
Participants can also listen to the live audio webcast through the
Investor Relations section of www.SouthStateBank.com.
A replay will be available beginning October 24th by 2:00 p.m. Eastern
Time until 9:00 a.m. on November 7th, 2017. To listen to the replay,
dial 877-344-7529 or 412-317-0088. The passcode is 10112652.

South State Corporation is the largest bank holding company
headquartered in South Carolina.
Founded in 1933, the company's
primary subsidiary, South State Bank, has been serving the financial
needs of its local communities in 25 South Carolina counties, 15 Georgia
counties and 4 North Carolina counties for over 80 years.
The
bank also operates Minis & Co., Inc. and South State Advisory, both
registered investment advisors.
South State Corporation has
assets of approximately $11.2 billion and its stock is traded under the
symbol SSB on the NASDAQ Global Select Market. More information can be
found at
www.SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and
should be read along with the accompanying tables which provide a
reconciliation of non-GAAP measures to GAAP measures. Management
believes that these non-GAAP measures provide additional useful
information which allows readers to evaluate the ongoing performance of
the Company. Non-GAAP measures should not be considered as an
alternative to any measure of performance or financial condition as
promulgated under GAAP, and investors should consider the company's
performance and financial condition as reported under GAAP and all other
relevant information when assessing the performance or financial
condition of the company. Non-GAAP measures have limitations as
analytical tools, and investors should not consider them in isolation or
as a substitute for analysis of the company's results or financial
condition as reported under GAAP.

                               
Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) Sept. 30,       June 30, Mar.31, Dec.31, Sept. 30, Sept. 30,   Sept. 30,
RECONCILIATION OF GAAP TO Non-GAAP   2017     2017     2017     2016     2016     2017     2016  
Adjusted net income (non-GAAP) (3)
Net income (GAAP) $ 35,046 $ 31,823 $ 18,264 $ 24,177 $ 28,095 $ 85,133 $ 77,105
Securities gains, net of tax (349 ) (73 ) -- -- -- (422 ) (81 )
FDIC LSA early termination, net of tax -- -- -- -- -- -- 2,938
Merger and branch consolidation/acq. expense, net of tax   1,031     2,870     15,137     3,814     468     19,038     2,146  
Adjusted net income (non-GAAP) $ 35,728   $ 34,620   $ 33,401   $ 27,991   $ 28,563   $ 103,749   $ 82,108  
 
Adjusted net income per common share - Basic (3)
Earnings per common share - Basic (GAAP) $ 1.20 $ 1.09 $ 0.63 $ 1.01 $ 1.17 $ 2.92 $ 3.21
Effect to adjust for securities gains (0.01 ) -- -- -- -- (0.01 ) (0.01 )
Effect to adjust for FDIC LSA early termination -- -- -- -- -- - 0.12
Effect to adjust for merger & branch consol./acq expenses   0.04     0.10     0.53     0.15     0.02     0.67     0.10  
Adjusted net income per common share - Basic (non-GAAP) $ 1.23   $ 1.19   $ 1.16   $ 1.16   $ 1.19   $ 3.58   $ 3.42  
 
Adjusted net income per common share - Diluted (3)
Earnings per common share - Diluted (GAAP) $ 1.19 $ 1.08 $ 0.63 $ 1.00 $ 1.16 $ 2.90 $ 3.18
Effect to adjust for securities gains (0.01 ) -- -- -- -- (0.01 ) --
Effect to adjust for FDIC LSA early termination -- -- -- -- -- - 0.12
Effect to adjust for merger & branch consol./acq expenses   0.04     0.10     0.52     0.15     0.02     0.66     0.10  
Adjusted net income per common share - Diluted (non-GAAP) $ 1.22   $ 1.18   $ 1.15   $ 1.15   $ 1.18   $ 3.55   $ 3.40  
 
Adjusted Return of Average Assets (3)
Return on average assets (GAAP) 1.25 % 1.15 % 0.68 % 1.08 % 1.28 % 1.03 % 1.19 %
Effect to adjust for securities gains -0.01 % -- -- -- -- -0.01 % --
Effect to adjust for FDIC LSA early termination -- -- -- -- -- -- 0.05 %
Effect to adjust for merger & branch consol./acq expenses   0.04 %   0.10 %   0.57 %   0.18 %   0.02 %   0.24 %   0.03 %
Adjusted return on average assets (non-GAAP)   1.28 %   1.25 %   1.25 %   1.26 %   1.30 %   1.26 %   1.27 %
 
Adjusted Return of Average Equity (3)
Return on average equity (GAAP) 8.57 % 7.98 % 4.74 % 8.50 % 10.00 % 7.14 % 9.41 %
Effect to adjust for securities gains -0.09 % -0.02 % -- -- -- -0.04 % -0.01 %
Effect to adjust for FDIC LSA early termination -- -- -- -- -- -- 0.36 %
Effect to adjust for merger & branch consol./acq expenses   0.25 %   0.73 %   3.93 %   1.34 %   0.17 %   1.60 %   0.26 %
Adjusted return on average equity (non-GAAP)   8.73 %   8.69 %   8.67 %   9.84 %   10.17 %   8.70 %   10.02 %
 
Adjusted Return on Average Common Tangible Equity (3) (7)
Return on average common equity (GAAP) 8.57 % 7.98 % 4.74 % 8.50 % 10.00 % 7.14 % 9.41 %
Effect to adjust for securities gains -0.09 % -0.02 % -- -- -- -0.04 % -0.01 %
Effect to adjust for FDIC LSA early termination -- -- -- -- -- -- 0.36 %
Effect to adjust for merger & branch consol./acq expenses 0.25 % 0.72 % 3.93 % 1.34 % 0.17 % 1.60 % 0.26 %
Effect to adjust for intangible assets   6.48 %   6.66 %   6.88 %   5.60 %   5.94 %   6.66 %   6.10 %
Adjusted return on average common tangible equity (non-GAAP)   15.21 %   15.34 %   15.55 %   15.44 %   16.11 %   15.36 %   16.12 %
Return on average common equity (GAAP)
Tangible Book Value Per Common Share (7)
Book value per common share (GAAP) $ 55.79 $ 54.87 $ 54.05 $ 46.82 $ 46.43
Effect to adjust for intangible assets   (22.13 )   (22.17 )   (22.28 )   (15.60 )   (15.70 )
Tangible book value per common share (non-GAAP) $ 33.66   $ 32.70   $ 31.77   $ 31.22   $ 30.73  
 
Tangible Equity-to-Tangible Assets (7)
Equity-to-assets (GAAP) 14.62 % 14.39 % 14.17 % 12.75 % 12.78 %
Effect to adjust for intangible assets   -5.26 %   -5.28 %   -5.32 %   -3.87 %   -3.94 %
Tangible equity-to-tangible assets (non-GAAP)   9.36 %   9.11 %   8.85 %   8.88 %   8.84 %
 

Footnotes to tables:

(1) Loan data excludes mortgage loans held for sale.

(2) The dividend payout ratio is calculated by dividing total dividends
paid during the period by the total net income for the same period.

(3) Adjusted earnings, adjusted return on average assets, and adjusted
return on average equity are non-GAAP measures and exclude the after-tax
effect of gains on acquisitions, gains or losses on sales of securities,
other-than-temporary-impairment (OTTI), and merger and branch
consolidation related expense. Management believes that non-GAAP
adjusted measures provide additional useful information that allows
readers to evaluate the ongoing performance of the company. Non-GAAP
measures should not be considered as an alternative to any measure of
performance or financial condition as promulgated under GAAP, and
investors should consider the company's performance and financial
condition as reported under GAAP and all other relevant information when
assessing the performance or financial condition of the company.
Non-GAAP measures have limitations as analytical tools, and investors
should not consider them in isolation or as a substitute for analysis of
the company's results or financial condition as reported under GAAP.
Adjusted earnings and the related adjusted return measures (non-GAAP)
exclude the following from net income (GAAP) on an after-tax basis: (a)
pre-tax merger and branch consolidation related expense of $1.6 million,
$4.3 million, $21.0 million, $4.8 million, $709,000, and $1.6 million,
for the quarters ended September 30, 2017, June 30, 2017, March 31,
2017, December 31, 2016, and September, 30, 2016, respectively; (b)
securities gains, net of $525,000 and $110,000 for the quarter ended
September 30, 2017 and June 30, 2017, and (c) FDIC Loss Share Agreement
(LSA) Early Termination of $4.4 million for the nine month period ended
September 30, 2016.

(4) Repossessed assets include OREO and other nonperforming assets.

(5) Calculated by dividing total non-acquired NPAs by total assets.

(6) September 30, 2017 ratios are estimated and may be subject to change
pending the final filing of the FR Y-9C; all other periods are presented
as filed.

(7) The tangible measures are non-GAAP measures and exclude the effect
of period end or average balance of intangible assets. The tangible
returns on equity and common equity measures also add back the after-tax
amortization of intangibles to GAAP basis net income. Management
believes that these non-GAAP tangible measures provide additional useful
information, particularly since these measures are widely used by
industry analysts for companies with prior merger and acquisition
activities. Non-GAAP measures should not be considered as an alternative
to any measure of performance or financial condition as promulgated
under GAAP, and investors should consider the company's performance and
financial condition as reported under GAAP and all other relevant
information when assessing the performance or financial condition of the
company. Non-GAAP measures have limitations as analytical tools, and
investors should not consider them in isolation or as a substitute for
analysis of the company's results or financial condition as reported
under GAAP. The sections titled "Reconciliation of Non-GAAP to GAAP"
provide tables that reconcile non-GAAP measures to GAAP.

(8) Includes noncash loan interest income related to the discount on
acquired performing loans of $2.2 million; $3.3 million; $4.2 million;
$943,000; and $1.1 million, respectively during the five quarters above.

(9) Adjusted efficiency ratio is calculated by taking the noninterest
expense excluding branch consolidation cost and merger cost divided by
net interest income and noninterest income excluding securities gains
(losses), OTTI and FDIC early termination of the loss share agreement,
which occurred in the second quarter of 2016 and included in the YTD
ratio.

Cautionary Statement Regarding Forward Looking Statements

Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words "may," "will," "anticipate,"
"could," "should," "would," "believe," "contemplate," "expect,"
"estimate," "continue," "plan," "project" and "intend," as well as other
similar words and expressions of the future, are intended to identify
forward-looking statements. South State Corporation ("South
State
") and Park Sterling Corporation ("Park
Sterling
") caution readers that forward-looking statements are
subject to certain risks and uncertainties that could cause actual
results to differ materially from anticipated results. Such risks and
uncertainties, include, among others, the following possibilities: the
occurrence of any event, change or other circumstances that could give
rise to the right of one or both of the parties to terminate the
definitive merger agreement between South State and Park Sterling; the
outcome of any legal proceedings that may be instituted against South
State or Park Sterling; the failure to obtain necessary regulatory
approvals (and the risk that such approvals may result in the imposition
of conditions that could adversely affect the combined company or the
expected benefits of the transaction), and shareholder approvals or to
satisfy any of the other conditions to the transaction on a timely basis
or at all; the possibility that the anticipated benefits of the
transaction are not realized when expected or at all, including as a
result of the impact of, or problems arising from, the integration of
the two companies or as a result of the strength of the economy and
competitive factors in the areas where South State and Park Sterling do
business; the possibility that the transaction may be more expensive to
complete than anticipated, including as a result of unexpected factors
or events; diversion of management's attention from ongoing business
operations and opportunities; potential adverse reactions or changes to
business or employee relationships, including those resulting from the
announcement or completion of the transaction; South State's ability to
complete the acquisition and integration of Park Sterling successfully;
credit risk associated with commercial real estate, commercial business
and construction lending; interest risk involving the effect of a change
in interest rates on both of South State's and Park Sterling's earnings
and the market value of the portfolio equity; liquidity risk affecting
each bank's ability to meet its obligations when they come due; price
risk focusing on changes in market factors that may affect the value of
traded instruments; transaction risk arising from problems with service
or product delivery; compliance risk involving risk to earnings or
capital resulting from violations of or nonconformance with laws, rules,
regulations, prescribed practices, or ethical standards; strategic risk
resulting from adverse business decisions or improper implementation of
business decisions; reputation risk that adversely affects earnings or
capital arising from negative public opinion; cybersecurity risk related
to the dependence of South State and Park Sterling on internal computer
systems and the technology of outside service providers, as well as the
potential impacts of third-party security breaches, which subjects each
company to potential business disruptions or financial losses resulting
from deliberate attacks or unintentional events; economic downturn risk
resulting from changes in the credit markets, greater than expected
noninterest expenses, excessive loan losses and other factors and the
implementation of federal spending cuts currently scheduled to go into
effect; and other factors that may affect future results of South State
and Park Sterling. Additional factors that could cause results to differ
materially from those described above can be found in South State's
Annual Report on Form 10-K for the year ended December 31, 2016, and in
its subsequent Quarterly Report on Form 10-Q, including for the quarters
ended June 30, 2017 and March 31, 2017, which is on file with the
Securities and Exchange Commission (the "SEC")
and available in the "Investor Relations" section of South State's
website, http://www.southstatebank.com,
under the heading "SEC Filings" and in other documents South State files
with the SEC, and in Park Sterling's Annual Report on Form 10-K for the
year ended December 31, 2016, and in its subsequent Quarterly Report on
Form 10-Q, including for the quarters ended June 30, 2017 and March 31,
2017, which is on file with the SEC and available on the "Investor
Relations" page linked to Park Sterling's website, http://www.parksterlingbank.com,
under the heading "Regulatory Filings" and in other documents Park
Sterling files with the SEC.

All forward-looking statements speak only as of the date they are made
and are based on information available at that time. Neither South State
nor Park Sterling assumes any obligation to update forward-looking
statements to reflect circumstances or events that occur after the date
the forward-looking statements were made or to reflect the occurrence of
unanticipated events except as required by federal securities laws. As
forward-looking statements involve significant risks and uncertainties,
caution should be exercised against placing undue reliance on such
statements.

IMPORTANT ADDITIONAL INFORMATION

In connection with the proposed transaction between South State and Park
Sterling, South State have filed with the SEC a Registration Statement
on Form S-4 that has included a Joint Proxy Statement of South State and
Park Sterling and a Prospectus of South State, as well as other relevant
documents concerning the proposed transaction. The proposed transaction
involving South State and Park Sterling has been submitted to Park
Sterling's shareholders and South State's shareholders for their
consideration. This communication shall not constitute an offer to sell
or the solicitation of an offer to buy any securities nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction.
Shareholders of South State and shareholders of Park Sterling are urged
to read the registration statement and the joint proxy
statement/prospectus regarding the transaction and any other relevant
documents filed with the SEC, as well as any amendments or supplements
to those documents, because they will contain important information.

Shareholders can obtain a free copy of the definitive joint proxy
statement/prospectus, as well as other filings containing information
about South State and Park Sterling, without charge, at the SEC's
website (http://www.sec.gov).
Copies of the joint proxy statement/prospectus and the filings with the
SEC that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing
a request to South State Corporation, 520 Gervais Street, Columbia,
South Carolina 29201, Attention: John C. Pollok, Senior Executive Vice
President, CFO and COO, (800) 277-2175 or to Park Sterling Corporation,
1043 E. Morehead Street, Suite 201, Charlotte, North Carolina 28204,
Attention: Donald K. Truslow, (704) 323-4292.

PARTICIPANTS IN THE SOLICITATION

South State, Park Sterling and certain of their respective directors,
executive officers and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding South State's directors and executive officers is
available in its definitive proxy statement, which was filed with the
SEC on March 6, 2017, and certain of its Current Reports on Form 8-K.
Information regarding Park Sterling's directors and executive officers
is available in its definitive proxy statement, which was filed with the
SEC on April 13, 2017, and certain of its Current Reports on Form 8-K.
Other information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by security
holdings or otherwise, are contained in the joint proxy
statement/prospectus and other relevant materials filed with the SEC.
Free copies of this document may be obtained as described in the
preceding paragraph.

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