Market Overview

South State Corporation Reports First Quarter 2019 Results and Declares Increase in 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 period ended March 31, 2019. Highlights for the first
quarter of 2019 include the following:

This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20190429005836/en/

  • GAAP diluted EPS improvement of 8.7% compared to last year
  • Adjusted diluted EPS declined by 9.4% compared to last year
  • Loan growth totaled $128.3 million, or 4.7% annualized for the quarter
  • Deposit growth totaled $272.0 million, or 9.5% annualized for the
    quarter, with 58% of the growth from noninterest bearing deposits
  • Noninterest expense decreased by $15.2 million, or 13.4%, compared to
    last year
  • Adjusted noninterest expense declined by $5.0 million, or 5.0%,
    compared to last year
  • Asset quality remains strong as net charge-offs on non-acquired loans
    totaled 2 basis points annualized, or $493,000, during the first
    quarter of 2019
  • Non-performing assets to total assets were 0.27%, and remain at
    historically low level
  • Repurchased 500,000 common shares in Q1 2019 for $33.3 million
  • Tangible book value per share improved 9% annualized to $37.15 per
    share, and the dividend increased $0.05 per share, or 15.2%, compared
    to last year

During the first quarter of 2019, South State positioned the balance
sheet for future growth, and took other actions to improve profitability
and include the following:

  • Secured longer-term funding of $500.0 million over 4 to 5 year period;
  • Increased on-hand liquidity by approximately $600.0 million in order
    to fund future loan / securities growth;
  • With the current environment, plan to continue the systematic
    repurchase of common shares of the Company; and
  • Identified annual cost saving initiatives of approximately $13.0
    million (pre-tax), and expect to recognize $10.0 million in 2019,
    which includes the previously announced branch consolidations of $2.5
    million annualized cost savings; allowing for limited growth in
    noninterest expense.

"The first quarter marked a positive start to the year," said Robert R.
Hill, Jr., CEO of South State Corporation. "South State experienced
solid loan and deposit growth, exhibited good expense control, and
positioned the balance sheet to accommodate further loan growth. We also
continue to utilize our capital position to enhance shareholder value
through increased dividends and common stock repurchases. Additionally,
during the past few weeks we moved into a new headquarters in Richmond,
Virginia and opened the first of two new offices in Raleigh, North
Carolina. Both of these markets demonstrated strong results in the first
quarter. Finally, we added 13 new bankers to our sales team and
experienced further adoption of our digital platform."

Quarterly Cash Dividend and Common Stock Repurchase Plan

The Board of Directors of South State Corporation declared a quarterly
cash dividend on April 25, 2019, of $0.40 per share payable on its
common stock. This per share amount is higher by $0.02 per share, or
5.3%, compared to last quarter and $0.06 per share, or 17.6%, higher
than the same quarter one year ago. The dividend will be payable on May
17, 2019 to shareholders of record as of May 10, 2019.

As previously announced, the Board of Directors of South State
Corporation announced the authorization for the repurchase of up to
1,000,000 common shares of the Company's common stock (the "Repurchase
Program"). During the first quarter of 2019, the Company bought back
500,000 shares during the first week of February at an average price of
$66.53 per share, or $33.3 million. This results in an estimated
increase in diluted EPS annually of approximately $0.08 per share. The
Company intends to remain active in repurchasing shares and will seek
authorization for additional share repurchases given the current
environment and the Company's capital strategy. The Company is not
obligated to repurchase any such shares under the Repurchase Program,
but any such purchases will be executed in open market transactions at
prevailing market prices, in privately negotiated transactions, or by
other means in accordance with federal securities laws. Repurchases
under any approved Repurchase Program must be executed within one year
or would require additional Federal Reserve approval.

In addition, as a part of the company's capital strategy, the Company
intends to continue managing capital within the established long-term
range of 8% to 9% of tangible common equity to tangible assets; and the
dividend payout range for shareholders has been adjusted to 30% to 35%
annually, from the historical range of 25% to 30%.

Branch consolidation and other cost initiatives – 2019

In mid-January 2019, the Company scheduled the close of 13 branch
locations during 2019. Most are scheduled for the second quarter of
2019. In addition, certain cost reduction initiatives began during the
first quarter of 2019. The expected cost associated with these closures
and cost initiatives has been estimated to be approximately $3.2
million, and primarily includes personnel, facilities and equipment
cost. The annual savings of these closures and cost initiatives is
expected to be $13.0 million, and the impact on 2019 is anticipated to
be approximately $10.0 million.

 

First Quarter 2019 Financial Performance

    Three Months Ended
(Dollars in thousands, except per share data) Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31,
INCOME STATEMENT 2019 2018 2018 2018 2018
Interest income
Loans, including fees (8) $ 131,834 $ 132,541 $ 132,043 $ 129,852 $ 127,041

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

  11,556     11,327     11,517     11,880     11,007  
Total interest income 143,390 143,868 143,560 141,732 138,048
Interest expense
Deposits 16,645 15,310 13,220 10,009 6,913

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

  3,478     2,166     2,051     2,161     2,162  
Total interest expense   20,123     17,476     15,271     12,170     9,075  
Net interest income 123,267 126,392 128,289 129,562 128,973
Provision for loan losses   1,488     3,734     3,117     4,478     2,454  
Net interest income after provision for l
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