UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): May 8,
2020
SOUTH STATE CORPORATION
(Exact name of registrant as specified
in its charter)
Commission file number: 001-12669
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South Carolina
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57-0799315
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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520 Gervais Street
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Columbia, South Carolina
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29201
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(Address of principal executive offices)
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(Zip Code)
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(800 )277-2175
(Registrant’s telephone number, including
area code)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
x
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section
12(b) of the Act:
Title of each class: Common Stock
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Trading Symbol
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Name of each exchange on which registered
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$2.50 par value
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SSB
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Nasdaq Global Select Market
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Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
EXPLANATORY NOTE
This Amendment No. 1 on Form 8-K/A amends the Current
Report on Form 8-K dated May 8, 2020 (the “Original Filing”) filed by South State Corporation providing
unaudited pro forma combined condensed financial information relating to the merger of South State Corporation with
CenterState Bank Corporation. The sole purpose of this amendment is to correct a technical printer error in the hyperlink for
Exhibit 99.1 filed with the Original Filing. The full text of the Original Filing is repeated herein for convenience, but has
not been modified from the text of the Original Filing except solely to correct the hyperlink described above.
As previously reported,
on January 27, 2020, South State Corporation (the “Company” or “South State”) and CenterState Bank Corporation
(“CenterState”) announced the execution of an Agreement and Plan of Merger, dated as of January 25, 2020 (the “merger
agreement”), providing for the merger of the Company and CenterState, subject to the terms and conditions set forth therein.
The transaction is expected to close in the third quarter of 2020 subject to customary closing conditions, including receipt of
required regulatory approvals and shareholder approval of each company.
The unaudited pro
forma combined condensed financial information included with this filing updates and supplements the unaudited pro forma combined
condensed financial information of South State and CenterState and related disclosures contained in South State’s registration
statement on Form S-4, as amended, which contains a joint proxy statement of South State and CenterState that also constitutes
a prospectus of South State. The registration statement was declared effective by the SEC on April 20, 2020, and South State and
CenterState commenced mailing the joint proxy statement/prospectus to their respective shareholders on or about April 20, 2020.
The updated unaudited pro forma financial information in this Form 8-K is incorporated by reference into the joint proxy statement/prospectus.
To the extent that information in this Form 8-K differs from or updates information contained in the joint proxy statement/prospectus,
the information in this Form 8-K shall supersede or supplement the information in the joint proxy statement/prospectus.
Cautionary Statement Regarding Forward-Looking Statements
Some of the statements made in this report
are “forward-looking statements” within the meaning of the Securities Act of 1933 (the “Securities Act”)
and the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include statements with respect
to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance
and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause
the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements.
All forward-looking statements are subject
to risks, uncertainties and other factors that may cause the actual results, performance or achievements of South State or CenterState
to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others,
(1) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than
anticipated to be realized, (2) disruption to the parties’ businesses as a result of the announcement and pendency of the
merger, (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement,
(4) the risk that the integration of each party’s operations will be materially delayed or will be more costly or difficult
than expected or that the parties are otherwise unable to successfully integrate each party’s businesses into the other’s
businesses, (5) the failure to obtain the necessary approvals by the shareholders of South State or CenterState, (6) the amount
of the costs, fees, expenses and charges related to the merger, (7) the ability by each of South State and CenterState to obtain
required governmental approvals of the merger (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), (8) reputational risk and the reaction
of each company’s customers, suppliers, employees or other business partners to the merger, (9) the failure of the closing
conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger, (10) the possibility that the
merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (11) the dilution
caused by South State’s issuance of additional shares of its common stock in the merger, (12) a material adverse change in
the financial condition of South State or CenterState, (13) general competitive, economic, political and market conditions, (14)
major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, including
the recent outbreak of a novel strain of coronavirus, a respiratory illness, the related disruption to local, regional and global
economic activity and financial markets, and the impact that any of the foregoing may have on South State or CenterState and its
customers and other constituencies, and (15) other factors that may affect future results of CenterState and South State including
changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital
markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological
changes; capital management activities; and other actions of the Federal Reserve Board and legislative and regulatory actions and
reforms; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.
All written or oral forward-looking statements
that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking
statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein
by reference. Neither CenterState nor South State undertakes any obligation to update, revise or correct any of the forward-looking
statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as
a result of new information, future events or otherwise.
Important Information About the Merger
and Where to Find It
South State has filed a registration
statement on Form S-4 and an amendment thereto with the SEC to register the shares of South State’s common stock that
will be issued to CenterState’s shareholders in connection with the transaction. The registration statement contains a
joint proxy statement of South State and CenterState that also constitutes a prospectus of South State. The registration
statement on Form S-4, as amended, was declared effective by the SEC on April 20, 2020, and South State and CenterState
commenced mailing the definitive joint proxy statement/prospectus to their respective shareholders on or about April 20,
2020. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS (AS WELL AS ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY
REFERENCE INTO THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS CONTAIN IMPORTANT INFORMATION
REGARDING THE PROPOSED MERGER AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents
and other documents filed with the SEC by South State or CenterState through the website maintained by the SEC at
http://www.sec.gov or by contacting the investor relations department of South State or CenterState at:
South State Corporation
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CenterState Bank Corporation
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520 Gervais Street
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1101 First Street South, Suite 202
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Columbia, SC 29201-3046
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Winter Haven, FL 33880
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Attention: Investor Relations
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Attention: Investor Relations
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(800) 277-2175
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(863) 293-4710
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Participants in Solicitation
South State, CenterState and certain of
their directors and executive officers may be deemed participants in the solicitation of proxies from the shareholders of each
of South State and CenterState in connection with the merger. Information regarding the directors and executive officers of South
State and CenterState and other persons who may be deemed participants in the solicitation of the shareholders of South State or
of CenterState in connection with the merger is contained in the definitive joint proxy statement/prospectus related to the proposed
merger. Information about the directors and executive officers of South State and their ownership of South State common stock can
also be found in South State’s definitive proxy statement in connection with its 2019 annual meeting of shareholders, as
filed with the SEC on March 6, 2019, and other documents subsequently filed by South State with the SEC, including, but not limited
to, Amendment No. 1 to South State’s Annual Report on Form 10-K/A, as filed with the SEC on March 6, 2020. Information about
the directors and executive officers of CenterState and their ownership of CenterState common stock can also be found in CenterState’s
definitive proxy statement in connection with its 2020 annual meeting of shareholders, as filed with the SEC on March 10, 2020,
and other documents subsequently filed by CenterState with the SEC. Additional information regarding the interests of such participants
is included in the definitive joint proxy statement/prospectus and other relevant documents regarding the merger filed with the
SEC.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SOUTH STATE CORPORATION
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By:
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/s/ John C. Pollok
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Name:
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John C. Pollok
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Title:
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Senior Executive Vice President and
Chief Financial Officer
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Date: May 11, 2020
Exhibit 99.1
UNAUDITED
PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The
following unaudited pro forma combined condensed financial information is based on the separate historical financial statements
of South State Corporation (“South State”) and CenterState Bank Corporation (“CenterState”) after giving
effect to the merger (the “merger”) of CenterState with and into South State pursuant to the terms and conditions of
the Agreement and Plan of Merger, dated as of January 25, 2020, by and between CenterState and South State, and the issuance of
South State common stock in connection therewith, and the assumptions and adjustments described in the accompanying notes to the
unaudited pro forma combined condensed financial information. The unaudited pro forma combined condensed statements of income for
the three months ended March 31, 2020 and the year ended December 31, 2019 combine the historical consolidated statements
of income of South State and CenterState, giving effect to the merger as if it had been completed on January 1, 2019. The
accompanying unaudited pro forma combined condensed balance sheet as of March 31, 2020 combines the historical consolidated balance
sheets of South State and CenterState, giving effect to the merger as if it had been completed on March 31, 2020.
The
following unaudited pro forma combined condensed financial information and related notes are based on and should be read in conjunction
with (i) the audited historical consolidated financial statements of South State and the related notes included in South State’s
Annual Report on Form 10-K for the year ended December 31, 2019 and the unaudited historical consolidated financial statements
of South State and the related notes included in South State’s Quarterly Report on Form 10-Q for the three months ended March
31, 2020, and (ii) the historical audited consolidated financial statements of CenterState and the related notes included
in CenterState’s Annual Report on Form 10-K for the year ended December 31, 2019 and the unaudited historical
consolidated financial statements of CenterState and the related notes included in CenterState’s Quarterly Report on Form
10-Q for the three months ended March 31, 2020. The CenterState historical results reported in the unaudited pro forma combined
condensed statement of income for the year ended December 31, 2019, have been adjusted to give effect to CenterState’s acquisition
of National Commerce Corporation (“NCC”), which closed on April 1, 2019, as if it had occurred on January 1,
2019.
The
historical consolidated financial information has been adjusted in the unaudited pro forma combined condensed financial information
to give effect to the pro forma events that are (i) directly related to the merger, (ii) factually supportable and (iii) with
respect to the unaudited pro forma combined condensed statement of income, expected to have a continuing effect on the results
of the combined company. The unaudited pro forma combined condensed financial information contained herein does not reflect the
costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies,
or any other synergies that may result from the merger. The following unaudited pro forma combined condensed financial information
gives effect to the merger and includes adjustments for the following:
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•
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certain reclassifications to conform historical financial
statement presentations between the companies;
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•
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application of the acquisition method of accounting
under the provisions of topic ASC 805, “Business Combinations,” to reflect merger consideration of approximately $2.2 billion
in exchange for 100% of all outstanding shares of CenterState common stock; and
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•
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transaction costs in connection with the merger.
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Future
results may differ materially from the results reflected because of various factors, including those appearing under the caption
“Risk Factors” in South State’s and CenterState’s most recently filed Annual Reports on Form 10-K
and in any subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K and in the joint proxy statement/prospectus
filed by each of South State and CenterState in connection with the merger. Among other factors, the actual amounts recorded as
of the completion of the merger may differ materially from the information presented in the unaudited pro forma combined condensed
financial information as a result of:
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•
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changes in the trading price for South State common
stock;
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•
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net cash used or generated in South State’s or CenterState’s operations between the
signing of the merger agreement and the completion of the merger;
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•
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the timing of the completion of the merger, changes in total merger-related expenses, and integration
costs, including costs associated with systems implementation, severance, and other costs related to exit or disposal activities;
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•
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other changes in South State’s or CenterState’s net assets that occur prior to the
completion of the merger, which could cause material differences in the information presented below; and
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•
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changes in the financial results of the combined company.
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The
risk of such variance is particularly significant with respect to the preliminary purchase price allocation, because such allocation
is based, in large part, on the closing price per share of South State common stock as of the closing date. The preliminary purchase
price allocation reflected in the unaudited pro forma combined condensed financial information assumes a closing price per share
of South State common stock of $58.73, the closing price of South State common stock on March 31, 2020. The financial markets have
recently experienced extreme volatility, due in large part to the coronavirus pandemic and its widespread economic impacts. Such
volatility has contributed to a significant drop in the trading price of South State common stock and CenterState common stock.
Continued financial market volatility, and its effect on the trading prices of South State common stock and CenterState common
stock, will largely depend on future developments, which South State and CenterState cannot accurately predict or control, including
new information which may emerge concerning the severity of the coronavirus pandemic, the effectiveness or ineffectiveness of governmental
and private actions taken to contain or treat the coronavirus pandemic, and reactions by companies, consumers, investors, governmental
entities and financial markets to such actions. Particularly given this volatility and uncertainty, the unaudited pro forma combined
condensed financial information may not be indicative of and does not purport to represent the combined company’s actual
financial condition or results of operations as of the closing date or any future or other date or period.
For
the sole purpose of illustrating the effect of various trading prices of South State common stock on certain items of the unaudited
pro forma combined condensed financial information of the combined company, the below “Hypothetical Illustration of South
State Common Stock Trading Price Impact on Selected March 31, 2020 Pro Forma Financial Information” table sets out the hypothetical
value of the total merger consideration per share of CenterState common stock, goodwill, and shareholders’ equity, based
on various hypothetical trading prices of South State common stock. This illustration is intended to show the effect on those measures
if the trading price of South State’s common stock as of March 31, 2020 had differed from $58.73 (the actual trading price
of South State common stock as of March 31, 2020 and the trading price used to calculate the pro forma purchase price of the merger),
with all other information used to create the unaudited pro forma combined condensed financial information included herein. This
illustration does not show how the pro forma presentation would have changed if loan, deposit, investment, and other values had
been re-assessed as of any other date. Variation in loan, deposit, investment, and other values over time can significantly affect
the pro forma presentation, and, as such, the calculations of goodwill and shareholders’ equity at the applicable trading
prices set forth below are not necessarily indicative of, and may materially vary from, the combined company’s actual goodwill
and shareholders’ equity as of the closing date.
Hypothetical
Illustration of South State Common Stock Trading Price Impact on
Selected
March 31, 2020 Pro Forma Financial Information
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Total Merger
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South State
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Consideration Per
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Common Stock
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Share of CenterState
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Shareholders'
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Trading Price (a)
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Common Stock
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Goodwill
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Equity
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$
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65.00
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$
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19.69
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$
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1,593,799
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$
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4,678,934
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$
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60.00
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$
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18.18
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$
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1,405,347
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$
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4,490,481
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$
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55.00
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$
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16.66
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$
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1,216,894
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$
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4,302,028
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$
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50.00
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$
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15.14
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$
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1,028,441
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$
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4,113,575
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$
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45.00
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$
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13.62
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$
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1,002,899
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(b)
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$
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4,250,945
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(b)
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$
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40.00
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$
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12.10
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$
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1,002,899
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(b)
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$
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4,439,398
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(b)
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(a)
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Range of South State common stock trading prices is for
illustrative purposes only and the actual South State common stock price as of the closing of the merger could fall
outside the range set forth in this table.
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(b)
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At such price, hypothetical goodwill of the merger is
less than zero resulting in a purchase accounting gain which is reflected as an increase in shareholders' equity.
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The
following unaudited pro forma combined condensed financial information and related notes are being provided for illustrative purposes
only and do not purport to represent what the combined company’s actual results of operations or financial position would
have been had the merger been completed on the dates indicated, nor are they necessarily indicative of the combined company’s
future results of operations or financial position for any future period. The preparation of the unaudited pro forma combined condensed
financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma
combined condensed financial statements should be read together with:
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•
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the accompanying notes to the unaudited pro forma combined
condensed financial statements;
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•
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South State’s separate audited historical consolidated financial statements and accompanying
notes as of and for the year ended December 31, 2019, included in South State’s Annual Report on Form 10-K for
the year ended December 31, 2019;
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•
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South State’s separate unaudited historical consolidated financial statements and accompanying
notes as of and for the three months ended March 31, 2020, included in South State’s Quarterly Report on Form 10-Q for
the three months ended March 31, 2020;
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•
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CenterState’s separate audited historical consolidated financial statements and accompanying
notes as of and for the year ended December 31, 2019, included in CenterState’s Annual Report on Form 10-K for
the year ended December 31, 2019; and
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•
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CenterState’s separate unaudited historical consolidated financial statements and accompanying
notes as of and for the three months ended March 31, 2020, included in CenterState’s Quarterly Report on Form 10-Q for
the three months ended March 31, 2020.
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SOUTH STATE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
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South State
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CenterState
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Corporation
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Bank Corporation
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Purchase Acct
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Pro Forma
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3/31/2020
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3/31/2020
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Adjustments &
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3/31/2020
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(as reported)
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(as reported)
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Reclassifications
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Combined
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ASSETS
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Cash and cash equivalents:
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|
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|
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Cash and due from banks
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$
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259,775
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$
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135,338
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$
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395,113
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Interest-bearing deposits with banks
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1,003,061
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550,101
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|
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1,553,162
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Federal funds sold and securities
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|
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|
|
|
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purchased under agreements to resell
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--
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|
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461,252
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|
|
|
|
|
|
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461,252
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Total cash and cash equivalents
|
|
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1,262,836
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|
|
|
1,146,691
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|
|
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--
|
|
|
|
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2,409,527
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Investment securities:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Trading securities, at fair value
|
|
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--
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|
|
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8,432
|
|
|
|
|
|
|
|
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8,432
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Securities held to maturity
|
|
|
--
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|
|
|
195,948
|
|
|
|
9,510
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(h)
|
|
|
205,458
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Securities available for sale, at fair value
|
|
|
1,971,195
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|
|
|
2,138,442
|
|
|
|
|
|
|
|
|
4,109,637
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Other investments
|
|
|
62,994
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|
|
|
100,463
|
|
|
|
|
|
|
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|
163,457
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Total investment securities
|
|
|
2,034,189
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|
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|
2,443,285
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|
|
|
9,510
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|
|
|
|
4,486,984
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Loans held for sale
|
|
|
71,719
|
|
|
|
188,316
|
|
|
|
|
|
|
|
|
260,035
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Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Loans
|
|
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11,506,890
|
|
|
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12,027,231
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|
|
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139,596
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(a)
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|
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23,673,717
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Less allowance for credit losses
|
|
|
(144,785
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)
|
|
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(158,733
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)
|
|
|
|
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(b)
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|
|
(303,518
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Loans, net
|
|
|
11,362,105
|
|
|
|
11,868,498
|
|
|
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139,596
|
|
|
|
|
23,370,199
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Other real estate owned (OREO)
|
|
|
12,844
|
|
|
|
9,942
|
|
|
|
(1,273
|
)
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(c)
|
|
|
21,513
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Premises and equipment, net
|
|
|
312,151
|
|
|
|
329,533
|
|
|
|
--
|
|
|
|
|
641,684
|
|
Goodwill
|
|
|
1,002,899
|
|
|
|
1,204,417
|
|
|
|
(1,204,417
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)
|
(d)
|
|
|
1,357,480
|
|
|
|
|
|
|
|
|
|
|
|
|
354,581
|
|
(d)
|
|
|
|
|
Bank-owned life insurance
|
|
|
233,850
|
|
|
|
331,713
|
|
|
|
|
|
|
|
|
565,563
|
|
Mortgage servicing rights (MSRs)
|
|
|
26,365
|
|
|
|
4,131
|
|
|
|
|
|
|
|
|
30,496
|
|
Other intangible assets
|
|
|
46,809
|
|
|
|
87,295
|
|
|
|
(87,295
|
)
|
(e)
|
|
|
237,687
|
|
|
|
|
|
|
|
|
|
|
|
|
190,878
|
|
(e)
|
|
|
|
|
Deferred tax asset
|
|
|
46,365
|
|
|
|
37,687
|
|
|
|
(56,625
|
)
|
(f),(l)
|
|
|
27,427
|
|
Interest rate swap derivatives, at fair value
|
|
|
-
|
|
|
|
831,891
|
|
|
|
--
|
|
|
|
|
831,891
|
|
Other assets
|
|
|
230,779
|
|
|
|
112,893
|
|
|
|
--
|
|
|
|
|
343,672
|
|
Total assets
|
|
$
|
16,642,911
|
|
|
$
|
18,596,292
|
|
|
$
|
(655,046
|
)
|
|
|
$
|
34,584,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
3,367,422
|
|
|
$
|
4,164,091
|
|
|
$
|
--
|
|
|
|
$
|
7,531,513
|
|
Interest-bearing
|
|
|
8,977,125
|
|
|
|
9,957,408
|
|
|
|
25,232
|
|
(g)
|
|
|
18,959,765
|
|
Total deposits
|
|
|
12,344,547
|
|
|
|
14,121,499
|
|
|
|
25,232
|
|
|
|
|
26,491,278
|
|
Federal funds purchased and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sold under agreements to repurchase
|
|
|
325,723
|
|
|
|
337,169
|
|
|
|
--
|
|
|
|
|
662,892
|
|
Advances from Federal Home Loan Bank
|
|
|
1,000,101
|
|
|
|
150,000
|
|
|
|
--
|
|
|
|
|
1,150,101
|
|
Other borrowings
|
|
|
315,999
|
|
|
|
132,356
|
|
|
|
--
|
|
|
|
|
448,355
|
|
Interest Rate Swap Derivatives, at fair value
|
|
|
51,244
|
|
|
|
842,451
|
|
|
|
--
|
|
|
|
|
893,695
|
|
Other liabilities
|
|
|
284,254
|
|
|
|
142,565
|
|
|
|
89,416
|
|
(k)
|
|
|
495,222
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,013
|
)
|
(k)
|
|
|
|
|
Total liabilities
|
|
|
14,321,868
|
|
|
|
15,726,040
|
|
|
|
93,635
|
|
|
|
|
30,141,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock - $.01 par value; authorized 10,000,000 shares;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
no shares issued and outstanding
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
Common stock
|
|
|
83,611
|
|
|
|
1,241
|
|
|
|
(1,241
|
)
|
(i)
|
|
|
176,741
|
|
|
|
|
|
|
|
|
|
|
|
|
93,130
|
|
(j)
|
|
|
|
|
Surplus (APIC)
|
|
|
1,584,322
|
|
|
|
2,376,637
|
|
|
|
(2,376,637
|
)
|
(i)
|
|
|
3,699,470
|
|
|
|
|
|
|
|
|
--
|
|
|
|
2,115,148
|
|
(j)
|
|
|
|
|
Retained earnings
|
|
|
643,345
|
|
|
|
435,984
|
|
|
|
(522,691
|
)
|
(i),(l)
|
|
|
556,638
|
|
Accumulated other comprehensive
|
|
|
9,765
|
|
|
|
56,390
|
|
|
|
(56,390
|
)
|
(i)
|
|
|
9,765
|
|
Total shareholders’ equity
|
|
|
2,321,043
|
|
|
|
2,870,252
|
|
|
|
(748,681
|
)
|
|
|
|
4,442,614
|
|
Total liabilities and shareholders’ equity
|
|
$
|
16,642,911
|
|
|
$
|
18,596,292
|
|
|
$
|
(655,046
|
)
|
|
|
$
|
34,584,157
|
|
SOUTH STATE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
|
|
South State
|
|
|
CenterState
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
|
Bank Corporation
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
3/31/2020
|
|
|
3/31/2020
|
|
|
Pro Forma
|
|
|
|
3/31/2020
|
|
|
|
(as reported)
|
|
|
(as reported)
|
|
|
Adjustments
|
|
|
|
Combined
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees
|
|
$
|
133,034
|
|
|
$
|
160,675
|
|
|
$
|
(3,490
|
)
|
(2)
|
|
$
|
290,219
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
11,584
|
|
|
|
12,534
|
|
|
|
(713
|
)
|
(3)
|
|
|
23,405
|
|
Tax-exempt
|
|
|
1,399
|
|
|
|
1,737
|
|
|
|
-
|
|
|
|
|
3,136
|
|
Federal funds sold and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchased under agreements to resell
|
|
|
1,783
|
|
|
|
1,813
|
|
|
|
|
|
|
|
|
3,596
|
|
Total interest income
|
|
|
147,800
|
|
|
|
176,759
|
|
|
|
(4,203
|
)
|
|
|
|
320,356
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
14,437
|
|
|
|
19,836
|
|
|
|
(1,397
|
)
|
(4)
|
|
|
32,876
|
|
Federal funds purchased and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sold under agreements to repurchase
|
|
|
615
|
|
|
|
2,573
|
|
|
|
|
|
|
|
|
3,188
|
|
Other borrowings
|
|
|
4,735
|
|
|
|
997
|
|
|
|
-
|
|
|
|
|
5,732
|
|
Total interest expense
|
|
|
19,787
|
|
|
|
23,406
|
|
|
|
(1,397
|
)
|
|
|
|
41,796
|
|
Net interest income
|
|
|
128,013
|
|
|
|
153,353
|
|
|
|
(2,806
|
)
|
|
|
|
278,560
|
|
Provision for credit losses
|
|
|
36,533
|
|
|
|
44,914
|
|
|
|
|
|
|
|
|
81,447
|
|
Net interest income after provision for credit losses
|
|
|
91,480
|
|
|
|
108,439
|
|
|
|
(2,806
|
)
|
|
|
|
197,113
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
12,304
|
|
|
|
7,522
|
|
|
|
|
|
|
|
|
19,826
|
|
Correspondent Banking capital markets revenue
|
|
|
-
|
|
|
|
27,808
|
|
|
|
|
|
|
|
|
27,808
|
|
Bankcard services income
|
|
|
5,837
|
|
|
|
3,667
|
|
|
|
|
|
|
|
|
9,504
|
|
Trust and investment services income
|
|
|
7,389
|
|
|
|
831
|
|
|
|
|
|
|
|
|
8,220
|
|
Mortgage banking income
|
|
|
14,647
|
|
|
|
10,973
|
|
|
|
|
|
|
|
|
25,620
|
|
Securities gains, net
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
Other
|
|
|
3,955
|
|
|
|
4,989
|
|
|
|
|
|
|
|
|
8,944
|
|
Total noninterest income
|
|
|
44,132
|
|
|
|
55,790
|
|
|
|
-
|
|
|
|
|
99,922
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
60,978
|
|
|
|
77,077
|
|
|
|
|
|
|
|
|
138,055
|
|
Net occupancy expense
|
|
|
8,170
|
|
|
|
7,346
|
|
|
|
|
|
|
|
|
15,516
|
|
OREO expense and loan related
|
|
|
587
|
|
|
|
2,002
|
|
|
|
|
|
|
|
|
2,589
|
|
Information services expense
|
|
|
9,306
|
|
|
|
5,617
|
|
|
|
|
|
|
|
|
14,923
|
|
Furniture and equipment expense
|
|
|
4,117
|
|
|
|
4,045
|
|
|
|
|
|
|
|
|
8,162
|
|
Bankcard expense
|
|
|
525
|
|
|
|
1,598
|
|
|
|
|
|
|
|
|
2,123
|
|
FDIC assessment and other regulatory charges
|
|
|
2,058
|
|
|
|
1,807
|
|
|
|
|
|
|
|
|
3,865
|
|
Advertising and marketing
|
|
|
814
|
|
|
|
2,158
|
|
|
|
|
|
|
|
|
2,972
|
|
Amortization of intangibles
|
|
|
3,007
|
|
|
|
4,535
|
|
|
|
3,274
|
|
(5)
|
|
|
10,816
|
|
Supplies, printing and postage expense
|
|
|
1,505
|
|
|
|
2,021
|
|
|
|
|
|
|
|
|
3,526
|
|
Professional fees
|
|
|
2,494
|
|
|
|
2,682
|
|
|
|
|
|
|
|
|
5,176
|
|
Merger and branch consolidation related expenses
|
|
|
4,129
|
|
|
|
3,051
|
|
|
|
|
|
|
|
|
7,180
|
|
Other
|
|
|
9,557
|
|
|
|
8,833
|
|
|
|
|
|
|
|
|
18,390
|
|
Total noninterest expense
|
|
|
107,247
|
|
|
|
122,772
|
|
|
|
3,274
|
|
|
|
|
233,293
|
|
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
28,365
|
|
|
|
41,457
|
|
|
|
(6,079
|
)
|
|
|
|
63,743
|
|
Provision for income taxes
|
|
|
4,255
|
|
|
|
6,025
|
|
|
|
(1,337
|
)
|
(8)
|
|
|
8,943
|
|
Net income
|
|
|
24,110
|
|
|
|
35,432
|
|
|
|
(4,742
|
)
|
|
|
|
54,800
|
|
Earnings attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
Earnings allocated to participating securities
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
8
|
|
Net income attributable to SSB/CSFL
|
|
|
24,110
|
|
|
|
35,424
|
|
|
|
(4,742
|
)
|
|
|
|
54,792
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.72
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
$
|
0.77
|
|
Diluted
|
|
|
0.71
|
|
|
|
0.28
|
|
|
|
|
|
|
|
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$
|
0.47
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
$
|
0.47
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,566
|
|
|
|
124,799
|
|
|
|
(87,347
|
)
|
(9)
|
|
|
71,018
|
|
Diluted
|
|
|
33,805
|
|
|
|
125,341
|
|
|
|
(87,726
|
)
|
(9)
|
|
|
71,420
|
|
SOUTH STATE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
National
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
State
|
|
|
CenterState
|
|
|
National
|
|
|
Commerce
|
|
|
|
CenterState
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
|
Bank
Corporation
|
|
|
Commerce
|
|
|
Corporation
|
|
|
|
Bank
Corporation
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
12/31/2019
|
|
|
12/31/2019
|
|
|
Corporation
|
|
|
Pro
Forma
|
|
|
|
12/31/2019
|
|
|
Pro
Forma
|
|
|
|
12/31/2019
|
|
|
|
(as
reported)
|
|
|
(as
reported)
|
|
|
3/31/2019(1)
|
|
|
Adjustments
(10)
|
|
|
|
(Pro
Forma)
|
|
|
Adjustments
|
|
|
|
Combined
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
including fees
|
|
$
|
534,790
|
|
|
$
|
618,125
|
|
|
$
|
49,569
|
|
|
$
|
3,528
|
|
(a)
|
|
$
|
671,222
|
|
|
$
|
(13,960
|
)
|
(2)
|
|
$
|
1,192,052
|
|
Investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
39,949
|
|
|
|
48,432
|
|
|
|
1,791
|
|
|
|
|
|
|
|
|
50,223
|
|
|
|
(2,380
|
)
|
(3)
|
|
|
87,792
|
|
Tax-exempt
|
|
|
6,186
|
|
|
|
6,899
|
|
|
|
165
|
|
|
|
|
|
|
|
|
7,064
|
|
|
|
-
|
|
|
|
|
13,250
|
|
Federal
funds sold and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchased
under agreements to resell
|
|
|
9,902
|
|
|
|
11,876
|
|
|
|
842
|
|
|
|
|
|
|
|
|
12,718
|
|
|
|
|
|
|
|
|
22,620
|
|
Total
interest income
|
|
|
590,827
|
|
|
|
685,332
|
|
|
|
52,367
|
|
|
|
3,528
|
|
|
|
|
741,227
|
|
|
|
(16,340
|
)
|
|
|
|
1,315,714
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
65,920
|
|
|
|
83,099
|
|
|
|
7,513
|
|
|
|
(436
|
)
|
(b)
|
|
|
90,176
|
|
|
|
(1,703
|
)
|
(4)
|
|
|
154,393
|
|
Federal
funds purchased and securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
sold
under agreements to repurchase
|
|
|
2,627
|
|
|
|
12,130
|
|
|
|
79
|
|
|
|
|
|
|
|
|
12,209
|
|
|
|
|
|
|
|
|
14,836
|
|
Other
borrowings
|
|
|
18,005
|
|
|
|
4,375
|
|
|
|
689
|
|
|
|
(75
|
)
|
(d)
|
|
|
4,989
|
|
|
|
-
|
|
|
|
|
22,994
|
|
Total
interest expense
|
|
|
86,552
|
|
|
|
99,604
|
|
|
|
8,281
|
|
|
|
(511
|
)
|
|
|
|
107,374
|
|
|
|
(1,703
|
)
|
|
|
|
192,223
|
|
Net
interest income
|
|
|
504,275
|
|
|
|
585,728
|
|
|
|
44,086
|
|
|
|
4,039
|
|
|
|
|
633,853
|
|
|
|
(14,637
|
)
|
|
|
|
1,123,491
|
|
Provision
for credit losses
|
|
|
12,777
|
|
|
|
10,585
|
|
|
|
34
|
|
|
|
|
|
|
|
|
10,619
|
|
|
|
|
|
|
|
|
23,396
|
|
Net
interest income after provision for credit losses
|
|
|
491,498
|
|
|
|
575,143
|
|
|
|
44,052
|
|
|
|
4,039
|
|
|
|
|
623,234
|
|
|
|
(14,637
|
)
|
|
|
|
1,100,095
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
|
|
51,931
|
|
|
|
30,168
|
|
|
|
1,151
|
|
|
|
|
|
|
|
|
31,319
|
|
|
|
|
|
|
|
|
83,250
|
|
Correspondent
Banking capital markets revenue
|
|
|
-
|
|
|
|
64,898
|
|
|
|
|
|
|
|
|
|
|
|
|
64,898
|
|
|
|
|
|
|
|
|
64,898
|
|
Bankcard
services income
|
|
|
23,504
|
|
|
|
18,399
|
|
|
|
1,096
|
|
|
|
|
|
|
|
|
19,495
|
|
|
|
|
|
|
|
|
42,999
|
|
Trust
and investment services income
|
|
|
29,244
|
|
|
|
3,161
|
|
|
|
29
|
|
|
|
|
|
|
|
|
3,190
|
|
|
|
|
|
|
|
|
32,434
|
|
Mortgage
banking income
|
|
|
17,564
|
|
|
|
29,553
|
|
|
|
1,929
|
|
|
|
|
|
|
|
|
31,482
|
|
|
|
|
|
|
|
|
49,046
|
|
Securities
gains, net
|
|
|
2,711
|
|
|
|
25
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
2,727
|
|
Other
|
|
|
18,611
|
|
|
|
19,856
|
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
19,555
|
|
|
|
|
|
|
|
|
38,166
|
|
Total
noninterest income
|
|
|
143,565
|
|
|
|
166,060
|
|
|
|
3,895
|
|
|
|
-
|
|
|
|
|
169,955
|
|
|
|
-
|
|
|
|
|
313,520
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
234,747
|
|
|
|
260,234
|
|
|
|
18,687
|
|
|
|
|
|
|
|
|
278,921
|
|
|
|
|
|
|
|
|
513,668
|
|
Net
occupancy expense
|
|
|
31,158
|
|
|
|
28,350
|
|
|
|
2,801
|
|
|
|
|
|
|
|
|
31,151
|
|
|
|
|
|
|
|
|
62,309
|
|
OREO
expense and loan related
|
|
|
3,242
|
|
|
|
4,899
|
|
|
|
14
|
|
|
|
|
|
|
|
|
4,913
|
|
|
|
|
|
|
|
|
8,155
|
|
Information
services expense
|
|
|
35,477
|
|
|
|
19,605
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
21,343
|
|
|
|
|
|
|
|
|
56,820
|
|
Furniture
and equipment expense
|
|
|
16,299
|
|
|
|
14,438
|
|
|
|
-
|
|
|
|
|
|
|
|
|
14,438
|
|
|
|
|
|
|
|
|
30,737
|
|
Pension
plan termination expense
|
|
|
9,526
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
9,526
|
|
Bankcard
expense
|
|
|
2,331
|
|
|
|
5,501
|
|
|
|
439
|
|
|
|
|
|
|
|
|
5,940
|
|
|
|
|
|
|
|
|
8,271
|
|
FDIC
assessment and other regulatory charges
|
|
|
4,545
|
|
|
|
5,048
|
|
|
|
642
|
|
|
|
|
|
|
|
|
5,690
|
|
|
|
|
|
|
|
|
10,235
|
|
Advertising
and marketing
|
|
|
4,309
|
|
|
|
7,540
|
|
|
|
76
|
|
|
|
|
|
|
|
|
7,616
|
|
|
|
|
|
|
|
|
11,925
|
|
Amortization of intangibles
|
|
|
13,084
|
|
|
|
16,030
|
|
|
|
1,363
|
|
|
|
1,496
|
|
(c)
|
|
|
18,889
|
|
|
|
15,729
|
|
(5)
|
|
|
47,702
|
|
Supplies,
printing and postage expense
|
|
|
5,881
|
|
|
|
7,201
|
|
|
|
|
|
|
|
|
|
|
|
|
7,201
|
|
|
|
|
|
|
|
|
13,082
|
|
Professional
fees
|
|
|
10,325
|
|
|
|
8,870
|
|
|
|
428
|
|
|
|
|
|
|
|
|
9,298
|
|
|
|
15,500
|
|
(6)
|
|
|
35,123
|
|
Merger
and branch consolidation related expenses
|
|
|
4,552
|
|
|
|
39,257
|
|
|
|
25,773
|
|
|
|
(58,867
|
)
|
(e)
|
|
|
6,163
|
|
|
|
-
|
|
(7)
|
|
|
10,715
|
|
Other
|
|
|
29,162
|
|
|
|
29,934
|
|
|
|
3,161
|
|
|
|
|
|
|
|
|
33,095
|
|
|
|
-
|
|
|
|
|
62,257
|
|
Total
noninterest expense
|
|
|
404,638
|
|
|
|
446,907
|
|
|
|
55,122
|
|
|
|
(57,371
|
)
|
|
|
|
444,658
|
|
|
|
31,229
|
|
|
|
|
880,525
|
|
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
230,425
|
|
|
|
294,296
|
|
|
|
(7,175
|
)
|
|
|
61,410
|
|
|
|
|
348,531
|
|
|
|
(45,866
|
)
|
|
|
|
533,090
|
|
Provision
for income taxes
|
|
|
43,942
|
|
|
|
67,698
|
|
|
|
(2,239
|
)
|
|
|
14,126
|
|
(f)
|
|
|
79,585
|
|
|
|
(10,090
|
)
|
(8)
|
|
|
113,437
|
|
Net
income
|
|
|
186,483
|
|
|
|
226,598
|
|
|
|
(4,936
|
)
|
|
|
47,284
|
|
|
|
|
268,946
|
|
|
|
(35,775
|
)
|
|
|
|
419,654
|
|
Earnings attributable
to noncontrolling interest
|
|
|
-
|
|
|
|
1,202
|
|
|
|
466
|
|
|
|
-
|
|
|
|
|
1,668
|
|
|
|
|
|
|
|
|
1,668
|
|
Earnings
allocated to participating securities
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
88
|
|
Net
income attributable to SSB/CSFL
|
|
$
|
186,483
|
|
|
$
|
225,308
|
|
|
$
|
(5,402
|
)
|
|
$
|
47,284
|
|
|
|
$
|
267,190
|
|
|
$
|
(35,775
|
)
|
|
|
$
|
417,898
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
5.40
|
|
|
$
|
1.88
|
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
$
|
2.08
|
|
|
|
|
|
|
|
$
|
5.72
|
|
Diluted
|
|
|
5.36
|
|
|
|
1.87
|
|
|
|
(0.26
|
)
|
|
|
|
|
|
|
|
2.07
|
|
|
|
|
|
|
|
|
5.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common
share
|
|
$
|
1.67
|
|
|
$
|
0.44
|
|
|
$
|
-
|
|
|
|
|
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
$
|
1.67
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,561
|
|
|
|
119,747
|
|
|
|
20,800
|
|
|
|
(12,338
|
)
|
|
|
|
128,209
|
|
|
|
(89,734
|
)
|
(9)
|
|
|
73,037
|
|
Diluted
|
|
|
34,797
|
|
|
|
120,604
|
|
|
|
21,159
|
|
|
|
(12,550
|
)
|
|
|
|
129,213
|
|
|
|
(90,436
|
)
|
(9)
|
|
|
73,574
|
|
NOTES
TO THE UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1:
Basis of pro forma presentation
The
accompanying unaudited pro forma combined condensed financial statements and related notes were prepared in accordance with Article 11
of Regulation S-X. The unaudited pro forma combined condensed statement of income for the three months ended March 31, 2020
and for year ended December 31, 2019 combine the historical consolidated statements of income of South State and CenterState,
giving effect to the merger as if it had been completed on January 1, 2019. The accompanying unaudited pro forma combined
condensed balance sheet as of March 31, 2020 combines the historical consolidated balance sheets of South State and CenterState,
giving effect to the merger as if it had been completed on March 31, 2020.
South
State’s and CenterState’s historical financial statements were prepared in accordance with GAAP. As discussed in Note 3
and Note 4, certain reclassifications were made to align South State’s and CenterState’s financial statement presentation.
South State has not identified all adjustments necessary to conform CenterState’s accounting policies to South State’s
accounting policies. Upon completion of the merger, or as more information becomes available, the combined company will perform
a more detailed review of CenterState’s accounting policies. As a result of that review, differences could be identified
between the accounting policies of the two companies that, when combined, could have a material impact on the combined company’s
financial information.
The
accompanying unaudited pro forma combined condensed financial statements and related notes were prepared using the acquisition
method of accounting under the provisions of ASC 805, with South State considered to be the acquirer of CenterState. ASC 805 requires,
among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values
as of the acquisition date. For purposes of the unaudited pro forma combined condensed balance sheet, the purchase consideration
has been allocated to the assets acquired and liabilities assumed of CenterState based upon management’s preliminary estimate
of their fair values as of March 31, 2020. South State has not completed the valuation analysis and calculations in sufficient
detail necessary to arrive at the required estimates of the fair value of CenterState assets to be acquired or liabilities assumed,
other than a preliminary estimate for intangible assets and certain financial assets and financial liabilities. Accordingly, apart
from the aforementioned, certain CenterState assets and liabilities are presented at their respective carrying amounts and should
be treated as preliminary values. Any differences between the fair value of the consideration transferred and the fair value of
the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, the purchase price allocation and related
adjustments reflected in these unaudited pro forma combined condensed financial statements are preliminary and subject to revision
based on final determination of fair value.
All
dollar amounts presented within these Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements are in
thousands of dollars, except per share data, unless otherwise indicated.
Note 2:
Preliminary purchase price allocation
The
following table summarizes the preliminary purchase price allocation to the estimated fair value of assets and liabilities of CenterState
Bank Corporation (in thousands, except per share data):
|
|
Note
|
|
Amount
|
|
Shares of CenterState common stock outstanding
|
|
(i)
|
|
|
124,131,401
|
|
Converted price per share of CenterState common stock
|
|
(i)
|
|
$
|
17.6249
|
|
Total pro forma purchase price from common stock
|
|
|
|
$
|
2,187,800
|
|
Stock options converted to South State options
|
|
|
|
|
2,932
|
|
Performance based equity awards
|
|
|
|
|
9,299
|
|
Restricted stock awards
|
|
|
|
|
8,247
|
|
Total pro forma purchase price
|
|
|
|
$
|
2,208,278
|
|
|
(i)
|
Under
the terms of the merger agreement, holders of CenterState common stock have the right to receive a fixed exchange ratio of 0.3001
shares of South State common stock for each share of CenterState common stock. For purposes of the unaudited pro forma combined
condensed balance sheet, the estimated merger consideration is based on the total number of shares of CenterState common stock
issued and outstanding as of March 31, 2020 and the closing price per share of South State common stock of $58.73 on March 31,
2020.
|
The
preliminary estimated merger consideration as shown in the table above is allocated to the tangible and intangible assets acquired
and liabilities assumed of CenterState based on their preliminary estimated fair values. As mentioned above in Note 1, South
State has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates
of the fair market value of the CenterState assets to be acquired or liabilities assumed, other than a preliminary estimate for
intangible assets and certain financial assets and financial liabilities. Accordingly, apart from the aforementioned, certain assets
acquired and liabilities assumed are presented at their respective carrying amounts and should be treated as preliminary values.
The fair value assessments are preliminary and are based upon available information and certain assumptions, which South State
believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the unaudited
pro forma combined condensed financial statements.
The
following table sets forth a preliminary allocation of the estimated merger consideration to the fair value of the identifiable
tangible and intangible assets acquired and liabilities assumed of CenterState using CenterState’s unaudited consolidated
balance sheet as of March 31, 2020:
Preliminary fair value of estimated total merger consideration
|
|
$
|
2,208,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,146,691
|
|
|
|
|
|
Investment securities
|
|
|
2,452,795
|
|
|
|
|
|
Loans, net
|
|
|
12,312,074
|
|
|
|
|
|
Other real estate owned
|
|
|
8,669
|
|
|
|
|
|
Premises & equipment
|
|
|
329,533
|
|
|
|
|
|
Other intangible assets, CDI
|
|
|
190,878
|
|
|
|
|
|
Bank owned life insurance
|
|
|
331,713
|
|
|
|
|
|
Deferred tax asset, net
|
|
|
(47,896
|
)
|
|
|
|
|
Other assets
|
|
|
948,915
|
|
|
|
|
|
Total assets
|
|
|
17,673,372
|
|
|
|
|
|
Fair value of liabilities assumed:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
14,146,731
|
|
|
|
|
|
Fed Funds purchased and securities sold under repurchase agreement
|
|
|
337,169
|
|
|
|
|
|
Other borrowings
|
|
|
282,356
|
|
|
|
|
|
Other liabilities
|
|
|
1,053,419
|
|
|
|
|
|
Total liabilities
|
|
|
15,819,675
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
1,853,697
|
|
Preliminary Pro Forma Goodwill
|
|
|
|
|
|
$
|
354,581
|
|
Note 3:
Adjustments to the unaudited pro forma combined condensed balance sheet Purchase Accounting Adjustments:
|
(a)
|
Adjustment reflects the fair value adjustments based on data as of March 31, 2020 as reflected
in CenterState’s 10-Q. Any subsequent changes in the economy, interest rates and in economic forecasts will cause these figures
to change significantly.
|
|
(b)
|
The current allowance for credit losses ("ACL")
at CenterState approximates the ACL South State will record for the acquired loans. Approximately $43.0 million of the ACL is
attributable to loans identified as Purchased Credit Deteriorated (“PCD”) based on a preliminary analysis and recorded
as an adjustment to goodwill. The remaining $115.7 million of ACL is attributable to non-PCD loans and is recorded as provision
for credit losses with a deferred tax adjustment of $28.9 million, resulting in a net impact to retained earnings of $86.7 million.
This adjustment assumes data as of March 31, 2020 as reflected in CenterState’s 10-Q. Any subsequent changes in the economy,
interest rates and in economic forecasts will cause these figures to change significantly.
|
|
(c)
|
Adjustment reflects the fair value adjustments to OREO
based on South State’s evaluation of the acquired OREO portfolio.
|
|
(d)
|
Adjustment reflects the reversal of CenterState’s
existing goodwill and recording the goodwill generated as a result of the consideration paid being greater than the fair value
of net assets acquired.
|
|
(e)
|
Adjustment reflects the reversal of CenterState’s
existing core deposit intangible asset and recording of the core deposit intangible of $190.9 million on the acquired core
deposit accounts.
|
|
(f)
|
Adjustment reflects the recording of the deferred tax
asset generated by the net fair value adjustments (at a rate equal to 25.0352%).
|
|
(g)
|
Adjustment reflects the fair value adjustment on deposits.
|
|
(h)
|
Adjustment reflects the fair value adjustment of the
securities portfolio.
|
|
(i)
|
Adjustment reflects the reversal of CenterState’s
March 31, 2020 retained earnings, common stock, surplus and AOCI.
|
|
(j)
|
Adjustment reflects the difference in par value of
common stock from $0.01 at CenterState to $2.50 at South State and the exchange ratio of 0.3001.
|
|
(k)
|
Adjustment reflects the accrual for CenterState’s
estimated direct transaction cost of $89.4 million and the related income tax effect of $21.0 million incurred at closing, including,
but not limited to, investment banker, legal fees, personnel costs and system conversion costs.
|
|
(l)
|
Adjustments reflect a deferred tax adjustment of $28.9
million and a net impact to retained earnings of $86.7 million, attributable to the $115.7 million of ACL South State will record
for the acquired non-PCD loans.
|
Note 4: Adjustments to the
unaudited pro forma combined condensed statements of income Pro Forma Adjustments:
|
(1)
|
On April 1, 2019, CenterState completed its acquisition
of NCC. The pro forma adjustments for CenterState’s acquisition of NCC in the unaudited pro forma combined condensed statement
of income are necessary to adjust CenterState’s historical results to assume that the transaction had been completed on
January 1, 2019.
|
|
(2)
|
Adjusted loan interest income for purchased loans using
level yield methodology over the estimated lives of the acquired loan portfolios.
|
|
(3)
|
Adjustment reflects amortization of premium on the
fair value mark on held to maturity securities.
|
|
(4)
|
Adjustment reflects the amortization of CD premium
based upon the scheduled maturities of the related deposits less amortization previously recorded by CenterState.
|
|
(5)
|
Adjustment reflects the annual amortization of intangibles
using sum of years digits over ten (10) years for CDI less amortization recorded by CenterState.
|
|
(6)
|
Adjustment reflects South State’s direct transaction
costs.
|
|
(7)
|
South State expects to incur significant merger charges
related to contract cancellations, severance, change in control and other merger related charges, however, these are not reflected
in these pro forma income statements.
|
|
(8)
|
Adjustment reflects 22.0% assumed effective tax rate
on net pro forma adjustments.
|
|
(9)
|
Adjustment reflects exchange ratio of 0.3001 multiplied
by the number of outstanding shares of CenterState common stock.
|
Pro Forma Adjusting Entries (Income Statements) (dollars are in thousands):
|
|
NCC
|
|
(a) Preliminary estimate of loan interest accretion
|
|
$
|
21,822
|
|
(a) Remove existing loan accretion of fair value adjustment
|
|
|
(18,294
|
)
|
(b) Remove existing time deposit amortization of fair value adjustment
|
|
|
3,077
|
|
(b) Time deposits amortization of fair value adjustment at acquisition date
|
|
|
(3,513
|
)
|
(c) Remove amortization of existing CDI
|
|
|
(4,489
|
)
|
(c) Amortization of new CDI
|
|
|
5,985
|
|
(d) Remove amortization of existing amortization for other borrowings
|
|
|
225
|
|
(d) Amortization of new fair value adjustment on other borrowings
|
|
|
(300
|
)
|
(e) Remove merger related fees
|
|
|
(58,867
|
)
|
(f) Income tax expense of pro-forma adjustments
|
|
|
14,126
|
|
Financial
Accounting Standards Board issued Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”):
Beginning
on January 1, 2020, both South State and CenterState adopted ASU No. 2016-13, or Current Expected Credit Loss (“CECL”),
as required. The standard also requires enhanced disclosures. The CECL model is expected to result in earlier recognition of credit
losses for loans, investment securities, and purchased financial assets with credit deterioration. For more information on the
impact of the adoption of CECL for South State and CenterState, see each of their respective historical consolidated financial
statements of each of South State and CenterState filed on their respective Form 10-Q for the three months ended March 31, 2020.
Because ASU No. 2016-13 was not in effect in 2019, the unaudited pro forma combined condensed consolidated statements of income
for year ending 2019 was not prepared to reflect the accounting under the new standard and therefore the two income statement periods
are not comparable. In addition, the provision for loan losses for year ending 2019 would have been different under ASU No. 2016-13.
COMPARATIVE
HISTORICAL AND UNAUDITED PRO FORMA PER COMMON SHARE DATA
The
historical per share data for South State common stock and CenterState common stock below has been derived from the audited consolidated
financial statements of each of South State and CenterState as of and for the year ended December 31, 2019 and the unaudited
consolidated financial statements of each of South State and CenterState as of and for the three months ended March 31, 2020
included in each of South State's and CenterState’s respective Annual Report on Form 10-K for the year ended December 31,
2019 and Quarterly Report on Form 10-Q for the three months ended March 31, 2020.
The
unaudited pro forma combined per share data set forth below gives effect to the merger and CenterState’s acquisition of NCC
as if each had occurred on January 1, 2019, assuming that (x) each outstanding share of NCC common stock had been converted
into shares of CenterState common stock based on the exchange ratio of 1.65 shares of CenterState common stock for each share of
NCC common stock in CenterState’s acquisition of NCC and (y) each outstanding share of CenterState common stock had
been converted into shares of South State common stock based on the exchange ratio of 0.3001 shares of South State common
stock for each share of CenterState common stock in the merger. The unaudited pro forma combined per share data has been derived
from the audited consolidated financial statements for each of South State and CenterState as of and for the year ended December 31,
2019 and the unaudited consolidated financial statements of each of South State and CenterState as of and for the three months
ended March 31, 2020
The
unaudited pro forma combined per share data has been derived assuming that the merger is accounted for using the acquisition method
of accounting. See the section entitled “Unaudited Pro Forma Combined Condensed Consolidated Financial Information”.
Accordingly, the pro forma adjustments reflect the assets and liabilities of the combined company at their preliminary estimated
fair values. Differences between these preliminary estimates and the final values in acquisition accounting will occur and these
differences could have a material impact on the unaudited pro forma combined per share information set forth below.
The
unaudited pro forma combined per share data does not purport to represent the actual results of operations that the combined company
would have achieved had the merger been completed during the period presented or to project the future results of operations that
the combined company may achieve after the merger.
The
unaudited pro forma combined per share equivalent data set forth below shows the effect of the merger from the perspective of a
holder of CenterState common stock. The information was calculated by multiplying the unaudited pro forma combined per share data
by the exchange ratio of 0.3001.
You
should read the information below in conjunction with (i) the audited historical consolidated financial statements of South
State and the related notes included in South State’s Annual Report on Form 10-K for the year ended December 31,
2019 and the unaudited historical consolidated financial statements of South State and the related notes included in South State’s
Quarterly Report on Form 10-Q for the three months ended March 31, 2020, and (ii) the historical audited consolidated financial
statements of CenterState and the related notes included in CenterState’s Annual Report on Form 10-K for the year
ended December 31, 2019 and the unaudited historical consolidated financial statements of CenterState and the related notes
included in CenterState’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
Equivalent
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
South State
|
|
|
CenterState
|
|
|
Pro Forma
|
|
|
Per Share of
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Combined
|
|
|
CenterState (a)
|
|
Comparative per Share Data
|
|
(Unaudited)
|
|
Book Value per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2020
|
|
$
|
69.40
|
|
|
$
|
23.12
|
|
|
$
|
62.84
|
|
|
$
|
18.86
|
|
As of December 31, 2019
|
|
$
|
70.32
|
|
|
$
|
23.14
|
|
|
$
|
64.62
|
|
|
$
|
19.39
|
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2020
|
|
$
|
0.47
|
|
|
$
|
0.14
|
|
|
$
|
0.47
|
|
|
$
|
0.14
|
|
For the year ended December 31, 2019
|
|
$
|
1.67
|
|
|
$
|
0.44
|
|
|
$
|
1.67
|
|
|
$
|
0.50
|
|
Basic Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2020
|
|
$
|
0.72
|
|
|
$
|
0.28
|
|
|
$
|
0.77
|
|
|
$
|
0.23
|
|
For the year ended December 31, 2019
|
|
$
|
5.40
|
|
|
$
|
1.88
|
|
|
$
|
5.72
|
|
|
$
|
1.72
|
|
Diluted Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2020
|
|
$
|
0.71
|
|
|
$
|
0.28
|
|
|
$
|
0.77
|
|
|
$
|
0.23
|
|
For the year ended December 31, 2019
|
|
$
|
5.36
|
|
|
$
|
1.87
|
|
|
$
|
5.68
|
|
|
$
|
1.70
|
|
(a) The
equivalent pro forma per share amounts of CenterState were calculated by multiplying the pro forma combined amounts by the fixed
exchange ratio of 0.3001 shares of South State common stock for each share of CenterState common stock.
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