COLUMBIA, S.C.--(BUSINESS WIRE)--South State Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and six-month period ended June 30, 2016. Highlights of the second quarter 2016 include the following:

• Net income was $24.5 million for the 2Q 2016 equal to the 1Q 2016, while net operating earnings improved by $3.5 million to $28.5 million from 1Q 2016 of $25.0 million, a 13.8% increase
  • Earnings per share (EPS) – diluted was $1.01 for 1Q and 2Q of 2016 compared to $1.03 in 2Q 2015, a 1.9% decrease;
  • Operating earnings per share – diluted was $1.18 for 2Q 2016 compared to $1.04 for 1Q 2016 and $1.09 in 2Q 2015, a 8.3% increase;
  • Increased dividend paid to common shareholders by 25.0%, or $0.06, since June 30, 2015

• Net loan growth (non-acquired loans exceeded acquired loan runoff) during 2Q 2016 was $253.1 million, or 16.5% annualized
  • Non-acquired loan growth totaled $344.2 million or 31.0% annualized growth; which
  • Outpaced acquired loan runoff of $91.1 million
• Performance ratios 2Q 2016 to 1Q 2016
  • Return on average assets was 1.13% compared to 1.15%
  • Operating return on average assets improved to 1.32% from 1.18%
  • Return on average tangible equity was 14.59% compared to 15.04%
  • Operating return on average tangible equity improved to 16.85% from 15.36%
  • Efficiency ratio was 64.54% compared to 64.07%
  • Operating efficiency ratio improved to 60.81% from 63.22% (excluding branch consolidation expenses and the charge for the early termination of the FDIC loss share agreements)

• Balance sheet 2Q 2016
  • Cash and cash equivalents decreased by $215.4 million with growth in loans
  • Other real estate owned (“OREO”) decreased $3.5 million to $22.4 million, including the disposition of 45 properties during the second quarter of 2016
  • Early termination of loss share agreements with the FDIC during the 2Q 2016
  • Noninterest bearing deposits increased by $96.6 million, or 19.2% annualized
  • Shareholders’ equity increased $22.3 million to $1.1 billion
  • Equity to assets improved to 12.66% from 12.48%
  • Tangible equity to tangible assets improved to 8.66% from 8.43%
• Asset quality improvement from 1Q 2016
  • Nonperforming assets (NPAs) declined by 8.0%, or $4.0 million, to $45.9 million
  • NPAs to total assets improved to 0.53% from 0.58%
  • Net charge offs on non-acquired loans were 0.06% in 2Q 2106 down from 0.09%
  • Net charge offs on acquired non-credit impaired loans decreased to 0.07% in 2Q 2016 compared to 0.08%
  • Coverage ratio of ALLL on non-acquired non-performing loans improved to 201.1% from 182.6%

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.31 per share payable on its common stock. This per share amount is $0.01 per share, or 3.3% higher than the dividend paid in the immediately preceding quarter and is $0.06 per share, or 24.0%, higher than a year ago. The dividend will be payable on August 19, 2016 to shareholders of record as of August 12, 2016.

Merger with Southeastern Bank Financial Corporation (“SBFC” or “Southeastern”)

On June 17, 2016, we announced jointly the signing of a definitive merger agreement with SBFC. As of March 31, 2016, SBFC, headquartered in Augusta, Georgia, had approximately $1.9 billion in assets, $1.6 billion in deposits and $1.0 billion in loans. This merger will add 12 offices in the Augusta, Ga and Aiken, SC markets. Southeastern currently ranks second in market share in the Augusta metro market. Under the terms of the agreement, shareholders of Southeastern are expected to receive 0.7307 shares of South State Corporation stock for each share of SBFC common stock. Pending regulatory and shareholder approvals, the closing and system conversion is scheduled to occur in the first quarter of 2017.

Branch Initiatives - Update

The Company announced the consolidation of 11 locations during the second, third and fourth quarters of 2016. During the second quarter, the Company closed 8 locations. The remaining three locations will be closed during third and fourth quarter of 2016. The expected one-time cost and cost savings remain on target as previously disclosed.

The Company reported consolidated net income of $24.5 million, or $1.01 per diluted common share for the three-months ended June 30, 2016 equal to the first quarter of 2016. Interest income was down $436,000 primarily from lower income from investment securities. This decline was partially offset by lower interest expense of $233,000 which was the result of lower yield and lower balances on certificates and other time deposits. The provision for loan losses increased by a net $170,000. The provision for loan losses on non-acquired loans increased by $520,000, and was offset by the decline in the provision for loan losses on acquired loans by $350,000. Noninterest income increased by $2.1 million from the following items: Mortgage banking income increased by $1.4 million primarily from additional gains from the sale of mortgage loans; improved fees on deposit accounts of $1.4 million primarily from bankcard services; and additional income from the resolution of acquired loans of $2.2 million. These improvements were offset partially by a $3.0 million increase in the amortization of indemnification asset, which resulted from the early termination of the FDIC loss share agreements. Noninterest expense increased by $1.8 million with $615,000 coming from branch consolidation expenses and $1.1 million coming from operational charge offs, increased sales and use tax, and increased secondary mortgage repurchase activity. During the quarter, our effective income tax rate declined to 33.63% from 33.90% in the first quarter of 2016.

“These results reflect the ongoing progress in many areas of our company. Our growth is driven by attracting talented bankers to the team, and a strong and growing reputation as the alternative to the big banks. We see this activity across our markets, and it is balanced across loan categories and lines of business,” said Robert R. Hill, Jr., CEO of South State Corporation. “Growth in customer relationships is also creating shareholder value. Increasing tangible book value, earnings per share, and dividends are priorities, and all are evident in the results for the quarter and for the first half of 2016. Our team is well-positioned to make further gains with a strong and liquid balance sheet, and competitive products and services. We look forward to the Southeastern Bank Financial Corporation merger and welcoming their talented team in early 2017.”

Compared to the second quarter of 2015, noninterest income grew by $2.0 million due to $3.8 million improvement in fees of deposit accounts in bankcard services and service charges on deposit accounts primarily the result of the purchase of Bank of America branches in the third quarter of 2015, $1.1 million improvement from recoveries on acquired loans as a result of the early termination of LSAs, and $1.1 million improvement in other income due to the positive resolution of an acquired credit impaired loan. These improvements were offset by the $4.4 million charge related to the early termination of LSAs which was $2.4 million greater than the amortization of the FDIC indemnification asset in the second quarter of 2015; and lower mortgage banking income of $1.5 million due to lower gains on sold mortgage loans offset by the positive change in fair value of the mortgage pipeline.

Noninterest expense was $73.9 million in the second quarter of 2016, an increase of $1.9 million from $72.0 million in the first quarter of 2016. This increase was due to $615,000 of expenses related to branch consolidation with the closing of eight locations. Other expense was higher by $1.8 million due primarily to an increase in operational charge offs, an increase in sales and use taxes, and an increase in secondary mortgage repurchase activity. Business development and staff related expense increased by $329,000 due to the loan production during the quarter. Professional fees increased by $247,000, as the Company prepares to pass the $10.0 billion in assets threshold. Salaries and benefits were down during the quarter by $895,000 due primarily to lower cost related to our self-funded medical plan. OREO expense and other loan related costs were $900,000 lower than the first quarter of 2016 due to lower write downs and less cost to carry of these assets due to the decline in OREO and nonperforming loans.

Compared to the second quarter of 2015, noninterest expense increased by $2.3 million. The increases were in the following categories and were primarily the result of the additional branches acquired from Bank of America during the third quarter of 2015: salary and employee benefits of $783,000, net occupancy expense of $495,000, information services expense of $701,000, bankcard expenses of $755,000, and supplies, printing and postage of $327,000. In addition, there was $1.1 million increase in operational charge offs, donations, and passive losses on tax advantaged investments. These increases were offset by decreases in the following categories: OREO and loan related expenses by $1.1 million due to lower number of properties, fewer write downs, and lower carrying cost; branch consolidation cost by $664,000 and FDIC assessment and other regulatory charges by $236,000 due to lower assessment from the FDIC.

South State Corporation will hold a conference call today, July 22nd 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 10088427. Participants can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available beginning July 22nd by 2:00 p.m. Eastern Time until 9:00 a.m. on August 5th, 2016. To listen to the replay, dial 877-344-7529 or 412-317-0088. The passcode is 10088427.

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 24 South Carolina counties, 13 Georgia counties and 4 North Carolina counties for over 80 years. The bank also operates Minis & Co., Inc. and First Southeast 401K Fiduciaries, Inc., both registered investment advisors; and First Southeast Investor Services, Inc., a limited purpose broker-dealer. South State Corporation has assets of approximately $8.7 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.