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 nine-month period ended September 30, 2016. Highlights of the third quarter 2016 include the following:

• Net income was $28.1 million for the 3Q 2016, a $3.6 million increase, from 2Q 2016, while adjusted net income (non-GAAP) was $28.6 million, up $67,000 from 2Q 2016
  • Earnings per share (EPS) – diluted was $1.16 for 3Q 2016 compared to $1.01 in 2Q 2016 and to $1.04, or 11.5% increase, compared in 3Q 2015;
  • Adjusted net income per share – diluted was $1.18 for 3Q 2016 and 2Q 2016, and $1.12, or a 5.4% increase, compared to 3Q 2015;
  • Increased dividend paid to common shareholders by 24.0%, or $0.06 per share, compared to September 30, 2015

• Net loan growth during 3Q 2016 was $108.8 million, or 6.7% annualized
  • Non-acquired loan growth totaled $191.2 million, or 15.8% annualized growth; which
  • Outpaced acquired loan runoff of $82.4 million
• Performance ratios 3Q 2016 compared to 2Q 2016
  • Return on average assets improved to 1.28% compared to 1.13%
  • Adjusted return on average assets (non-GAAP) was 1.30% from 1.32%
  • Return on average tangible equity increased to 15.86% compared to 14.59%
  • Adjusted return on average tangible equity (non-GAAP) declined to 16.11% from 16.85%
  • Efficiency ratio improved to 62.3% compared to 64.5%
  • Adjusted efficiency ratio (non-GAAP) was 61.7% up from 60.8% (excluding branch consolidation and merger expenses and the charge for the early termination of the FDIC loss share agreements in 2Q 2016)

• Balance sheet 3Q 2016 compared to 2Q 2016
  • Investment securities portfolio declined by $65.4 million during the third quarter
  • Noninterest bearing deposits increased by $58.9 million, or 11.1% annualized
  • Shareholders’ equity increased $19.8 million, primarily from net income less the quarterly dividend
  • Equity to assets improved to 12.78% from 12.66%
  • Tangible equity to tangible assets improved to 8.84% from 8.66%
• Asset quality improvement in 3Q 2016 compared to 2Q 2016
  • Nonperforming assets (NPAs) declined by 7.4%, or $3.4 million, to $42.5 million
  • NPAs to total assets improved to 0.48% from 0.53%
  • Net charge offs on non-acquired loans were 0.03% down from 0.06%
  • Net charge offs on acquired non-credit impaired loans remained at 0.07%
  • Coverage ratio of ALLL on non-acquired non-performing loans improved to 248.6% from 201.1%

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.32 per share payable on its common stock. This per share amount is $0.01 per share, or 3.2% higher than the dividend paid in the immediately preceding quarter and is $0.06 per share, or 23.1%, higher than a year ago. The dividend will be payable on November 18, 2016 to shareholders of record as of November 11, 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 June 30, 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. Special shareholder meetings for Southeastern and South State to ratify the merger proposal were held on October 18, 2016 and were approved. All regulatory approvals have been received from the Georgia Department of Banking and Finance, South Carolina State Board of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve of Richmond. Closing is currently scheduled on or around January 3, 2017 and the system conversion is scheduled to occur in the first quarter of 2017.

Branch Initiatives - Update

The Company announced the consolidation of eleven locations during the second, third and fourth quarters of 2016. During the second quarter, the Company closed eight locations and one location was closed in the third quarter. There are two remaining locations which will be closed, one in the fourth quarter of 2016 and one in the first quarter of 2017. The expected branch closure cost and anticipated cost savings remain on target as previously disclosed.

The Company reported consolidated net income of $28.1 million, or $1.16 per diluted common share for the three-months ended September 30, 2016, a $3.6 million increase from the second quarter of 2016. Interest income was down $98,000 primarily from lower income on investment securities and securities purchased under agreements to resell. Interest expense increased by $56,000 due primarily to higher average balances of transaction and money market accounts and savings accounts. The provision for loan losses decreased compared to the second quarter by $1.8 million due primarily to a lower provision for loan losses on non-acquired loans of $1.7 million which was driven by our overall improvement in credit quality. Noninterest income increased by $3.2 million from the reduction in the amortization of the indemnification asset of $4.4 million (with the termination of loss share agreements in the second quarter), partially offset by lower other income of $1.1 million related to the resolution of an acquired loan in the second quarter. Noninterest expense decreased by $662,000 with $864,000 coming from branch consolidation and merger expenses and $1.9 million related to operational charge offs taken in the second quarter, lower sales and use tax, and lower secondary mortgage repurchase activity. These decreases were offset by increases in salaries and benefits of $1.4 million and higher OREO and loan related cost of $1.2 million. During the quarter, our effective income tax rate increased to 33.87% from 33.63% in the second quarter of 2016 due primarily to the increase in pretax net income of $3.6 million.

“Third quarter results continued to build on the success of the first six months of 2016. Return on average assets equaled 1.28% and the return on average tangible common equity was 15.86%, said Robert R. Hill, Jr., CEO of South State Corporation. “This performance also reflects continued investments in people and technology to prepare South State for additional growth. Southeastern and South State have now received all necessary regulatory and shareholder approvals to close the merger and we look forward to their team officially joining South State in early January. Lastly, our Board has approved a quarterly dividend rate increase to $0.32 per share, a 23% increase from last year.”

At September 30, 2016, the Company’s total assets were $8.8 billion, an increase of $73.2 million from June 30, 2016 and an increase of $239.8 million from December 31, 2015. During the third quarter of 2016, the Company experienced asset growth primarily in loans of $108.8 million, excluding the change in the allowance for loan losses, and in cash and cash equivalents of $25.6 million. These increases were primarily offset by a decline in the investment securities portfolio of $65.4 million. Mortgage servicing rights increased by $714,000 primarily from the increased volume of loans serviced during the quarter. Total deposits increased $83.5 million due to noninterest-bearing deposit growth of $58.9 million, or 11.1% annualized, and interest-bearing deposits increased by $24.6 million, resulting mainly from an increase in savings and money market accounts, partially offset by a decline in time deposits. Fed funds purchased and securities sold under repurchase agreements decreased by $35.8 million during the third quarter to $305.3 million.

The Company’s book value per common share increased to $46.43 per share at September 30, 2016, compared to $45.64 at June 30, 2016, and $43.84 at December 31, 2015. Capital increased $19.8 million due primarily to net income of $28.1 million, which was offset by the common dividend paid of $7.5 million. Accumulated other comprehensive income (“AOCI”) decreased during the third quarter of 2016 due to the decline in unrealized gains in the AFS securities portfolio during the quarter of $2.7 million, net of tax. Tangible book value (“TBV”) per common share increased by $0.87 per share to $30.73 at September 30, 2016, compared to $29.86 at June 30, 2016, and increased by $2.85 per share from $27.88 at December 31, 2015. The quarterly increase was the result of earnings per share, excluding amortization of intangibles, of $1.21, stock compensation related activity of $0.07 per share, offset by the dividend paid to shareholders of $0.31 per share and the decrease in AOCI (primarily lower unrealized gain in the AFS portfolio) of $0.10 per share.

The total risk-based capital (RBC) ratio is estimated to be 12.9% up from June 30, 2016 of 12.6%, due primarily to our asset mix moving from higher risk weighted categories to lower risk weighted categories, and the increase in capital discussed above. Total RBC was down from December 31, 2015 of 13.3%, due primarily to loan growth during the year and the termination of our loss share agreements with the FDIC during the second quarter of 2016. Tier 1 leverage ratio increased from 9.5% at June 30, 2016 to 9.7% at September 30, 2016.

“Over the past year, our tangible equity has increased $3.47 per share, or 12.7%, to $30.73 per share,” said John C. Pollok, COO and CFO. “During the third quarter, our asset quality continued to improve as nonaccrual loans declined by $3.2 million from second quarter, net charge offs were 3 basis points annualized on non-acquired loans and 7 basis points on acquired noncredit impaired loans.”