Fintrust Brokerage Services Equity Researchfintrustadvisors.com/wp-content/uploads/2015/04/FinTrust... · 2018. 11. 21. · South State Bank (SSB) Initiation of Coverage FinTrust

South State Bank (SSB)

Initiation of Coverage

FinTrust Brokerage Services

Equity Research

April 22, 2015

1 Fintrust Brokerage Services www.Fintrustadvisors.com 124 Verdae Blvd, Ste. #504

864-288-2849 Equity Research Greenville, SC 29607

Please see pages 27 and 28 of this publication for important certification and disclosure information.

Company Summary: With $7.8 billion in assets and $5.7 billion in loans, South State Bank is the largest publicly traded bank holding company headquartered in South Carolina. SSB provides a full range of retail and commercial banking services, mortgage lending services, trust and investment services, and consumer finance loans through financial centers in South Carolina (19 counties), North Carolina (4), northeast Georgia (10), and coastal Georgia (2). Charleston S.C. County encompasses by far the bank’s largest footprint with 22 locations (17% of all locations), followed by Horry County S.C. with 12 locations. In Q4 2014, Charleston contributed ~ $44 million, or 27% of the bank’s ~ $163 million of non-acquired loan growth, making it the bank’s largest loan growth market. With its 2013 acquisition, of First Financial Holdings, acquisitive SSB increased its assets 60%, and in the process gained a contiguous presence in the Wilmington NC - Savannah GA coastal ‘corridor’, which includes the vibrant Hilton Head (SC), Savannah (GA), Charleston (SC), and Myrtle Beach (SC) markets. In fact, those 4 markets plus Charlotte, NC, and Greenville SC comprise ~ 2/3rds of the Bank’s total deposit base. The loan portfolio is an amalgam of non-acquired internally generated loans, which are growing at an above-average rate of ~ 20%, and acquired loans, which generate higher yields, but which we expect to run-off by 14% this year to $1.9 billion. Ultimately, we estimate that the non-acquired loan portfolio’s high rate of growth will compensate for the gradual loss of acquired loan yield.

FinTrust Recommendation

FinTrust Rating: BUY

Target Price: $75.91

Current Share Price $69.02

Expected Return 9.98%

52 Week Price Range $69.63 - $53.78

FinTrust Brokerage Services, LLC rates companies a BUY,

HOLD, SELL, or SHORT.

A BUY rating is given when the security is expected to outperform the broad equity market as measured by the S&P 500 on a risk adjusted basis over the next year.

A HOLD rating is given when the security is expected to perform in line with the broad equity market as measured by the S&P 500 on a risk adjusted basis over the next year.

A SELL rating is given when the security is expected to perform below the broad equity market as measured by the S&P 500 on a risk adjusted basis over the next year.

A SELL SHORT is given when the security is expected to decline in value over the next year.

The distribution of ratings across FinTrust’s entire

company universe is 53.8% Buy, 38.4% Hold, 7.9%Sell,

and 0% Short

Valuation

EPS (14A) $3.08

EPS (‘15E) $4.30

EPS (‘16E) $4.75

P/E (14) 22.4x

P/E (15) 16.1x

P/E (16) 14.5x

Est. 2015-2016 Growth 10.5%

Price / Book 1.74X

Industry: Financial Services GICS Sector/ Sub code: Financials Sector / Banks (GIC Code: 40 / Sub code: 4010)

Analyst Notes:

Analysis by Bruce Roberts (917) 701-3357 & Allen Gillespie, CFA (864) 288-2849

FinTrust Brokerage Services is commencing coverage of South State with a BUY rating and $75.91 year-end 2015 target price (1.69x BV) representing 12.1% potential upside. We expect the shares to increase roughly in line with Book Value which we expect to grow to $45 by year-end 2015. With regard to valuation, the Bank is trading at premiums on most metrics including P/BV, P/TBV, and P/E. SSB trades for 1.74x book value and 2.8x tangible book value. Its southeast Peers trade for respective multiples of 1.47x and 1.72x, leaving investors exposed to theoretically greater share price compression if the Bank’s results falter. To the extent SSB is in a position to make further acquisitions, as it recently indicated it is, its premium valuation would be of benefit to current shareholders.

SSB has grown quickly by way of strong internal growth and acquisition. SSB has acquired both Purchased Credit Impaired (PCI – 310-30) and non-PCI loan portfolios (310-20). From 2010 – 2014, SSB’s assets and total loans advanced 21.4% and 21.6%, respectively, on an annual basis. SSB’s non-acquired loan portfolio advanced at a vibrant 10.8% CAGR during the period. Reflecting effective acquisition integration and capture of merger synergies, non-GAAP EPS grew 37.5% per year from 2011 to 2014, while growing 18.8% in 2014 versus 2013. We forecast EPS growth of 39.9% and 10.5% in 2015 and 2016, respectively.

SSB United has generated average ROAE (7.79% in 2014), despite a higher-than average efficiency ratio. On the other hand, last year, the Bank generated 13.77% ROTCE, well above its peer average of 12.03%.

We recommend purchase of SSB to long-term risk tolerant investors. Risk include, but are not limited to (1) the potential that interest rates continue to languish into 2015 (2) SSB is unable to grow its loan portfolio quickly enough to offset acquired loans runoff preventing the achievement of our total growth estimates, (3) credit quality reverses course, and erodes, and (3) that regulatory bodies promulgate new banking rules unfavorable to the industry.

Key Figures Key figures pricing data reflects previous trading day’s

closing price. Other applicable data are trailing 12-months

unless otherwise specified.

ROE 8.63%

ROA 1.07%

Loans / Deposit Ratio 87.9%

Payout Ratio 24.8%

Revenue (000’s) $451,108

Net Income (000’s) $104,269

Outstanding (mi) 24.2

Shares Short (mil) nmf

Market Capitalization ($ mil) $1,646

Gross Loans ($ mil) $5,680

Beta 1.24x

http://www.fintrustadvisors.com/




Equity Research

April 22, 2015



South State Bank Overview - SSB South State Bank is a South Carolina-chartered commercial bank headquartered in Columbia that first opened for business in 1934, in Orangeburg, S.C. and which now operates in South Carolina, Georgia and North Carolina. These states enjoy above-average population growth. From April 2010 to July 2014, S.C., Georgia, N.C. and the U.S. generated 4.5%, 4.2%, 4.3% and 3.3% population growth, respectively. Although the Bank has a diversified loan portfolio, a substantial portion of borrowers' abilities to honor their loan contracts is dependent upon economic conditions within South Carolina, North Carolina, Georgia and the surrounding regions. The Bank was formerly known as SCBT until June 30, 2014, or until approx. 1 year after the completion of a $447.0 million merger (which included $65.0 million in preferred stock, which was subsequently redeemed) with First Financial Holdings (FFH) of Charleston S.C. in July 26, 2013, which added $3.1 billion in assets to the combined entities, including $2.3 billion and $2.5 billion in loans and deposits, respectively. The merger increased the Bank’s assets by approx. 60%, and followed on the heels of two significant acquisitions completed in 2012; The Savannah Bancorp and Peoples Bancorporation, which together added $1.3 billion in assets. SSB provides a full range of retail and commercial banking services, mortgage lending services, trust and investment services, and consumer finance loans through financial centers in South Carolina (19 counties), North Carolina (4), northeast Georgia (10), and coastal Georgia (2). At December 31, 2014, SSB had approx. $7.8 billion in assets, $5.7 billion in loans, $6.5 billion in deposits, $984.9 million in shareholders' equity, and a market capitalization of $1.6 billion. The Bank operates Minis & Co., Inc. and First Southeast

401k Fiduciaries, both wholly owned registered investment advisors, and First Southeast Investor Services, a wholly-owned limited service broker-dealer. A key component of the merger was the prospect of creating a strong wholesale mortgage division and adding a portfolio servicing entity, which the merger accomplished: with the FFH merger, SSB acquired a portfolio of residential mortgages serviced for others and began to sell mortgages directly to Fannie Mae. Prior to this merger, all of the Company's loan sales were to third party investors on the secondary market with servicing rights released. In the ~ 1-year period following the closing of the merger, FFH systems and assets were converted over to SCBT, a process which was completed late last year, and which enabled the achievement of the projected 30% cost savings on a timely basis. With the combination, which at the time of its announcement represented a Price / TBV per Share of 1.33x, SSB became the largest publicly-traded bank headquartered in South Carolina, ranking 5th in deposit market share in the state, as of June 30th 2014, with a 6.9% statewide share (the leader – Wells Fargo – has a 19.8% share). The merger enhanced market share in all combined markets, and formed a continuous coastal presence from Savannah, GA, to Wilmington NC. Essentially, FFH ‘delivered’ the markets of Charleston, Georgetown, Myrtle Beach and Wilmington (NC). The combination substantially enhanced deposit market shares in several key locations. With the combination, SSB attained a #1 share in Hilton Head and Georgetown, a #2 position in Charleston, and a #5 position in Greenville, as

Charleston, 26%

Inland S.C., 20%

Charlotte, 16%

Coastal, 15%

Georgia, 13%

Upstate S.C., 10%

SOUTH STATE BANK: $5.72 BILLION LOANS BY KEY MARKETS

Analyst’s Notes....Continued





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April 22, 2015



well as, a #3 share in overall mortgage banking in S.C. The following table summarizes the Bank’s market-leading deposit shares in SC footprints that together represent ~ 68% of total SC deposits.

MSA / COUNTY DEPOSIT SHARE RANKING DEPOSIT SHARE - %

ORANGEBURG MSA 1st 39.3 CHARLESTON MSA 2nd 16.7 HILTON HEAD MSA 2nd 16.6 GEORGETOWN MSA 2nd 15.7 WALTERBORO MSA 2nd 19.6 GREENVILLE COUNTY 5th 5.3 COLUMBIA MSA 8th 2.3

Source: SNL, 2013

In Georgia and N.C., SSB’s deposit share ranks were 18th (with a 0.66% share) and 38th (0.13%), respectively. Importantly, the Savannah, Georgia MSA presence represents the Bank’s highest deposit share ranking in Georgia (4th), providing the Bank with a substantial contiguous presence in the Wilmington NC - Savannah GA coastal ‘corridor’, which includes the vibrant Hilton Head (SC), Savannah (GA), Charleston (SC), and Myrtle Beach (SC) markets. In fact, those 4 markets plus Charlotte, NC, and Greenville SC comprise ~ 2/3rds of the Bank’s total deposit base. According to the Census Bureau’s latest population growth report -

“The Carolinas were home to four of the nation's 20 fastest-growing metro areas between 2013 and 2014: Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C. (second); Hilton Head Island-Bluffton-Beaufort, S.C. (13th); Raleigh, N.C. (15th); and Charleston-North Charleston, S.C. (17th)”.

The Bank operates 92, 25, and 9 full-service locations in S.C., Georgia and N.C., respectively. Charleston S.C. County encompasses by far the bank’s largest footprint with 22 locations (17% of all locations), followed by Horry County (S.C.), with 12 locations. In Q4 2014, Charleston contributed ~ $44 million, or 27% of the bank’s ~ $163 million of non-acquired loan growth, making it the bank’s largest loan growth market.

Management has indicated that with its goal of executing and integrating the merger in 2014 essentially complete, that additional acquisitions are again now part of the near-term strategic focus. We estimate that large acquisition targets are now more likely to come from outside S.C.

$4,845, 74%

$1,308, 20%

$431, 6%

SSB Deposit Base -$6.57 BillionSource: FDIC June 2014

South Carolina Georgia North Carolina






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April 22, 2015



SSB has grown quickly by way of strong internal growth and acquisition. SSB has acquired both Purchased Credit Impaired (PCI – 310-30) and non-PCI loan portfolios (310-20). From 2010 – 2014, SSB’s assets and total loans advanced 21.4% and 21.6%, respectively, on an annual basis. SSB’s non-acquired loan portfolio advanced at a vibrant 10.8% CAGR during the period. Reflecting effective acquisition

integration and capture of merger synergies, adjusted for merger and acquisition related expenses and Gains on Acquisitions, non-GAAP EPS grew 37.5% per year from 2011 to 2014, while growing 18.8% in 2014 versus 2013. Over the same period, shareholder’s equity grew 31.4% per annum. This performance is reflected in the Company’s share price performance. Since the end of 2009, including dividend reinvestment, SSB shares significantly outperformed the SNL Southeast Bank Index, rising 265% versus 144% for the SNL Index, and 222% for the NASDAQ Composite Index. We forecast vibrant earnings growth in 2015, as we discuss later on.

Despite its rapid expansion and strong trajectory towards a $10 billion-plus asset base, the Bank has retained its community bank ‘roots’ as reflected in its loan portfolio breakdown. Like other sub-$10 billion Banks in the SC market, SSB’s loan portfolio is dominated by real estate, which comprises 83.4% of its loan portfolio (versus 43.0% for U.S. banks with over $10 billion in assets). Like its peers, C&I loans comprise a smaller portion of the total loan book (6.8%) compared to Banks with over $10 billion in assets where C&I loans comprised 23.4% of total loans. Management has indicated, however, that SSB is experiencing a strong pickup in C&I loan demand due to the attractiveness of SSB’s increased balance sheet and larger footprint, providing a banking presence along important business corridors across SC. In 2014, non-acquired C&I loans grew 26.1% to $405.9 million, versus 10.6% growth for U.S. banks with over $10 billion in assets and 20.8% for SC banks with assets between $1 billion and $10 billion. As the following chart illustrates, the bank’s acquired loan portfolio is in run-off mode. As the acquired portfolio shrinks the vibrant growth of the organic, non-acquired portfolio is increasingly

reflected in total loan growth.

321,038 370,581969,395 1,220,638 919,40273,215

1,600,9351,327,9992,296,200 2,470,565

2,571,003

2,865,2163,467,826

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

2010 2011 2012 2013 2014

SSB Total Loan Portfolio: 21.6% CAGRSource: Financials ($ 000s)

Acquired Credit Impaired Loans Acquired Non-Credit Impaired Loans Non Acquired Loans






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April 22, 2015



Loans SSB earned a higher Net Interest Margin (NIM) in 2014 than its peers (4.80% versus 3.47% for UBPR Peers) for two reasons: (1) the bank’s balance sheet has an above-average loan component (82.2% of average earning assets versus 72.2% for FDIC Peers),

and (2) SSB earned 5.62% on its average loans in 2014 versus 4.21% for FDIC Peers, driven by its high-yielding acquired portfolio. In 2014, total acquired loans declined 20.3%, or $574.1 million, to $2.25 billion. Gross non-acquired loans increased 20.0%, or $602.6 million, to $3.47 billion. Consequently, SSB’s total loans grew $29 million y-o-y, or ~ 1% to $5.72 billion. In 2015, continued strong organic loan growth combined with a declining rate of acquired loan run-off should produce substantially higher Bank-wide loan growth this year. In fact in Q4 2014, organic loan growth outpaced acquired loan decline by ~ $50 million, and in Q4, the bank generated 3.7% total annualized loan growth.

50.1% 52.9% 55.7% 58.1% 60.4% 62.6% 64.7% 66.5% 68.0% 73.3%

28.3% 27.1% 25.7% 24.5% 23.4% 22.3% 21.3% 20.4% 19.6%16.7%

21.6% 20.0% 18.6% 17.4% 16.2% 15.1% 14.1% 13.2% 12.4% 9.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2013A 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2016E

A C Q U I R E D LO A N S D E C L I N E TO 2 6 . 6 % ( ' 1 6 ) F R O M 4 9 . 9 % ( ' 1 3 )

Non Acquired Loans Acquired 310-20 Loans Acquired 310-30 Loans

At 12/31/14 / $-mms

CRE 390.3 42.1% 135.6 10.2% 1,605.7 46.3% 2,131.6 37.3%

C&I 60.6 6.5% 41.1 3.1% 405.9 11.7% 507.6 8.9%

Consumer 85.5 9.2% 204.7 15.4% 189.3 5.5% 479.5 8.4%

Residential RE 390.2 42.1% 881.3 66.4% 1,070.7 30.9% 2,342.2 40.9%

Other 0.0 0.0% 65.1 4.9% 196.1 5.7% 261.2 4.6%

Total - Pre Allowance 926.6 100.0% 1,327.8 100.0% 3,467.7 100.0% 5,722.1 100.0%

Source: Financials

Acquired Loans

310-30 (PCI) 310-20 Non-Acquired Loans Total Loan Portfolio






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April 22, 2015



Acquired Loans Through acquisition, the Bank has accumulated a significant portfolio of PCI and non-PCI loans. At 12/31/14, acquired loans represented $2.25 billion or 39.4% of the Bank’s entire loan portfolio. At the end of 2013, acquired loans totaled $2.82 billion, or 49.6% of the bank’s entire loan portfolio, indicating that ~ $570 million in acquired loans were ‘run off’ in 2014. Of the $2.25 billion of acquired loans, $1.33 billion, or 59.1%, are acquired non-credit impaired loans (accounted for under ASC 310-20), with the remaining $919.4 million of acquired credit impaired (PCI) loans accounted for under ASC 310-30.

Accounting for performing, non-impaired loans at acquisition is governed under 310-20. The key aspect of the accounting principal is the income-recognition assumption that all contractual cash flows will be collected. A loss allowance is established for credit losses incurred after acquisition though a provision to earnings.

Accounting for acquired loans with evidence of deteriorated credit quality at acquisition is governed under 310-30. The yield is predicated on the amount and timing of expected future cash flows at acquisition. The ‘cash flows expected at acquisition’ is the benchmark for calculating interest income on the investment in the loan, and for purposes of determining whether the loan is impaired, in contrast to 310-20, which measures yield and impairment using contractual cash flows as the benchmark. Most, if not all loans of an acquired failed bank is accounted for using 310-30. Credit losses expected at acquisition are incorporated into yield rather than making loan loss provisions.

1. Expected cash flows that exceed the initial investment of the loan (which is referred to as the Fair Value of the loan (as

indicated on the balance sheet), or the sum of the present value of future expected cash flows) represents “accretable yield”, recognized as interest income over the life of the loan. The difference between the cash flows expected at acquisition and the total contractual cash flows is considered “non-accretable” yield. If credit quality of 310-30 loans improves, as has been the case over the last several years since the recession, non-accretable yield is reclassified into accretable yield, and is included in interest income as additional yield accretion recognized as a result of updated estimates of the cash flows of the acquired loans. The loan’s yield rate is revised upwards on a prospective basis over the remaining life of the loan. (In 2013 and 2014, 50.6% and 58.0% of non-accretable yield was reclassified, respectively. While actual yield depends in part on the estimated life of the loan portfolio, SSB ended 2014 with $306.8 million and $104.2 million of accretable yield and non-accretable yield, respectively, and $927.8 million in the carrying value of its acquired PCI loans, while ending 2013 with $301.5 million and $1.23 billion of accretable yield and loans, respectively).

2. Conversely, loans under-performing their initial cash flow projections require the recognition of impairment, accomplished

through the provision for loan losses sufficient to reduce the carrying amount and maintain the same yield determined at acquisition. For loans covered by FDIC loss sharing agreements (LSA), the increases in expected cash flows also reduce the amount of expected reimbursements under the loss sharing agreements, which are recorded as FDIC indemnification assets (FDIC IA). The estimated adjustments to the indemnification assets are amortized on a level-yield basis over the remainder of the loss sharing agreements or the remaining expected life of the loan pools, whichever is shorter, and are recorded in non-interest expense. Such expense is expected to further decline, as it did in 2014. In 2014, SSB amortized $21.9 million of its FDIC IA, down $7.6 million from 2013. The 2014 decline in amortization was induced by a smaller decline in the value of the FDIC IA, as, we estimate, the rate of increase in credit quality slowed. In March 2015, the LSA on the Bank’s $15.8 million FDIC-acquired CBT (Community Bank and Trust, acquired early 2010) portfolio ends, which will hasten the decline in the amortization of the FDIC IA, thereby increasing overall earnings beginning in Q2 2015. Management has indicated that the CBT loan portfolio IA generated in excess of $2 million of negative amortization in Q4 2014.

3. The impact of 310-30 loans on yield can be striking. Generally, PCI loans generate higher yield reflecting the reduced certainty of such loans’ cash flows. In addition the loans’ yield moves higher as the credit environment improves. In 2014, SSB’s tax-equivalent net interest margin – NIM – was 4.75%, whereas its SC peers generated a 2.99% NIM (in 2014, the Bank generated 4.98% yield on average Interest Earning Assets versus 3.83% for its UBPR Peers). In 2014, SSB’s acquired-loan yield was 7.46%, while the non-acquired yield was 4.17%. Despite a lower balance of acquired loans, acquired loans generated $186.6 million in interest income versus $131.5 million in interest income for the non-acquired portfolio. While the 2014 acquired-loan yield dropped on a y-o-y basis (was 8.19% in 2013) due to loan run-off, asset sales, etc. – reclassification of loans to accretable yield favorably impacted Q4 2014 NIM by 7 basis points, on a sequential basis, driven by a 40 basis point sequential improvement in acquired-loan portfolio yield, to 7.68% from 7.28%. In Q3 2014 and Q4 2014, SSB ‘released’ approx. $22 million (with the impact fully reflected in Q4) and $51 million (primarily from the First






Equity Research

April 22, 2015



Financial portfolio) of non-accretable yield, which the Bank has indicated is likely to result in further yield enhancement. In combination with a leveling off of the yield of newly originated loans, and the potential for additional reclassification of non-accretable yield, we estimate that 310-30 loan yield will trend up throughout 2015.

This portfolio’s credit quality, generally, has improved over the last 3 years. In 2014, the company took a $1.9 million negative loss

provision (PLL), versus a $31.6 million provision in 2011. Commercial loans classified as Special Mention or Substandard declined 33.5%

in 2014, to $456.3 million, or 49.2% of the lender’s acquired credit impaired loan portfolio. At year-end 2014, there was $69.8 million of

past due loans, or 7.5% of the total portfolio, down from 10.5% in 2013.

FDIC Indemnifications Asset (IA)

Improvement in credit quality and resultant declines in expected cash flows from the FDIC generally result in increasing amortization of

the indemnification asset. The rate of amortization changes with the credit climate. As the cash flows from the acquired credit-impaired

loans improves, the prospective cash indemnification from the FDIC Indemnification Asset (I/A) lessens, and hence the I/A is amortized,

to a degree consistent with the dimensional increase in the value of the underlying loans. In 2014, the rate of credit improvement slowed,

we estimate, and consequently, SSB amortized $21.9 million of its I/A, down from $29.5 million in 2013, thereby increasing non-interest

income by $7.6 million.

At December 31, 2014, the projected cash flows related to the FDIC indemnification asset for losses on assets acquired were

approximately $16.0 million less than the current carrying value of $22.2 million). This amount is being recognized as negative

accretion in non-interest income.

The Commercial Shared-Loss Agreement for CBT will expire March 31, 2015 and losses on assets covered under this agreement

will no longer be claimable after this date; however, 95% of recoveries received over the next three years will be shared with the

FDIC.

1,338

104307

927

1,727

194302

1,232

0200400600800

1,0001,2001,4001,6001,8002,000

Contractual Principal& Interest

Non AccretableDifference

AccretableDifference

Carrying Value

Acquired Credit Impaired Loans Source: Financials - $ mms

2014 2013






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April 22, 2015



Non-Acquired Loans SSB had $3.47 billion of non-acquired gross loans at the end of last year, indicating a 21.0% y-o-y increase, effected by substantial increases across the portfolio’s various categories. Real estate represented 77.1% of the portfolio’s composition versus 84.2% for the acquired credit-impaired loan portfolio. The acquired non-credit impaired portfolio contained 76.6% real estate exposure.

The Bank’s FDIC peer group enjoyed 15.7% overall y-o-y loan growth in 2014, highlighted by 14.5% and 20.8% increases in real estate and C&I loans, respectively. For several reasons, the Bank bested its peers: (1) with its recent merger, 2/3rds of SBB’s deposit footprint is located in strong demographic markets (2) SSB has actively hired experienced bankers in the last several years, and will continue to do so (3) the Bank’s expanded footprint offers corporate customers greater ‘coverage’ and convenience and (4) at 26.1% y-o-y loan growth, SSB is taking C&I loans market share from larger competitors as its expanded balance sheet strength attracts new corporate customers.

At 12/31/14 / $-mmsCRE - Non-Owner Occupied

CRE - Owner Occupied

Consumer Real Estate

Owner Occupied

Home Equity

Total Consumer RE

C&I

Consumer Loans

Other

Total Non-Acquired Loans

Allowance for Loan Losses

Total Non-Acquired Loans, net

Source: Financials

10.8%

21.0%

0.6%

21.3%

(34.5)

3,433.2

18.1%

8.9%

43.5%

10.4%

33.0%

26.1%

38.8%

697.8

907.9

786.8

283.9

1,070.7

405.9

189.3

196.1

3,467.7

177.0

2,865.1

(34.3)

2,830.8

591.1

833.5

548.2

257.1

805.3

321.8

136.4

2013 2014 Change

Non-Acquired Loans






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April 22, 2015



The non-acquired loan portfolio’s credit quality, generally, has improved over the last 3 years. From 2012 to 2014, such loans increased

to $3.48 billion, from $2.57 billion in 2012, or 35% collectively. At the same time, PLL dropped to $5.1 million in 2014, from $13.1 million

in 2012, and the amount of loans collectively evaluated for impairment in the calculation of the portfolio’s ALL fell to $27.1 million, from

$47.2 million in 2012. NCO fell to $4.9 million in 2014, or 0.16% versus 0.41% in 2013. Commercial loans classified as Special Mention

or Substandard declined 14.3% in 2014, to $126.4 million, or 5.9% of the lender’s non-acquired commercial loan portfolio. Total portfolio

non-acquired classified assets were $70.7 million at year-end 2014, down from $96.3 million in 2013. At year-end 2014, there was $22.2

million of past due loans, or 0.64% of the total portfolio, down from 0.86% in 2013. Including restructure loans – TDR – nonaccrual loans

were $28.0 million at YE 2014, or 0.81% of total loans at YE 2014.

Asset Quality

Asset quality trends have been positive, and are in line with peers. Asset quality is evaluated two ways; with and without the acquired loan portfolios. Non-acquired non-performing loans equaled 0.82% of period-ending non-acquired loans, or $28.5 million at the end of 2014, down from 1.48% in 2013 ($42.3 million) and 2.41% ($62.0 million) in 2012. For UBPR Peers, the measurement was 0.79% in 2014. While accounting standards for 310-30 loans exclude 90-day + loans outstanding in the non-performing loan analysis, there were $48.5 million of acquired PCI loans contractually past due 90 days or more. Including these loans, and non-accruing non-PCI loans - Bank-wide ‘non-current’ loans / total loans was 1.48% in 2014, and 2.19% in 2013. The Bank’s FDIC peer metric (loans and leases 90 days or more past due plus loans in nonaccrual status, as a percent of gross loans and leases) for 2014 was 1.42%.

2,471 2,5712,865

3,467

7.6%

4.0%

11.4%

21.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2011 2012 2013 2014

South State Non Acquired Loans and GrowthSource: Financials ($ mms)

Non-Acquired Loans Y-o-Y Growth






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April 22, 2015



The $48.5 million of acquired PCI loans contractually past due 90 days or more represented 5.2% of all PCI loans, down from 6.7%, or $82.1 million in 2013. Acquired PCI loans contractually past due 30 – 89 days dropped substantially in 2014, to 2.3% of PCI loans, down from 3.8% in 2013. Total Bank-wide non-performing assets, including acquired assets, and which encompasses TDRs and OREO were 1.02% of total assets in 2014, down from 1.36% in 2013.

Non-acquired loan net charge offs (NCO) were $4.9 million in 2014, or 0.16% of average loans, down from 0.41% in 2013 ($11.0 million) and 0.73% in 2012 ($18.2 million). Peers charged off 0.17% of average loans in 2014. The improvement in 2014 was largely driven by a $5.9 million y-o-y decline in CRE NCOs. In the PCI portfolio, NCO are absorbed by the FDIC LSA. The acquired 310-20 loan portfolio had a 0.06% NCO rate in 2014 SSB’s non-acquired portfolio had $34.5 million of reserves (ALLL) at year-end 2014, or 1.00% of period ending loans. In 2014, SSB took a $5.2 million provision (PLL), up from $1.0 million in 2013, to reflect the 21%, or $602.6 million y-o-y increase in the portfolio. The ALL / non-acquired non-accrual loans ratio increased to 121% in 2014, up from 81% at year-end 2013. Acquired PCI PLL expense patterns show a vastly improving portfolio: Acquired PCI loans incurred a $1.9 million negative provision (PLL) as the portfolio’s credit quality improved, up from a $918k negative provision in 2013, and $31.6 million provision (debit expense) in 2011. The acquired-PCI portfolio had a $7.4 million allowance at year-end 2014, equal to 0.79% of the portfolio.

South State Bank Loan Portfolio Analysis 2013 2014

Yield on Average Non-Acquired Loans 4.42% 4.17%

Yield on Average Acquired Loans 8.19% 7.46%

Yield on Average Total Loans (exclud. Held for sale) 5.94% 5.62%

Loans / Deposits 86.7% 88.4%

Loans / Assets 71.6% 73.0%

Non-Acquired Non-Performing Loans / Non Acquired Loans 1.48% 0.82%

Non-Acquired Non-Performing Loans + PCI Loans 90 Days past due +

Non-Accrual, Non PCI Acquired Loans / Total Loans --------------------------------------> 2.19% 1.48%

Source: Financials and FinTrust estimates

Non-Acquired Acquired Acquired

At 12/31/14 / $-000s Loans Non-PCI Loans PCI Loans Total

Allowances For Loan Losses, Beginning Balance; 12/31/13 34,331 0 11,618 45,949

NCO (4,942) (927) 0 (5,869)

PLL 5,150 927 (1,907) 4,170

Reduction due to Loan Removals 0 0 (2,346) (2,346)

Allowances For Loan Losses, Ending Balance; 12/31/14 34,539 0 7,365 41,904

ALL / Period Ending Loans 1.00% 0.00% 0.80% 0.73%

Source: Financials






Equity Research

April 22, 2015



Investment Securities

Total investment securities increased $14.3 million on a y-o-y basis to $826.9 million, representing 10.5% of total assets, versus 20.4% for its Peer Group, the difference largely accounted for by the Bank’s higher ( ~ 10 percentage points) than average loan / total asset ratio. Average securities totaled $813.7 million, up 33.3% over 2013, reflecting the addition of securities from the 2013 First Financial merger. Interest income generated by available-for-sale securities was $19.4 million in 2014, up 30.1% over 2013, which is reflective of a 16 basis point decrease in the portfolio’s yield versus 2013. The expected average life of the investment portfolio at December 31, 2014 was approximately 3.46 years, compared with 4.27 years at December 31, 2013, and its modified duration is 3.17 years. The portfolio’s tax equivalent yield is 2.65%.

Liquidity Management

The Bank’s liquidity is strong. South State currently has qualifying collateral to increase FHLB advances by $941 million, a Federal Reserve discount window capacity of $165 million, and a Federal Funds credit line of $376 million. Currently, the Bank employs $20 million of FHLB advances. According to the Q4 2014 Uniform Bank Performance Report (‘UBPR’), South State’s core deposits (as defined by UBPR) equal 79.9% of total assets versus a 69.8% ratio for its Peer group, suggesting a more stable liability base. As well, net loans and leases / deposits are 88.7% and 82.7%, for SSB and the Peer Group, respectively. In addition, SSB has a much lower use rate of non-core funding of long term assets (non-core liabilities less short term investments / long term assets) at 3.5% versus 12.9% for Peers.

On the other hand, the Bank’s Short-term Assets / Short-Term Liabilities ratio, at 79.2%, is less than Peers at 153.1%. In absolute terms the margin of difference between ST Assets and ST Liabilities is $219 million, which is a fraction of the above-mentioned borrowing facilities aggregating $1.5 billion. In addition, the Bank increased core deposits by $195 million in 2014, indicating a strong capacity to secure additional funding. In 2014, the net result of changes in Investment Securities, Loans and Deposits was $(138.5) million. We note that the bank generated $119 million cash from operating activities last year.

71.50%81.20%

121.10%0.73%

0.41%

0.16%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

2012 2013 2014

Improved Non-Acquired Loan Quality

Non Acquired ALL / Non-Performing Loans

Non Acquired Portfolio NCO / Average Loans






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April 22, 2015



Liabilities

‘Other Borrowings’, consists of high-cost trust preferred and subordinated debt securities. Due to a decline in deposit interest rates the

Bank’s average rate of interest-bearing liabilities remained constant in 2014 at 30 basis points, despite a marginal increase in the interest

rate of ‘other borrowings’ (which included a full year of 7%-cost trust preferred securities assumed in the 2013 merger). However, in

January, 2015, the Company redeemed $46.4 million of the trust securities, which should cause a prospective decline in 2015 ‘other

borrowings interest’ expense, which increased to $6.0 million in 2014, from $4.1 million in 2013.

Regarding deposits, in 2014, total deposits declined $93.1 million, or 1.4% driven by a $288.4 million deliberate decline in expensive time

deposits, largely offset by a $153.5 increase in noninterest-bearing demand deposits. The average balance of interest-bearing deposits

and total deposits, however, advanced 22.9% and 24.6%, respectively, increases reflective of the 2013 merger. Rates on total interest-

bearing deposits fell to 0.18% in 2014, from 0.21% in 2013. Consequently, deposit expense climbed more slowly (9.5%) than average

deposits in 2014, to $9.3 million. While total deposits dropped, in 2014, noninterest-bearing demand deposits climbed 10.2% to $1.64

billion or 25.4% of total deposits.

In 2014, average interest bearing liabilities expanded $906 million, or 20.6% on a y-o-y basis, to $5.29 billion, while average non-interest

bearing liabilities expanded $389 million, or 32.0% y-o-y, to $1.60 billion. The average cost for interest bearing liabilities remained stable

at 0.30%, however the yield on total interest-earning assets fell 19 basis points in 2014, to 4.98%, stimulating a 19 basis point y-o-y drop

in net interest-rate spread to 4.68% last year from 4.87% in 2013. NIM, a measure of the profitability of a bank’s balance sheet that reflects

the positive impact of funding a portion of interest-earning assets with non-interest bearing liabilities and stockholder’s equity, declined

as well. In 2014, NIM contracted to 4.80% from 4.99%, largely reflecting a decline in acquired and non-acquired loan yield versus 2013.

484.8

658.4

982.0

1,486.41,639.9

16.1%

20.2%

22.8%

22.7%25.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2010 2011 2012 2013 2014

Interest-Free (Demand) Deposits Rise 37% per YearSource: Financials $ - mms

Demand Deposits Demand Deposits / Total Deposits






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April 22, 2015



The FFH merger closed at the end of the first month of 3Q 2013. Since then, total revenue (net interest income + non-interest income)

growth has been driven by a number of moving parts (some offsetting others), including (1) steady payoff of the acquired portfolio (2)

generally, rising non-interest income (3) steady increases in the non-acquired loan portfolio (4) marginal period-to-period declines in non-

acquired loan yield and (5) increases in acquired loan yield due to reclassification of non-accretable yield. Growth in Non-Interest income

has been powered by growth in Mortgage banking income, and steady declines in negative amortization of the FDIC IA (from $7.5 million

in 4Q 2013, to $4.2 million in 4Q 2014). The bottom line is that driven by rapid non-acquired loan growth and slowing decline in

acquired portfolio payoff and slowing amortization of the FDIC IA asset, SSB headed into 2015 after posting its highest-ever

quarterly revenues (as well as operating and GAAP net income and EPS).

$53,801 $55,284

$79,681$84,415 $83,467 $80,973 $80,369 $81,551

$9,523 $8,485 $15,063$20,649 $20,545

$24,399 $24,453 $25,299

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Non-Interest Income Powers Total Revenue Growth Since Merger (7/13)Source: Financials

Net Interest Income Non-Interest Income

$0.51

$0.63

$0.83

$0.72 $0.71$0.77

$0.85$0.80 $0.82

$0.92$1.00 $1.01

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Operating EPS / Past 3 AcquisitionsSource: Company Financials

Peoples BancorpClosed: 4/24/12

Savannah Bancorp

Closed: 12/13/12

Assets: $950 mm

First Financial Holdings

Closed: 7/19/14

Assets: $3.2 billion






Equity Research

April 22, 2015



Recent South State Performance and Statistics

Financial Review: South State Bank Through internal growth and acquisition, SSB has grown quickly over the last several years. From 2010 – 2014, SSB’s assets and total loans have advanced 21.4% and 21.6%, respectively, on an annual basis. SSB’s non-acquired loan portfolio advanced at a vibrant

10.8% CAGR during the period. Reflecting effective acquisition integration and capture of merger synergies, adjusted for merger and acquisition related expenses and Gains on Acquisitions, non-GAAP EPS grew 37.5% per year from 2011 to 2014, while growing 18.8% in 2014 versus 2013. Over the same period, shareholder’s equity grew 31.4% per annum. In 2013, the bank completed its largest acquisition to date, hence 2014 was billed by management as a year of integration and rebranding. The Bank has largely accomplished its 2014 agenda (albeit, management has indicated that there are significant opportunities for further cost reductions this year), and has indicated that it is again in a position to consider potential acquisitions. The Bank ended the year with 127 branches and 2,081 employees, down from 144 branches and 2,106 employees at the end of 2013. 2014 reflects a full year of impact from the First Financial merger, versus 5 months of results in 2013. Consequently, our comparative analysis centers on sequential quarterly results covering the 3Q14 to 4Q14 period. In fact, for the entire year 2014, SSB enjoyed a number of milestones:

1. Record Operating Earnings (which excludes merger expense) and EPS: $90.6 million, and $3.75 per diluted share. 2. Highest return on average TCE in 4 years: 13.77% 3. Successful integration of FFH merger and Bank name rebranding to South State.

'13 -'14

in millions, except EPS and Dividends 2012 2013 2014 Change

Investment Securities 560.1 812.6 826.9 1.8%

Average Assets 4,276.2 6,354.9 7,938.4 24.9%

Average Loans 2,966.4 4,490.9 5,652.4 25.9%

Deposits 4,298.4 6,554.1 6,461.0 -1.4%

Loans / Deposits 69% 69% 87% 27.7%

Net Interest Income 176.4 273.4 326.4 19.4%

Non-Interest Income (1) 41.3 53.7 94.7 76.4%

Non-Interest Expense (2) 158.9 250.6 303.0 20.9%

Burden (1-2) (117.6) (196.9) (208.3) 5.8%

EBT 45.1 74.6 111.4 49.3%

Net Income to Common $30.00 $47.90 $74.40 55.3%

EPS $2.03 $2.38 $3.08 29.4%

Dividend per Common Share $0.69 $0.74 $0.82 10.8%

Payout Ratio 34.1% 31.9% 26.6% -16.6%

BV / Share 29.97 40.72 40.78 0.15%

Tangible BV / Share 22.54 22.36 25.59 14.45%

ROAA 0.70% 0.77% 0.95%

ROAE 7.15% 6.90% 7.79%

Return on Average TCE 9.27% 11.54% 13.77%

NIM 4.83% 4.99% 4.80%

Source: Financials






Equity Research

April 22, 2015



2014 Results

For the full year the Bank posted robust merger-driven growth and strong returns on assets, and tangible common equity (TCE). Average loans, net interest income, noninterest income, and earnings rose 25.8%, 19.3%, 76.3%, and 55.4%, respectively. GAAP EPS (which includes merger expenses) increased 29.4% in 2014, to $3.08. Diluted shares outstanding increased 19.9% to 24.1 million shares. BV / common share rose slightly to $40.78, from $40.72 in 2013, and $29.97 at year-end 2012. In 2014, book value expansion was impeded by the redemption of $65 million in preferred stock, acquired from the 2013 merger, while the increase in 2013 over 2012 was driven by the merger. ROAA expanded to 0.95%, from 0.77% and 0.70% in 2013 and 2012, respectively. Despite a 24.9% increase in average assets in 2014, improved net income drove higher returns. Excluding merger expenses, ‘operating’ ROAA climbed to 1.15%, up from 1.02% in 2013. ROAE expanded to 7.80% from 6.99% in 2013. Operating Return on Average Tangible Equity reached 16.56%, up from 15.00% in the prior year.

Non-interest income rose significantly in 2014, by 74.1%, driven by (1) the merger, (2) a $7.6 million decline in negative accretion of the FDIC IA, increases in recoveries from acquired assets, (3) strong mortgage banking income growth (76.7% to $16.1 million), which was stimulated by more refinancing and a $280 million increase in the Bank’s Mortgage Servicing Portfolio since the 2013 merger was announced (the MSP stands at $2.3 billion), and (4) a 44% y-o-y increase in wealth management fees to $18.3 million (at year-end, SSB had ~ $3.8 billion in AUM). On the other hand, non-interest expense only grew 20.9% in 2014 to $303.0 million, driven by flat merger expense, which was $23.9 million in 2014, and declines in OREO and loan related expense, and advertising and marketing costs.

Despite generating a much higher [Revenues (interest Income + Non Interest Income) / Average Assets] ratio in 2014 (5.51%

versus 4.53% for UBPR Peers), the Bank’s ROAA was slightly lower at 0.95% versus 0.98% for UBPR Peers. Higher SSB Non-Interest Expense / Average Assets (3.75% versus 2.65%) – i.e., higher overhead - accounted for the shortfall in SSB ROAA. The culprit was higher personnel expense (2.0% versus 1.29% of average assets), suggesting that the Bank’s higher-than-average efficiency ratio is likely to linger, unless the Bank can increase its Average Assets / employee closer to the industry average of $8.8 million, from the current $3.8 million.

The Bank’s ROAE was 7.79% in 2014. However, goodwill represents ~ 30% of the bank’s total bank equity as referenced on its

Call Report, versus ~ 13% for UBPR Peers, which suggests that by itself, ROAE sharply understates the Bank’s profitability. SSB’s return on TCE was 13.77% in 2014, versus 12.03% for UBPR Peers.

Due to improvement in expected cash flow, reflecting an improving credit environment, SSB reclassified $112.3 million in acquired impaired loans non-accretable difference to accretable difference in 2014, up from $71.1 million in 2013.

SSB incurred an effective tax rate of 32.3% in 2014, compared to 34.0% in 2013. The decline was attributable to ‘new job’ related credits in South Carolina and additional sundry one-time tax credits. The tax rate is expected to be 34%.

4Q 2014 Results

Unless specified, the following discussion analyzes 4Q 2014 results on a sequential basis. In 4Q 2014, the Bank failed to achieve the level of cost savings outlined in prior guidance. This was an intentional development insofar as the Bank decided to get out of ‘integration mode’ in the quarter and go on offense. For example, SSB proceeded to hire 2 investment reps and 3 private bankers in the quarter, and absorb various ‘growth-oriented’ expenses, such as advertising and marketing, and loan-growth related expenses. The investment bore fruit: non-acquired loans expanded $163.1 million in the quarter, to $3.467 billion, from $3.305 billion in 3Q 2014. This equates to an annualized growth rate of 21.2%, a slightly faster pace than the y-o-y increase. Acquired loans fell $110.3 million, to $2.247 billion from $2.357 billion. Net, net, total loans grew $52.8 million, representing a 3.7% annualized growth rate. In the coming quarters, the pace of acquired loan pay down is expected to decelerate.

Driven by continued strength in mortgage banking income, wealth management and a steady decline in amortization of the FDIC IA, in 4Q 2014, the Bank recorded continued sequential growth in non-interest income, as well as steadily declining non-interest expense. Overall, driven by 1.5% and 3.4% respective sequential increases in net interest income (~ $1 million) and non-interest income (~ $850k), as well as a $380k sequential drop in non-interest expense, in the quarter, the Bank generated $21.3 million in net income, or $0.88 per






Equity Research

April 22, 2015



diluted share, up 10% sequentially from $0.80 in 3Q 2014. Excluding merger expense, SSB’s ‘operating’ EPS reached $1.02 in the quarter fulfilling guidance made at the time of the merger announcement. In absolute terms, net interest income grew $1.2 million driven by several factors.

A $136.8 million increase in average non-acquired loans, which generated $800k of added interest income despite a decline in loan yield to 4.08% from 4.15%.

An increase of $136k of acquired-loan interest income due to a 40 basis point increase on the portfolio’s yield, to 7.68%.

The increase in yield was generated by a $51 million decline in non-accretable difference, resulting in $40 million of

improved accretable yield which will be recognized over time.

A $150k decrease in interest expense driven by a decline in interest rates. The NIM increased 7 basis points sequentially, as the average yield on interest-earning assets increased 6 basis points while the average rate on interest-bearing liabilities declined 1 basis point. Average earning assets were flat at $6.9 billion, while average interest-bearing liabilities declined $78.8 million to $5.2 billion. Non-interest income advanced $850k due primarily to a $650k decline in FDIC IA amortization. Non-interest expense dropped $382k due to lower salary expense, lower OREO costs, and lower rebranding expenses. The declines were offset by growth-initiative costs increases.

Tangible BV / share increased $0.81 to $25.59, while the Bank’s total risk-based capital ratio reached 14.3%, up from 14.1%, driven by net income for the quarter. The Bank’s risk-based capital ratios are in-line with Peers.

Overall, asset quality improvement continued. Non-acquired NPAs / Non-acquired loans + OREO declined to 1.05%, compared

to 1.20% in 3Q 2014. Acquired + Non-acquired NPAs declined $8.6 million, or 9.7%, to $79.6 million in the quarter. Non-acquired NCOs were $1.1 million, or 0.13% annualized down from the 0.26% annualized rate in 3Q 2014.

79,681

15,063

75,406

18,679

6,805

81,551

25,299

74,676

30,694

9,445

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Net Interest Income Non-Interest Income Non-Interest Expense Pre-tax Earnings Net Income

SSB Earnings Quarterly Earnings Components - $ mmsSource: Financials

3Q13 4Q13 1Q14 2Q14 3Q14 4Q14






Equity Research

April 22, 2015



Sources: Financials and FinTrust Brokerage estimates

FinTrust Earnings Forecast & Valuation Analysis: South State Bank (SSB) We expect South State’s non-acquired loan growth momentum to continue this year and next, albeit at a decelerating pace. As well, the acquired portfolios are expected to continue to shrink, but at a more moderate pace. At the same time we forecast that non-acquired loan yield will stay essentially constant this year and next at ~ 4.10% (2015) and 4.12% (2016). Given that the bank has approx. $104 million in remaining non-accretable yield that could be reclassified if credit quality continue to move higher, the prospect is that acquired loan yield will continue to expand in 2015 and 2016, from 7.46% in 2014, to 8.38% and 8.58% in 2015 and 2016, respectively. Due to the increasing mix of lower-yield non-acquired loans, however, total loan yield declines to 5.59% in 2015 and 5.44% in 2016, down from 5.63% in 2014. In 2015, we envision non-acquired, acquired and total loans of $4.1 billion, $1.9 billion, and $6.0 billion, respectively, representing y-o-y respective growth rates of 19.3% (14.0% in 2016), -14.2% (-11.6% in 2016), and 6.2% (5.9% in 2016).

Summary Income Statement, Balances and Ratio Analysis

South State Corp. ($ in thousands)

Income Statement 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Interest Income 286,348 87,338 84,831 84,348 85,380 341,897 86,742 87,699 89,042 90,588 354,071 364,716

Interest Expense 12,987 3,996 3,857 3,979 3,829 15,661 3,750 3,683 3,738 3,795 14,967 15,990

Net Interest Income - NII 273,361 83,342 80,974 80,369 81,551 326,236 82,991 84,015 85,305 86,793 339,105 348,726

Provision for Loan Losses - PLL 1,886 849 2,169 2,091 1,481 6,590 1,471 1,391 1,300 1,196 5,358 7,054

NII - PLL 271,475 82,493 78,805 78,278 80,070 319,646 81,520 82,624 84,005 85,597 333,747 341,672

Non Interest Income 53,720 20,679 24,399 24,453 25,299 94,830 26,252 27,742 28,588 29,422 112,003 119,596

Total Revenues 325,195 103,172 103,204 102,731 105,369 414,476 107,772 110,366 112,593 115,019 445,750 461,268

Non Interest Expense 250,621 77,423 75,889 75,058 74,676 303,046 75,098 72,341 70,592 69,735 287,766 286,037

EBT 74,574 25,749 27,315 27,673 30,693 111,430 32,674 38,025 42,002 45,283 157,984 175,231

Tax Benefit (expense) (25,355) (8,832) (9,368) (8,346) (9,445) (35,991) (11,109) (12,929) (14,281) (15,396) (53,715) (59,579)

Net Income 49,219 16,917 17,947 19,327 21,248 75,439 21,565 25,097 27,721 29,887 104,269 115,653

Preferred stock dividends, other (1,354) (1,073) 0 0 0 (1,073) 0 0 0 0 0 0

Net Income To Common Shareholders $47,865 $15,844 $17,947 $19,327 $21,248 $74,366 $21,565 $25,097 $27,721 $29,887 $104,269 $115,653

Basic EPS $2.41 $0.66 $0.75 $0.81 $0.89 $3.08 $0.89 $1.04 $1.14 $1.23 $4.30 $4.75

BV / Share $40.72 $38.73 $39.50 $40.07 $40.78 $40.78 $41.58 $42.59 $43.71 $44.92 $44.92 $49.53

TBV / Share $22.36 $23.11 $24.13 $24.78 $25.59 $25.59 $26.46 $27.52 $28.69 $29.94 $29.94 $34.70

Dividends / Share $0.74 $0.19 $0.20 $0.21 $0.22 $0.82 $0.23 $0.24 $0.26 $0.28 $1.01 $1.19

Payout Ratio 31.9% 28.6% 26.6% 26.0% 24.8% 26.6% 25.8% 23.2% 22.7% 22.7% 23.5% 25.0%

Balance Sheet

Total Assets 7,937,911 7,990,975 7,993,686 7,896,132 7,826,227 7,826,227 7,875,094 7,930,858 7,992,561 8,059,697 8,059,697 8,528,140

Acquired Loans 2,825,749 2,637,010 2,504,078 2,365,867 2,254,766 2,254,766 2,152,658 2,066,070 1,993,439 1,933,510 1,933,510 1,707,456

Non-Acquired Loans 2,865,216 2,979,958 3,174,625 3,304,708 3,467,826 3,467,826 3,630,512 3,802,152 3,971,888 4,138,743 4,138,743 4,718,712

Total Loans 5,690,965 5,616,968 5,678,703 5,670,575 5,722,592 5,722,592 5,783,171 5,868,222 5,965,327 6,072,253 6,072,253 6,426,168

Shareholders Equity 916,470 934,163 953,018 966,995 984,920 984,920 1,006,485 1,031,581 1,059,302 1,089,189 1,089,189 1,204,842

Key Metrics

ROAA 0.77% 0.85% 0.90% 0.97% 1.08% 0.95% 1.10% 1.27% 1.39% 1.49% 1.31% 1.39%

ROAE 6.90% 6.81% 7.61% 8.06% 8.62% 7.79% 8.66% 9.85% 10.61% 11.13% 9.57% 10.08%

RO Average TCE 11.54% 12.60% 13.62% 13.97% 14.77% 13.77% 13.71% 15.36% 16.28% 16.82% 15.52% 14.73%

Net Interest Margin - NIM 4.94% 4.93% 4.75% 4.64% 4.72% 4.75% 4.74% 4.76% 4.79% 4.83% 4.77% 4.68%

Net Charge offs / Avg Non-Acquired Loans 0.41% 0.41% 0.05% 0.17% 0.26% 0.16% 0.16% 0.15% 0.14% 0.13% 0.13% 0.13%






Equity Research

April 22, 2015



Sources: Financials and FinTrust Brokerage estimates

During the last quarter of 2015, we forecast that non-acquired loan interest income will approx. reach that of acquired interest income. For 2015 and 2016 we estimate $155.7 million (47.2% of total loan interest income) and $183.6 million (54.0%) of non-acquired interest income, respectively. We also estimate acquired interest income of $173.8 million, and $156.2 million in 2015 and 2016, respectively. Overall we envision total net interest income of $339.1 million and $348.7 million in 2015 and 2016, respectively, up from $326.2 million in 2014. Put differently, we estimate that net interest income will advance 3.9% and 2.8% this year and next. The deceleration of these growth rates are impacted by 2 factors: (1) the growing proportion of lower-yielding non-acquired loans (2) a leveling off of non-acquired loans growth in 2016, from 21% in 2015, to 14% next year. On the other hand, over the same time periods, we estimate that net income will grow 40.0% in 2015, to $104.3 million ($4.30 / share), and 11.0% in 2016, to $115.7 million ($4.75 / share). The relatively rapid growth rates of non-interest income and declining absolute non-interest expenses account for the more rapid growth in total profits. The key moving parts are (1) the decline in the amortization of the FDIC IA and (2) near cessation of merger related expenses.

Year-on-Year Loan Growth 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

Acquired Credit Impaired 310-30 (PCI)

Commercial - CBT -34.4% -31.5% -29.7% -24.4% -22.8% -22.8% -19.4%

CRE -29.5% -28.5% -28.4% -28.5% -27.0% -27.0% -22.9%

Residential RE -18.9% -15.2% -14.7% -12.2% -10.4% -10.4% -8.8%

Consumer -17.8% -18.1% -17.8% -16.3% -14.5% -14.5% -12.3%

C&I -34.9% -28.3% -23.6% -22.4% -25.7% -25.7% -21.8%

Other -33.3% -36.0% -8.4% -6.0% -4.0% -4.0% -3.4%

Total 310-30 Loans -24.8% -22.4% -21.7% -20.3% -18.7% -18.7% -15.2%

Acquired Non-Credit Impaired 310-20 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

Non-owner occupied CRE -37.1% -24.0% -23.1% -18.3% -16.6% -16.6% -14.1%

Owner occupied CRE -15.8% -17.3% -17.6% -16.4% -14.6% -14.6% -12.4%

Residential RE -12.7% -13.8% -12.5% -11.5% -9.7% -9.7% -8.2%

Consumer -23.4% -18.6% -18.0% -14.3% -12.5% -12.5% -10.6%

C&I -30.0% -11.6% -11.1% 2.1% -16.0% -16.0% -13.6%

Other -12.6% -15.6% -16.7% -15.9% -14.1% -14.1% -12.0%

Total 310-20 Loans -17.0% -15.4% -14.4% -12.4% -11.1% -11.1% -9.4%

Non-Acquired Loans 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

CRE - Non Owner Occupied

Construction / Land development 21.4% 18.6% 6.0% 6.0% 16.0% 16.0% 11.2%

CRE Non Owner Occupied 14.6% 21.7% 19.1% 17.5% 16.0% 16.0% 11.2%

Total Non Owner Occupied CRE 18.0% 20.0% 11.9% 11.2% 16.0% 16.0% 11.2%

CRE - Owner Occupied 8.9% 10.6% 13.4% 12.2% 11.6% 11.6% 8.1%


Owner Occupied 43.5% 41.3% 41.4% 36.8% 30.0% 30.0% 21.0%

Home equity 10.4% 10.6% 10.1% 10.3% 9.4% 9.4% 6.6%

Total Consumer Real Estate 33.0% 31.9% 32.0% 29.3% 24.5% 24.5% 17.2%

C&I 26.1% 30.2% 31.6% 39.5% 30.0% 30.0% 21.0%

Consumer: 38.8% 37.1% 26.8% 26.1% 30.0% 30.0% 21.0%

Other income Producing Property 5.4% -2.7% 3.4% 3.1% 7.3% 7.3% 5.1%

Other 33.7% 45.9% -30.1% 0.7% 5.2% 5.2% 3.6%

Total Non-Acquired Loans, Gross 21.0% 21.8% 19.8% 20.2% 19.3% 19.3% 14.0%

Total SSB Loans 0.5% 3.1% 3.4% 5.3% 6.2% 6.2% 5.9%






Equity Research

April 22, 2015



For example, we estimate that non-interest income will climb to $112.0 million this year, an 18.1% increase over 2014. The decline in FDIC IA amortization accounts for a large part of the increase. Stated differently, if the amortization remained at 2014 levels, total non-interest income would only climb 7.0% in 2015.

Concurrently, we estimate that non-interest expense will fall 5.0% in 2015, to $287.7 million, down from $303.0 million in 2014.

The near completion of the FFH merger and rebranding process and hence diminution of related expenses is driving the decline in non-interest income. In 2014, such expenses were $23.9 million. We estimate that these expenses will fall to $3.0 million and $1.2 million this year and next, respectively.

In 2014, the Bank generated 0.95%, 7.79% and 13.77% ROA, ROAE and ROTCE, respectively. Driven by a series of increasingly large acquisitions since 2012, [goodwill + core deposit + other intangible assets] comprise 4.7% of total assets and 38.6% of shareholder equity. That same ratio for Peers stands at 14.9%. At 14.9%, SSB’s 2014 ROAE would come to ~ 10.5%, versus 10.0% for Peers. SSB’s 4Q 2014 return on tangible common equity (TCE) stands at a peer-leading 14.77% (Peers: 12.03%). The Bank’s efficiency ratio, at 69.3% is, however, above its peers, suggesting an opportunity for further cost savings. Our forecast of increasing profitability, we estimate, will propel SSB to a clear leadership position on ROA, ROAE and ROTCE in the coming quarters.

Valuation / Conclusion

With regard to valuation, the Bank is trading at premiums on most metrics including P/BV, P/TBV, and P/E. SSB trades for 1.74x book value and 2.79x tangible book value. It’s southeast peers trade for respective multiples of 1.47x and 1.72x. To the extent SSB is in a position to make further acquisitions, as it recently indicated it is, its premium valuation would be of benefit to current shareholders. If the P/BV valuation stays at its levels, the shares would trade for $75.91 one year from now (1.69 x $44.02 (year-end 2015 book value estimate)), or 10% upside. That said, we estimate that to the extent the Bank is unable to find sizable appropriate acquisitions near term, the shares lofty valuation metrics are subject to compression, particularly since we estimate that the drivers of earnings

growth – falling merger expenses, declining FDIC IA amortization, and reclassification of non-accretable yield – are already factored into the stock price. As well, the shares have appreciated significantly, delivering a 3-year total return of 142.6% as of the end of last year. We believe that SSB is a dynamic, well-managed institution, and we are positive about the bank’s future, and we would recommend long term investors BUY the shares despite the near term valuation compression risk. The stock is more likely to enjoy its current valuation multiples than not for the following reasons.

The Bank is reviewing its operations for additional cost saves, which as we discuss, are likely available and which could boost earnings growth beyond analysts’ expectations.

The Bank is likely to generate non-acquired loan growth in excess of its peers over the coming 1-2 years as it hires more bankers and expands its non-interest income activities that are synergistic to loan growth, such as mortgage banking services.

Additional loan yield-expanding reclassifications of yield are more likely than not. Anticipation of further acquisitions should serve to support current valuation levels, which would enable the Bank to transact

earnings additive asset acquisitions. Based on several estimated forward variables - ROTCE, Dividend Payout ratio, cost of SSB equity and ongoing dividend

growth rate - we calculate that the Bank’s ~ fair P/TBV ratio is 2.50x, versus its current ratio of 2.65x. We note that 2.5 x $29.94 (2015 year-end TBV) = $75. We also note that since 2011, ROTCE and P/TBV have grown 17.6% and 15.8% per annum, respectively.






Equity Research

April 22, 2015



17%

20%

24%

17% 16%

2011 2012 2013 2014 2015

SSB: PTBV / (ROTCE x 100)Sources: FinTrust estimates and Financials

FFH Merger: Announced

2/2013






Equity Research

April 22, 2015








Equity Research

April 22, 2015




Company versus Market Comparison Chart:

Corporate Governance:

The majority of South State’s Board members are considered independent under NASDAQ listing requirements. The Board members serve staggered three year terms.

As an alternative to term limits, the Governance Committee of the Board will review each director’s

nomination to the shareholders every three years. Note: Among independent institutions, 64% have

term limits, and among public institutions, 41% use this practice.

A potentially shareholder-enhancing sale or merger of SSB must be approved by 80% or more of the outstanding voting stock if the Board does not recommend a vote in favor of such a transaction.





Equity Research

April 22, 2015




Ratio Analysis

Profitability Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Pretax Return on AA 1.17% 1.29% 1.38% 1.39% 1.56% 1.40% 1.66% 1.92% 2.11% 2.26% 1.99% 2.11%

ROAA 0.77% 0.85% 0.90% 0.97% 1.08% 0.95% 1.10% 1.27% 1.39% 1.49% 1.31% 1.39%

ROAE 6.90% 6.81% 7.61% 8.06% 8.62% 7.79% 8.66% 9.85% 10.61% 11.13% 9.57% 10.08%

Efficiency Ratio 76.62% 74.43% 72.02% 71.61% 69.89% 71.97% 68.74% 64.73% 61.98% 60.01% 63.79% 61.08%

Performance Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

1. Revenues /Average Total Assets (ata) 5.35% 5.43% 5.50% 5.47% 5.61% 5.50% 5.76% 5.84% 5.91% 5.98% 5.87% 5.84%

2. Less: Total Op Expenses / ata 4.18% 4.13% 4.13% 4.08% 4.05% 4.10% 4.09% 3.92% 3.80% 3.72% 3.88% 3.73%

3. Less: Applicable Income Taxes / ata 0.40% 0.44% 0.47% 0.42% 0.48% 0.45% 0.57% 0.65% 0.72% 0.77% 0.68% 0.72%

= ROA 0.77% 0.85% 0.90% 0.97% 1.08% 0.95% 1.10% 1.27% 1.39% 1.49% 1.31% 1.39%

NIM 4.94% 4.93% 4.75% 4.64% 4.72% 4.75% 4.74% 4.76% 4.79% 4.83% 4.77% 4.68%

Interest Income / ata 4.51% 4.39% 4.27% 4.24% 4.33% 4.31% 4.42% 4.44% 4.47% 4.51% 4.46% 4.40%

NonInterest Income / ata 0.85% 1.04% 1.23% 1.23% 1.28% 1.19% 1.34% 1.40% 1.44% 1.47% 1.41% 1.44%

Revenues / ata 5.35% 5.43% 5.50% 5.47% 5.61% 5.50% 5.76% 5.84% 5.91% 5.98% 5.87% 5.84%

Interest Exp / ata 0.20% 0.20% 0.19% 0.20% 0.19% 0.20% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%

Non Interest Exp / ata 3.94% 3.89% 3.82% 3.78% 3.78% 3.82% 3.83% 3.66% 3.55% 3.48% 3.62% 3.45%

PLL / ata 0.03% 0.04% 0.11% 0.11% 0.08% 0.08% 0.07% 0.07% 0.07% 0.06% 0.07% 0.09%

Total Op Expenses / ata 4.18% 4.13% 4.13% 4.08% 4.05% 4.10% 4.09% 3.92% 3.80% 3.72% 3.88% 3.73%

Average Interest Earnings Assets / ata 87.2% 86.0% 87.0% 87.2% 87.8% 86.5% 89.3% 89.4% 89.5% 89.5% 89.4% 89.8%

Average Yield / Rate 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Net Interest Margin - NIM 4.94% 4.93% 4.75% 4.64% 4.72% 4.75% 4.74% 4.76% 4.79% 4.83% 4.77% 4.68%

Asset Yield (Int Income / Int Earning Assets) 5.17% 5.17% 4.93% 4.87% 4.93% 4.98% 4.95% 4.97% 5.00% 5.04% 4.98% 4.90%

Funding Cost (Int Expense / Int Bearing Liabilities) 0.30% 0.30% 0.29% 0.30% 0.30% 0.30% 0.29% 0.29% 0.29% 0.30% 0.29% 0.31%

Net Interest Spread (Asset Yld - Funding Cost) 4.87% 4.87% 4.65% 4.57% 4.63% 4.68% 4.66% 4.68% 4.71% 4.74% 4.69% 4.59%

Non Acquired Loan Yield 4.43% 4.25% 4.18% 4.15% 4.08% 4.17% 4.08% 4.08% 4.10% 4.12% 4.10% 4.15%

Acquired Loan Yield 8.18% 7.56% 7.33% 7.28% 7.68% 7.46% 8.08% 8.28% 8.48% 8.68% 8.38% 8.58%

Yield on Loans 5.80% 5.85% 5.62% 5.53% 5.58% 5.63% 5.61% 5.60% 5.60% 5.61% 5.59% 5.44%

Non Interest Income / Avg Assets 0.85% 1.05% 1.23% 1.23% 1.28% 1.19% 1.34% 1.40% 1.44% 1.47% 1.41% 1.44%

Funding Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Deposit Expense / Total Avg Deposits 0.16% 0.15% 0.14% 0.15% 0.14% 0.14% 0.13% 0.13% 0.13% 0.14% 0.13% 0.14%

Deposit Expense / Avg Int Bearing Deposits 0.21% 0.19% 0.18% 0.20% 0.19% 0.19% 0.18% 0.18% 0.18% 0.19% 0.18% 0.20%

Non Interest Bearing Deposits / Total Deposits 23.1% 22.8% 24.2% 25.3% 25.8% 24.5% 25.6% 26.2% 26.7% 27.2% 26.4% 28.8%

Asset Quality and Provisioning Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Allow for Loan Losses / Non-Acq. Loans 1.20% 1.16% 1.12% 1.05% 1.00% 1.00% 0.96% 0.92% 0.88% 0.84% 0.84% 0.75%

Allow for NA Loan Losses / Net Charge offs 310.3% 2610.6% 664.8% 407.0% 757.4% 698.9% 666.1% 685.0% 705.8% 730.4% 693.3% 605.8%

Provision for NA Loan Losses / Net Charge offs 17.0% 255.7% 162.8% 97.8% 129.9% 133.3% 112.9% 109.4% 105.5% 101.0% 107.4% 121.4%

Non Accrual Loans / Non Acquired Loans 1.47% 0.98% 0.84% 0.62% 0.54% 0.54% 0.51% 0.48% 0.45% 0.42% 0.39% 0.33%

Net Charge offs / Avg Non Acq. Loans 0.41% 0.05% 0.17% 0.26% 0.13% 0.16% 0.15% 0.14% 0.13% 0.12% 0.13% 0.13%

Liquidity Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

Loan-to-Deposit ratio 86.8% 84.7% 86.4% 87.0% 88.6% 88.6% 89.1% 90.0% 91.0% 92.1% 92.1% 92.6%

Loan-to-Assets ratio 71.7% 70.3% 71.0% 71.8% 73.1% 73.1% 73.4% 74.0% 74.6% 75.3% 75.3% 75.4%

Balance Sheet Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

A Assets / A Equity 8.91x 8.01x 8.42x 8.29x 8.08x 8.08x 7.88x 7.69x 7.55x 7.4x 7.4x 7.08x

Loans / Assets 71.7% 70.3% 71.0% 71.8% 73.1% 73.1% 73.4% 74.0% 74.6% 75.3% 75.3% 75.4%

Income Statement Ratios 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15E 2Q15E 3Q15E 4Q15E 2015E 2016E

EBT / Revenues 22.9% 25.0% 26.5% 26.9% 29.1% 26.9% 30.3% 34.5% 37.3% 39.4% 35.4% 38.0%

Non Interest Income / Total Revenues 15.8% 19.1% 22.3% 22.5% 22.9% 21.7% 23.2% 24.0% 24.3% 24.5% 24.0% 24.7%

Provision for Loan Losses / Revenues 0.55% 0.79% 1.99% 1.92% 1.34% 1.51% 1.30% 1.20% 1.11% 1.00% 1.15% 1.46%

Operating Income / Average Total Assets 1.17% 0.32% 0.34% 0.35% 0.39% 1.40% 1.66% 1.92% 2.11% 2.26% 1.99% 2.11%





Equity Research

April 22, 2015




South State Corp. SSB

Commom Sized Balance Sheet FY Ended December 31

($ in thousands)

2013A % of Total 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A % of Total 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E % of Total 2016E % of Total

ASSETS

Cash and cash equivalents

Cash & Due From Banks $212,473 2.7% $361,816 $388,852 $269,480 $229,901 $229,901 2.9% $212,473 $212,473 $212,473 $212,473 $212,473 2.6% $212,473 2.5%

Interest Bearing Deposits w/ Banks 4,770 0.1% 4,690 6,418 7,382 7,456 7,456 0.1% 4,770 4,770 4,770 4,770 4,770 0.1% 4,770 0.1%

Federal Funds Sold 262,218 3.3% 246,109 194,253 226,166 180,512 180,512 2.3% 262,218 262,218 262,218 262,218 262,218 3.3% 262,218 3.1%

Total Cash and Cash Equivalents 479,461 6.0% 612,615 589,523 503,028 417,869 417,869 5.3% 406,374 376,748 341,781 301,613 301,613 3.7% 398,262 4.7%

Total Investment Securities 812,603 10.2% 814,533 816,648 826,021 826,943 826,943 10.6% 826,943 826,943 826,943 826,943 826,943 10.3% 826,943 9.7%

Loans held for sale 30,586 0.4% 57,200 56,407 56,595 60,270 60,270 0.8% 60,270 60,270 60,270 60,270 60,270 0.7% 60,270 0.7%

Loans

Acquired Credit Impaired 310-30 (PCI)

Commercial - CBT 24,109 0.3% 21,479 19,557 17,097 15,813 15,813 0.2% 14,704 13,747 12,921 12,209 12,209 0.2% 9,844 0.1%

CRE 553,911 7.0% 500,565 461,270 428,037 390,371 390,371 5.0% 357,971 330,051 305,958 285,154 285,154 3.5% 219,824 2.6%

Residential RE 481,247 6.1% 444,115 428,811 406,276 390,244 390,244 5.0% 376,796 365,695 356,750 349,807 349,807 4.3% 318,998 3.7%

Consumer 103,998 1.3% 99,545 95,089 90,038 85,449 85,449 1.1% 81,521 78,181 75,369 73,035 73,035 0.9% 64,017 0.8%

C&I 68,862 0.9% 58,973 51,677 46,988 44,804 44,804 0.6% 42,273 39,463 36,445 33,293 33,293 0.4% 26,023 0.3%

Other 129 0.0% 132 91 88 86 86 0.0% 84 83 83 83 83 0.0% 80 0.0%

Total 310-30 Loans 1,232,256 15.5% 1,124,809 1,056,495 988,524 926,767 926,767 11.8% 873,351 827,221 787,526 753,581 753,581 9.3% 638,785 7.5%

Less Allowance (11,619) -0.1% (11,046) (9,159) (8,032) (7,365) (7,365) -0.1% (6,987) (6,618) (6,300) (6,029) (6,029) -0.1% (5,110) -0.1%

Total 310-30 Loans, net 1,220,637 15.4% 1,113,763 1,047,336 980,492 919,402 919,402 11.7% 866,364 820,603 781,226 747,553 747,553 9.3% 633,675 7.4%

Acquired Non-Credit Impaired 310-20

Non-owner occupied CRE 116,994 1.5% 91,806 86,473 78,012 73,575 73,575 0.9% 69,758 66,488 63,704 61,355 61,355 0.8% 52,693 0.6%

Owner occupied CRE 73,714 0.9% 71,607 68,831 65,420 62,065 62,065 0.8% 59,192 56,749 54,690 52,979 52,979 0.7% 46,386 0.5%

Residential RE 1,009,631 12.7% 989,527 947,448 915,819 881,324 881,324 11.3% 852,535 828,949 810,160 795,848 795,848 9.9% 730,240 8.6%

Consumer 267,257 3.4% 241,325 231,170 214,463 204,766 204,766 2.6% 196,531 189,610 183,881 179,245 179,245 2.2% 160,255 1.9%

C&I 58,773 0.7% 44,183 41,977 35,072 41,130 41,130 0.5% 39,074 37,315 35,823 34,569 34,569 0.4% 29,881 0.4%

Other 74,566 0.9% 73,753 71,684 68,557 65,139 65,139 0.8% 62,217 59,737 57,655 55,934 55,934 0.7% 49,215 0.6%

Total 310-20 Loans 1,600,935 20.2% 1,512,201 1,447,583 1,377,343 1,327,999 1,327,999 17.0% 1,279,307 1,238,849 1,205,913 1,179,929 1,179,929 14.6% 1,068,671 12.5%

Non-Acquired Loans

CRE - Non Owner Occupied

Construction / Land development 299,951 3.8% 319,441 371,751 385,318 364,221 364,221 4.7% 378,790 393,941 408,517 422,407 422,407 5.2% 469,644 5.5%

CRE Non Owner Occupied 291,171 3.7% 285,145 302,961 318,470 333,590 333,590 4.3% 346,934 360,811 374,161 386,882 386,882 4.8% 430,147 5.0%

Total Non Owner Occupied CRE 591,122 7.5% 604,586 674,712 703,788 697,811 697,811 8.9% 725,723 754,752 782,678 809,289 809,289 10.0% 899,790 10.6%

CRE - Owner Occupied 833,513 10.5% 845,728 849,048 881,403 907,913 907,913 11.6% 935,150 963,205 989,211 1,012,953 1,012,953 12.6% 1,094,987 12.8%


Owner Occupied 548,170 6.9% 595,652 637,071 702,521 786,778 786,778 10.1% 841,852 900,782 961,135 1,022,647 1,022,647 12.7% 1,237,254 14.5%

Home equity 257,139 3.2% 263,057 271,028 276,341 283,934 283,934 3.6% 291,032 298,308 304,871 310,663 310,663 3.9% 331,136 3.9%

Total Consumer Real Estate 805,309 10.2% 858,709 908,099 978,862 1,070,712 1,070,712 13.7% 1,132,885 1,199,090 1,266,005 1,333,311 1,333,311 16.5% 1,568,389 18.4%

C&I 321,824 4.1% 333,574 353,211 355,580 405,923 405,923 5.2% 434,338 464,741 495,879 527,615 527,615 6.5% 638,337 7.5%

Consumer: 136,410 1.7% 147,710 170,982 183,451 189,317 189,317 2.4% 202,569 216,749 231,271 246,073 246,073 3.1% 297,712 3.5%

Other income Producing Property 143,204 1.8% 158,186 151,928 154,822 150,928 150,928 1.9% 153,947 157,025 159,695 161,931 161,931 2.0% 170,194 2.0%

Other 33,834 0.4% 31,465 66,645 46,802 45,222 45,222 0.6% 45,900 46,589 47,148 47,572 47,572 0.6% 49,303 0.6%

Total Non-Acquired Loans, Gross 2,865,216 36.1% 2,979,958 3,174,625 3,304,708 3,467,826 3,467,826 44.3% 3,630,512 3,802,152 3,971,888 4,138,743 4,138,743 51.4% 4,718,712 55.3%

Allowance (34,331) -0.4% (34,669) (35,422) (34,804) (34,539) (34,539) -0.4% (34,707) (34,827) (34,793) (34,599) (34,599) -0.4% (35,201) -0.4%

Total Non-Acquired Loans, net 2,830,885 35.7% 2,945,289 3,139,203 3,269,904 3,433,287 3,433,287 43.9% 3,595,805 3,767,325 3,937,095 4,104,144 4,104,144 50.9% 4,683,512 54.9%

Total Loans, Net 5,652,457 71.3% 5,571,253 5,634,122 5,627,739 5,680,688 5,680,688 72.6% 5,741,477 5,826,777 5,924,234 6,031,625 6,031,625 74.8% 6,385,857 74.9%

Total Earning Assets 6,975,107 87.9% 7,055,601 7,096,700 7,013,383 6,985,770 6,985,770 89.3% 7,035,064 7,090,738 7,153,228 7,220,451 7,220,451 89.6% 7,671,332 90.0%

FDIC Rec. for Loss Sharing Agreements 86,447 1.1% 67,984 43,766 30,983 22,161 22,161 0.3% 18,402 15,582 13,045 10,761 10,761 0.1% 1,625 0.0%

BOLI 97,197 1.2% 97,314 97,933 98,505 99,140 99,140 1.3% 99,140 99,140 99,140 99,140 99,140 1.2% 99,140 1.2%

PP&E, net 188,114 2.4% 187,127 184,113 173,425 171,772 171,772 2.2% 171,772 171,772 171,772 171,772 171,772 2.1% 171,772 2.0%

OREO 64,918 0.8% 64,147 53,733 51,250 42,726 42,726 0.5% 42,726 42,726 42,726 42,726 42,726 0.5% 42,726 0.5%

Mortgage Servicing Rights 20,729 0.3% 20,925 21,015 22,052 21,601 21,601 0.3% 21,601 21,601 21,601 21,601 21,601 0.3% 21,601 0.3%

Goodwill 317,688 4.0% 319,107 317,385 317,688 317,688 317,688 4.1% 317,688 317,688 317,688 317,688 317,688 3.9% 317,688 3.7%

Core Deposit / Other Intangibles 59,908 0.8% 57,568 53,371 51,291 49,239 49,239 0.6% 48,254 47,289 46,343 45,416 45,416 0.6% 43,146 0.5%

Deferred Income Taxes 73,763 0.9% 70,923 66,780 60,322 42,692 42,692 0.5% 40,557 38,530 36,603 34,773 34,773 0.4% 33,034 0.4%

Other Assets 47,626 0.6% 50,279 58,890 61,189 73,438 73,438 0.9% 79,890 85,792 90,415 95,369 95,369 1.2% 126,076 1.5%

Total assets 7,931,497 100.0% 7,990,975 7,993,686 7,880,088 7,826,227 7,826,227 100.0% 7,875,094 7,930,858 7,992,561 8,059,697 8,059,697 100.0% 8,528,140 100.0%

(0) (0) 0 0 0 (0)

LIABILITIES & SHAREHOLDERS' EQUITY

Deposits

Non interest bearing 1,486,445 18.7% 1,581,157 1,623,291 1,654,308 1,639,953 1,639,953 21.0% 1,680,952 1,722,976 1,766,050 1,810,201 1,810,201 22.5% 2,081,731 24.4%

Interest-Bearing Demand 2,893,646 36.5% 2,915,756 2,899,532 2,900,140 2,927,820 2,927,820 37.4% 2,957,098 2,986,669 3,016,536 3,046,701 3,046,701 37.8% 3,199,036 37.5%

Savings 647,648 8.2% 678,650 676,482 658,903 655,132 655,132 8.4% 661,683 668,300 674,983 681,733 681,733 8.5% 715,820 8.4%

Time deposits 1,526,405 19.2% 1,455,090 1,376,833 1,304,877 1,238,140 1,238,140 15.8% 1,188,614 1,141,070 1,095,427 1,051,610 1,051,610 13.0% 946,449 11.1%

Total Deposits 6,554,144 82.6% 6,630,653 6,576,138 6,518,228 6,461,045 6,461,045 82.6% 6,488,348 6,519,015 6,552,996 6,590,245 6,590,245 81.8% 6,943,036 81.4%

Fed Funds Purchased / Repos 211,401 2.7% 254,985 280,595 231,229 221,541 221,541 2.8% 221,541 221,541 221,541 221,541 221,541 2.7% 221,541 2.6%

Other Borrowings 102,060 1.3% 100,963 101,045 101,127 101,210 101,210 1.3% 101,210 101,210 101,210 101,210 101,210 1.3% 101,210 1.2%

Other liabilities 82,424 1.0% 70,211 82,890 62,509 57,511 57,511 0.7% 57,511 57,511 57,511 57,511 57,511 0.7% 57,511 0.7%

Total liabilities 6,950,029 87.6% 7,056,812 7,040,668 6,913,093 6,841,307 6,841,307 87.4% 6,868,610 6,899,277 6,933,258 6,970,507 6,970,507 86.5% 7,323,298 85.9%

Interest Bearing Liabilities 5,381,160 67.8% 5,405,444 5,334,487 5,196,276 5,143,843 5,143,843 65.7% 5,130,147 5,118,790 5,109,697 5,102,795 5,102,795 63.3% 5,184,056 60.8%

Shareholders' equity:

Common Stock 60,260 0.8% 60,296 60,325 60,338 60,377 60,377 0.8% 60,377 60,377 60,377 60,377 60,377 0.7% 60,377 0.7%

Capital surplus 762,354 9.6% 698,079 699,324 700,579 701,764 701,764 9.0% 701,764 701,764 701,764 701,764 701,764 8.7% 701,764 8.2%

AOCI (9,723) -0.1% (4,054) 408 (1,141) (377) (377) 0.0% (377) (377) (377) (377) (377) 0.0% (377) 0.0%

Retained earnings 168,577 2.1% 179,842 192,961 207,219 223,156 223,156 2.9% 244,721 269,817 297,538 327,425 327,425 4.1% 443,078 5.2%

Total shareholders' equity 981,468 12.37% 934,163 953,018 966,995 984,920 984,920 12.58% 1,006,485 1,031,581 1,059,302 1,089,189 1,089,189 13.51% 1,204,842 14.13%

Total liabilities and shareholders' equity $7,931,497 100.0% $7,990,975 $7,993,686 $7,880,088 $7,826,227 $7,826,227 100.0% $7,875,094 $7,930,858 $7,992,560 $8,059,697 $8,059,697 100.0% $8,528,140 100.0%

Interest Earning Asset Composition 2013A 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

Cash 6.9% 8.8% 8.4% 7.2% 6.0% 6.0% 5.8% 5.4% 4.8% 4.2% 4.2% 5.2%

Investment Securities 11.7% 11.6% 11.6% 11.9% 11.9% 11.9% 11.9% 11.8% 11.7% 11.5% 11.5% 10.9%

Loans 81.4% 79.6% 80.0% 80.9% 82.0% 82.0% 82.3% 82.9% 83.5% 84.2% 84.2% 83.9%

Interest Bearing Funding Composition 2013A 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

Non Interest Bearing Deposits 27.6% 29.3% 30.4% 31.8% 31.9% 31.9% 32.8% 33.7% 34.6% 35.5% 35.5% 40.2%

Interest Bearing Deposits 94.2% 93.4% 92.8% 93.6% 93.7% 93.7% 93.7% 93.7% 93.7% 93.7% 93.7% 93.8%

Fed Funds 3.9% 4.7% 5.3% 4.4% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%

Other Borrowings 1.9% 1.9% 1.9% 1.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

Total Loan Portfolio Composition 2013A 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

CRE Total 38.4% 38.0% 38.0% 38.3% 37.5% 37.5% 37.4% 37.3% 37.1% 36.8% 36.8% 36.2%

Residential RE 40.6% 41.1% 40.5% 40.9% 41.2% 41.2% 41.1% 41.1% 41.1% 41.1% 41.1% 41.0%

C&I 8.0% 7.8% 7.9% 7.8% 8.7% 8.7% 9.0% 9.3% 9.6% 9.9% 9.9% 10.9%

Consumer: 9.0% 8.8% 8.8% 8.7% 8.4% 8.4% 8.4% 8.3% 8.3% 8.3% 8.3% 8.2%

Other 4.1% 4.3% 4.7% 4.3% 4.1% 4.1% 4.1% 4.0% 4.0% 3.9% 3.9% 3.7%

Other 2013A 1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E 2016E

Book Value per Share $40.72 $38.73 $39.50 $40.07 $40.78 $40.78 $41.58 $42.59 $43.71 $44.92 $44.92 $49.53

TBV / Share $22.36 $23.11 $24.13 $24.78 $25.59 $25.59 $26.46 $27.52 $28.69 $29.94 $29.94 $34.70

Loans / Assets 71.3% 69.7% 70.5% 71.4% 72.6% 72.6% 72.9% 73.5% 74.1% 74.8% 74.8% 74.9%

Loans / Deposits 86.2% 84.0% 85.7% 86.3% 87.9% 87.9% 88.5% 89.4% 90.4% 91.5% 91.5% 92.0%

Equity / Assets 12.37% 11.69% 11.92% 12.27% 12.58% 12.58% 12.78% 13.01% 13.25% 13.51% 13.51% 14.13%





Equity Research

April 22, 2015




South State Corp. SSB

Income Statement FY Ended December 31

($ in thousands)

1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A % of Total 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E % of Total FY2016E % of Total

Interest Income

Fed Funds Sold / other 460 441 430 463 1,794 0.4% 460 460 460 460 1,840 0.4% 1,840 0.4%

Investment Securities 5,037 5,068 5,218 5,024 20,347 4.7% 5,065 5,168 5,210 5,251 20,694 4.4% 21,108 4.4%

Loans Held for Sale 320 676 375 636 2,007 0.5% 500 500 500 500 2,000 0.4% 2,000 0.4%

Loans - Acquired 51,051 46,759 44,369 44,505 186,684 42.7% 44,515 43,664 43,031 42,607 173,817 37.3% 156,197 32.3%

Loans - Non Acquired 30,470 31,887 33,956 34,752 131,065 30.0% 36,202 37,907 39,842 41,770 155,720 33.4% 183,571 37.9%

Total Interest Income 87,338 84,831 84,348 85,380 341,897 78.3% 86,742 87,699 89,042 90,588 354,071 76.0% 364,716 75.3%

Interest expense

Total Deposits Expense 2,393 2,260 2,395 2,246 9,294 2.1% 2,175 2,109 2,164 2,221 8,669 1.9% 9,641 2.0%

Other Borrrowings 1,502 1,508 1,497 1,503 6,010 1,490 1,489 1,487 1,489 5,954 6,005

Fed Funds Purchased / other 101 89 87 80 357 0.1% 86 86 86 86 344 0.1% 344 0.1%

Total Interest Expense 3,996 3,857 3,979 3,829 15,661 3.6% 3,750 3,683 3,738 3,795 14,967 3.2% 15,990 3.3%

Net interest income 83,342 80,974 80,369 81,551 326,236 74.7% 82,991 84,015 85,305 86,793 339,105 72.8% 348,726 72.0%

Provision for loan losses 849 2,169 2,091 1,481 6,590 1.5% 1,471 1,391 1,300 1,196 5,358 1.1% 7,054 1.5%

NII after PLL 82,493 78,805 78,278 80,070 319,646 73.2% 81,520 82,624 84,005 85,597 333,747 71.6% 341,672 70.5%

Non interest income

Service Fees for Deposit Accounts 8,988 9,144 9,126 8,986 36,244 8.3% 9,024 9,067 9,114 9,166 36,370 7.8% 38,317 7.9%

Mortgage Banking Income 3,291 4,683 4,124 4,072 16,170 3.7% 4,174 4,278 4,385 4,495 17,332 3.7% 18,198 3.8%

Trst + Investment Advisory Fees 4,543 4,812 4,490 4,499 18,344 4.2% 4,611 4,727 4,845 4,966 19,149 4.1% 20,107 4.2%

Bankcard Services Income 7,124 7,741 7,489 7,320 29,674 6.8% 7,503 7,691 7,883 8,080 31,156 6.7% 32,714 6.8%

Amortization of FDIC Indemnification Asset (7,078) (5,815) (4,825) (4,177) (21,895) -5.0% (3,759) (2,819) (2,538) (2,284) (11,400) -2.4% (9,136) -1.9%

Other 3,811 3,834 4,049 4,599 16,293 3.7% 4,699 4,799 4,899 4,999 19,396 4.2% 19,396 4.0%

Total Non Interest income 20,679 24,399 24,453 25,299 94,830 21.7% 26,252 27,742 28,588 29,422 112,003 24.0% 119,596 24.7%

Total Income 108,017 109,230 108,801 110,679 436,727 100.0% 112,993 115,440 117,631 120,010 466,074 100.0% 484,312 100.0%

NII + Non Interest Income 104,021 105,373 104,822 106,850 421,066 96.4% 109,243 111,757 113,893 116,215 451,108 96.8% 468,322 96.7%

Non Interest Expense

Salaries and other personnel 39,093 40,276 40,029 39,034 158,432 36.3% 38,702 39,873 39,629 38,644 156,848 33.7% 156,848 32.4%

Merger / Rebranding Exp 5,985 6,510 6,846 4,599 23,940 5.5% 2,000 1,000 0 0 3,000 0.6% 1,200 0.2%

Supplies Printing and Postage 0 0 0 2,074 2,074 0.5% 2,000 2,000 2,000 2,000 8,000 1.7% 8,000 1.7%

Occupancy 5,590 5,731 5,387 5,701 22,409 5.1% 5,562 5,702 5,360 5,672 22,297 4.8% 22,074 4.6%

Equipment 3,754 3,264 3,166 3,100 13,284 3.0% 3,735 3,248 3,150 3,085 13,218 2.8% 13,085 2.7%

Information Svcs 4,222 4,313 3,417 3,724 15,676 3.6% 4,180 4,270 3,383 3,687 15,519 3.3% 15,364 3.2%

Marketing 1,134 1,054 837 1,172 4,197 1.0% 1,201 1,231 1,262 1,294 4,988 1.1% 5,507 1.1%

Bankcard Expense 2,299 2,187 2,141 2,043 8,670 2.0% 2,288 2,176 2,130 2,033 8,627 1.9% 8,540 1.8%

FDIC Insurance 1,576 1,267 1,268 1,321 5,432 1.2% 1,568 1,261 1,262 1,314 5,405 1.2% 5,351 1.1%

OREO expenses 4,269 1,875 3,374 2,520 12,038 2.8% 4,248 1,866 3,357 2,507 11,978 2.6% 11,858 2.4%

Amortization of intangibles 2,104 2,084 2,080 2,052 8,320 1.9% 2,093 2,074 2,070 2,042 8,278 1.8% 8,196 1.7%

Professional Fees 1,341 1,190 1,068 1,459 5,058 1.2% 1,495 1,533 1,571 1,610 6,210 1.3% 6,850 1.4%

Other 6,056 6,138 5,445 5,877 23,516 5.4% 6,026 6,107 5,418 5,848 23,398 5.0% 23,164 4.8%

Total Non Interest Expense 77,423 75,889 75,058 74,676 303,046 69.4% 75,098 72,341 70,592 69,735 287,766 61.7% 286,037 59.1%

EBT 25,749 27,315 27,673 30,693 111,430 25.5% 32,674 38,025 42,002 45,283 157,984 33.9% 175,231 36.2%

Income Tax Expense (8,832) (9,368) (8,346) (9,445) (35,991) -8.2% (11,109) (12,929) (14,281) (15,396) (53,715) -11.5% (59,579) -12.3%

Net income 16,917 17,947 19,327 21,248 75,439 17.3% 21,565 25,097 27,721 29,887 104,269 22.4% 115,653 23.9%

Preferred Stock Dividend (1,073) 0 0 0 (1,073) -0.2% 0 0 0 0 0 0.0% 0 0.0%

Redemption of Preferred 0 0 0 0 0 0.0% 0 0 0 0 0 0.0% 0 0.0%

Net Income Available to Common $15,844 $17,947 $19,327 $21,248 $74,366 17.0% $21,565 $25,097 $27,721 $29,887 $104,269 22.4% $115,653 23.9%

Net income per common share:

Basic $0.66 $0.75 $0.81 $0.89 $3.11 $0.90 $1.05 $1.16 $1.25 $4.35 $4.81

Diluted $0.66 $0.74 $0.80 $0.88 $3.08 T $0.89 $1.04 $1.14 $1.23 $4.30 $4.75

Weighted average common shares outstanding:

Basic 23,873,000 23,892,000 23,899,000 23,912,000 23,897,051 23,927,000 23,942,000 23,957,000 23,972,000 23,949,500 24,049,500

Diluted 24,116,000 24,141,000 24,160,000 24,189,000 24,153,657 24,204,000 24,219,000 24,234,000 24,249,000 24,226,500 24,326,500

1Q 2014A 2Q 2014A 3Q 2014A 4Q 2014A 2014A 1Q 2015E 2Q 2015E 3Q 2015E 4Q 2015E 2015E FY2016E

Yield Analysis on Average Balances

Investment Securities 2.51% 2.50% 2.53% 2.45% 2.50% 2.45% 2.50% 2.52% 2.54% 2.50% 2.55%

Loans - All Loans 5.85% 5.62% 5.53% 5.58% 5.63% 5.61% 5.60% 5.60% 5.61% 5.59% 5.44%

Loans - Acquired 7.56% 7.33% 7.28% 7.68% 7.46% 8.08% 8.28% 8.48% 8.68% 8.38% 8.58%

Loans - Non Acquired 4.25% 4.18% 4.15% 4.08% 4.17% 4.08% 4.08% 4.10% 4.12% 4.10% 4.15%

Total Earning Assets 5.18% 4.92% 4.83% 4.89% 4.98% 4.95% 4.97% 5.00% 5.04% 4.98% 4.90%

NOW + MM 0.11% 0.16% 0.12% 0.10% 0.11% 0.10% 0.10% 0.09% 0.10% 0.11% 0.12%

Savings 0.07% 0.11% 0.08% 0.07% 0.07% 0.07% 0.07% 0.06% 0.07% 0.07% 0.09%

Time Deposits 0.40% 0.37% 0.41% 0.43% 0.40% 0.43% 0.43% 0.42% 0.43% 0.43% 0.48%

Interest bearing deposits 0.19% 0.18% 0.20% 0.19% 0.19% 0.18% 0.18% 0.18% 0.19% 0.18% 0.20%

Other Borrowings 5.96% 5.94% 5.88% 5.89% 5.93% 5.89% 5.89% 5.88% 5.89% 5.89% 5.94%

Total Interest Bearing Liabililties 0.30% 0.29% 0.30% 0.29% 0.30% 0.29% 0.29% 0.29% 0.30% 0.29% 0.31%

Profitability

ROAA 0.85% 0.90% 0.97% 1.08% 0.95% 0.47% 2.40% 1.45% 1.54% 2.50% 1.47%

ROAE 6.81% 7.61% 8.06% 8.62% 7.79% 5.42% 19.07% 11.01% 11.48% 19.05% 10.60%

Net Interest Income Margin - NIM 4.93% 4.75% 4.64% 4.72% 4.75% 3.32% 6.81% 6.73% 6.67% 6.80% 6.22%

Net Interest SPREAD 4.87% 4.65% 4.57% 4.63% 4.68% 3.19% 6.82% 6.73% 6.67% 6.80% 6.20%

EBT / NII and non interest income 24.8% 25.9% 26.4% 28.7% 26.5% 29.9% 34.0% 36.9% 39.0% 35.0% 37.4%

Tax Rate 34.3% 34.3% 30.2% 30.8% 32.3% 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%

Salaries and other personnel expense / tot Income 36.2% 36.9% 36.8% 35.3% 36.3% 34.3% 34.2% 34.1% 34.0% 33.7% 33.0%

Efficiency ratio 74.4% 72.0% 71.6% 69.9% 72.0% 68.7% 64.7% 62.0% 60.0% 63.8% 61.1%





Equity Research

April 22, 2015




Recommendation: We recommend that investors BUY SSB shares, despite current valuation multiples that surpass peer average.

We estimate that the bank will continue to generate above-average organic growth and profitability, eventualities that are, in part, based on expectations of continued accretive transactions. Having said that, there are several risks to our recommendation. For example, SSB trades for 1.69x and 2.70x current BV and TBV, respectively, versus 1.47x and 1.72x like multiples for its Peer group. We estimate that the premium valuations reflect several variables: (1) expectations of further growth-enhancing acquisitions and (2) above average organic loan growth, two eventualities that while likely given the recent past, are far from assured, as well as above-average ROTCE. As well, the shares have appreciated significantly, delivering a 3-year total return of 142.6% as of the end of last year. Finally, while we believe that SSB is a dynamic, well-managed institution, and we are positive about the bank’s future, we note that the institution operates in a heavily regulated and competitive industry. We strongly recommend that investors refer to this report and the latest 10K for risk factors to consider. RISKS: Risk to the recommendation include, but are not limited to (1) the potential that interest rates continue to languish into 2015 (2)

SSB is unable to grow its loan portfolio quickly enough to offset acquired loans runoff preventing the achievement of our total growth estimates, (3) credit quality reverses course, and erodes, and (3) that regulatory bodies promulgate new banking rules unfavorable to the industry. We strongly recommend that investors refer to this report and the latest 10K for risk factors to consider.





Equity Research

April 22, 2015




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Important Disclosures





Equity Research

April 22, 2015




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