SouthState Bank Corp: Form 10-Q for the period ended Mar 31, 2025

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) relates to the financial statements contained in this Quarterly Report beginning on page 3. For further information, refer to the MD&A appearing in the Annual Report on Form 10-K for the year ended December 31, 2024. Results for the three months ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future period.

Unless otherwise mentioned or unless the context requires otherwise, references to “SouthState,” the “Company,” “we,” “us,” “our” or similar references mean SouthState Corporation and its consolidated subsidiaries. References to the “Bank” means SouthState Corporation’s wholly owned subsidiary, SouthState Bank, National Association, a national banking association.

Overview

SouthState Corporation is a financial holding company headquartered in Winter Haven, Florida, and was incorporated under the laws of South Carolina in 1985. We provide a wide range of banking services and products to our customers through our Bank. The Bank operates SouthState|Duncan-Williams Securities Corp. (“SouthState|Duncan-Williams”), a registered broker-dealer headquartered in Memphis, Tennessee that serves primarily institutional clients across the U.S. in the fixed income business. The Bank also operates SouthState Advisory, Inc., a wholly-owned registered investment advisor, and Private Capital Management, also a wholly-owned registered investment advisor which it acquired through the Independent acquisition completed on January 1, 2025. The Bank, through its Corporate Billing Division, provides factoring, invoicing, collection and accounts receivable management services to transportation companies and automotive parts and service providers nationwide. In 2023, the Bank formed SSB First Street Corporation, an investment subsidiary headquartered in Wilmington, Delaware, to hold tax-exempt municipal investment securities as part of the Bank’s investment portfolio. The holding company also owns SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b) of the U.S. Tax Code.

At March 31, 2025, we had $65.1 billion in assets and 6,405 full-time equivalent employees. Through our Bank branches, ATMs and online banking platforms, we provide our customers with a wide range of financial products and services, through an eight (8) state footprint in Alabama, Colorado, Florida, Georgia, North Carolina, South Carolina, Texas, and Virginia. These financial products and services include deposit accounts such as checking accounts, savings and time deposits of various types, safe deposit boxes, bank money orders, wire transfer and ACH services, brokerage services and alternative investment products such as annuities and mutual funds, trust and asset management services, loans of all types, including business loans, agriculture loans, real estate-secured (mortgage) loans, personal use loans, home improvement loans, automobile loans, manufactured housing loans, boat loans, credit cards, letters of credit, home equity lines of credit, treasury management services, and merchant services. As of December 31, 2024, our workforce included employees that are White (70.95%), Black or African American (14.78%), Hispanic (7.78%), Asian (1.95%), Native - American or Alaskan) (0.23%), Native Hawaiian/Pacific Islander (0.17%), Two or more races (2.05%), and Other (2.09%).

We also operate a correspondent banking and capital markets division within our national bank subsidiary, of which the majority of its bond salesmen, traders and operational personnel are housed in facilities located in Atlanta, Georgia, Memphis, Tennessee, Walnut Creek, California, and Birmingham, Alabama. This division’s primary revenue generating activities are related to its capital markets division, which includes commissions earned on fixed income security sales, fees from hedging services, loan brokerage fees and consulting fees for services related to these activities; and its correspondent banking division, which includes spread income earned on correspondent bank deposits (i.e., federal funds purchased) and correspondent bank checking account deposits and fees from safe-keeping activities, bond accounting services for correspondents, asset/liability consulting related activities, international wires, and other clearing and corporate checking account services.

We have pursued, and continue to pursue, a growth strategy that focuses on organic growth, supplemented by acquisitions of select financial institutions, or branches in certain market areas.

The following discussion describes our results of operations for the quarter ended March 31, 2025, compared to the quarter ended March 31, 2024, and also analyzes our financial condition as of March 31, 2025 as compared to December 31, 2024. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we may pay interest. Consequently, one of the key measures of our success is the amount of our net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

Of course, there are risks inherent in all loans, as such, we maintain an allowance for credit losses, otherwise referred to herein as ACL, to absorb probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for credit losses against our operating earnings. In the following discussion, we have included a detailed discussion of this process.

In addition to earning interest on our loans and investments, we earn income through fees and other services we charge to our customers. We incur costs in addition to interest expense on deposits and other borrowings, the largest of which is salaries and employee benefits. We describe the various components of this noninterest income and noninterest expense in the following discussion.

The following sections also identify significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report.

Recent Events

Independent Bank Group, Inc. (“Independent”) Merger

On January 1, 2025, the Company acquired Independent, a Texas-based corporation, the bank holding company for Independent Bank, in an all-stock transaction. Pursuant to the Agreement dated May 17, 2024, shareholders of Independent received 0.60 shares of the Company’s common stock in exchange for each share of Independent stock resulting in the Company issuing 24,858,731 shares of its common stock. In total, the purchase price for Independent was $2.5 billion.

Sale-leaseback Transaction

On January 8, 2025, the Bank entered into an agreement for the purchase and sale of real property (the “Sale Agreement”) with entities affiliated with Blue Owl Real Estate Capital LLC (“Blue Owl”), providing for the sale to entities affiliated with Blue Owl of certain bank branch properties owned and operated by the Bank. The branch properties are located in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia. Under the Sale Agreement, the Bank has agreed, concurrently with the closing of the sale of the branches, to enter into triple net lease agreements (the “Lease Agreements”) with entities affiliated with Blue Owl, pursuant to which the Bank will lease each of the Branches (the “Sale-leaseback Transaction”). The Company completed the Sale-leaseback Transaction on February 28, 2025. See accompanying Note 8 — Leases to our consolidated financial statements.

Capital Management

On February 11, 2025, the Company received Federal Reserve Board’s supervisory nonobjection on the 2025 stock repurchase program (the “2025 Repurchase Program”), which was previously approved by the Board of Directors of the Company, contingent upon receipt of such supervisory nonobjection. The 2025 Repurchase Program authorizes the Company to repurchase up to 3,000,000 shares, or up to approximately three percent, of the Company’s outstanding shares of common stock as of January 2, 2025. See accompanying Note 22 — Stock Repurchase Program to our consolidated financial statements.

Governmental and Regulatory Environment

It is uncertain how the rapid changes initiated by the Trump Administration will impact our business going forward. These include the impact of tariffs, immigration reform, and changes at the agencies that regulate us, including the modification, rescission, withdrawal or changes to the approach and enforcement of, rules and guidance relating to us.

In October 2024, the CFPB finalized a rule to implement Section 1033 of the Dodd-Frank Act, which would require certain entities, including the Company and the Bank, to, among other things, make available to a consumer, upon request, information in its control or possession concerning the consumer financial product or service that the consumer obtained from that entity. In general, the rule also requires, among other things, data providers holding a consumer account, such as the Bank, to establish a developer interface satisfying certain data security specifications and other standards, through which the data provider can receive requests for, and provide, specific types of data covered by the rule in electronic, usable form to authorized third parties, including data aggregators. Under the rule, data providers are prohibited from, among other things, charging consumers or third parties fees for processing these consumer data requests. The rule also places certain data security, authorization and other obligations on third parties accessing covered data from data providers, which could include the Company and the Bank when acting in certain capacities. The rule requires third parties to limit their collection, use, and retention of the data received to only what is reasonably necessary to provide the consumers’ requested product or service. The compliance date for a depository institution data provider that holds at least $10 billion in total assets but less than $250 billion in total assets is April 1, 2027; however, the final rule is subject to ongoing litigation that could impact whether and when the Company and the Bank are required to comply with the rule. We continue to evaluate the final rule and the potential impacts on the Company and the Bank.

Critical Accounting Policies

Our consolidated financial statements are prepared based on the application of accounting policies in accordance with GAAP and follow general practices within the banking industry. Our financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Differences in the application of these policies could result in material changes in our consolidated financial position and consolidated results of operations and related disclosures. Understanding our accounting policies is fundamental to understanding our consolidated financial position and consolidated results of operations. Accordingly, our significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in Note 2 — Summary of Significant Accounting Policies and Note 3 — Recent Accounting and Regulatory Pronouncements of our consolidated financial statements in this Quarterly Report on Form 10-Q and in Note 1 — Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2024.

The following is a summary of our allowance for credit losses (“ACL”) critical accounting policy, which is highly dependent on estimates, assumptions and judgments.

Allowance for Credit Losses (ACL)

The ACL reflects management’s estimate of the portion of the amortized cost of loans and unfunded commitments that it does not expect to collect. Management has a methodology determining its ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded on the balance sheet reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. See Note 2 — Summary of Significant Accounting Policies for further detailed descriptions of our estimation process and methodology related to the ACL. See also Note 7 — Allowance for Credit Losses and “Allowance for Credit Losses (ACL) on Loans and Certain Off-Balance-Sheet Credit Exposures” in this MD&A.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from the third-party service provider. Changes in the economic forecasts may significantly affect the estimated credit losses which may potentially lead to materially different quantitatively modeled allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables, it is difficult to estimate the impact of a change in any one individual variable on the ACL. SouthState uses a third-party service provider to support the economic forecast assumptions under CECL forecast by providing various levels of economic scenarios. These scenarios are weighted in accordance with management assessment of scenarios as well as expectations of the general market and industry conditions. To illustrate the sensitivity of these scenarios, if a 100% probability weighting was applied to the adverse scenario rather than using the probability-weighted three scenario approach, this would result in an increase in the ACL by approximately $246 million. Conversely, if a 100% probability weighting was applied to the upside scenario, this would result in a decrease in the ACL by approximately $118 million. The adverse scenario includes assumptions including, but not limited to, rising unemployment consistent with a recession, high levels of inflation and weakened consumer and business spending, elevated interest rates, tightening credit, widening Federal deficit, and continued geopolitical tensions. Conversely, the upside scenario includes assumptions such as a stronger domestic economy, swift resolution of international conflicts and strengthening global economy, more than full employment, reduced political tensions, and other favorable assumptions. This sensitivity analysis and related impact on the ACL is a hypothetical analysis and is not intended to represent management’s judgments at March 31, 2025.

Results of Operations

Overview

We reported consolidated net income of $89.1 million, or diluted earnings per share (“EPS”) of $0.87, for the first quarter of 2025 as compared to consolidated net income of $115.1 million, or diluted EPS of $1.50, in the comparable period of 2024, a 22.6% decrease in consolidated net income and a 42.0% decrease in diluted EPS. The $26.0 million decrease in consolidated net income was the net result of the following items:

• A $291.3 million increase in interest income, resulting from a $260.9 million increase in interest income from loans and loans held for sale, a $16.1 million increase in interest income from investment securities, and a $14.3 million increase in interest income on federal funds sold, securities purchased under agreement to resell and interest-bearing deposits. The increase in interest income from loans was due to a $14.4 billion increase in average balance of loans and loans held for sale along with a 52 basis point increase in yield. The increase in average balance was mainly due to the loans acquired in the Independent acquisition of $13.1 billion in the first quarter of 2025 along with the organic loan growth in 2024. The increase in yield was mainly due to the loan accretion recognized for the Independent loan portfolio. The increase in interest income from investments securities was due to a $860.0 million increase in the average balance and a 55 basis point increase in the yield. The increase in the average balance in the investment portfolio was also due to the Independent acquisition and the increase in yield was due to the effect of the investment bond restructuring completed in the first quarter of 2025. The increase in interest income on federal funds sold, securities purchased under agreements to resell and interest-bearing deposits was due to a $1.5 billion increase in the average balance;
• A $90.7 million increase in interest expense, which resulted from a $85.8 million increase in interest expense from deposits, a $182,000 increase in interest expense in federal funds purchased and securities sold under agreements to repurchase and a $4.7 million increase in interest expense from corporate and subordinated debentures and other borrowings. The increase in interest expense from deposits resulted from an increase in the average balance of interest-bearing deposits of $12.9 billion along with a 10 basis point increase in average cost on interest bearing deposits. The increase in average balance was mainly due to $12.0 billion of interest-bearing deposits assumed from Independent in the first quarter of 2025. The increase in interest expense from corporate and subordinated debentures and other borrowings was due to an increase in average balance of $248.3 million as the Company assumed $360.5 million in corporate and subordinated debentures from the Independent acquisition;
• An $87.9 million increase in the provision for credit losses, as the Company recorded a provision for credit losses of $100.6 million in the first quarter of 2025 while recording a provision for credit losses of $12.7 million in the first quarter of 2024. The main reason for the increase in 2025 was due to the Company recording the initial provision for credit losses of $80.0 million and $12.1 million on the Independent non-PCD loans portfolio and unfunded commitments, respectively, in the first quarter of 2025;
• A $14.5 million increase in noninterest income, primarily from an increase in service charges on deposit accounts of $2.3 million, in mortgage banking income of $1.6 million, in trust and investment services income of $4.5 million, in correspondent banking and capital market income of $5.2 million and in bank owned life insurance income of $3.3 million. These increases were slightly offset by a decline in other noninterest income of $2.2 million and SBA income of $1.1 million. The increases in service charge on deposit account, trust and investment services income and bank owned life insurance income were mainly due to the acquisition of Independent in the first quarter of 2025. The decline in other noninterest income was due to the Company recognizing $2.5 million in credits from an external vendor in the first quarter of 2024. See Noninterest Income section on page 60 for further discussion;
• A $159.5 million increase in noninterest expense, which resulted primarily from an increase in salaries and employee benefits of $45.4 million, in merger, branch consolidation, severance related and other restructuring expenses of $63.5 million, in amortization of intangibles of $17.8 million, in occupancy expense of $12.9 million, in information services expense of $9.0 million and in other noninterest expense of $6.9 million. These increases were mainly due to the increase in expenses resulting from the Independent acquisition in the first quarter of 2025. See Noninterest Expense section on page 62 for further discussion; and
• Lower income tax provision of $6.3 million primarily due to lower pretax book income between the two quarters. The Company recorded pretax book income of $121.2 million in the first quarter of 2025 compared to pretax book income of $153.5 million in the first quarter of 2024. The effects of the lower pretax book income were partially offset by the impact of deferred tax remeasurement for legacy SouthState’s deferred balances, as a result of the acquisition Independent. Our effective tax rate was 26.53% for the three months ended March 31, 2025 compared to 25.05% for the three months ended March 31, 2024. See Income Tax Expense section on page 63 for further discussion.

Our quarterly efficiency ratio increased to 61.0% in the first quarter of 2025 compared to 58.5% in the first quarter of 2024. The increase in the efficiency ratio compared to the first quarter of 2024 was the result of a 58.2% increase in noninterest expense (excluding amortization of intangibles) partially offset by 51.8% increase in the total of tax-equivalent net interest income and noninterest income. The overall increase in both noninterest expense and tax-equivalent net interest income and noninterest income was due to the acquisition of Independent in the first quarter of 2025. The higher increase in noninterest expense was mainly due to the $63.5 million increase in merger, branch consolidation, severance related and other restructuring expenses during the first quarter of 2025 compared to the first quarter of 2024.

Basic and diluted EPS were $0.88 and $0.87, respectively, for the first quarter of 2025, compared to $1.51 and $1.50, respectively, for the first quarter of 2024. The decrease in basic and diluted EPS was due to a 22.6% decrease in net income in the first quarter of 2025 compared to the same period in 2024 along with an increase in average basic common shares of 32.9%. The decrease in net income in the first quarter of 2025 was mainly attributable to the initial provision for credit losses on Non-PCD loan portfolio and unfunded commitments from Independent of $92.1 million, an $63.5 million increase in merger, branch consolidation, severance related and other restructuring expenses and the impact of the deferred tax remeasurement of $5.6 million during the first quarter of 2025. The increase in average basic common shares was mainly due to the issuance of approximately 24.9 million shares of common stock related to the acquisition of Independent in the first quarter of 2025.

Selected Figures and Ratios

(Dollars in thousands)

* Denotes a non-GAAP financial measure. The section titled “Reconciliation of GAAP to non-GAAP” below provides a table that reconciles GAAP measures to non-GAAP measures.

• For the three months ended March 31, 2025, the return on average assets declined compared to the same period in 2024. This decrease was primarily due to the decrease in net income of $26.0 million, or 22.6%, which was mainly attributable to costs associated with the acquisition of Independent including the initial provision for credit losses on Non-PCD loan portfolio and unfunded commitments from Independent of $92.1 million and a $63.5 million increase in merger, branch consolidation, severance related and other restructuring expenses. The decline in the return on average assets was also due to an increase in average assets for the three months ended March 31, 2025 of $19.3 billion, or 42.8%, compared to the same period in 2024, mainly due to the $18.1 billion in assets acquired from Independent in the first quarter of 2025.
• For the three months ended March 31, 2025, the return on average equity and the return on average tangible equity declined compared to the same period in 2024. These decreases were primarily due to lower net income of 22.6%, along with an increase in average equity of 52.0% and tangible equity of 37.8%. The decline in net income was mainly due to costs associated with the acquisition of Independent noted above and the increase in average equity and tangible equity was mainly due to common stock issued in the acquisition of Independent.
• The equity-to-assets ratio was 13.24% for the three months ended March 31, 2025, an increase of 0.95% from March 31, 2024. This increase resulted primarily from common stock issued with the acquisition of Independent and the net income earned during the last twelve months being greater than the increase in total assets of 44.3% from March 31, 2024.
• Dividend payout ratios were 61.45% for the three-month period ending March 31, 2025 and 34.42% for the three-month period ending March 31, 2024. The increase in the dividend payout ratio for the three months ended March 31, 2025 was due to the 22.6% decrease in net income along with total dividends paid during the first quarter of 2025 increasing 38.2% compared to the same period in 2024. The increase in dividends paid was due to the increase in outstanding common shares in 2025 resulting from the issuance of 24.9 million shares of common stock for the acquisition of Independent in the first quarter of 2025.

Net Interest Income and Margin

Non-Tax Equivalent (“TE”) net interest income increased $200.6 million, or 58.3%, to $544.5 million in the first quarter of 2025 compared to $343.9 million in the same period in 2024, which primarily was due to the acquisition of Independent completed on January 1, 2025. Interest earning assets averaged $57.5 billion during the three months ended March 31, 2025 compared to $40.7 billion for the same period in 2024, an increase of $16.8 billion, or 41.4%. Interest bearing liabilities averaged $40.8 billion during the three months ended March 31, 2025 compared to $27.5 billion for the same period in 2024, an increase of $13.2 billion, or 48.1%.

The Federal Reserve implemented a total rate cut of 100 basis-point, beginning with a 50 basis-point reduction in mid-September 2024. This was followed by two additional cuts of 25 basis-point each, one in early November 2024 and the other in mid-December 2024. These rate cuts came after a series of rate hikes that began in March 2022, resulting in a target range of 4.25% to 4.50% at March 31, 2025. As a result, the Company operated in a comparatively lower rate environment for the first quarter of 2025 compared to the first quarter of 2024. Some key highlights are outlined below:

• The non-tax equivalent and the Tax Equivalent (“TE”) net interest margin increased by 44 basis points in the first quarter of 2025 compared to the same quarter of 2024. The net interest margin increased primarily due to the increase in the yield on interest earning assets of 58 basis points outweighing the increase in the cost of interest-bearing liabilities of 10 basis points.
• Non-TE yield on interest-earning assets for the first quarter of 2025 increased by 58 basis points to 5.70% from the comparable period in 2024 due to higher yields on a majority of interest-earning assets, including loans held for investment, investments securities, and loans held for sale. The yield on loans increased primarily due to loan accretion of approximately $59.0 million recognized for the loan portfolio acquired from Independent. The yield on investment securities increased due to the effect of the investment bond restructuring completed in the first quarter of 2025. In addition, the average balance of the higher yielding acquired loans increased by $11.5 billion, the average balance of non-acquired loans increased by $2.8 billion, and the average balance of investment securities increased by $860.0 million, all due to balances acquired from Independent.
• The average cost of interest-bearing liabilities for the first quarter of 2025 increased 10 basis points to 2.63% from the same period in 2024. The average cost of interest-bearing deposits increased 10 basis points primarily due to a higher interest expense incurred from corporate and subordinated debentures as the average balance increased by $360.5 million. The Company assumed $360.5 million in corporate and subordinated debentures from the Independent acquisition. The cost decrease occurred across all deposit categories except for the transaction and money market accounts as a result of the comparatively lower rate environment. Our deposits started to shift from higher-costing certificates and other time deposits to lower-costing transaction and money market and savings accounts as the depositors have sought more liquidity and flexible funding in a changing interest rate environment. The average cost of federal funds purchased and securities sold with agreements to repurchase decreased by 92 basis points and 1 basis point, respectively, while the average balance increased by $66.9 million and $17.6 million, respectively. Other borrowings, consisting of FHLB advances had an average cost of 4.40% during the first quarter of 2025 compared to 5.66% for the comparable period in 2024. Our overall cost of funds, including noninterest-bearing deposits, was 1.97% for the three months ended March 31, 2025 compared to 1.83% for the three months ended March 31, 2024.

The table below summarizes the analysis of changes in interest income and interest expense for the quarter ended March 31, 2025 and 2024 and net interest margin on a tax equivalent basis.

(Dollars in thousands)

(1) Investment securities (taxable) and (tax-exempt) include trading securities.

Investment Securities

The interest earned on investment securities increased by $16.1 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This is a result of the Bank carrying a higher average balance in investment securities along with an increase in the yield on the investment portfolio in 2025 compared to the same period in 2024. The average balance of investment securities for the three months ended March 31, 2025 increased $860.0 million from the comparable period in 2024 due to the Company acquiring $1.6 billion in investment securities through the acquisition of Independent during the quarter. These securities were subsequently sold during the quarter with the proceeds reinvested into purchases of new securities that fit the Company’s investment strategy. The increase in investment securities related to the Independent acquisition was partially offset due to maturities and mortgage paydowns within the AFS and HTM investment portfolios. The yield on the total investment securities increased 55 basis points during the three months ended March 31, 2025 compared to the same period in 2024. This was due to recent purchases, including the reinvestment of the Independent investment portfolio at current market rates. The Company also conducted a securities repositioning during the quarter where it sold approximately $1.8 billion in investment securities at a loss of $228.8 million and used the proceeds to purchase new securities. This securities repositioning improved the yield and risk weightings and shortened the duration of the investment portfolio.

Loans

Interest earned on loans held for investment increased $258.0 million to $721.0 million in the quarter ended March 31, 2025 compared to the same period in 2024. Interest earned on loans held for investment included loan accretion income recognized during the quarters ended March 31, 2025 and 2024 of $61.8 million and $4.3 million, respectively, an increase of $57.5 million. Some key highlights for the quarter ended March 31, 2025 are outlined below:

• Our non-TE yield on total loans increased 51 basis points in the first quarter of 2025 compared to the same period in 2024 due to a 108 basis-point increase in the yield on the acquired loan portfolio, slightly offset by a 1 basis-point decrease in yield on the non-acquired loan portfolio.
• The yield on the acquired loan portfolio increased 108 basis points to 7.34% in the first quarter of 2025 from 6.26% in the same period in 2024, while interest income on the acquired loan portfolio increased $222.5 million during the same period.
• The interest income on acquired loans increased primarily due to an increase in the average balance of acquired loans of $11.5 billion. The average balance increased due to loans acquired from Independent, which was offset by paydowns, pay-offs and renewals of acquired loans that were moved to our non-acquired loan portfolio. The yield increased primarily due to loan accretion of approximately $59.0 million recognized for the loan portfolio acquired from Independent during the first quarter of 2025.
• The yield on the non-acquired loan portfolio slightly decreased 1 basis points to 5.61% in the first quarter of 2025 compared to 5.62% in the same period in 2024. Interest income on the non-acquired loan portfolio increased $35.5 million during the same period.
• The increase in interest income on non-acquired loans was attributable to a higher average balance of $2.8 billion through organic loan growth and renewals of matured acquired loans that were moved to our non-acquired loan portfolio. The yield slightly decreased despite the average balance and interest income increases as the Company operated in a relatively lower rate environment during the current year compared to the same period in 2024.

Interest-Bearing Liabilities

The quarter-to-date average balance of interest-bearing liabilities increased $13.2 billion, or 48.1%, in the first quarter of 2025 compared to the same period in 2024. The cost of interest-bearing liabilities increased by 10 basis points to 2.63% and the overall cost of funds, including demand deposits, increased by 14 basis points to 1.97% in the first quarter of 2025 compared to the same period in 2024. Some key highlights for the quarter ended March 31, 2025 compared to the same period in 2024 include:

• The cost of interest-bearing deposits was 2.54% for the first quarter of 2025 compared to 2.44% for the same period in 2024.
• Interest expense on interest-bearing deposits increased by $85.8 million in the first quarter of 2025 compared to the same period in 2024 as interest expense on all interest-bearing deposit accounts increased, primarily due to an increase in average balance of deposit accounts as a result of the balances assumed from the Independent acquisition. Interest expense on transaction and money market accounts, savings, certificates and other time deposits increased by $59.7 million, $126,000, and $26.0 million, respectively.
• The average balance of interest-bearing deposits increased by $12.9 million, driving up interest expense. The increase in the average balance of transaction and money market, savings, and certificates and time deposits accounts were $9.7 billion, $315.7 million, and $2.9 billion, respectively.
• The cost of federal funds purchased decreased by 92 basis points in the first quarter of 2025. The decline in the yield compared to the same period in 2024 was primarily driven by a lower interest rate environment, as the interest expense increased by $110,000 while the average balance grew by $66.9 million.
• The cost of securities sold with agreements to repurchase was 1.94% for the first quarter of 2025 compared to 1.95% for the same period in 2024, driven by the effects from the lower interest environment. While the average balance grew by $17.6 million, interest expense only increased by $72,000.
• The cost of corporate and subordinated debentures increased by 57 basis points to 6.74% for the three months ended March 31, 2025 compared to the same period in 2024, also driven by the effects from the increase in average balance of $360.5 million. The Company assumed $360.5 million in corporate and subordinated debentures from the Independent acquisition. The increase in average balance resulted in an increase in interest expense of $6.5 million.
• The cost of other borrowings, consisting of FHLB advances, for the three months ended March 31, 2025 was 4.40% and interest expense was $648,000 compared to 5.66% and $2.4 million during the first quarter of 2024. The decline in interest expense was due to a decline in the average balance of other borrowings of $112.3 million from $172.0 million during the first quarter of 2024 compared to $59.7 million during the same period in 2025.

We continue to monitor and adjust rates paid on deposit products as part of our strategy to manage our net interest margin. Interest-bearing liabilities include interest-bearing transaction accounts, savings deposits, CDs, other time deposits, federal funds purchased, and other borrowings. Interest-bearing transaction accounts include NOW, HSA, Interest on Lawyers’ Trust Accounts (“IOLTA”), and Market Rate checking accounts.

Noninterest-Bearing Deposits

Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. Average noninterest-bearing deposits increased $3.0 billion, or 28.1%, to $13.5 billion in the first quarter of 2025 compared to $10.5 billion during the same period in 2024. The increase in the average balance of noninterest bearing deposits was primarily due to noninterest-bearing deposit balances assumed from Independent during the first quarter of 2025.

Noninterest Income

Noninterest income provides us with additional revenues that are significant sources of income. For the three months ended March 31, 2025 and 2024, noninterest income comprised 13.7% and 17.2%, respectively, of total net interest income and noninterest income.

(Dollars in thousands)

Noninterest income increased by $14.5 million, or 20.3%, during the first quarter of 2025 compared to the same period in 2024. This quarterly change in total noninterest income resulted from the following:

• Service charges on deposit accounts were higher by $2.3 million, or 10.1%, in the first quarter of 2025 compared to the same period in 2024. The increase was mainly attributable to deposit accounts acquired from Independent.
• Mortgage banking income increased by $1.6 million, or 25.4%, during the first quarter of 2025 compared to the same period of 2024, primarily from a $1.6 million, or 43.5%, increase in secondary market mortgage income. Mortgage production increased from $428.8 million in the first quarter of 2024 to $459.2 million in the first quarter of 2025 with slightly lower mortgage rates in 2025 compared to the same period in 2024. We allocated a higher percentage of mortgage production to the secondary market in the first quarter of 2025 compared to the same period in 2024 as the percentage allocated increased from 53% to 56%. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and is expected to fluctuate year to year.
• Mortgage income from the secondary market increased by $1.6 million between the comparable periods resulting from a $2.3 million increase in the gain on sale of mortgage loans, which is net of the commission expense related to mortgage production, and increases in the change in fair value of the pipeline of $201,000 and loans held for sale of $394,000, offset by a decrease in the fair value of MBS forward trades of $1.3 million. Mortgage commission expense was $2.4 million during the first quarter of 2025 compared to $2.2 million during the comparable period in 2024.
• The mortgage servicing related income, net of the hedge, slightly decreased by $23,000 in the first quarter of 2025. The decrease was primarily due to a $131,000 decrease in the change in fair value of the MSR including decay, offset by a $109,000 increase in service fee income. The decrease in fair value of the MSR between the comparable periods was primarily due to a decrease in the change in fair value from interest rates of $5.5 million, offset by an increase from gains/losses on the MSR hedge of $4.9 million and a $414,000 increase in MSR decay.
• Trust and investment services income for the first quarter of 2025 increased by $4.5 million, or 43.7%, from the first quarter of 2024 as assets under management have increased by $2.0 billion, or 23.5%, in that same time frame. The trust and investment services income increased during the first quarter of 2025, primarily due to higher asset values and the addition of new clients through wealth management services provided by Private Capital Management, which became the Bank’s wholly owned subsidiary through the Company’s acquisition of Independent during the first quarter of 2025.
• Correspondent banking and capital markets income in the first quarter of 2025 increased by $5.2 million, or 121.4%, compared to the same period in 2024. The increase was primarily related to an increase of $2.1 million in income generated from the sale of customer swap ARC hedges during the first quarter of 2025 compared to the first quarter of 2024, resulting from the comparatively lower interest rate environment in 2025. The increase was also due to the expense attributable to the variation margin payments for centrally cleared swaps where we recorded an expense of $7.2 million related to variation margin payments in the first quarter of 2025 compared to an expense of $10.3 million in the first quarter of 2024.
• SBA income decreased by $1.1 million, or 25.9%, during the first quarter of 2025 compared to the same period in 2024. SBA income includes changes in fair value of the servicing asset, loan servicing fees and gains on sale of SBA loans. The decrease was attributable to lower gains on sale of SBA loans of $897,000 and decline in the change in fair value of the SBA servicing asset of $235,000.
• During the three months ended March 31, 2025, the Company recorded net losses of $228.8 million on the sales of investment securities, excluding the sales of investment securities acquired from Independent. See Note 5 — Securities for more information.
• The Company recorded a gain on sale of the properties of $229.3 million, net of transaction costs from a sale-leaseback transaction completed in February 2025. See Note 8 — Leases under Sale-leaseback Transaction section for more information.
• Bank owned life insurance income increased by $3.3 million, or 48.0%, during the first quarter of 2025 compared to the first quarter of 2024. Bank owned life insurance income increased as the Company acquired approximately $252.0 million of bank owned life insurance assets from the Independent acquisition which increased the income by approximately $1.7 million, and death proceeds on policies received during the first quarter of 2025 for approximately $1.5 million.
• Other income decreased by $2.2 million, or 35.7%, in the first quarter of 2025 compared to the same quarter in 2024. This decrease was primarily due to the Bank recognizing approximately $2.5 million in credits from an external vendor during the first quarter of 2024.

Noninterest Expense

(Dollars in thousands)

Noninterest expense increased by $159.5 million, or 64.0%, in the first quarter of 2025 compared to the same period in 2024. The quarterly increase in total noninterest expense primarily resulted from the following:

• Salaries and employee benefits increased by $45.4 million, or 30.1%, in the first quarter of 2025 compared to the same period in 2024. The increase was primarily associated with the addition of Independent employees during the first quarter of 2025. Salaries increased by $34.9 million resulting from both merit increases and an increase in the number of employees, along with higher employee benefits from higher FICA tax paid and medical insurance expense of $6.7 million.
• Occupancy expense increased $12.9 million, or 57.2%, in the first quarter of 2025 compared to the same period in 2024. The increase was primarily due to increases in branch maintenance and repair expenses and lease expense of $4.6 million and $5.4 million, respectively.
• Information services expense increased by $9.0 million, or 40.3% in the first quarter of 2025 compared to the same period in 2024. The increase was due to additional cost associated with the Company updating its systems and software as it grows in size and complexity.
• Amortization of intangibles increased by $17.8 million, or 297.3%, which is related to the Independent acquisition.
• FDIC assessment and other regulatory charges increased by $2.7 million, or 31.9%, in the first quarter of 2025 compared to the same period in 2024. The increase in the FDIC assessment was primarily due to an increase in the FDIC assessment rate to bring the overall FDIC insurance fund to 1.35 times total deposits by the end of 2028. The increase also reflects changes in the Company’s size and complexity along with the effects from the increase in the Company’s classified assets.
• The FDIC’s special assessment expense decreased by $3.9 million as the FDIC announced a projected reduction in the special assessment rate late 2024, resulting in no additional accrual recorded during the first quarter of 2025. The Company accrued a total of $3.9 million during the first quarter of 2024 based on the anticipation of a higher assessment that may be allocated to the Bank at that time.
• Merger, branch consolidation, severance related and other expense increased by $63.5 million to $68.0 million in the first quarter of 2025 compared to the same period in 2024 primarily due to the Independent acquisition. Of the $68.0 million of expense recognized in the first quarter of 2025, approximately $66.5 million pertains to the Independent acquisition.
• Other noninterest expense increased by $7.4 million, or 42.9%, in the first quarter of 2025 compared to the same period in 2024. This increase primarily resulted from a $2.7 million increase in other miscellaneous charge-offs and a $1.3 million increase in earnings credit expense to Homeowners Association (“HOA”) customers. The Bank provides a credit to HOA customers based on the average deposit balances held that reduces fees for other services provided. In addition, other miscellaneous expenses increased by approximately $2.2 million, which included increases from new expenses recorded as a result of the Independent acquisition including franchise tax payments, donations.

Income Tax Expense

Our effective tax rate was 26.53% for the three months ended March 31, 2025 compared to 25.05% for the three months ended March 31, 2024. The increase in the effective rate for the quarter, when compared to the same period in the prior year, is driven primarily by an increase in non-deductible executive compensation related to the acquisition of Independent, as well as an increase in non-deductible FDIC premiums, an increase in non-deductible merger expense, and one-time expense of $5.6 million related to the remeasurement of the Company’s deferred tax balances resulting from the acquisition of Independent and new blended income tax rate. This was partially offset by an increase in the cash surrender value of BOLI policies, increased tax-exempt interest income, and additional tax benefits associated with the vesting of incentive stock compensation during the first quarter of 2025.

Segment Reporting

As discussed in Note 23—Segment Reporting, the Company’s operations are managed and financial performance is evaluated on an organization-wide basis, and the Company’s banking and finance operations are considered by management to constitute one reportable operating segment, the General Banking Unit.

The Company’s Chief Operating Decision Maker (“CODM”), the Executive Committee, consists of the Company’s senior executive management team, including the Chief Executive Officer, Chief Strategy Officer, President, Chief Financial Officer, Chief Operating Officer, Chief Risk Officer, and other executives. The CODM generally meets monthly to assess performance of the General Banking Unit using a variety of figures, metrics and key performance indicators. In addition to net income and non-Tax Equivalent (“TE”) Net Interest Margin (“NIM”), the CODM considers Pre-Provision Net Revenue (“PPNR”) and TE NIM to make business decisions. The CODM monitors these profitability measures at each meeting, and is regularly featured in various investor presentations, earnings releases, and other internal management reports. These performance and profitability measures influence business decisions and allocation of resources within the General Banking Unit.

The table below provides PPNR and TE NIM information of the General Banking Unit.

Pre-Provision Net Revenue and Tax Equivalent Net Interest Margin

(Dollars in thousands)

Analysis of Financial Condition

Summary

Our total assets increased by approximately $18.8 billion, or 40.4%, from December 31, 2024 to approximately $65.1 billion at March 31, 2025. Within total assets, cash and cash equivalents increased by $1.9 billion, or 137.0% and loans increased by $12.9 billion or 37.9% during the period, while investment securities increased by $1.6 billion, or 23.5%. Within total liabilities, deposits grew $15.3 billion, or 40.1%, and federal funds purchased and securities sold under agreements to repurchase increased by $164.4 million, or 31.9%. Total borrowings increased by $361.3 million, or 92.3%. Total shareholder’s equity increased by $2.7 billion, or 46.4%. The increases in total assets, cash and cash equivalents, investment securities, loans, deposits and equity were all primarily driven by the acquisition of Independent on January 1, 2025. The increase in cash and cash equivalents was also due to the cash received from the sale-leaseback transaction of approximately $456.4 million, an increase in deposits (excluding deposits acquired with Independent) of approximately $68.0 million and an increase in federal funds purchased and securities sold under agreements to repurchase of $164.4 million. The increase in deposits excluding deposits acquired with Independent was mainly from the increases in money market accounts and time deposit accounts. Loans declined $263.2 million during the quarter, excluding the $13.1 billion in loans acquired in the Independent acquisition. Our loan to deposit ratio was 88% and 89% at March 31, 2025 and December 31, 2024, respectively, while our percentage of noninterest-bearing deposit accounts to total deposits was 26% and 27% at March 31, 2025 and December 31, 2024, respectively.

Investment Securities

We use investment securities, our second largest category of earning assets, to generate interest income, provide liquidity, fund loan demand or deposit liquidation, and to pledge as collateral for public funds deposits, repurchase agreements, derivative exposures and to augment borrowing capacity at the Federal Reserve Bank of Atlanta, and the Federal Home Loan Bank of Atlanta. At March 31, 2025, investment securities totaled $8.4 billion, compared to $6.8 billion at December 31, 2024, an increase of $1.6 billion, or 23.5%. During the first quarter of 2025, the Company acquired $1.6 billion in investment securities through the acquisition of Independent. A majority of these securities were subsequently sold during the quarter with the proceeds reinvested into securities that fit the Company’s investment strategy. The Company executed a securities repositioning during the quarter and sold investment securities with a book value of approximately $1.8 billion at a loss of $228.8 million and used the proceeds to purchase new securities. This securities repositioning improved the yield and risk weightings and shortened the duration of the investment portfolio. We purchased $3.3 billion in investment securities during the quarter from reinvesting funds provided by the sales of securities acquired from Independent and reinvesting proceeds from the sale of securities involved in the repositioning strategy. The increases in investment securities from the acquisition and purchases were partially offset as a result of maturities, calls, sales and paydowns of investment securities totaling $3.6 billion and a reduction from the net amortization of premiums of $2.4 million. Of the $3.3 billion in purchases of investment securities during the quarter, $3.2 billion were available-for-sale securities and $115.5 million were other investment securities. There were no purchases of held to maturity securities during the quarter. Other investment securities purchased were mainly related to capital stock with the Federal Home Loan Bank and Federal Reserve Bank. $38.0 million was redeemed by the Federal Home Loan Bank during the first quarter of 2025. The purchases in the Federal Home Loan Bank Stock and Federal Reserve Bank Stock during the quarter were mainly due to stock holding requirements related to the Independent acquisition. At March 31, 2025, approximately 69.7% of the investment portfolio was classified as available for sale, approximately 26.2% was classified as held to maturity and 4.1% was classified as other investments.

At March 31, 2025, the unrealized net loss of the available for sale securities portfolio was $505.1 million, or 7.9%, below its amortized cost basis, compared to an unrealized net loss of $808.6 million, or 15.8%, at December 31, 2024. At March 31, 2025, the unrealized net loss of the held to maturity securities portfolio was $375.5 million, or 17.1%, below its amortized cost basis, compared to an unrealized net loss of $420.1 million, or 18.6%, at December 31, 2024. The decrease in the unrealized net loss in the available for sale investment portfolio of $303.6 was mainly due to the securities repositioning transaction where the Company sold $1.8 billion in securities during the quarter and recognized a loss of $228.8 million. The proceeds from this transaction were reinvested in investment securities at current pricing. The decrease in the unrealized net loss for the held to maturity portfolio of $44.6 during the first three months of 2025 was due to changes in market interest rates during the quarter.

The following is the combined amortized cost and fair value of investment securities available for sale and held for maturity, aggregated by credit quality indicator:

(Dollars in thousands)

* Agency mortgage-backed securities (“MBS”), agency collateralized mortgage-obligations (“CMO”) and agency commercial mortgage-backed securities (“CMBS”) are guaranteed by the issuing government-sponsored enterprise (“GSE”) as to the timely payments of principal and interest. Except for Government National Mortgage Association securities, which have the full faith and credit backing of the United States Government, the GSE alone is responsible for making payments on this guaranty. While the rating agencies have not rated any of the MBS, CMO and CMBS issued, senior debt securities issued by GSEs are rated consistently as “Triple-A.” Most market participants consider agency MBS, CMOs and CMBSs as carrying an implied Aaa rating (S&P rating of AA+) because of the guarantees of timely payments and selection criteria of mortgages backing the securities. We do not own any private label mortgage-backed securities. The balances presented under the ratings above reflect the amortized cost of the investment securities.

At March 31, 2025, we had 1,123 investment securities, including both available for sale and held to maturity in an unrealized loss position, which totaled $893.6 million unrealized loss position. At December 31, 2024, we had 1,214 investment securities, including both available for sale and held to maturity, in an unrealized loss position, which totaled $1.3 billion. The total number of investment securities with an unrealized loss position decreased by 91 securities, while the total dollar amount of the unrealized loss decreased by $335.9 million. The reduction in the number of securities in a loss position and level of unrealized losses during the quarter was mainly due the securities repositioning strategy during the quarter where we sold certain available-for-sale investment securities and recognized the losses and then reinvested the proceeds in investment securities at current market prices. The reduction was also due to changes in interest rate during the quarter.

All investment securities in an unrealized loss position as of March 31, 2025, continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability and intent to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is more likely than not that we will not be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of our securities may be sold or would require a charge to earnings as a provision for credit losses in such periods. Any charges as a provision for credit losses related to investment securities could impact cash flow, tangible capital or liquidity. See Note 2 — Summary of Significant Accounting Policies and Note 5 — Securities for further discussion on the application of ASU 2016-13 on the investment securities portfolio.

As securities held for investment are purchased, they are designated as held to maturity or available for sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Although securities classified as available for sale may be sold from time to time to meet liquidity or other needs, it is not our normal practice to trade this segment of the investment securities portfolio. From time to time, the Bank may execute transactions to reposition the investment portfolio, as we did during the quarter ended March 31, 2025. Such activity has not expanded the broad asset classes used by the Bank. While management generally holds these assets on a long-term basis or until maturity, any short-term investments or securities available for sale could be converted at an earlier point, depending partly on changes in interest rates and alternative investment opportunities.

The following table presents a summary of our investment portfolio by contractual maturity and related yield as of March 31, 2025:

(Dollars in thousands)

(1) Yields on tax exempt income have been presented on a taxable equivalent basis in the table above.

(2) FRB, FHLB and other non-marketable equity securities have no set maturity date and are classified in “Due after 10 Years.”

(3) The total values presented in the table above represent total fair value for available for sale and amortized cost for held to maturity.

Approximately 83.6% (based on amortized cost) of the investment portfolio is comprised of U.S. Treasury securities, U.S. Government agency securities, and U.S. Government Agency Mortgage-backed securities. These securities may be pledged to the Federal Home Loan Bank of Atlanta or the Federal Reserve Bank of Atlanta Discount Window. Approximately 12.2% (based on amortized cost) of the investment portfolio is comprised of municipal securities. A portion of the municipal bond portfolio may be pledged to the Federal Home Loan Bank of Atlanta subject to their credit approval. Approximately 99% of the municipal bond portfolio has ratings in the Double A or Triple A category.

As of March 31, 2025, the portfolio had an effective duration of 4.77 years. We continue to monitor duration risk and seek to align actual duration with the target range.

The following table presents a summary of our investment portfolio duration for the periods presented:

(Dollars in thousands, duration in years)

66

Other Investments

Other investment securities include primarily our investments in FHLB and FRB stock with no readily determinable market value. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. As of March 31, 2025, we determined that there was no impairment on our other investment securities. As of March 31, 2025, other investment securities represented approximately $345.7 million, or 0.53% of total assets, and primarily consists of FHLB and FRB stock which totals to approximately $257.7 million, or 0.40% of total assets. There were no gains or losses on the sales of these securities for three months ended March 31, 2025 and 2024, respectively.

Trading Securities

We have a trading portfolio associated with our Correspondent Banking Division and its subsidiary SouthState|Duncan-Williams. This portfolio is carried at fair value and realized and unrealized gains and losses are included in trading securities revenue, a component of Correspondent Banking and Capital Markets Income in our Consolidated Statements of Income. Securities purchased for this portfolio have primarily been municipal bonds, treasuries and mortgage-backed agency securities, which are held for short periods of time and totaled $107.4 million and $102.9 million at March 31, 2025 and December 31, 2024, respectively.

Loans Held for Sale

The balance of loans held for sale increased $78.5 million from December 31, 2024 to $357.9 million at March 31, 2025. Loans held for sale at March 31, 2025 and December 31, 2024 consisted of mortgage and SBA loans held for sale.

During the third quarter of 2024, the Company began purchasing the guaranteed portions of SBA loans from third-party originators with the intent to aggregate the guaranteed portion of the SBA loans into pools with similar characteristics to create a security representing an interest in those pools through the SBA’s fiscal transfer agent. SBA loans held for sale totaled $271.1 million at March 31, 2025 compared to $181.3 million at December 31, 2024. See Note 20 — SBA Loans Held for Sale for more information.

Mortgage loans held for sale totaled $86.8 million at March 31, 2025, a decrease from $98.1 million at December 31, 2024. Total mortgage production was $459 million in the first quarter of 2025. This compares to $456 million in the fourth quarter of 2024. Mortgage production has remained relatively stable as mortgage rates declined slightly during the quarter. The percentage of mortgage production sold into the secondary market decreased to 56% at March 31, 2025 compared to 60% at December 31, 2024. The allocation of mortgage production between portfolio and secondary market depends on the Company’s liquidity, market spreads and rate changes during each period and will fluctuate over time.

Loans

The following table presents a summary of the loan portfolio by category (excludes loans held for sale):

(Dollars in thousands)

Total loans, net of deferred loan costs and fees (excluding mortgage loans held for sale), increased by $12.9 billion to $46.8 billion at March 31, 2025. Our non-acquired loan portfolio increased by $642.4 million, or 8.9% annualized, driven by organic growth and the migration of loans from acquired loans as they renew. Commercial non-owner-occupied loans, commercial owner-occupied real estate loans, consumer owner-occupied loans, commercial and industrial loans, home equity loans and construction and land development loans led the way with $307.9 million, $133.1 million, $103.8 million, $102.4 million, $33.7 million and $4.3 million in year-to-date loan growth, respectively, or 16.2%, 11.9%, 6.4%, 7.4%, 10.1% and .8% annualized growth, respectively. The acquired loan portfolio increased by $12.2 billion. This increase in acquired loans was due to the addition of $13.1 billion from the acquisition of Independent, net of offsets from paydowns and payoffs in both the PCD and Non-PCD loan categories along with renewals of acquired loans that were moved to our non-acquired loan portfolio. The main categories that increased were commercial non-owner-occupied loans, commercial and industrial loans, commercial owner-occupied real estate loans, construction and land development loans, consumer owner-occupied loans and other income producing property loans which increased by $5.8 billion, $1.8 billion, $1.6 billion, $1.3 billion, $919.8 million and $687.0 million, respectively, during the quarter. Acquired loans as a percentage of total loans increased to 35.7% and non-acquired loans as a percentage of the overall portfolio decreased to 64.3% at March 31, 2025. This compares to acquired loans as a percentage of total loans of 13.3% and non-acquired loans as a percentage of total loans of 86.7% at December 31, 2024.

Total commercial non-owner-occupied loans of $15.5 billion, approximately 33.2% of the total loans held for investment, was the largest category of the loan portfolio as of March 31, 2025. As of March 31, 2025, approximately 94% of the commercial non-owner-occupied portfolio was located within the Company’s footprint. Of the $15.5 billion, approximately $1.8 billion, or 4% of the total loans, represented our office segment. Approximately 96% of the office segment was located in the Company’s footprint and approximately 5% was located within the metropolitan or central business district.

The following table presents the top eight loan segments of the commercial non-owner-occupied loan category (excluding loans held for sale). The loan segments in the table below are determined by the call code, used for the Bank’s regulatory reporting requirements issued by the FDIC for the FFIEC 041, also referred to as the Call Report.

(Dollars in thousands)

(1) Net book balance in each segment that represents 2% or more of commercial non-owner-occupied portfolio as of March 31, 2025.

Allowance for Credit Losses (“ACL”) on Loans and Certain Off-Balance-Sheet Credit Exposures

The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. The Company records loans charged off against the ACL and subsequent recoveries, if any, increase the ACL when they are recognized. Please see Note 1 — Summary of Significant Accounting Policies, under the “ACL – Loans” section, of our Annual Report on Form 10-K for the year ended December 31, 2024 and Note 2 — Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL on loans.

Management considers forward-looking information in estimating expected credit losses. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is used by management to determine the best estimate within the range of expected credit losses. Management evaluates the appropriateness of the reasonable and supportable forecast scenarios and takes into consideration the scenarios in relation to actual economic and other data, such as gross domestic product growth, monetary and fiscal policy, inflation, supply chain issues and global events like the Russian/Ukraine conflict, unrest in middle east, and changes in global trade policy, as well as the volatility and magnitude of changes within those scenarios quarter over quarter, and consideration of conditions within the Bank’s operating environment and geographic area. Additional forecast scenarios may be weighted along with the baseline forecast to arrive at the final reserve estimate. While periods of relative economic stability should generally lead to stability in forecast scenarios and weightings to estimate credit losses, periods of instability can likewise require management to adjust the selection of scenarios and weightings, in accordance with the accounting standards. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors within four quarters using a straight-line approach. The Company generally uses an eight-quarter forecast and a four-quarter reversion period.

In spite of the rapid interest rate hikes experienced cycle-to-date, the U.S. has thus far avoided a recession, although an inverted yield curve such as observed in the current interest rate environment often portends a coming recession. Management continues to use a blended forecast scenario of the baseline, upside, and more severe scenario, depending on the circumstances and economic outlook. For the quarter ending March 31, 2025, management selected a baseline weighting of 40%, a 30% weighting for an upside scenario and a 30% weighting for the more severe scenario. The scenario weightings were unchanged from the prior quarter. Scenario weightings are generally expected to remain stable but are reviewed on a quarterly basis. The scenario weightings reflect continued recognition of downside risks in the economic forecast from persistent levels of inflation, high interest rates, and tightening credit conditions conducive of a mild recession. While employment figures still show resilience and actual loan losses remain at low levels, continued projected borrower weakness related to high interest rates, uncertainty, and lingering chances of an economic downturn continue to moderate optimism in the path of the forecast and kept expected losses mostly flat. The Company recorded a total provision for credit losses of $100.6 million for the first quarter of 2025, which included an initial provision for credit losses of $80.0 million and $12.1 million for Non-PCD loans and unfunded commitments, respectively, acquired from Independent. Excluding this initial provision for balances acquired from Independent, the Company recorded a provision for credit losses of $3.7 million and $4.8 million for funded loans and unfunded commitments, respectively, during the first quarter of 2025.

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. Please see MD&A, under the “Financial Condition”, “Allowance for Credit Losses (“ACL”)” section, of our Annual Report on Form 10-K for the year ended December 31, 2024 and Note 2 — Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL on certain off-balance-sheet credit exposures.

As of March 31, 2025, the balance of the ACL was $623.7 million or 1.33% of total loans. The ACL increased $158.4 million from the balance of $465.3 million recorded at December 31, 2024. The net increase during the first quarter of 2025 included an initial provision related to PCD loans acquired from Independent of $118.6 million, an initial provision related to Non-PCD loans acquired from Independent of $80.0 million, a $3.7 million provision for all other loans, and $43.9 million in net charge-offs, which included $39.4 million of acquisition date charge-offs on PCD loans acquired from Independent. During the three months ended March 31, 2025, the Company recorded a provision for credit losses based on loan growth and current forecasts applied to our modeling to adequately capture potential economic recessionary risks.

At March 31, 2025, the Company had a reserve on unfunded commitments of $62.3 million, which was recorded as a liability on the Consolidated Balance Sheet, compared to $45.3 million at December 31, 2024. During the three months ended March 31, 2025, the Company recorded an increase in the reserve for unfunded commitments of $16.9 million, which was comprised of $12.1 million in the initial provision for unfunded commitments acquired from Independent and $4.8 million for all other unfunded commitments. This amount was recorded in Provision for Credit Losses on the Consolidated Statements of Income. For the comparative period in 2024, the Company had a reserve on unfunded commitments of $53.2 million recorded at March 31, 2024. The Company did not have an allowance for credit losses or record a provision for credit losses on investment securities or other financial assets during the first three months of 2025.

The ACL provides 2.29 times coverage of nonperforming loans at March 31, 2025. Net charge-offs to the total average loans during the three months ended March 31, 2025 were 0.38%, including the acquisition date charge-offs on PCD loans acquired from Independent, compared to 0.03% during the three months ended March 31, 2024. We continued to experience solid and stable asset quality numbers and ratios as of March 31, 2025.

The following table provides the allocation, by segment, for expected credit losses as of March 31, 2025:

(Dollars in thousands)

* Loan balance in each category expressed as a percentage of total loans.

The following table presents a summary of net charge-off ratios (annualized) by loan segment, for the quarters ended March 31, 2025 and 2024:

(Dollars in thousands)

The following table presents a summary of the changes in the ACL, for the three months ended March 31, 2025, and 2024:

(Dollars in thousands)

Nonperforming Assets (“NPAs”)

The following table summarizes our nonperforming assets for the past five quarters:

(Dollars in thousands)

(1) Consists of real estate acquired as a result of foreclosure.

(2) Consists of non-real estate foreclosed assets, such as repossessed vehicles.

(3) Includes nonaccrual loans that are purchase credit deteriorated (PCD loans).

(4) Loan data excludes mortgage loans held for sale.

(5) For purposes of this calculation, total assets include all assets (both acquired and non-acquired).

(6) Excludes non-acquired bank properties held for sale of $2.9 million, $3.3 million, $5.2 million, $6.1 million, and $9.0 million as of March 31, 2025, December 31, 2024, September 30, 2024, June 30, 2024 and March 31, 2024, respectively, that is now separately disclosed on the balance sheet.

(7) Excludes acquired bank properties held for sale of $72.0 million, $0, $0, $0, and $0 as of March 31, 2025, December 31, 2024, September 30, 2024, June 30, 2024 and March 31, 2024, respectively, that is now separately disclosed on the balance sheet. This was one property acquired in the acquisition of Independent.

Total nonperforming assets were $280.4 million, or 0.60% of total loans and repossessed assets, at March 31, 2025, an increase of $67.1 million, or 31.4%, from December 31, 2024. Total nonperforming loans were $272.2 million, or 0.58%, of total loans, at March 31, 2025, an increase of $61.6 million, or 31.4%, from December 31, 2024. Non-acquired nonperforming loans increased by $9.7 million from December 31, 2024. The increase in non-acquired nonperforming loans was driven primarily by an increase in commercial nonaccrual loans of $7.6 million, an increase in consumer nonaccrual loans of $1.7 million, and an increase in modified loans to a borrower experiencing financial difficulty of $479,000. Acquired nonperforming loans increased $51.9 million from December 31, 2024. The increase in the acquired nonperforming loan balances was due primarily to an increase in commercial nonaccrual loans of $51.4 million and an increase in accruing loans past due 90 days or more of $537,000. The majority of the increase in acquired commercial nonaccrual loans was due to the addition of $53.7 million in loans acquired in the merger with Independent, offset by a $2.3 million decline in legacy commercial nonaccrual loans. The $53.7 million in loans acquired were primarily commercial real estate and commercial and industrial loans.

Interest-Bearing Liabilities

Interest-bearing liabilities include interest-bearing transaction accounts, savings deposits, CDs, other time deposits, federal funds purchased, securities sold under agreements to repurchase and other borrowings. Interest-bearing transaction accounts include NOW, HSA, Interest on Layers’ Trust Accounts (“IOLTA”), and Market Rate checking accounts.

Total interest-bearing deposits increased by $11.7 billion, or 170.4% annualized, to $39.6 billion at March 31, 2025 from $27.9 billion at December 31, 2024. This increase was mainly driven by interest-bearing deposits of $10.8 billion as of March 31, 2025 acquired from Independent on January 1, 2025. Interest-bearing checking accounts increased $3.8 billion during the quarter which was driven by $3.9 billion as of March 31, 2025 in interest-bearing checking accounts acquired in the Independent acquisition. Savings accounts increased by $525.2 million during the quarter which was driven by $475.6 million as of March 31, 2025 in savings accounts acquired in the Independent acquisition. Money market accounts increased $4.4 billion during the quarter which was driven by $3.9 billion as of March 31, 2025 in money market accounts acquired in the Independent acquisition. Money market accounts additionally increased $475.3 million as customers continue to move funds from lower yielding deposit products seeking higher yields in money market accounts. Time deposits increased $3.0 billion during the quarter which was driven by $2.2 billion as of March 31, 2025 in time deposits acquired in the Independent acquisition. The additional growth in time deposits was due to an increase in brokered time deposits of $775.5 million during the quarter. Federal funds purchases related to the Correspondent Banking Division and securities sold under agreements to repurchase were $679.3 million at March 31, 2025, a $164.4 million increase from December 31, 2024. Corporate and subordinated debentures increased by $361.3 million to $752.8 million and was due to $360.5 in corporate and subordinated debentures assumed in the Independent acquisition.

As noted above, excluding the money market accounts acquired in the Independent acquisition, the Company continued to see higher yielding money market accounts increase during the first quarter of 2025. The Company raised interest rates on most interest-bearing deposit products (in particular money market accounts and time deposit specials) due to competitive pressures to retain deposits. Average interest-bearing deposits increased $12.9 billion to $39.3 billion in the quarter ended March 31, 2025 compared to the same period in 2024. For more information on the composition of our total deposits, see Note 9 — Deposits.

Noninterest-Bearing Deposits

Noninterest-bearing deposits are transaction accounts that provide our Bank with “interest-free” sources of funds. At March 31, 2025, the period end balance of noninterest-bearing deposits of $13.8 billion increased compared to the balance at December 31, 2024 of $10.2 billion. At March 31, 2025, the period-end balance of noninterest-bearing deposits included $3.9 billion assumed in the Independent acquisition. Noninterest-bearing deposits, excluding the deposits assumed during the quarter, declined $290.1 million. Average noninterest-bearing deposits were $13.5 billion for the first quarter of 2025 compared to $10.5 billion for the first quarter of 2024. This increase in the average noninterest bearing deposits from the quarter ended March 31, 2024 was due to the deposits assumed in the Independent acquisition.

Uninsured Deposits

At March 31, 2025 and December 31, 2024, the Company had approximately $21.8 billion and $14.7 billion, respectively, in estimated uninsured deposits. Total uninsured deposits at March 31, 2025 included $7.1 billion related to the Independent deposit base. The amounts above are estimates and are based on the same methodologies and assumptions used for the Bank’s regulatory reporting requirements issued by the FDIC for the FFIEC 041, also referred to as the Call Report.

Capital Resources

Our ongoing capital requirements have been met primarily through retained earnings, less the payment of cash dividends. During the first quarter of 2025, the Company issued $2.5 billion in stock related to the acquisition of Independent. As of March 31, 2025, shareholders’ equity was $8.6 billion, an increase of $2.7 billion, or 46.4%, from December 31, 2024.

The following table shows the changes in shareholders’ equity during the three months ended March 31, 2025.

(Dollars in thousands)

The Company did not repurchase any shares under the under the 2025 Repurchase Program during the first quarter of 2025. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, general business conditions, regulatory requirements, the market price of our common stock, and the availability of alternative investment opportunities. As of March 31, 2025, a total of 3,000,000 authorized shares remained available for repurchase.

Under current regulations, the Company and the Bank are subject to a minimum ratio of common equity Tier 1 capital (“CET1”) to risk-weighted assets of 4.5% and a minimum required ratio of Tier 1 capital to risk-weighted assets of 6%. The minimum required leverage ratio is 4%. The minimum required total capital to risk-weighted assets ratio is 8%. Refer to Note 17 — Capital Ratios for more information regarding Company and Bank’s regulatory capital compliance requirements.

The well-capitalized minimums and the Company’s and the Bank’s regulatory capital ratios for the following periods are reflected below:

The Company’s and Bank’s Common equity Tier 1 risk-based capital, Tier 1 risk-based capital and total risk-based capital and Tier 1 leverage ratios as of March 31, 2025 all declined as compared to December 31, 2024. The capital ratios declined due mainly to the effects on capital and assets from the acquisition with Independent. Tier 1 capital increased by 20.5% and 26.7% at both the Company and Bank, respectively, with the increase in equity resulting from the issuance of shares of common stock for the Independent acquisition and the net income recognized during the quarter. Total risk-based capital increased by 26.5% and 27.0% at both the Company and Bank, respectively, with the increase in equity resulting from the issuance of shares of common stock for the Independent acquisition, the net income recognized during the quarter along with the increase in the allowance for credit losses and unfunded commitments includable in Tier 2 capital. Both regulatory risk-based assets and quarterly average assets increased in the first quarter of 2025 when compared to the fourth quarter with average assets for both the Company and Bank increasing by 35.9% and risk-based assets increasing by 37.9%. The increases in both average assets and risk-based assets were due to the assets acquired in the Independent acquisition during the quarter ended March 31, 2025. Our capital ratios are currently well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification.

Liquidity

Liquidity refers to our ability to generate sufficient cash to meet our financial obligations, which arise primarily from the withdrawal of deposits, extension of credit and payment of operating expenses. Liquidity risk is the risk that the Bank’s financial condition or overall safety and soundness is adversely affected by an inability (or perceived inability) to meet its obligations. Our Asset Liability Management Committee (“ALCO”) is charged with the responsibility of monitoring policies designed to ensure an acceptable composition of our asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management. We have employed our funds in a manner to provide liquidity from both assets and liabilities sufficient to meet our cash needs.

The ALCO has established key risk indicators to monitor liquidity and interest rate risk. The key risk indicators are reviewed and approved by the ALCO on an annual basis. The liquidity key risk indicators include the loan to deposit ratio (policy limit not to exceed 100%), net noncore funding dependence ratio (policy limit not to exceed 30%), on-hand liquidity to total liabilities ratio (policy limit not to fall below 5%), the percentage of securities pledged to total securities (policy limit not to exceed 85%), primary liquidity to uninsured deposits excluding collateralized deposits (policy limit to maintain a minimum of 95%), primary liquidity to uninsured deposits including collateralized deposits (policy limit to maintain a minimum of 80%) and the ratio of brokered deposits to total deposits (policy limit not to exceed 15%). As of March 31, 2025, the Company was operating within its liquidity policy limits except for the primary liquidity to uninsured deposits including collateralized deposits coverage ratio. This ratio temporarily did not meet the policy threshold of 80% due to the Independent acquisition and operational timing related to the movement of collateral. Management expects the ratio to return within the policy limit during the second quarter of 2025.

Asset liquidity is maintained by the maturity structure of loans, investment securities and other short-term investments. Management has policies and procedures governing the length of time to maturity on loans and investments. Normally, changes in the earning asset mix are of a longer-term nature and are not used for day-to-day corporate liquidity needs.

Our liabilities provide liquidity on a day-to-day basis. Daily liquidity needs are met from deposit levels or from our use of federal funds purchased, securities sold under agreements to repurchase, interest-bearing deposits at other banks and other short-term borrowings. We engage in routine activities to retain deposits intended to enhance our liquidity position. These routine activities include various measures, such as the following:

• Emphasizing relationship banking to new and existing customers, where borrowers are encouraged and normally expected to maintain deposit accounts with our Bank;
• Pricing deposits, including certificates of deposit, at rate levels that will attract and /or retain balances of deposits that will enhance our Bank’s asset/liability management and net interest margin requirements; and
• Continually working to identify and introduce new products that will attract customers or enhance our Bank’s appeal as a primary provider of financial services.

Our non-acquired loan portfolio increased in the three months ended March 31, 2025 by approximately $642.4 million, or approximately 8.9% annualized, compared to the balance at December 31, 2024. The increase from December 31, 2024 was mainly related to organic growth and renewals of acquired loans that are moved to our non-acquired loan portfolio. The acquired loan portfolio increased by $12.2 billion from the balance at December 31, 2024 due to acquisition of the Independent loan portfolio of $13.1 billion during the quarter. The acquired loans portfolio had reductions totaling $905.6 million through principal paydowns, charge-offs, foreclosures and renewals of acquired loans.

Our investment securities portfolio (excluding trading securities) increased in the three months ended March 31, 2025 by $1.6 billion compared to the balance at December 31, 2024. During the first quarter of 2025, the Company acquired $1.6 billion in investment securities through the acquisition of Independent. These securities were subsequently sold during the quarter with the proceeds reinvested into purchases of new securities that fit the Company’s investment strategy. The Company also conducted a securities repositioning during the quarter where it sold approximately $1.8 billion in investment securities at a loss of $228.8 million and used the proceeds to purchase new securities. This securities repositioning improved the yield and shortened the duration of the investment portfolio. Increases in the investment securities portfolio came from $1.6 billion in securities acquired in the Independent acquisition and $3.3 billion in investment securities purchased during the quarter from reinvesting funds provided by the sales of securities acquired from Independent and securities repositioning strategy. The increases in investment securities from the acquisition and purchases were partially offset as a result of maturities, calls, sales and paydowns of investment securities totaling $3.6 billion and a reduction from the net amortization of premiums of $2.4 million. The market value of the available for sale securities also increased during quarter by $303.6 million mainly through the securities repositioning and the recognition of losses in the portfolio. Of the $3.3 billion in purchases of investment securities during the quarter, $3.2 billion were in available-for-sale securities and $115.5 million were in other investment securities. There were no purchases of held to maturity securities during the quarter. Other investment securities purchased were mainly related to capital stock with the Federal Home Loan Bank and Federal Reserve Bank of which we sold back $38.0 million during the first quarter of 2025. The purchases in the Federal Home Loan Bank Stock and Federal Reserve Bank Stock during the quarter were mainly due to stock holding requirements related to the Independent acquisition. The Bank pledges a portion of its available-for-sale and held-to-maturity investment portfolios for a variety of purposes, including, but not limited to, collateral for public funds and credit with the Federal Home Loan Bank of Atlanta. As of March 31, 2025, the bank pledged 69.4% of the market value of its available-for-sale and held-to-maturity investment portfolios. As of March 31, 2025, the Bank had unpledged securities with a market value of $2.3 billion. These securities included Treasury, Agency, Agency MBS, Municipals and Corporate securities.

Total cash and cash equivalents were $3.3 billion at March 31, 2025 as compared to $1.4 billion at December 31, 2024. The increase in cash and cash equivalents was primarily due to the cash and cash equivalents acquired in the Independent acquisition of $1.0 billion, the cash received from the sale-leaseback transaction of approximately $456.4 million, an increase in deposits (excluding deposits acquired with Independent) of approximately $68.0 million and an increase in federal funds purchased and securities sold under agreements to repurchase of $164.4 million.

At March 31, 2025, and December 31, 2024, we had $1.4 billion and $614.5 million of traditional, out–of–market brokered time deposits, respectively. At March 31, 2025, and December 31, 2024, we had $4.3 billion and $2.5 billion, respectively, of reciprocal brokered deposits. Total deposits were $53.3 billion at March 31, 2025, an increase of $15.3 million from $38.1 billion at December 31, 2024. Our deposit growth since December 31, 2024 was mainly attributable to the deposits acquired in the Independent acquisition of $15.2 billion. See further discussion on changes in deposits in the Interest-Bearing Liabilities and Noninterest-Bearing Deposits section of this MD&A. Total short-term borrowings at March 31, 2025 were $679.3 million, consisting of $398.7 million in federal funds purchased and $280.7 million in securities sold under agreements to repurchase. Total long-term borrowing at March 31, 2025, were $752.8 million and consisted of trust preferred securities and subordinated debentures. To the extent that we employ other types of non-deposit funding sources, typically to accommodate retail and correspondent customers, we continue to take in shorter maturities of such funds. Our current approach may provide an opportunity to sustain a low funding rate or possibly lower our cost of funds but could also increase our cost of funds if interest rates rise.

Deposit flows are significantly influenced by general and local economic conditions, changes in prevailing interest rates, internal pricing decisions and competition. Our deposits are primarily obtained from depositors located around our branch footprint, and we believe that we have attractive opportunities to capture additional retail and commercial deposits in our markets, in addition to having access to brokered deposits. Of the $53.3 billion in total deposits at March 31, 2025, approximately 68% were insured or collateralized. The Bank has a granular deposit base comprised of over 1.7 million accounts, with an average deposit size of $31,000. The top ten and twenty deposit relationships comprise approximately 3% and 4% of total deposits, and approximately 26% of total deposits are noninterest-bearing.

As discussed previously and presented below, the Bank maintains credit facilities with the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank of Atlanta. The table below compares Primary Funding Sources to uninsured deposits as of March 31, 2025.

(Dollars in millions)

Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes. We believe that we have adequate sources of liquidity to fund commitments that are drawn upon by the borrowers. In addition to commitments to extend credit, we also issue standby letters of credit, which are assurances to third parties that they will not suffer a loss if our customer fails to meet its contractual obligation to the third-party. Although our experience indicates that many of these standby letters of credit will expire unused, through our various sources of liquidity, we believe that we will have the resources to meet these obligations should the need arise.

Our ongoing philosophy is to remain in a liquid position, as reflected by such indicators as the composition of our earning assets, typically including some level of reverse repurchase agreements; federal funds sold; balances at the Federal Reserve Bank; and/or other short-term investments; asset quality; well-capitalized position; and profitable operating results. Cyclical and other economic trends and conditions can disrupt our desired liquidity position at any time. We expect that these conditions would generally be of a short-term nature. Under such circumstances, we expect our reverse repurchase agreements and federal funds sold positions, or balances at the Federal Reserve Bank, if any, to serve as the primary source of immediate liquidity. We could draw on additional alternative immediate funding sources from lines of credit extended to us from our correspondent banks. The Bank may also access funds from borrowing facilities established with the Federal Home Loan Bank of Atlanta and the discount window of the Federal Reserve Bank of Atlanta.

At March 31, 2025, the Bank had a total FHLB credit facility of $9.8 billion, with no outstanding borrowings in short-term FHLB advances and $2.3 million FHLB letters of credit outstanding at quarter-end, leaving $9.8 billion in availability on the FHLB credit facility. At March 31, 2025, the Bank had $1.8 billion of credit available at the Federal Reserve Bank’s discount window and federal funds credit lines of $300.0 million with no balances outstanding at March 31, 2025. The Bank has $2.3 billion in market value of unpledged securities at March 31, 2025, that can be pledged to attain additional funds if necessary. The Bank also has an internal limit on brokered deposits of 15% of total deposits, which would allow capacity of $8.0 billion at March 31, 2025. The Bank had $2.1 billion of outstanding brokered deposits at the end of the quarter-end leaving $5.9 billion in available capacity as per the internal policy limit of 15% of total deposits. All of the primary sources noted in the table above and the brokered deposit remaining available capacity would provide an additional $23.0 billion in funding if we needed additional liquidity. We can also consider actions such as deposit promotions to increase core deposits. The Company has a $100.0 million unsecured line of credit with U.S. Bank National Association with no balance outstanding at March 31, 2025. We believe that our liquidity position continues to be adequate and readily available.

In addition to adequate liquidity, the Company and Bank are considered well capitalized by all regulatory capital standards as the Company and the Bank were significantly above the required capital levels as of March 31, 2025. The Company’s tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 8.91%, 11.03% and 13.72%, respectively, at March 31, 2025. The Bank’s Tier 1 leverage ratio, CET 1 risk-based capital ratio and total risk-based capital ratio were 9.92%, 12.29% and 13.48%, respectively, at March 31, 2025. As permitted, we elected to exclude accumulated other comprehensive income related to available for sale securities from Tier 1, CET 1 and total risk-based capital; however, even if our unrealized losses as of March 31, 2025 in our available for sale and held to maturity investment portfolios were recognized by selling the portfolios for liquidity purposes, all else being equal, our regulatory capital ratios would remain well in excess of the minimum standards and continue to be in the “well capitalized” regulatory classification.

Our contingency funding plan describes several potential stages based on stressed liquidity levels. Liquidity key risk indicators are reported to the Board of Directors on a quarterly basis. As noted previously, we maintain various wholesale sources of funding. If our deposit retention efforts were to be unsuccessful, we would use these alternative sources of funding. Under such circumstances, depending on the external source of funds, our interest cost would vary based on the range of interest rates charged. This could increase our cost of funds, impacting our net interest margin and net interest spread.

Asset-Liability Management and Market Risk Sensitivity

Our earnings and the economic value of equity vary in relation to the behavior of interest rates and the accompanying fluctuations in market prices of certain of our financial instruments. We define interest rate risk as the risk to earnings and equity arising from the behavior of interest rates. These behaviors include increases and decreases in interest rates as well as continuation of the current interest rate environment.

Our interest rate risk principally consists of reprice, option, basis, and yield curve risk. Reprice risk results from differences in the maturity or repricing characteristics of asset and liability portfolios. Option risk arises from embedded options in the investment and loan portfolios such as investment securities calls and loan prepayment options. Option risk also exists since deposit customers may withdraw funds at their discretion in response to general market conditions, competitive alternatives to existing accounts or other factors. The exercise of such options may result in higher costs or lower revenue. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in narrowing spreads on interest-earning assets and interest-bearing liabilities. Basis risk also exists in administered rate liabilities, such as interest-bearing checking accounts, savings accounts, and money market accounts where the price sensitivity of such products may vary relative to general markets rates. Yield curve risk refers to adverse consequences of nonparallel shifts in the yield curves of various market indices that impact our assets and liabilities.

We use simulation analysis as a primary method to assess earnings at risk and equity at risk due to assumed changes in interest rates. Management uses the results of its various simulation analyses in combination with other data and observations to formulate strategies designed to maintain interest rate risk within risk tolerances.

Simulation analysis involves the use of several assumptions including, but not limited to, the timing of cash flows such as the terms of contractual agreements, investment security calls, loan prepayment speeds, deposit attrition rates, the interest rate sensitivity of loans and deposits relative to general market rates, and the behavior of interest rates and spreads. The assumptions for loan prepayments, deposit decay, and nonstable deposit balances are derived from models that use historical bank data. These models are independently validated. Equity at risk simulation uses assumptions regarding discount rates that value cash flows. Simulation analysis is highly dependent on model assumptions that may vary from actual outcomes. Key simulation assumptions are subject to sensitivity analysis to assess the impact of assumption changes on earnings at risk and equity at risk. Model assumptions are reviewed by our Assumptions Committee. While the Bank is continuously refining its modeling methodology, the core principles of the methodology have remained stable over for several years.

Earnings at risk is defined as the percentage change in net interest income due to assumed changes in interest rates. Earnings at risk is generally used to assess interest rate risk over relatively short time horizons.

Equity at risk is defined as the percentage change in the net economic value of assets and liabilities due to changes in interest rates compared to a base net economic value. The discounted present value of all cash flows represents our economic value of equity. Equity at risk is generally considered a measure of the long-term interest rate exposures of the balance sheet at a point in time.

The earnings simulation models consider our contractual agreements with regard to investments, loans, deposits, borrowings, and derivatives as well as a number of behavioral assumptions applied to certain assets and liabilities.

Mortgage banking derivatives used in the ordinary course of business consist of forward sales contracts and interest rate lock commitments on residential mortgage loans. These derivatives involve underlying items, such as interest rates, and are designed to mitigate risk. Derivatives are also used to hedge mortgage servicing rights. For additional information see Note 16 — Derivative Financial Instruments in the consolidated financial statements.

From time to time, we execute interest rate swaps to hedge some of our interest rate risks. Under these arrangements, the Company enters into a variable rate loan with a client in addition to a swap agreement. The swap agreement effectively converts the client’s variable rate loan into a fixed rate loan. The Company then enters into a matching swap agreement with a third-party dealer to offset its exposure on the customer swap. The Company may also execute interest rate swap agreements that are not specific to client loans. As of March 31, 2025, the Company had a series of short-term interest rate hedges to address monthly accrual mismatches related to the Company’s ARC program and its transition from LIBOR to SOFR after June 30, 2023. For additional information on these derivatives refer to Note 16 — Derivative Financial Instruments in the consolidated financial statements.

Our interest rate risk key indicators are applied to a static balance sheet using forward rates from the Moody’s Baseline Scenario. The Company will also use other rate forecasts, including, but not limited to, Moody’s Consensus Scenario. This Base Case Scenario assumes the maturity composition of asset and liability rollover volumes is modeled to approximately replicate current consolidated balance sheet characteristics throughout the simulation. These treatments are consistent with the Company’s goal of assessing current interest rate risk embedded in its current balance sheet. The Base Case Scenario assumes that maturing or repricing assets and liabilities are replaced at prices referencing forward rates derived from the selected rate forecast consistent with current balance sheet pricing characteristics. Key rate drivers are used to price assets and liabilities with sensitivity assumptions used to price non-maturity deposits. The sensitivity assumptions for the pricing of non-maturity deposits are subjected to sensitivity analysis no less frequently than on an annual basis.

Interest rate shocks are applied to the Base Case on an instantaneous basis. Our policy establishes the use of upward and downward interest rate shocks applied in 100 basis point increments through 400 basis points. We calculate smaller rate shocks as needed. At times, market conditions may result in assumed rate movements that will be deemphasized. For example, during a period of ultra-low interest rates, certain downward rate shocks may be impractical. The model simulation results produced from the Base Case Scenario and related instantaneous shocks for changes in net interest income and changes in the economic value of equity are referred to as the Core Scenario Analysis and constitute the policy key risk indicators for interest rate risk when compared to risk tolerances. As of March 31, 2025, the Company was operating within its interest rate key risk indicator policy limits.

During 2024 and for the three months ended March 31, 2025, the beta assumption applied to total deposits increased to reflect changes in deposit mix. Management recognizes the difficulty in using historical data to forecast deposit betas in the current environment. For internal purposes, and based on the deposit mix as of March 31, 2025, the total deposit beta assumption was 37.7%. For internal forecasting, management will apply overlays to certain assumptions to adjust for current market conditions rather than use assumptions modeled over longer periods of time.

The following interest rate risk metrics are derived from analysis using the Moody’s Baseline Scenario published in January 2025 as the Base Case Scenario. As of March 31, 2025, the earnings simulations indicated that the year 1 impact of an instantaneous 100 basis point parallel increase / decrease in rates would result in an estimated 1.1% increase (up 100) and 1.3% decrease (down 100) in net interest income.

We use Economic Value of Equity (“EVE”) analysis as an indicator of the extent to which the present value of our capital could change, given potential changes in interest rates. This measure also assumes a static balance sheet (Base Case Scenario) with rate shocks applied as described above. At March 31, 2025, the percentage change in EVE due to a 100-basis point increase or decrease in interest rates was 2.0% decrease and 1.0 % increase, respectively. The percentage changes in EVE due to a 200-basis point increase or decrease in interest rates were 4.7% decrease and 1.0% increase, respectively. Downward shocks are constrained on various balance sheet categories due to the inability to price products below floors or zero. This is particularly meaningful given the cost of deposits as of March 31, 2025.

The analysis below reflects a Base Case and shocked scenarios that assume a static balance sheet projection where volume is added to maintain balances consistent with current levels. Base Case assumes new and repricing volumes reference forward rates derived from the Moody’s Baseline rate forecast. Instantaneous, parallel, and sustained interest rate shocks are applied to the Base Case scenario over a one-year time horizon.

Deposit Concentrations

At March 31, 2025, and December 31, 2024, we have no material concentration of deposits from any single customer or group of customers. We have no significant portion of our deposits concentrated within a single industry or group of related industries. We do not believe there are any material seasonal factors that would have a material adverse effect on us. The total deposit balances held by top 10 and 20 deposit holders were below 5% of the Company’s average total deposit balances at March 31, 2025. We do not have any foreign deposits.

Concentration of Credit Risk

Each category of earning assets has a certain degree of credit risk. We use various techniques to measure credit risk. Credit risk in the investment portfolio can be measured through bond ratings published by independent agencies. In the investment securities portfolio, the investments consist of U.S. government-sponsored entity securities, tax-free securities, or other securities having ratings of “AAA” to “Not Rated”. All securities, with the exception of those that are not rated, were rated by at least one of the nationally recognized statistical rating organizations. The credit risk of the loan portfolio can be measured by historical experience. We maintain our loan portfolio in accordance with credit policies that we have established. Although the Bank has a diversified loan portfolio, a substantial portion of our borrowers’ abilities to honor their contracts is dependent upon economic conditions within our geographic footprint and the surrounding regions.

We consider concentrations of credit to exist when, pursuant to regulatory guidelines, the amounts loaned to a multiple number of borrowers engaged in similar business activities which would cause them to be similarly impacted by general economic conditions represents 25% of total Tier 1 capital plus regulatory adjusted allowance for credit losses of the Company, or $1.5 billion at March 31, 2025. Based on this criteria, we had eight such credit concentrations at March 31, 2025, including loans to lessors of nonresidential buildings (except mini-warehouses) of $10.3 billion, loans secured by owner-occupied office buildings (including medical office buildings) of $2.4 billion, loans secured by owner-occupied nonresidential buildings (excluding office buildings) of $3.1 billion, loans to lessors of residential buildings (investment properties and multi-family) of $3.8 billion, loans secured by 1st mortgage 1-4 family owner-occupied residential property (including condos and home equity lines) of $11.3 billion, loans secured by jumbo (original loans greater than $548,250) of $3.4 billion, loans secured by business assets including accounts receivable, inventory and equipment of $3.2 billion and purchased syndication loans of $2.0 billion. The risk for these loans and for all loans is managed collectively through the use of credit underwriting practices developed and updated over time. The loss estimate for these loans is determined using our standard ACL methodology.

After the adoption of CECL in the first quarter of 2020, banking regulators established guidelines for calculating credit concentrations. Banking regulators set the guidelines for construction, land development and other land loans to total less than 100% of total Tier 1 capital less modified CECL transitional amount plus ACL (CDL concentration ratio) and for total commercial real estate loans (construction, land development and other land loans along with other non-owner-occupied commercial real estate and multifamily loans) to total less than 300% of total Tier 1 capital less modified CECL transitional amount plus ACL (CRE concentration ratio). Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total Tier 1 capital less modified CECL transitional amount plus ACL. At March 31, 2025, and December 31, 2024, the Bank’s CDL concentration ratio was 51.5% and 40.9%, respectively, and its CRE concentration ratio was 282.9% and 219.6%, respectively. As of March 31, 2025, the Bank was below the established regulatory guidelines. When a bank’s ratios are in excess of one or both of these loan concentration ratios guidelines, banking regulators generally require an increased level of monitoring in these lending areas by bank management. Therefore, we monitor these two ratios as part of our concentration management processes.

Reconciliation of GAAP to Non-GAAP

The return on average tangible equity is a non-GAAP financial measure that excludes the effect of the average balance of intangible assets and adds back the after-tax amortization of intangibles to GAAP basis net income. Management believes these non-GAAP financial measures provide additional information that is useful to investors in evaluating our performance and capital and may facilitate comparisons with other institutions in the banking industry as well as period-to-period comparisons. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, are not audited, and may not be comparable to other similarly titled financial measures used by other companies. Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

(Dollars in thousands)

Cautionary Note Regarding Any Forward-Looking Statements

Statements included in this report, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward looking statements are based on, among other things, management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and our acquisition of Independent in all-stock merger transaction. Words and phrases such as “may,” “approximately,” “continue,” “should,” “expects,” “projects,” “anticipates,” “is likely,” “look ahead,” “look forward,” “believes,” “will,” “intends,” “estimates,” “strategy,” “plan,” “could,” “potential,” “possible” and variations of such words and similar expressions are intended to identify such forward-looking statements. We caution readers that forward-looking statements are subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following:

Risks relating to our Business and Business Strategy

• Economic volatility risk, as a result of monetary, fiscal and trade law policies, such as tariffs, and inflation, potentially resulting in higher rates, deterioration in the credit markets, inflation, greater than expected noninterest expenses, excessive loan losses and other negative consequences, or on the other hand, lower rates, which also may have other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from federal spending cuts and/or one or more federal budget-related impasses or actions;
• Risks relating to the merger and integration of SouthState and Independent, including, among others, (i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (ii) the risk that the integration of Independent’s operations into SouthState’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate Independent’s businesses into SouthState’s businesses, (iii) the amount of the costs, fees, expenses and charges related to the merger, (iii) the risk of deposit attrition, client loss or revenue loss that may be greater than anticipated, and (iv) reputational risk and the reaction of each company’s customers, supplies, employees or other business partners to the merger;
• Risks related to the ability of the Company to pursue its strategic plans which depend upon certain growth goals in our lines of business which are dependent on a variety of factors including economic conditions in the U.S. and globally, geopolitical factors including tariffs, competition, and the regulatory environment;
• Interest rate risk and a decrease in our net interest income primarily resulting from our inability to effectively manage the risk, and its impact on the Bank’s earnings, including from the correspondent and mortgage divisions, housing demand and changes in mortgage conditions, the market value of the Bank’s loan and securities portfolios, and the market value of SouthState’s equity;
• Inflationary risks negatively impacting our business and profitability, earnings and budgetary projections, or demand for our products and services;
• Risks related to the costs of funds and our profitability and liquidity, and changes in our deposit mix and growth;
• Compliance, reputational and operational risks related to implementing new lines of business or new products and services and our failure to successfully manage such risks;
• The impact of increasing digitization of the banking industry and movement of customers to on-line platforms, and the possible impact on the Bank’s results of operations, customer base, expenses, suppliers and operations;
• Risks related to the potential deterioration in real estate values and other adverse changes in mortgage conditions, higher risks inherent in a loan portfolio that includes commercial real estate loans, environmental risks in our lending activities, and risks that appraisals used in deciding whether to make a loan that is secured by real estate not ensuring the value of the real property collateral;
• Risks related to (i) our ability to effectively manage credit risk, interest rate risk and liquidity risk affecting the Bank’s ability to meet its obligations when they come due; and (ii) an obligor’s failure to meet the terms of any contract with the Bank or otherwise fail to perform as agreed under the terms of any loan-related document;
• The results of our most recent stress tests not accurately predicting the impact on our financial condition if the economy were to deteriorate;
• The impact of the Current Expected Credit Loss standard, merger activity, and global events on our allowance for credit losses;
• Risks related to maintaining adequate levels of capital to support our operations and the availability of additional capital when needed due to our size and continued pace of growth;
• Controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures;
• Reputational and operational risks associated with sustainability, stewardship and governance matters, including the impact of state legislation and inconsistent federal and state regulatory guidance and regulation;
• Risks related to losses arising from errors, omissions or fraudulent behavior by employees, clients, counterparties and third parties;
• Increased risk from the adoption and use of artificial intelligence tools by us and our third party vendors and service providers, including risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, clients, counterparties or other third parties;
• Risks related to our reliance on and our ability to retain our culture and attract, retain, develop, and motivate qualified and highly skilled personnel as we grow and are located in new markets, and being able to offer competitive salaries and benefits, including flexibility of working remotely or in the office;
• Cybersecurity risk related to the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of internal or external security breaches, which may subject the Company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;
• Transaction risk arising from problems with service or product delivery, and strategic risk resulting from adverse business decisions or improper implementation of business decisions;
• Reputation risk that adversely affects earnings or capital arising from negative public opinion including the effects of social media on market perceptions of us and banks generally;
• Operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash consideration;
• Risks related to unexpected outflows of uninsured deposits requiring us to sell investment securities at a loss, price risks focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios, and the loss of value of our investment portfolio negatively impacting market perceptions of us, possibly resulting in deposit withdrawals;
• Risks relating to consumers opting not to use banks to complete their financial transactions; and
• Reputational risk and possible higher than estimated reduced revenue from previously announced or proposed regulatory changes in the Bank’s consumer programs and products.

Risks relating to the Regulatory Environment

• Risks related to the heightened expectations of regulatory agencies exposing it to regulatory enforcement actions and civil penalties which could have an adverse material impact on the Company’s business, financial condition, operations and reputation and could jeopardize the Company’s ability to pursue acquisition opportunities;
• Regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums the impact of special FDIC assessments, the effects of Consumer Financial Protection Bureau regulations or other guidance, changes in policies and standards for regulatory review of bank mergers, challenges to our income tax provision following changes to tax laws, regulations or interpretations, and the possibility of changes in accounting standards, policies, principles and practices;
• Compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards, and contractual obligations regarding data privacy and cybersecurity; and
• Risks relating to the legal, regulatory and supervisory environment, including periodic examination and scrutiny by a number of banking agencies and any adjustments to our business resulting from such examinations, changes in financial services legislation and capital regulatory requirements, regulations policies or government officials or other personnel.

Risks relating to our Common Stock

• Risks related to state law and provisions in our articles of incorporation or bylaws that make it more difficult for another company to purchase us; and
• Risks related to: (i) shares of our Common Stock not being insured deposits and losing value; (ii) future capital needs resulting in dilution of shareholder investment; (iii) our ability to pay dividends which is subject to legal and regulatory limitations as well as the discretion of the board of directors of SouthState, SouthState’s performance and other factors; (iv) dilution in our common stock resulting from issuing stock as consideration in a potential merger or acquisition, future capital needs, or increased trading volume in our common stock in the public market; (v) rights of our holders of our junior subordinated debentures that are senior to those of our common shareholders; (vi) volatility of our stock price stock that may or may not reflect economic condition or performance of SouthState; and (vii) our institutional shareholders, exercising significant influence over us and having interests that differ from our other shareholders.

Risks relating to Economic Conditions and Other Outside Forces

• Geopolitical and economic risks and market volatility associated with the political and economic environment and uncertainty surrounding the potential legal, regulatory, and policy changes resulting from a new U.S. presidential administration, changes in the fiscal and monetary policies of the federal government and its agencies, and changes to and instability in global economic conditions and geopolitical matters, including as a result of possible tariffs or other trade disruptions;
• Risks related to a slowdown in economic growth or a resumption of recessionary economic conditions impacting inflationary pressures and interest rates to dampen demand could adversely affect consumer confidence, loan payment patterns, and our charge-offs and the provision for credit losses;
• Volatility in the financial services industry (including failures or rumors of failures of other depository institutions), along with actions taken by governmental agencies to address such turmoil, could affect the ability of depository institutions, including us, to attract and retain depositors and to borrow or raise capital;
• The impact of competition with other financial institutions, including deposit and loan pricing pressures and the resulting impact, including as a result of compression to net interest margin;
• Catastrophic events such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including public health crises and infectious disease outbreaks, as well as any government actions in response to such events, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on SouthState and its customers and other constituencies; and
• Risks that lawsuits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies result in significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way the Company and the Bank conduct their business, or reputational harm.

For any forward-looking statements made in this report or in any documents incorporated by reference into this Report, we claim the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. All forward-looking statements speak only as of the date they are made and are based on information available at that time. We do not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. All subsequent written and oral forward-looking statements by us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Additional information with respect to factors that may cause actual results to differ materially from those contemplated by our forward-looking statements may also be included in other reports that we file with the SEC. We caution that the foregoing list of risk factors is not exclusive and not to place undue reliance on forward-looking statements.

There have been no material changes in our quantitative and qualitative disclosures about market risk as of March 31, 2025 from those disclosures presented in our Annual Report on Form 10-K for the year ended 2024.

Evaluation of Disclosure Controls and Procedures

SouthState’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of SouthState’s disclosure controls and procedures as of March 31, 2025, in accordance with Rule 13a-15 of the Securities Exchange Act of 1934. We applied our judgment in the process of reviewing these controls and procedures, which, by their nature, can provide only reasonable assurance regarding our control objectives. Based upon that evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that SouthState’s disclosure controls and procedures as of March 31, 2025, were effective to provide reasonable assurance regarding our control objectives.

In conducting the evaluation of the effectiveness of our internal controls over financial reporting as of March 31, 2025, we excluded the operations of Independent as permitted by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). In conducting the evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2025, we excluded those disclosure controls and procedures of Independent that are subsumed by internal control over financial reporting. The merger was completed on January 1, 2025. As of January 1, 2025, Independent’s assets represented approximately 25 percent of our consolidated assets. See Note 4 — Mergers and Acquisitions for further discussion of the merger and its impact on our consolidated financial statements.

The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

During the first quarter of 2025, Independent merged into SouthState Corporation. We are working to integrate Independent into our overall internal control over financial reporting processes. Except for changes made in connection with this integration of Independent, there has been no change in our internal control over financial reporting during the three months ended March 31, 2025, that has materially affected, or is likely to materially affect, our internal control over financial reporting.

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as well as cautionary statements contained in this Quarterly Report on Form 10-Q, including those under the caption “Cautionary Note Regarding Any Forward-Looking Statements” set forth in Part I, Item 2. of this Quarterly Report on Form 10-Q, risks and matters described elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

There have been no material changes to the risk factors disclosed in Item 1A. of Part I in our Annual Report on Form 10-K for the year ended December 31, 2024.