SOUTHSTATE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

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 SouthState. 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, those risks listed under "Summary of Risk Factors" starting on page 19
of this Report.

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.

Introduction


The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") describes SouthState Corporation and its
subsidiary's results of operations for the year ended December 31, 2022 as
compared to the year ended December 31, 2021, and the year ended December 31,
2021 as compared to the year ended December 31, 2020, and also analyzes our
financial condition as of December 31, 2022 as compared to December 31, 2021.
Like most banking 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 most of which we pay interest.
Consequently, one of the key measures of our success is the amount of 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.

There are risks inherent in all loans, so we maintain an allowance for credit
losses to absorb our estimate of probable losses on existing loans that may
become uncollectible. We establish and maintain this allowance by recording a
provision or recovery for credit losses against our earnings. In the following
section, 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.

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The following section also identifies 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 information included in this Report.

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, a registered
broker-dealer headquartered in Memphis, Tennessee, which it acquired on February
1, 2021 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 CBI Holding Company, LLC ("CBI"), which
in turn owns Corporate Billing, a transaction-based finance company
headquartered in Decatur, Alabama that provides factoring, invoicing, collection
and accounts receivable management services to transportation companies and
automotive parts and service providers nationwide. The holding company also owns
SSB Insurance Corp., a captive insurance subsidiary pursuant to Section 831(b)
of the U.S. Tax Code.

At December 31, 2022, we had $43.9 billion in assets and 5,029 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 a six (6) state footprint in Alabama, Florida, Georgia, North
Carolina, South Carolina 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.

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. The correspondent banking and
capital markets division was expanded with the Bank's acquisition of
SouthState|Duncan-Williams.

We earned net income of $496.0 million, or $6.60 diluted earnings per share
("EPS"), during 2022 compared to net income of $475.5 million, or $6.71 diluted
EPS, in 2021. Net income available to the common shareholders was up
$20.5 million, or 4.3%, in 2022 compared to 2021. For further discussion of the
Company's results of operations for the year ended December 31, 2022 as compared
to the year ended December 31, 2021, and the year ended December 31, 2021 as
compared to the year ended December 31, 2020, see Results of Operations section
of this MD&A starting on page 55.

At December 31, 2022, we had total assets of approximately $43.9 billion
compared to approximately $41.8 billion at December 31, 2021. See the Financial
Condition section of this MD&A starting on page 66 for a more detailed
description of the change in our balance sheet.

Our asset quality results remained strong in December 31, 2022, net charge offs
as a percentage of average loans increased slightly to 0.02% compared to 0.01%
for the year ended December 31, 2021. The total nonperforming assets ("NPAs")
increased $26.0 million to $109.7 million at December 31, 2022 from $83.7
million at December 31, 2021. Acquired NPAs increased $2.6 million to $62.5
million at December 31, 2022 from $59.8 million at December 31, 2021. Acquired
nonperforming loans increased $4.6 million and acquired OREO and other
nonperforming assets decreased $2.0 million. Non-acquired NPAs increased $23.4
million to $47.3 million at December 31, 2022 from $23.9 million at December 31,
2021, which was related to an increase in non-acquired

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nonperforming loans of $23.7 million. Non-acquired OREO and other NPAs declined
by $345,000 to $245,000 as of December 31, 2022 compared to $590,000 as of
December 31, 2021. The total NPAs as a percentage of total assets increased 5
basis points to 0.25% at December 31, 2022 as compared to 0.20% at December 31,
2021.

Our efficiency ratio was 54.2% at December 31, 2022 compared to 65.5% at
December 31, 2021. The improvement in our efficiency ratio was due to both the
effects of a 2.0% decrease in noninterest expense and the 18.6% increase in the
total of tax-equivalent ("TE") net interest income and noninterest income. The
Company's net interest income has increased significantly in 2022 with the
current rising rate environment.

We continue to remain well-capitalized with a total risk-based capital ratio of
13.0% and a Tier 1 leverage ratio of 8.7%, as of December 31, 2022, compared to
13.6% and 8.1%, respectively, at December 31, 2021. The total risk-based capital
ratio decreased due to the additional risk-weighted assets acquired through the
acquisition of Atlantic Capital in the first quarter of 2022, which on average,
had a higher risk weighting, the reduction in cash and cash equivalents during
the year, which are lower risk weighted assets, and due to the organic growth in
loans during 2022, which have a higher risk weighting. The effects on our ratios
from the increase in risk-weighted assets were partially offset by an increase
in total risk-based capital due to net income recognized in 2022, the addition
to the net equity of $657.8 million issued for the Atlantic Capital acquisition
and the $75.0 million in subordinated debentures assumed from Atlantic Capital
that qualify as Tier 2 risk-based capital. These increases in capital were
partially offset by the $119.3 million of stock repurchases completed during
2022, including shares withheld for taxes pertaining to the vesting of equity
awards, along with the dividend paid to shareholders of $146.5 million and the
redemption of $13.0 million of subordinated debentures on June 30, 2022. The
Tier 1 leverage ratios for both the Company and Bank increased compared to
December 31, 2021, as the percentage increase in Tier 1 capital was greater than
the percentage increase in average assets during 2022, due mainly to net income
and equity issued in the Atlantic Capital acquisition. We believe our current
capital ratios position us well to grow both organically and through certain
strategic opportunities. For further discussion of the Company's financial
condition as of December 31, 2022 compared to December 31, 2021, see Financial
Condition section of this MD&A starting on page 66.

Recent Events

Atlantic Capital Bancshares, Inc. Merger

On March 1, 2022, the Company acquired all of the outstanding common stock of
Atlantic Capital in a stock transaction. Upon the terms and subject to the
conditions set forth therein, Atlantic Capital merged with and into the Company,
with the Company continuing as the surviving corporation in the merger.
Immediately following the merger, Atlantic Capital's wholly owned banking
subsidiary, Atlantic Capital Bank, N.A. ("ACB") merged with and into the Bank,
the surviving bank in the bank merger.

Shareholders of Atlantic Capital received 0.36 shares of the Company's common
stock for each share of Atlantic Capital common stock they owned. In total, the
purchase price for Atlantic Capital was $657.8 million.

In the acquisition, the Company acquired $2.4 billion of loans, including
Paycheck Protection Program ("PPP") loans, at fair value, net of $54.3 million,
or 2.24%, estimated discount to the outstanding principal balance, representing
10.0% of the Company's total loans at December 31, 2021. Of the total loans
acquired, management identified $137.9 million that had more than
insignificantly deteriorated since origination and were thus determined to be
PCD loans. Additional details regarding the Atlantic Capital merger are
discussed in Note 2 - Mergers and Acquisitions.

Branch Consolidation and Other Cost Initiatives


As a part of the ongoing evaluation of customer service delivery and
efficiencies, the Company consolidated 32 branch locations in the third and
fourth quarters of 2022.  The annual savings in 2023 of these closures, which
primarily includes personnel, facilities, and equipment cost, is expected to be
$12.0 million, and the impact in 2022 was approximately $3.5 million.  These
consolidated locations were in Florida, South Carolina, Georgia, North Carolina
and Virginia.

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Capital Management

On June 7, 2022, the Company received Federal Reserve Board's supervisory
nonobjection on the 2022 Stock Repurchase Program, which was previously approved
by the Board of Directors of the Company in April 2022, contingent upon receipt
of such supervisory nonobjection. The aggregate number of shares of common stock
the Company is authorized to repurchase totaled 4,120,021 million shares, which
includes 370,021 shares remaining from the Company's 2021 Stock Repurchase Plan.
During 2022, the Company did not repurchase any shares pursuant to the 2022
Stock Repurchase Program. During the first quarter of 2022, before the approval
of the 2022 Stock Repurchase Program, the Company repurchased a total of
1,312,038 shares at a weighted average price of $83.99 per share pursuant to the
2021 Stock Repurchase Plan.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared based on the application of
accounting policies in accordance with generally accepted accounting principles
("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 1 of our audited consolidated
financial statements.

The following is a summary of our critical accounting policies that are highly
dependent on estimates, assumptions and judgments.

Business Combinations


We account for acquisitions under FASB ASC Topic 805, Business Combinations,
which requires the use of the acquisition method of accounting. All identifiable
assets acquired, including loans, and liabilities assumed, are recorded at fair
value. We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020
which now requires us to record purchased financial assets with credit
deterioration (PCD assets), defined as a more-than-insignificant deterioration
in credit quality since origination or issuance, at the purchase price plus the
allowance for credit losses expected at the time of acquisition. Under this
method, there is no provision for credit losses affecting net income on
acquisition of PCD assets. Changes in estimates of expected credit losses after
acquisition are recognized as provision for credit loss expense (or recovery of
credit losses) in subsequent periods as they arise. Any non-credit discount or
premium resulting from acquiring a pool of purchased financial assets with
credit deterioration shall be allocated to each individual asset. At the
acquisition date, the initial allowance for credit losses determined on a
collective basis shall be allocated to individual assets to appropriately
allocate any non-credit discount or premium. The non-credit discount or premium,
after the adjustment for the allowance for credit losses, shall be accreted into
interest income using the interest method based on the effective interest rate
determined after the adjustment for credit losses at the adoption date.

A purchased financial asset that does not qualify as a PCD asset is accounted
for similar to an originated financial asset. Generally, this means that an
entity recognizes the allowance for credit losses for non-PCD assets through net
income at the time of acquisition. In addition, both the credit discount and
non-credit discount or premium resulting from acquiring a pool of purchased
financial assets that do not qualify as PCD assets shall be allocated to each
individual asset. This combined discount or premium shall be accreted into
interest income using the effective yield method.

For further discussion of our loan accounting and acquisitions, see
Note 1-Summary of Significant Accounting Policies, Note 2-Mergers and
Acquisitions, Note 4-Loans and Note 5-Allowance for Credit Losses to the audited
condensed consolidated financial statements.

Allowance for Credit Losses or ACL

The ACL reflects management’s estimate of expected credit losses that will
result from the inability of our

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borrowers to make required loan payments. Management used the systematic
methodology to determine 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 1-Summary
of Significant Accounting Policies for further detailed descriptions of our
estimation process and methodology related to the ACL. See also Note 5-Allowance
for Credit Losses and "Provision for Credit Losses" in this MD&A.

Other Real Estate Owned and Bank Property Held For Sale


Other real estate owned ("OREO") consists of properties obtained through
foreclosure or through a deed in lieu of foreclosure in satisfaction of loans.
Both OREO and bank property held for sale are recorded at the lower of cost or
fair value and the fair value was determined on the basis of current valuations
obtained principally from independent sources, adjusted for estimated selling
costs. At the time of foreclosure or initial possession of collateral, for OREO,
any excess of the loan balance over the fair value of the real estate held as
collateral is treated as a charge against the ACL. At the time a bank property
is no longer in service and is moved to held for sale, any excess of the current
book value over fair value is recorded as Noninterest Expense in the
Consolidated Statements of Income. Subsequent adjustments to this value are
described below in the following paragraph.

We report subsequent declines in the fair value of OREO and bank properties held
for sale below the new cost basis through valuation adjustments. Significant
judgment and complex estimates are required in estimating the fair value of
these properties, and the period of time within which such estimates can be
considered current is significantly shortened during periods of market
volatility. In response to market conditions and other economic factors,
management may utilize liquidation sales as part of its problem asset
disposition strategy. As a result of the significant judgments required in
estimating fair value and the variables involved in different methods of
disposition, the net proceeds realized from sales transactions could differ
significantly from the current valuations used to determine the fair value of
these properties. Management reviews the value of these properties periodically
and adjusts the values as appropriate. Revenue and expenses from OREO
operations, as well as gains or losses on sales and any subsequent adjustments
to the value are recorded as OREO Expense in the Consolidated Statements of
Income. Gains or losses on sale of bank properties held for sale, and generally
any subsequent write-downs to the value, are recorded as a component in Other
Expense in the Consolidated Statements of Income.

Goodwill and Other Intangible Assets


Goodwill represents the excess of the purchase price over the sum of the
estimated fair values of the tangible and identifiable intangible assets
acquired less the estimated fair value of the liabilities assumed in a business
combination. As of December 31, 2022 and 2021, the balance of goodwill was $1.9
billion and $1.6 billion, respectively. Goodwill has an indefinite useful life
and is evaluated for impairment annually or more frequently if events and
circumstances indicate that the asset might be impaired. An impairment loss is
recognized to the extent that the carrying amount exceeds the asset's fair
value.

In January 2017, the FASB issued ASU No. 2017-04, which simplifies the
accounting for goodwill impairment for all entities by requiring impairment
charges to be based on Step 1 of the previous accounting guidance's two-step
impairment test under ASC Topic 350. Under the new guidance, if a reporting
unit's carrying amount exceeds its fair value, an entity will record an
impairment charge based on that difference. The impairment charge will be
limited to the amount of goodwill allocated to that reporting unit. The new
standard eliminates the requirement to calculate a goodwill impairment charge
using Step 2 which involved calculating an implied fair value of goodwill for
each reporting unit for which the first step indicated impairment. The standard
does not change the guidance on completing Step 1 of the goodwill impairment
test. An entity will still be able to perform today's optional qualitative
goodwill impairment assessment before proceeding to the quantitative step of
determining whether the reporting unit's carrying amount exceeds it fair value.

We evaluated the carrying value of goodwill as of October 31, 2022, our annual
test date, and determined that

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no impairment charge was necessary. Our stock price has historically traded
above its book value. On December 31, 2022, our stock price closed at $76.36,
which is above the book value of $67.04 and tangible book value of $40.09. The
lowest trading price for our stock during 2022 was $72.26, which was above
year-end book value and tangible book value. Based upon our internal valuation
and analysis as of October 31, 2022, we determined that no impairment charge was
necessary at this time. We will continue to monitor the impact of current
economic conditions and other events on the Company's business, operating
results, cash flows and financial condition. If the current economic conditions
and other events were to deteriorate and our stock price falls below current
levels, we will have to reevaluate the impact on our financial condition and
potential impairment of goodwill.

Core deposit intangibles and client list intangibles consist primarily of
amortizing assets established during the acquisition of other banks. This
includes whole bank acquisitions and the acquisition of certain assets and
liabilities from other financial institutions. Core deposit intangibles
represent the estimated value of long-term deposit relationships acquired in
these transactions. Client list intangibles represent the value of long-term
client relationships for the correspondent banking and wealth and trust
management business. These costs are amortized over the estimated useful lives,
such as deposit accounts in the case of core deposit intangible, on a method
that we believe reasonably approximates the anticipated benefit stream from this
intangible. The estimated useful lives are periodically reviewed for
reasonableness.

Income Taxes and Deferred Tax Assets

Income taxes are provided for the tax effects of the transactions reported in
our consolidated financial statements and consist of taxes currently due plus
deferred taxes related to differences between the tax basis and accounting basis
of certain assets and liabilities, including loans, available for sale
securities, ACL, write downs of OREO properties and bank properties held for
sale, accumulated depreciation, net operating loss carry forwards, accretion
income, deferred compensation, intangible assets, mortgage servicing rights, and
post-retirement benefits. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Deferred tax assets and liabilities are reflected at income tax rates applicable
to the period in which the deferred tax assets or liabilities are expected to be
realized or settled. A valuation allowance is recorded in situations where it is
"more likely than not" that a deferred tax asset is not realizable. As changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes. The Company and its
subsidiaries file a consolidated federal income tax return. Additionally, income
tax returns are filed by the Company or its subsidiaries in the states of
Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Illinois,
Indiana, Minnesota, Mississippi, Missouri, New Jersey, New York, North Carolina,
South Carolina, Tennessee, Texas, and Virginia and city of New York City. We
evaluate the need for income tax reserves related to uncertain income tax
positions but had no material reserves at December 31, 2022 or 2021.

Recent Accounting Standards and Pronouncements

For information relating to recent accounting standards and pronouncements, see
Note 1 to our audited consolidated financial statements entitled "Summary of
Significant Accounting Policies."

Results of Operations


Consolidated net income available to common shareholders increased by
$20.5 million for the year ended December 31, 2022 compared to the year ended
December 31, 2021. This increase reflects an increase in interest income and a
decrease in noninterest expense. Partially offsetting these positive effects on
net income was an increase in provision for credit losses, a decrease in
noninterest income, an increase in interest expense, and an increase in the
provision for income taxes. Below are key highlights of our results of
operations during 2022:

Consolidated net income available to common shareholders increased 4.3% to

? $496.0 million in 2022 compared to $475.5 million in 2021, and increased

$375.4 million, or 311.2%, compared to $120.6 million in 2020.

Increased interest income of $312.2 million, resulting from a $187.5 million

increase in interest income from loans and loans held for sale, a $84.6 million

increase in interest income from investment securities, and a $40.1 million

o increase in interest income on federal funds sold, securities purchased under

agreement to resell and interest-bearing deposits. These increases were mainly

due to the increase in yields in all categories of interest-earning assets in

   the current rising rate environment as the Federal Reserve Bank has


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raised it federal funds rate 425 basis points in 2022. The increase in interest

income is also due to the increase in the average balance of both loans, through

organic loan growth and loans acquired through the Atlantic Capital acquisition,

and investment securities, from the retained portion of the investment

securities acquired from Atlantic Capital on March 1, 2022, along with the

strategic decision to increase the investment securities portfolio in 2022;

Increased interest expense of $9.7 million, which resulted from a $3.8 million

increase in interest expense from deposits, a $3.3 million increase in interest

expense in federal funds purchased and securities sold under agreements to

repurchase, a $2.6 million increase in interest expense from corporate and

o subordinated debentures and other borrowings. These increases were primarily

due to an increase in average costs in the current rising rate environment

along with a $1.7 billion increase in the average balance of interest-bearing

   deposits, primarily due to the interest-bearing deposits of $1.6 billion
   assumed from the Atlantic Capital acquisition on March 1, 2022;

Decreased noninterest income of $45.0 million, which resulted primarily from a

$46.8 million decline in mortgage banking income, a $31.3 million decrease in

correspondent banking and capital markets income, and a $1.1 million decrease

in other noninterest income. These decreases were offset by a $16.2 million

o increase in service charges on deposit accounts, a $6.4 million increase in

debit, prepaid, ATM and merchant card related income, a $5.9 million increase

in Bank Owned Life Insurance (“BOLI”) income, a $3.8 million increase in SBA

income, and a $2.0 million increase in trust and investment services income

(See Noninterest Income section on page 61 for further discussion);

Decreased noninterest expense of $18.7 million, which resulted primarily from a

$36.4 million decrease in merger and branch consolidation related expense,

extinguishment of debt cost of $11.7 million pertaining to the redemption of

$38.5 million in trust preferred securities completed during the second quarter

of 2021, and a $2.7 million decrease in occupancy expense. These decreases were

o partially offset by a $13.7 million increase in other noninterest expense, a

$5.3 million increase in information services expense, a $5.1 million increase

in FDIC assessment and other regulatory charges, a $4.7 million increase in

professional fees, a $3.5 million increase in business development and staff

related expense, and a $2.7 million increase in salaries and employee benefits

expense (See Noninterest Expense section on page 64 for further discussion);

A $247.1 million increase in the provision for allowance for credit losses, as

o the Company recorded provision for credit losses of $81.9 million in 2022 while

recording a release of the allowance for credit losses of $165.3 million in

2021; and

Higher income tax provision of $8.6 million primarily due to the change in

pretax book income between the two years. The Company recorded pretax book

o income of $633.4 million in 2022 compared to pretax book income of $604.3

million in 2021 The Company’s effective tax rate was 21.68% for the year ended

December 31, 2022 compared to 21.30% for the year ended December 31, 2021.

? Basic earnings per common share decreased 1.6% to $6.65 in 2022, from $6.76 in

2021 and increased 202.3% from $2.20 in 2020.

? Diluted earnings per common share decreased 1.6% to $6.60 in 2022, from $6.71

in 2021, and increased 201.4% from $2.19 in 2020.

Return on average assets was 1.12% in 2022, a decrease compared to 1.19% in

2021 and an increase compared to 0.42% in 2020. The decrease in 2022 compared

to 2021 was driven by the increase in total average assets of 11.6%, or $4.6

billion, to $44.5 billion in 2022 being greater than the increase in net income

of 4.3%, or $20.5 million, to $496.0 million. The increase in average assets

was mainly due to both increases in loans and investment securities through

? both the Atlantic Capital acquisition and organic growth. The increase in 2021

compared to 2020 was driven by the growth in net income of 294.2%, or $354.9

million, to $475.5 million being greater than the increase in total average

assets of 38.5%, or $11.1 billion, to $39.8 billion in 2021, mainly related to

the full year impact in 2021 from the merger with CenterState completed during

the second quarter of 2020 along with the change in the provision for credit

losses as the Company had a release of provision of $165.3 million in 2021

compared to provision of $236.0 million in 2020.

Return on average common shareholders’ equity decreased to 9.84% in 2022,

compared to 10.01% in 2021, and an increase from 3.35% in 2020. The decrease in

? 2022 compared to 2021 was driven by the higher growth in average common

   shareholders' equity of 6.1%, or $291.4 million 2021 compared to the growth in
   net income


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of 4.3%, or $20.5 million, to $496.0 million. The increase in 2021 compared to

2020 was driven by the greater growth in net income of 294.2%, or $354.9

million, to $475.5 million compared to an increase in average common

shareholders’ equity of 31.7%, or $1.1 billion, in 2021. As mentioned above, the

increase in net income in 2021 was mainly due to a full year’s impact from the

merger with CenterState, along with the reversals of provision for credit losses

in 2021 resulting from improved economic forecasts related to the COVID-19

pandemic.

Our dividend payout ratio was 29.54% for 2022 compared with 28.43% in 2021 and

81.45% in 2020. The increase in the dividend payout ratio in 2022 compared to

2021 was due to the increase in total dividends paid during 2022 of 8.3%, or

? $11.3 million being greater than the increase in net income available to common

shareholders, which increased 4.3%. The decrease in the dividend payout ratio

in 2021 compared to 2020 was due to the growth in net income available to

common shareholders, which increased 294.2%, being greater than the increase in

dividends paid of 37.7%, or $37.1 million.

Net Interest Income


Net interest income is the largest component of our net income. Net interest
income is the difference between income earned on interest-earning assets and
interest paid on deposits and borrowings. Net interest income is determined by
the yields earned on interest-earning assets, rates paid on interest-bearing
liabilities, the relative balances of interest-earning assets and
interest-bearing liabilities, the degree of mismatch, and the maturity and
repricing characteristics of interest-earning assets and interest-bearing
liabilities. Net interest income divided by average interest-earning assets
represents our net interest margin.

In March of 2020, the Federal Reserve dropped the federal funds target rate 150
basis points to a range of 0.00% to 0.25% in reaction to the COVID-19 pandemic.
During 2022, the Federal Reserve raised interest rates one time by 25 basis
points, two times by 50 basis points, and four times by 75 basis points from a
range of 0.00% to 0.25% to a range of 4.25% to 4.50%. As a result, the Company
operated under an increasing rate environment for the majority of 2022.

2022 compared to 2021

Net interest income and net interest margin are highlighted for the year ended
December 31, 2022, compared to 2021:

Both the non-tax equivalent and the tax equivalent net interest margin

increased by 45 basis points in 2022 compared to 2021. While the yield on

interest-earning assets increased 45 basis points, the cost of interest-bearing

liabilities marginally increased 3 basis points. The increase in the net

? interest margin was primarily due to the rising rate environment in effect

during 2022 as our interest-earning assets have repriced more quickly than our

interest-bearing liabilities. The increase was also due to a change in asset

mix as the lower yielding interest-bearing deposit and federal funds sold

declined in 2022, while our higher yielding loan portfolio and investments

increased.

Overall, our yield on interest-earning assets in 2022 increased 45 basis points

from 2021, primarily due to higher yields on all interest-earning assets as the

Federal Reserve Bank raised interest rates 425 basis points starting late in

first quarter of 2022. The increases in interest rates, in combination with the

o increase in the average balance of the higher yielding loan portfolio of $3.3

billion and the investment portfolio of $2.7 billion, along with the decline in

the average balance of lower yielding interest-earning deposits and federal

funds sold of $1.6 billion, affected the overall yield increase between the

comparable periods.

The average cost of interest-bearing liabilities in 2022 compared to 2021

increased 3 basis points. This increase was driven by the effects from the

rising rate environment on the repricing of variable rate products, including

interest-bearing and savings deposits, federal funds purchased and trust

o preferred corporate debt. The cost of interest-bearing and savings deposits

increased 5 basis points, while the cost of federal funds purchased increased

126 basis points and the cost of corporate and subordinated debentures

increased 12 basis points. Overall, interest-bearing deposits have been slower

to reprice in the rising rate environment.

Our net interest income increased by $302.5 million, or 29.3%, to $1.3 billion

? during 2022, compared to 2021, as interest income increased $312.2 million and

interest expense only increased $9.7 million.


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o Our interest income increased by $312.2 million due to –

Higher non-acquired loan interest income of $235.2 million due to a higher

average balance of $5.0 billion, higher investment securities interest income

? of $84.6 million because of a higher average balance of $2.7 billion, and

higher federal funds sold and repurchase agreements interest income of $40.1

million due to the rising rate environment in effect during the current year

even though the average balance was lower by $1.6 billion.

These increases in interest income were partially offset by lower interest

income on acquired loans of $43.6 million due to a lower average balance of

? $1.6 billion resulting from paydowns, pay-offs and renewals of acquired loans

that are moved to our non-acquired loan portfolio. Interest income on loans

held for sale also declined by $4.1 million due to a lower average balance of

$177.9 million.

o Our interest expense increased by of $9.7 million in 2022 compared to 2021 due

to –

Interest expense on interest-bearing deposits increasing $3.8 million because

of a slight increase in the average cost of 1 basis point along with a $1.7

? billion increase in the average balance, interest expense on federal funds

purchased increasing $3.3 million because of an increase in the average cost of

126 basis points, and interest expense related to other borrowings increasing

$2.6 million because of an increase in the average cost of 14 basis points.

? Average interest-earning assets increased $4.3 billion, or 12.0%, to $39.9

billion in 2022 compared to 2021.

The increase in the average balance on non-acquired loan portfolio of $5.0

o billion was due to organic growth and renewals of matured acquired loans that

are moved to our non-acquired loan portfolio.

The decrease in the average balance on the acquired loan portfolio of $1.6

o billion was due to paydowns, pay-offs and renewals of acquired loans that are

moved to our non-acquired loan portfolio.

The increase in the average balance in investment securities of $2.7 billion

was a result of the Bank using a portion of the excess funds to increase the

size of its investment securities, along with the Bank’s strategy on replacing

o lower yielding securities with higher yielding securities as interest rates

started to increase in the first quarter of 2022, in addition to retaining a

portion of the investment securities acquired from Atlantic Capital on March 1,

2022. The excess liquidity was from the growth in deposits in 2021 and during

the first half of 2022.

? Average interest-bearing liabilities increased $1.6 billion, or 6.8%, to $24.8

   billion in 2022 compared to 2021.


   The average balance of interest-bearing deposits increased $1.7 billion,

primarily due to the interest-bearing deposits of $1.6 billion assumed from the

o Atlantic Capital acquisition on March 1, 2022. The average balance of lower

costing interest-bearing transaction accounts, money market accounts and

savings accounts increased $2.4 billion, while the average balance of higher

costing time deposits declined $631.7 million in 2022 compared to 2021.

o The average balance of federal funds purchased decreased $204.2 million and

repurchase agreements decreased $357,000.

The average balance of other borrowings increased by $42.3 million due to $78.4

o million of subordinated debentures assumed from Atlantic Capital on March 1,

2022, partially offset by the redemption of $13.0 million of subordinated

debentures in late June 2022.

2021 compared to 2020

Net interest income and net interest margin highlighted for the year ended
December 31, 2021, compared to 2020:

Our net interest income increased by $206.7 million, or 25.0%, to $1.0 billion

? during 2021, compared to 2020, as interest income increased $174.8 million and

interest expense declined $31.9 million.

o Our interest income increased by $174.8 million due to –

Higher non-acquired loan interest income of $115.1 million due to a higher

? average balance of $3.4 billion, higher investment securities interest income

of $32.9 million because of higher average balances of $2.9 billion, acquired

   loan interest income increasing by $25.7 million because of higher


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average balances in acquired loans of $1.4 billion, and higher federal funds

sold and repurchase agreements interest income of $2.5 million because of higher

average balances of $2.6 billion.

These increases in interest income were partially offset by lower interest

? income of $1.5 million on loans held for sale due to lower average balances of

$54.3 million.

? The effects from the increases in the average balance of interest-earning

assets have outweighed the effects of the declines in average yields in 2021.

Average interest-earning assets increased $10.2 billion, or 39.9%, to $35.6

billion in 2021, compared to 2020. The increase in the average balance on the

non-acquired loan portfolio of $3.4 billion was due to organic growth and

renewals of acquired loans that are moved to our non-acquired loan portfolio.

The increase in the average balance on the acquired loan portfolio of $1.4

o billion was due to the loans acquired from the merger with CenterState, which

were outstanding for 207 days in 2020. Although the acquired loan portfolio

increased from 2020, it has declined throughout 2021 due to paydowns, pay-offs

and renewals of acquired loans that are moved to our non-acquired loan

portfolio. The increase in the average balance of investment securities of $2.9

billion was a result of the Company’s decision to strategically increase the

investment portfolio due to the excess liquidity from deposit growth.

Overall, our yield on interest-earning assets in 2021 declined 52 basis points

from 2020, due to the falling interest rate environment resulting from the

drops in the federal funds rate made by the Federal Reserve in March 2020. The

yield on the non-acquired loan portfolio decreased 12 basis points, the

acquired loan portfolio yield declined 41 basis points, the yield on investment

o securities dropped by 36 basis points, and on the yield on federal funds sold,

securities purchased under agreements to resell and interest-bearing deposits

decreased by 3 basis points. The yield on loans held for sale remained flat.

The yield on interest-earning assets also declined as the average balance of

lower yielding federal funds sold, securities purchased under agreements to

resell, interest-bearing deposits and investment securities increased as a

percentage of total interest-earning assets from 22.8% to 31.6%.

o Our interest expense declined by of $31.9 million in 2021 compared to 2020 due

to –

Interest expense on interest-bearing deposits declining $22.3 million because

of a reduction in the average cost of 21 basis points, interest expense related

? to other borrowings declined $8.9 million because of a lower average balance of

$662.6 million, and the interest expense on repurchase agreements declined

$790,000 because of a decrease in the average cost of 27 basis points.

? The effects from the declines in average cost of interest-bearing liabilities

have outweighed the effects of the increases in average balance in 2021.

Average interest-bearing liabilities increased $6.2 billion, or 36.1%, to $23.2

billion in 2021 compared to 2020 mainly due the interest-bearing liabilities

assumed from CenterState, which were outstanding for 207 days in 2020. The

average balance of interest-bearing deposits increased $6.5 billion, the

average balance of federal funds purchased increased $259.7 million and

repurchase agreements increased $65.1 million. The average balance on other

borrowing decreased $662.6 million. Within other borrowings, the average

o balance on corporate and subordinated debentures increased $81.4 million as the

Company assumed $271.5 million in borrowings in the merger with CenterState.

The increase related to the merger was partially offset by the Company’s

redemption of $63.5 million of subordinated debentures and trust preferred

securities assumed from the CenterState merger in June 2021. The average

balance of FHLB and FRB borrowings decreased $744.0 million due to the

Company’s strategic decision to payoff $700.0 million of FHLB advances (along

with the termination of interest rate hedges on these borrowings) in the fourth

quarter of 2020.

The average cost of interest-bearing liabilities in 2021 compared to 2020

decreased 27 basis points. This decrease occurred in all categories of funding,

except for other borrowings which increased 229 basis points in 2021. The

primary cause for the lower cost on interest-bearing deposits of 21 basis

points, federal funds purchased of 8 basis points and repurchase agreements of

o 27 basis points was the continued low interest rate environment. The cause for

the increase in cost on other borrowings in 2021 is due to having a full year’s

impact from the higher cost of subordinated debt assumed in the CenterState

merger along with the effects of paying off the lower cost FHLB and FRB

borrowings (along with the termination of the interest rate hedges on these

   borrowing) in the fourth quarter of 2020.


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The non-tax equivalent net interest margin decreased by 35 basis points (34

basis point decline on a tax equivalent basis) in 2021 compared to 2020 due to

? the decline in the yield on interest earning assets of 52 basis points, which

was only partially offset by a decrease in cost of interest-bearing liabilities

of 27 basis points.

Table 1-Yields on Average Interest-Earning Assets and Rates on Average
Interest-Bearing Liabilities


                                                                                              Year Ended December 31,
                                                               2022                                      2021                                     2020
                                                               Interest      Average                     Interest      Average                    Interest     Average
                                                Average         Earned/      Yield/       Average         Earned/      Yield/       Average        Earned/     Yield/
(Dollars in thousands)                          Balance          Paid         Rate        Balance          Paid         Rate        Balance         Paid        Rate
Assets
Interestearning assets:
Nonacquired loans, net of unearned
income(1)                                     $ 19,094,680    $   769,766       4.03 %  $ 14,121,233    $   534,565       3.79 %  $ 10,728,150    $ 419,458       3.91 %
Acquired loans, net                              8,361,454        405,578       4.85 %     9,997,279        449,153       4.49 %     8,643,706      423,433       4.90 %
Loans held for sale                                 64,684          2,682       4.15 %       242,584          6,801       2.80 %       296,914        8,308       2.80 %
Investment securities(2):
Taxable                                          7,569,603        149,790       1.98 %     5,208,857         76,850       1.48 %     2,588,208       47,420       1.83 %
Taxexempt                                         874,255         22,361       2.56 %       569,676         10,715       1.88 %       322,947        7,212       2.23 %
Federal funds sold and securities
purchased under agreements to resell and
time deposits                                    3,917,233         46,848

1.20 % 5,481,018 6,720 0.12 % 2,880,699 4,198 0.15 %
Total interestearning assets

                   39,881,909      1,397,025       3.50 %    35,620,647      1,084,804       3.05 %    25,460,624      910,029       3.57 %
Noninterestearning assets:
Cash and due from banks                            550,733                                   495,910                                   312,832
Other assets                                     4,361,927                                 4,112,373                                 3,287,870
Allowance for loan losses                        (314,094)                                 (381,244)                                 (299,814)

Total noninterestearning assets                 4,598,566                                 4,227,039                                 3,300,888
Total assets                                  $ 44,480,475                              $ 39,847,686                              $ 28,761,512

Liabilities

Interestbearing liabilities:
Deposits
Transaction and money market accounts         $ 17,515,277    $    27,408

    0.16 %  $ 15,639,103    $    15,240       0.10 %  $ 10,473,213    $  27,306       0.26 %
Savings deposits                                 3,529,142          1,781

0.05 % 3,043,977 1,262 0.04 % 2,064,183 2,074 0.10 %
Certificates and other time deposits

             2,673,000          7,795       0.29 %     3,304,673         16,680       0.50 %     2,953,735       26,062       0.88 %
Federal funds purchased                            278,251          3,744       1.35 %       482,471            411       0.09 %       222,742          382       0.17 %
Securities sold with agreements to
repurchase                                         395,141            759       0.19 %       395,498            778       0.20 %       330,368        1,568       0.47 %
Other borrowings                                   397,113         19,867

5.00 % 354,799 17,258 4.86 % 1,017,435 26,172 2.57 %
Total interestbearing liabilities

              24,787,924         61,354       0.25 %    23,220,521         51,629       0.22 %    17,061,676       83,564       0.49 %
Noninterestbearing liabilities:
Noninterestbearing deposits                    13,481,876                                11,026,104                                 7,148,289
Other liabilities                                1,170,394                                   852,135                                   946,131
Total noninterestbearing liabilities           14,652,270                                11,878,239                                 8,094,420
Shareholders' equity                             5,040,281                                 4,748,926                                 3,605,416
Total noninterestbearing liabilities and
shareholders' equity                            19,692,551                                16,627,165                                11,699,836
Total liabilities and shareholders' equity    $ 44,480,475                              $ 39,847,686                              $ 28,761,512
Net interest spread                                                             3.25 %                                    2.83 %                                  3.08 %
Net interest income and margin
(nontaxable equivalent)                                      $ 1,335,671       3.35 %                  $ 1,033,175       2.90 %                  $ 826,465       3.25 %
TEFRA (included in net interest margin,
tax equivalent)                                                     8,876                                     5,921

4,592

Net interest income and margin (taxable
equivalent)                                                   $ 1,344,547       3.37 %                  $ 1,039,096       2.92 %                  $ 831,057       3.26 %
Total Deposit Cost (without other
borrowings)                                                                     0.10 %                                    0.10 %                                  0.24 %
Overall Cost of Funds (including
interest-bearing deposits)                                                      0.16 %                                    0.15 %                                  0.35 %

(1) Nonaccrual loans are included in the above analysis.

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


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Table 2-Volume and Rate Variance Analysis


                                           2022 Compared to 2021

2021 Compared to 2020

                                        Increase (Decrease) due to                Increase (Decrease) due to
(Dollars in thousands)             Volume(1)      Rate(1)       Total       Volume(1)      Rate(1)        Total
Interest income on:
Nonacquired loans, net of
unearned income(2)                 $  188,272    $  46,929    $  235,201    $  132,666    $ (17,559)    $  115,107
Acquired loans                       (73,494)       29,919      (43,575)        66,308      (40,588)        25,720
Loans held for sale                   (4,988)          869       (4,119)       (1,520)            13       (1,507)
Investment securities:
Taxable                                34,830       38,110        72,940        48,014      (18,584)        29,430
Tax exempt(3)                           5,729        5,917        11,646         5,510       (2,007)         3,503
Federal funds sold and
securities purchased under
agreements to resell and
time deposits                         (1,917)       42,045        40,128         3,789       (1,267)         2,522
Total interest income                 148,432      163,789       312,221       254,767      (79,992)       174,775
Interest expense on:
Deposits
Transaction and money market
accounts                                1,828       10,340        12,168        13,469      (25,535)      (12,066)
Savings deposits                          201          318           519           984       (1,796)         (812)
Certificates and other time
deposits                              (3,188)      (5,697)       (8,885)         3,096      (12,478)       (9,382)
Federal funds purchased                 (174)        3,507         3,333           445         (416)            29
Securities sold under
agreements to repurchase                  (1)         (18)          (19)           309       (1,099)         (790)
Other borrowings                        2,058          551         2,609      (17,045)         8,131       (8,914)
Total interest expense                    724        9,001         9,725         1,258      (33,193)      (31,935)
Net interest income                $  147,708    $ 154,788    $  302,496    $  253,509    $ (46,799)    $  206,710

(1) The rate/volume variance for each category has been allocated on the same

basis between rate and volumes.

(2) Nonaccrual loans are included in the above analysis.

(3) Tax exempt income is not presented on a taxable-equivalent basis in the above

analysis.

Noninterest Income and Expense


Noninterest income provides us with additional revenues that are significant
sources of income. In 2022, 2021, and 2020, noninterest income comprised 18.8%,
25.5%, and 27.4%, respectively, of total net interest income and noninterest
income. Beginning in 2020 with the adoption of CECL, recoveries on acquired
loans are no longer recorded through the income statement but are recorded
through the allowance for credit losses on the balance sheet.

Table 3-Noninterest Income for the Three Years


                                                       Year Ended December

31,

(Dollars in thousands)                             2022         2021

2020

Service charges on deposit accounts              $  82,165    $  65,973    $  55,669
Debit, prepaid, ATM and merchant card related
income                                              46,063       39,668

28,650

Mortgage banking income                             17,790       64,599

106,202

Trust and investment services income                39,019       36,981

29,437

Correspondent banking and capital market
income                                              78,755      110,048       64,743
Securities gains, net                                   30          102           50
SBA income                                          15,636       11,865        5,721

Bank owned life insurance income                    24,311       18,410

  11,379
Other                                                5,478        6,606        9,289
Total noninterest income                         $ 309,247    $ 354,252    $ 311,140


2022 compared to 2021

Our noninterest income decreased 12.7% for the year ended December 31, 2022
compared to 2021. This change in total noninterest income resulted from the
following:

Mortgage banking income decreased by $46.8 million, or 72.5%, which was

comprised of $45.5 million, or 75.5%, decrease from mortgage income in the

secondary market and a $1.3 million, or 30.1%, decrease from mortgage servicing

? related income, net of the hedge. Starting in the second quarter of 2021, the

Company allocated a lower percentage of its mortgage production and pipeline to

the secondary market, which resulted in a decrease in mortgage income from the

   secondary market. The allocation of mortgage production between


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  portfolio and secondary market depends on the Company's liquidity, market

spreads and rate changes during each period and will fluctuate year to year.

During 2022, mortgage income from the secondary market comprised of a $4.8

million increase in the change in fair value of the pipeline, loans held for

sale and MBS forward trades and a $50.4 million decrease in the net gain on

o sale of mortgage loans due to overall lower mortgage production in 2022, along

with the lower allocation of mortgage production going to the secondary market.

Mortgage commission expense was $12.8 million during 2022 compared to $27.2

million during 2021.

The decrease in mortgage servicing related income, net of the hedge during 2022

was due to a $3.4 million decrease in the change in fair value of the MSR

including decay, which was partially offset by a $2.1 million increase from

servicing fee income. The decrease in the change in fair value of the MSR was

o primarily due to an increase in losses on the MSR hedge of $13.3 million,

offset by an increase in the change in fair value from interest rates of $5.0

million and a $5.0 million decline in MSR decay as interest rates have

increased since 2021. The increase in the servicing fee income is due to the

increase in size of the servicing portfolio.

Correspondent banking and capital markets income for 2022 decreased by $31.3

million, or 28.4%, from 2021. The decline was due to lower commissions and fees

earned on fixed income security sales during 2022 as the volume in sales

declined from 2021 and due to expense attributable to the variation margin

payments for the centrally cleared swaps. During 2022, the Company determined

the variation margin payments for its interest rate swaps centrally cleared

through London Clearing House (“LCH”) and Chicago Mercantile Exchange (“CME”)

met the legal characteristics of daily settlements of the derivatives rather

? than collateral. The expense or income attributable to the variation margin

payments for the centrally cleared swaps is now reported in noninterest income,

specifically within Correspondent and Capital Markets Income, as opposed to

interest income or interest expense. We recorded expense of $14.0 million

related to variation margin payments in 2022 compared to income of $43,000 in

2021. The increase in expense in 2022 was due to the rise in interest rates

which caused a decline in value in our centrally cleared interest rate swaps

with LCH and CME. Refer to Note 1-Summary of Significant Accounting Policies,

sections titled “Derivative Financial Instruments” and “Reclassifications” for

a detailed discussion.

Service charges on deposit accounts were higher in 2022 by $16.2 million, or

24.5%, compared to 2021. During the third quarter of 2022, the Company modified

its consumer overdraft program to eliminate Non-Sufficient Funds (“NSF”) fees

as well as transfer fees to cover overdrafts. We also started offering a

? deposit product with no overdraft fees. However, mainly due to the increase in

numbers of customers and activity through the Atlantic Capital merger completed

during the first quarter of 2022, service charge account maintenance fees

increased $9.8 million, NSF and Automated Overdraft Privilege (“AOP”) charges

increased $4.1 million, and commissions from sales of checks increased $1.7

   million.


   Debit, prepaid, ATM and merchant card related income was higher by $6.4

million, or 16.1%, in 2022 compared to 2021. The increase in debit, prepaid,

ATM and merchant card related income was mainly driven by higher debit card

? income, credit card sales incentive, and merchant card income resulting from

the increase in activity related to the acquisition of Atlantic Capital

completed in the first quarter of 2022. Debit card income (net of debit card

   expenses), credit card sales incentive, and merchant card related income
   increased by $4.1 million, $1.7 million, and by $533,000, respectively.

Bank owned life insurance income increased $5.9 million, or 32.1%, in 2022

compared to 2021. This increase was due to the purchase of $86.0 million of new

? policies since March 2022 and the addition of $74.6 million in bank owned life

insurance through the acquisition of Atlantic Capital completed in the first

quarter of 2022, along with an increase in income from the payout of bank owned

life insurance policies of $1.1 million in 2022 compared to 2021.

SBA income, including the impact from the change to fair value accounting

during 2022, increased by $3.8 million, or 31.8% compared to 2021. SBA income

? includes changes in fair value of the servicing asset, loan servicing fees and

gains on sale of SBA loans. The increase is mainly attributable to additional

business resulting from the acquisition of Atlantic Capital.

Trust and investment services income increased $2.0 million, or 5.5%, in 2022

compared to 2021. The increase was primarily due to an increase in fees

? earnings as the assets under management increased $53.9 million, or 0.8%, and

   increases in numbers of accounts and relationships under management from
   December 31, 2021 to December 31, 2022.


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2021 compared to 2020

Our noninterest income increased 13.9% for the year ended December 31, 2021
compared to 2020. This change in total noninterest income resulted from the
following:

Service charges on deposit accounts were higher in 2021 by $10.3 million, or

18.5%, compared to 2020, due primarily to the increase in customers and

activity in 2021 through the merger with CenterState completed during the

second quarter of 2020. Year-to-date 2020 only included CenterState activity

? from June 8, 2020 through December 31, 2020. The increase in service charges

on deposit accounts was mainly driven by an increase in service charge

maintenance fees on checking and savings accounts, in net NSF and overdraft

protection fee income, in fees related to wire transfers and in commissions

   from sales of checks.


   Debit, prepaid, ATM and merchant card related income was higher by $11.0

million, or 38.5%, in 2021 compared to 2020. The increase in debit, prepaid,

ATM and merchant card related income was mainly driven by higher debit card,

? credit card sales incentive, and ATM and merchant card income due to the

increase in activity related to the merger with CenterState completed in the

second quarter of 2020. Year-to-date 2020 only included CenterState activity

   from June 8, 2020 through December 31, 2020.


   Mortgage banking income decreased by $41.6 million, or 39.2%, which was

comprised of $42.2 million, or 41.2%, decrease from mortgage income in the

secondary market, partially offset by a $578,000, or 15.5%, increase from

mortgage servicing related income, net of the hedge. During 2021, mortgage

income from the secondary market comprised of a $8.9 million decline in the

change in fair value of the pipeline, loans held for sale and MBS forward

trades and a $33.3 million decrease in the net gain on sale of mortgage loans.

Net gains on the sale of mortgage loans was $75.1 million in 2021, which is

net of the commission expense related to mortgage production of $27.2 million.

During the second quarter of 2021, the Company began allocating a lower

percentage of its mortgage production and pipeline to the secondary market

compared to 2020, which resulted in lower mortgage income from the secondary

? market. This change was mainly due to the increase in liquidity held at the

Bank along with the reduction in the gain on sale margin in 2021 compared to

2020. 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 quarter to quarter. The increase in

mortgage servicing related income, net of the hedge during 2021 was due to a

$4.4 million increase from servicing fee income, which was partially offset by

a $3.8 million decrease in the change in fair value of the MSR including decay.

The decrease in fair value of the MSR is due to an increase in MSR decay of

$6.1 million and losses on the MSR hedge of $15.1 million, partially offset by

an increase in the change in fair value from interest rates of $17.4 million

compared to the 2020. The increase in the servicing fee income is due to the

increase in size of the servicing portfolio during 2021.

Trust and investment services income increased $7.5 million, or 25.6%, in 2021

compared to 2020. The increase in business through the merger with

? CenterState, which was completed in the second quarter of 2020, resulted in the

   increase in income.  Also, assets under management have increased $902.0
   million or 17.4% from December 31, 2020 to December 31, 2021.

Correspondent banking and capital markets income for 2021 increased by $45.3

million from 2020. Year-to-date 2020 only included CenterState correspondent

banking activity from June 8, 2020 through December 31, 2020. Also, the

? acquisition of SouthState|Duncan-Williams on February 1, 2021 contributed to

the increase in correspondent banking and capital markets income during 2021.

The income from this business includes commissions earned on fixed income

security sales, fees from hedging services, loan brokerage fees and consulting

fees for services related to these activities.

Bank owned life insurance income increased $7.0 million, or 61.8%, in 2021

compared to 2020. This increase was due to an increase in the cash surrender

value of $8.0 million which resulted from the $333.1 million of bank owned life

? insurance acquired in the merger with CenterState during the second quarter of

2020, along with the purchase of $205.6 million of policies in April 2021.

This increase was partially offset by a $1.0 million decline in income

resulting from the payout of insurance policies.

SBA income increased by $6.1 million, or 107.4% compared to 2020. This

? increase was due to increases in SBA loan servicing fees and gains on sale of

SBA loans which was mainly attributable to having a full year of activity from

   the CenterState merger in 2021 compared to a partial year in 2020.


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Other income decreased by $2.7 million or 28.9% in 2021 compared to 2020. This

decrease was mainly due to recording a one-time adjustment of $3.6 million in

income in 2020 related to the credit valuation adjustment on the Company’s

? back-to-back interest rate swaps. This decrease was partially offset by an

increase in Small Business Investment Company (“SBIC”) investment income of

$2.1 million during 2021 as the Company increased its SBIC investment portfolio

during 2020 and 2021.



Noninterest expense represents the largest expense category for our company.
During 2022 and 2021, we continued to emphasize careful controls around our
noninterest expense. With that, our expenses in 2022 decreased $18.7 million or
2.0% from 2021. Noninterest expense increased $150.8 million or 18.9% in 2021
from 2020, which was mainly attributable to having a full year of activity from
the CenterState merger in 2021 compared to a partial year in 2020.

Table 4-Noninterest Expense for the Three Years


                                                         Year Ended December 31,
(Dollars in thousands)                               2022         2021

2020

Salaries and employee benefits                     $ 554,704    $ 552,030    $ 416,599
Occupancy expense                                     89,501       92,225

75,587

Information services expense                          79,701       74,417

59,843

OREO expense and loan related expense                    369        2,029

3,568

Amortization of intangibles                           33,205       35,192

26,992

Business development and staff related expense 19,015 14,571

     8,721
Supplies and printing                                  2,871        3,246        3,636
Postage expense                                        6,750        6,413        5,043
Professional fees                                     15,331       10,629       14,033

FDIC assessment and other regulatory charges 23,033 17,982

10,713

Advertising and marketing                              8,888        7,959

4,092

Merger and branch consolidation related expense 30,888 67,242

    85,906
Extinguishment of debt cost                                -       11,706            -
Swap termination expense                                   -            -       38,787
Other                                                 65,445       52,780       44,124
Total noninterest expense                          $ 929,701    $ 948,421    $ 797,644


2022 compared to 2021

Noninterest expense decreased $18.7 million, or 2.0% for the year ended
December 31, 2022 compared to 2021. The change in total noninterest expense
resulted from the following:

Merger and branch consolidation related expense decreased $36.4 million, or

54.1% in 2022 compared to 2021. The expense in 2022 consists mainly of costs

associated with branch consolidations and the merger related costs pertaining

? to the Atlantic Capital acquisition. The expense in 2021 mainly consisted of

costs related to the merger with CenterState. Merger and branch consolidation

expense of $18.5 million in 2022 and $1.7 million in 2021 was related primarily

to the merger with Atlantic Capital while $64.4 million in merger and branch

consolidation expense was related to the merger with CenterState in 2021.

The Company had extinguishment of debt cost of $11.7 million in 2021. This cost

was from the write-off of the unamortized fair market value adjustment recorded

? on the trust preferred securities assumed in the CenterState merger. All of the

trust preferred securities assumed in the CenterState merger were redeemed in

June 2021.

Occupancy expense decreased $2.7 million, or 3.0%. The decrease was related to

? the cost savings associated with Atlantic Capital and branch consolidations

that occurred during 2022. The number of branches declined in 2022 to 251 from

281 at the end of 2021.

Other noninterest expense increased by $12.7 million, or 24.0%. This increase

was mainly due to a general increase in expenses due to the merger with

Atlantic Capital, an increase in fraud, digital banking and miscellaneous

? operational charge-off related expenses of $6.5 million, expense related to the

settlement of lawsuits of $2.6 million, increases in donations of $1.5 million,

increases in tax penalties of $1.3 million, and increases in incurred but not

reported insurance loss reserves of $1.1 million.

Information services expense increased $5.3 million, or 7.1%. The increase was

? due to additional cost associated with systems added through our acquisition of

   Atlantic Capital, along with the cost of the Company


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  updating systems as it grows in size and complexity.

FDIC assessment and other regulatory charges increased $5.1 million, or 28.1%.

? This increase was due to an increase in FDIC assessments and other regulatory

charges. The FDIC assessment increased $4.3 million and OCC examination fee

increased $761,000 as the Company continues to grow in size and complexity.

Professional fees increased $4.7 million, or 44.2%, in 2022 compared to 2021.

? This increase was primarily due to increases in non-loan legal, advisory and

consulting related fees.

Business development and staff related expense increased $4.4 million, or

? 30.5%, due mainly to the increase in employees resulting from the merger with

   Atlantic Capital and additional employee travel and entertainment as the
   COVID-19 pandemic receded.

Salary and employee benefits increased by $2.7 million, or 0.5%, primarily due

to the addition of Atlantic Capital employees during the year, annual salary

increases, and higher 2022 incentive costs. This increase was partially offset

by a $7.3 million decline in commission expense and higher deferred loan costs

due to increased loan production volumes and the late 2021 update of the

? Company’s standard loan costs. During 2022, we recorded a total of $383.6

million in salary expense and $(88.2) million in net deferred loan costs,

compared to $366.2 million and $(46.5) million, respectively, during 2021.

During 2022, we recorded a total of $35.5 million in commission expense and

$96.8 million in incentive expense, compared to $42.8 million and $71.8

million, respectively, during 2021.

2021 compared to 2020


Noninterest expense increased $150.8 million, or 18.9% for the year ended
December 31, 2021 compared to 2020. This increase was mainly due to 2021 having
a full year's effect from the merger with CenterState while 2020 was only
partially affected from the merger date of June 7, 2020. The change in total
noninterest expense resulted from the following:

Salary and employee benefits increased by $135.4 million, or 32.5%, as all

categories of salaries and benefits expense increased due to the merger with

? CenterState. Salaries increased $66.9 million, benefits increased $11.4

million, commissions increased $32.5 million, and incentives increased $24.6

million. With the merger with CenterState in June 2020, the Company added

approximately 2,800 employees, almost doubling its total employees.

In the fourth quarter of 2020, the company terminated three cash flow hedges

? (SWAPs) given the current low interest rate environment and expectation of low

interest rates in the foreseeable future resulting in a termination cost of

$38.8 million.

Merger and branch consolidation related expense decreased $18.7 million, or

? 21.7% in 2021 compared to 2020. Merger and branch consolidation expense of

$64.4 million in 2021 and $83.0 million in 2020 was related primarily to the

merger with CenterState.

The Company had extinguishment of debt cost of $11.7 million in 2021. This cost

was from the write-off of the fair market value adjustment recorded on the

? trust preferred securities assumed in the CenterState merger. All of the trust

preferred securities assumed in the CenterState merger were redeemed in June

2021.

Information services expense and occupancy expense increased $14.6 million, or

24.4% and $16.6 million, or 22.0%, respectively. These increases were related

? to the additional cost associated with facilities, employees and systems added

through our merger with CenterState as our number of branches increased by 129

   during 2020 to 285 at December 31, 2020. The number of branches declined
   slightly in 2021 to 281.

Amortization of intangibles increased $8.2 million, or 30.4%. This increase was

? due to the merger with CenterState, which resulted in the Company recording a

core deposit intangible asset of $125.9 million and a correspondent banking

customer intangible asset of $10.0 million in June of 2020.

FDIC assessment and other regulatory charges increased $7.3 million, or 67.9%.

This increase was due to an increase in FDIC assessments and OCC examination

? fees resulting from the merger with CenterState and the growth since the

merger, in addition to new regulatory charges attributable to

SouthState|Duncan-Williams.

? Business development and staff related expense increased $5.9 million, or 67.1%

   due mainly to the merger with


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CenterState with the increase in employees. The increase was also due to limited

expense in 2020 attributable to the initial impact from the COVID-19 pandemic

before vaccines were available.

Other noninterest expense increased by $8.7 million, or 19.6%. This increase

was mainly due to a general increase in expenses due to the merger with

? CenterState including loan expenses, insurance expense, donations, various

operational reserves, and operating charge-offs. There was also an increase of

$2.8 million in cost associated with the Association Banking Prime Earnings

Credit Program in 2021 from 2020.

Income Tax Expense


Our effective tax rate slightly increased to 21.68% at December 31, 2022
compared to 21.30% for the year-ended December 31, 2021.  The increase was
mainly due to increase in non-deductible executive compensation, an increase in
non-deductible FDIC premiums, and additional expense related to return to
provision items recorded during 2022. The increase was partially offset by an
increase in tax-exempt income and an increase in the cash surrender value of
BOLI policies held, and an increase in federal tax credits available in 2022
compared to 2021. For additional information refer to Note 12-income Taxes in
the consolidated financial statements.

Financial Condition

Overview


At December 31, 2022, we had total assets of approximately $43.9 billion,
consisting principally of $22.8 billion in non-acquired loans, $5.9 billion in
acquired non-credit deteriorated loans, $1.4 billion in acquired credit
deteriorated loans, net of $356.4 million allowance for credit losses, $8.2
billion in investment securities, $1.3 billion in cash and cash equivalents and
$1.9 billion in goodwill. Our liabilities at December 31, 2022 totaled $38.8
billion, consisting principally of deposits of $36.4 billion ($13.2 billion in
noninterest-bearing and $23.2 billion in interest-bearing), $1.0 billion
derivative liabilities and short-term and long-term borrowings of $948.7
million. At December 31, 2022, our shareholders' equity was $5.1 billion.

At December 31, 2021, we had total assets of approximately $41.8 billion,
consisting principally of $16.1 billion in non-acquired loans, $5.9 billion in
acquired non-credit impaired loans, $2.0 billion in acquired credit impaired
loans, net of $301.8 million allowance for credit losses, $7.2 billion in
investment securities, $6.7 billion in cash and cash equivalents and $1.6
billion in goodwill. Our liabilities at December 31, 2021 totaled $37.0 billion,
consisting principally of deposits of $35.1 billion ($11.5 billion in
noninterest-bearing and $23.6 in interest-bearing) and short-term and long-term
borrowings of $1.1 billion. At December 31, 2021, our shareholders' equity was
$4.8 billion.

Book value per common share was $67.04 at the end of 2022, a decrease from
$69.27 at the end of 2021. Book value per common share decreased in 2022 as
common shares outstanding increased by 9.2% while shareholder equity increased
by 5.7%. The primary reason for the increase in common shares outstanding of 6.4
million was due to 7.3 million shares issued for the Atlantic Capital merger,
offset by the Company repurchasing 1.3 million shares on the open market in
2022. The primary reasons for an increase in shareholder's equity of $272.0
million during 2022 were due to net income of $496.0 million and $659.8 million
in common stock issued for the Atlantic Capital acquisition. These increases
were partially offset by declines in equity resulting from a $655.9 million
reduction in AOCI related to unrealized losses on available for sale securities
and post-retirement benefit plans, $146.5 million in dividends paid to
shareholders, and $110.2 million in common stock repurchased in the open market.

Our common equity to assets ratio slightly increased to 11.6% in 2022, compared
with 11.5% in 2021. The increase in 2022, compared to 2021, was the result of
the percentage increase in shareholders' equity of 5.7% being greater than the
percentage increase in total assets of 5.0%.

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Trading Securities

We have a trading portfolio associated with our Correspondent Bank Division and
the Bank's 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 Market
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 $31.3
million and $77.7 million, respectively, at December 31, 2022 and 2021.

Investment Securities


We use investment securities, our second largest category of earning assets, to
generate interest income through the deployment of excess funds, provide
liquidity, fund loan demand or deposit liquidation, and pledge as collateral for
public funds deposits, repurchase agreements and derivative exposure. At
December 31, 2022 and 2021, investment securities totaled $8.2 billion and $7.2
billion, respectively. For the year ended December 31, 2022, average investment
securities were $8.4 billion, or 21.2% of average earning assets, compared with
$5.8 billion, or 16.2% of average earning assets for the year ended December 31,
2021. The expected average life of the investment portfolio at December 31, 2022
was approximately 7.96 years, compared with 6.27 years at December 31, 2021. See
Note 1-Summary of Significant Accounting Policies in the audited consolidated
financial statements for our accounting policy on investment securities.

As securities are purchased, they are designated as held to maturity or
available for sale based upon our intent, which considers liquidity needs,
interest rate expectations, asset/liability management strategies, and capital
requirements.

The following table presents the reported values of investment securities for
the past two years:

Table 5-Values of Investment Securities


                                                                                    December 31,
(Dollars in thousands)                                                          2022           2021
Held to Maturity (amortized cost):
U.S. Government agencies

$ 197,262 $ 112,913
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises

1,591,646 1,120,104
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises

474,660 174,178
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises

                                                362,586        350,116
Small Business Administration loan-backed securities                              57,087         62,590
Total held to maturity                                                       $ 2,683,241    $ 1,819,901
Available for Sale (fair value):
U.S. Treasuries                                                                  265,638              -
U.S. Government agencies

219,088 97,117
Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises

1,698,353 1,831,039
Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises

601,045 725,995
Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises

                                              1,000,398      1,207,241
State and municipal obligations                                                1,064,852        812,689
Small Business Administration loan-backed securities

     444,810        500,663
Corporate securities                                                              32,638         18,734
Total available for sale                                                       5,326,822      5,193,478
Total other investments                                                          179,717        160,568
Total investment securities                                                  $ 8,189,780    $ 7,173,947


During 2022, our total investment securities increased $1.0 billion, or 14.2%,
from December 31, 2021. The Atlantic Capital acquisition added $691.7 million of
investment securities available for sale to our portfolio. We immediately sold
$414.4 million in securities, after principal paydowns, and retained $273.7
million in our portfolio. The Atlantic Capital securities retained were mostly
state and municipal obligations. During 2022, we purchased $2.5 billion of
securities, $1.1 billion classified as held to maturity, $1.4 billion classified
as available for sale and $20.4 million classified as other investments. These
purchases were partially offset by maturities, paydowns, sales and calls of
investment securities totaling $1.3 billion. Net amortization of premiums were
$27.3 million for the year ended December 31, 2022.

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At December 31, 2022, the unrealized net loss of the available for sale
investment securities portfolio was $889.3 million, or 14.3%, below its
amortized cost basis. Comparable valuations at December 31, 2021 reflected an
unrealized net loss of the available for sale investment portfolio of $27.8
million, or 0.5%, below its amortized cost basis. The decrease in fair value in
the available for sale investment portfolio at December 31, 2022 compared to
December 31, 2021 was mainly due to an increase in both short term and long term
interest rates during 2022. At December 31, 2022, the unrealized net loss of the
held to maturity investment securities portfolio was $433.1 million, or 16.1%,
below its amortized cost basis. At December 31, 2021, the unrealized net loss of
the held to maturity investment securities portfolio was $41.8 million, or 2.3%,
below its amortized cost basis.

Table 6-Credit Ratings of Investment Securities


                                                                              Amortized          Fair         Unrealized
(Dollars in thousands)                                                           Cost           Value          Net Loss         AAA - A        Not Rated
December 31, 2022
U.S. Treasuries                                                              $    272,416    $    265,638    $     (6,778)    $    272,416    $          -
U.S. Government agencies                                                          443,234         386,563         (56,671)         443,234               -

Residential mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises*

                                              3,588,051       3,034,906        (553,145)              96

3,587,955

Residential collateralized mortgage-obligations issued by U.S. government
agencies or sponsored enterprises*

                                              1,182,997       1,006,041        (176,956)               -

1,182,997

Commercial mortgage-backed securities issued by U.S. government
agencies or sponsored enterprises*

1,559,286 1,296,680 (262,606) 17,000 1,542,286
State and municipal obligations

                                                 1,269,525       1,064,852        (204,673)       1,269,470

Small Business Administration loan-backed securities

      548,290         489,672         (58,618)         548,290               -
Corporate securities                                                               35,583          32,638          (2,945)               -          35,583
                                                                             $  8,899,382    $  7,576,990    $ (1,322,392)    $  2,550,506    $  6,348,876

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.


Held to maturity

As described above, the Company elected to classify some of its securities
purchased during 2022 and 2021 as held to maturity. These are securities that
the Company does not intend to sell and expects to hold to maturity. The
securities consist of $197.3 million of agency securities, $2.4 billion of
residential and commercial mortgage-backed securities issued by U.S government
agencies or sponsored enterprises and $57.1 million of Small Business
Administration loan-backed securities. The following are highlights of our held
to maturity portfolio:

? Total held to maturity portfolio totaled $2.7 billion

? The balance of securities held to maturity represented 6.1% of total assets at

December 31, 2022.

We purchased $1.1 billion of held to maturity investment securities in 2022,

? partially offset by maturities, calls and paydowns totaling $230.0 million in

   2022.


Available for sale

Securities available for sale consist of debentures of government sponsored
entities, state and municipal bonds, residential and commercial mortgage-backed
securities issued by U.S government agencies or sponsored enterprises, Small
Business Administration loan-backed securities and corporate securities. At
December 31, 2022, investment securities with a fair value and amortized cost of
$5.3 billion and $6.2 billion, respectively, were classified as available for
sale. The adjustment for net unrealized losses of $889.3 million between the
carrying value of these securities and their amortized cost has been reflected,
net of tax, in the Consolidated Balance Sheet as a component of Accumulated
Other Comprehensive Loss. The following are highlights of our available for sale
securities:

Total securities available for sale increased $133.3 million, or 2.6%, from the

balance at December 31, 2021. The unrealized gain/loss position on the

? investment portfolio decreased $861.5 million and net amortization of premiums

was $21.0 million during 2022. We purchased $1.4 billion of available for sale

   investment securities in 2022, partially offset by maturities, calls and
   paydowns totaling $575.9 million and sales totaling $482.0


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million in 2022. The sales in 2022 were mainly related to restructuring our

portfolio to fit our investment strategy and risk profile.

? The balance of securities available for sale represented 12.1% of total assets

   at December 31, 2022 and 12.4% of total assets at December 31, 2021.

Interest income earned on all investment securities in 2022 was $172.2 million,

an increase of $84.6 million, or 96.6%, from $87.6 million in 2021. The

increase was due to a $2.7 billion increase in average balances and an increase

in the yield on investment securities. The yield on investment securities

? increased 52 basis points during 2022, to 2.0%. In 2022, we deployed a portion

of our on balance sheet liquidity into our investment portfolio as market

interest rates increased. Therefore, the 2022 purchases had higher yields

compared to the existing portfolio resulting in an increase in the overall

yield of our investment portfolio.



At December 31, 2022, we had 1,311 investment securities (including both
available for sale and held to maturity) in an unrealized loss position, which
totaled $1.3 billion. See Note 3-Investment Securities in the consolidated
financial statements for additional information. The increase in the number of
securities in a loss position and the relative percentage of loss to portfolio
size was primarily due to an increase in short-term and long-term interest rates
during 2022.

Management evaluates securities for impairment where there has been a decline in
fair value below the amortized cost basis of a security to determine whether
there is a credit loss associated with the decline in fair value on at least a
quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Credit losses are calculated individually, rather than
collectively, using a discounted cash flow method, whereby management compares
the present value of expected cash flows with the amortized cost basis of the
security. The credit loss component would be recognized through the provision
for credit losses. Consideration is given to (1) the financial condition and
near-term prospects of the issuer including looking at default and delinquency
rates, (2) the outlook for receiving the contractual cash flows of the
investments, (3) the length of time and the extent to which the fair value has
been less than cost, (4) our intent and ability to retain our investment in the
issuer for a period of time sufficient to allow for any anticipated recovery in
fair value or for a debt security whether it is more-likely-than-not that we
will be required to sell the debt security prior to recovering its fair value,
(5) the anticipated outlook for changes in the general level of interest rates,
(6) credit ratings, (7) third-party guarantees, and (8) collateral values. In
analyzing an issuer's financial condition, management considers whether the
securities are issued by the federal government or its agencies, whether
downgrades by bond rating agencies have occurred, the results of reviews of the
issuer's financial condition, and the issuer's anticipated ability to pay the
contractual cash flows of the investments. The Company performed an analysis
that determined that the following securities have a zero expected credit loss:
U.S. Treasury Securities, Agency-Backed Securities including securities issued
by Ginnie Mae, Fannie Mae, FHLB, FFCB and SBA. All of the U.S. Treasury and
Agency-Backed Securities have the full faith and credit backing of the United
States Government or one of its agencies. Municipal securities and all other
securities that do not have a zero expected credit loss are evaluated quarterly
to determine whether there is a credit loss associated with a decline in fair
value. All debt securities in an unrealized loss position as of December 31,
2022 continue to perform as scheduled and we do not believe there is a credit
loss or a provision for credit losses is necessary.

Also, as part of our evaluation of our intent and ability to hold investments
for a period of time sufficient to allow for any anticipated recovery in the
market, we consider our investment strategy, cash flow needs, liquidity
position, capital adequacy and interest rate risk position. We do not currently
intend to sell the securities within the portfolio and it is not
more-likely-than-not that we will be required to sell the debt securities.
Changes in the above considerations may affect our intent in the future. See
Note 1-Summary of Significant Account Policies for further discussion.

Other Investments

Our other investment securities consist of non-marketable equity securities that
have 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
December 31, 2022, we determined that there was no impairment on our other
investment securities. As of December 31, 2022, other investment securities
represented approximately $179.7 million, or 0.41% of total assets and primarily
consisted of FRB and FHLB stock which totals $150.3 million and $15.1 million,
respectively. There were no gains or losses on the sales of these securities
during 2022 or 2021.

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Table 7-Maturity Distribution and Yields of Investment Securities


                                                   Due In              Due After              Due After               Due After
                                               1 Year or Less        1 Thru 5 Years        5 Thru 10 Years             10 Years               Total(12)
(Dollars in thousands)                        Amount      Yield     Amount      Yield      Amount       Yield      Amount       Yield      Amount       Yield
Held to Maturity (amortized cost)
U.S. Government agencies (1)                 $       -        - %  $  64,365     2.11 %  $    82,908     1.74 %  $    49,989     1.73 %  $   197,262     1.86 %
Residential mortgage-backed securities
issued by U.S. government
agencies or sponsored enterprises (2)                -        -

– – 226,335 1.99 1,365,311 1.81 1,591,646

1.84

Residential collateralized
mortgage-obligations issued by U.S.
government
agencies or sponsored enterprises (3)                -        -            -        -              -        -        474,660     2.49        474,660

2.49

Commercial mortgage-backed securities
issued by U.S. government
agencies or sponsored enterprises (4)                -        -       36,747     0.94         61,186     1.09        264,653     1.62        362,586     1.46
Small Business Administration loan-backed
securities (7)                                       -        -            -        -              -        -         57,087     1.25         57,087     1.25
Total held to maturity                       $       -        - %  $ 101,112     1.69 %  $   370,429     1.78 %  $ 2,211,700     1.92 %  $ 2,683,241     1.89 %
Available for Sale (fair value)
U.S. Government treasuries (9)               $ 194,531     1.70 %  $

71,107 1.86 % $ – – % $ – – % $ 265,638 1.74 %
U.S. Government agencies (1)

                         -        -      122,339     2.63         96,749     1.68              -        -        219,088     2.21
Residential mortgage-backed securities
issued by U.S. government
agencies or sponsored enterprises (2)              196        -        2,741     2.27        141,519     2.09      1,553,897     1.96      1,698,353     1.97
Residential collateralized
mortgage-obligations issued by U.S.
government
agencies or sponsored enterprises (3)                -        -       11,504     2.53         15,462     2.34        574,079     2.17        601,045     2.18
Commercial mortgage-backed securities
issued by U.S. government
agencies or sponsored enterprises (4)                4     4.52

88,120 2.29 449,870 1.89 462,404 1.78 1,000,398 1.87
State and municipal obligations (5)(6)

           3,765     3.09       50,193     3.35        112,939     3.01        897,955     2.71      1,064,852     2.77
Small Business Administration loan-backed
securities (7)                                   3,204        -

18,183 2.41 154,815 2.97 268,608 2.11 444,810 2.40
Corporate securities (8)

                             -        -        4,987     7.93         26,822     3.98            829     4.50         32,638     4.60
Total available for sale                     $ 201,700     1.70 %  $

369,174 2.51 % $ 998,177 2.25 % $ 3,757,771 2.16 % $ 5,326,822 2.19 %
Total other investments (10)

                 $       -        - %  $       -        - %  $         -        - %  $   179,717     3.47 %  $   179,717     3.47 %
Total investment securities (11)             $ 201,700     1.70 %  $ 470,286     2.33 %  $ 1,368,606     2.13 %  $ 6,149,188     2.11 %  $ 8,189,780     2.12 %
Percent of total                                     2 %                   6 %                    17 %                    75 %
Cumulative percent of total                          2 %                   8 %                    25 %                   100 %

(1) The expected average life for U.S. Government agencies is 5.51 years; 6.67

     years for held to maturity and 4.59 years for available for sale.

The expected average life for residential mortgage-backed securities issued

(2) by U.S. government agencies or sponsored enterprises is 7.44 years; 7.57

years for held to maturity and 7.35 years for available for sale.

The expected average life for residential collateralized mortgage-obligations

(3) securities issued by U.S. government agencies or sponsored enterprises is

7.62 years; 8.46 years for held to maturity and 7.06 years for available for

sale.

The expected average life for commercial mortgage-backed securities issued by

(4) U.S. government agencies or sponsored enterprises is 6.37 years; 5.99 years

for held to maturity and 6.49 years for available for sale.

(5) Yields on tax-exempt income have been presented on a taxable-equivalent basis

in the above table.

(6) The expected average life for state and municipal obligations is 14.82 years.

The expected average life for Small Business Administration loan-backed

(7) securities is 6.18 years; 7.87 years for held to maturity and 5.99 years for

available for sale.

(8) The expected average life for corporate securities is 6.80 years.

(9) The expected average life for US Treasuries is 0.89 years.

(10) FRB, FHLB and other non-marketable equity securities have no set maturity

date and are classified in “Due after 10 Years.”

The expected average life for the total investment securities portfolio is

(11) 7.96 years (not including FRB, FHLB and corporate stock with no maturity

date).

(12) The total values presented in the table above represent the total fair value

of available for sale securities and amortized cost for held to maturity.



Loan Portfolio

Our loan portfolio remains our largest category of interest-earning assets. At
December 31, 2022, total loans, excluding held for sale loans, were
$30.2 billion, which was an overall increase of $6.2 billion, or 26.1%, from the
balance at the end of 2021. Non-acquired loan growth was $6.8 billion, or 42.1%
for 2022, driven by growth in all categories, with the exception of other loans.
The loan growth was made up of a 58.4% increase in consumer real estate loans, a
43.9% increase in non-owner occupied real estate loans (including construction
and land development loans), a 19.0% increase in commercial owner occupied real
estate loans, a 41.7% increase in commercial and industrial loans, a 39.1%
increase in other income producing property and a 55.4% increase in consumer non
real estate loans. Total acquired loans decreased by $504.6 million, or 6.4%,
from the balance at the end of 2021. The decrease in acquired loans was due to
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,
offset by the addition of $2.4 billion from the merger with Atlantic Capital
during the period.

Average total loans outstanding during 2022 were $27.5 billion, $3.3 billion, or
13.8%, over the 2021 average of $24.1 billion. (For further discussion of the
Company's acquired loan accounting, see Note 1-Summary of Significant Accounting
Policies, Note 2-Mergers and Acquisitions, Note 4-Loans and Note 5-Allowance for
Credit Losses in the consolidated financial statements.)

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

Table 8-Distribution of Loans by Type

                                                                      December 31,
(Dollars in thousands)                                            2022            2021

Acquired loans:
Acquired – non-purchased credit deteriorated loans:
Nonowner occupied real estate(1)

                             $  2,250,428    $  2,229,401
Consumer real estate(2)                                            902,271

1,138,903

Commercial owner occupied real estate                            1,332,942

1,325,412

Commercial and industrial                                        1,128,280

770,133

Other income producing property                                    195,265

       286,566
Consumer                                                           133,679         139,470
Other                                                                  227             184

Total acquired – non-purchased credit deteriorated loans 5,943,092

5,890,069

Acquired – purchased credit deteriorated loans (PCD):
Nonowner occupied real estate(3)

                                  599,522

919,370

Consumer real estate(2)                                            233,740

296,682

Commercial owner occupied real estate                              435,650

542,602

Commercial and industrial                                           66,891

85,380

Other income producing property                                     52,827

88,093

Consumer                                                            41,101

55,195

Total acquired purchased credit deteriorated loans (PCD) 1,429,731

1,987,322

Total acquired loans                                             7,372,823

7,877,391

Non-acquired loans:
Nonowner occupied real estate(4)                                8,083,369

5,616,144

Consumer real estate(2)                                          5,339,199

3,371,373

Commercial owner occupied real estate                            3,691,601

3,102,102

Commercial and industrial                                        4,118,312

2,905,620

Other income producing property                                    448,150

       322,145
Consumer                                                         1,103,646         709,992
Other loans                                                         20,762          23,399
Total nonacquired loans                                        22,805,039      16,050,775

Total loans (net of unearned income)                          $ 30,177,862

$ 23,928,166

(1) Includes $258.5 million and $180.4 million of construction and land

development loans at December 31, 2022 and 2021, respectively.

(2) Includes loans on both 1-4 family owner occupied property, as well as loans

collateralized by 1-4 family owner occupied property with a business intent.

(3) Includes $46.5 million and $59.7 million of construction and land development

loans at December 31, 2022 and 2021, respectively.

(4) Includes $2.6 billion and $1.8 billion of construction and land development

loans at December 31, 2022 and 2021, respectively.

The following highlights of our loan portfolio as of December 31, 2022 compared
to December 31, 2021:

Non-acquired loans were $22.8 billion, or 75.6% of total loans of total loans

at December 31, 2022. This compares to non-acquired loans of $16.1 billion, or

? 67.1% at December 31, 2021. The increase in non-acquired loans of $6.8 billion

was due to organic growth and renewals of acquired loans that were moved to the

non-acquired loan portfolio. Excluding the reduction in PPP loans, non-acquired

loans increased $7.0 billion.

Acquired loans were $7.4 billion, or 24.4% of total loans at December 31, 2022.

This compares to acquired loans of $7.9 billion, or 32.9% at December 31, 2021.

? The $504.6 million decrease in acquired loans was due to principal payments,

charge offs, foreclosures and renewals of acquired loans that were moved to our

non-acquired loan portfolio. The decline also included a reduction of acquired

PPP loans of $11.2 million through pay-off and forgiveness of the loans.

Non-acquired loans secured by non-owner occupied and consumer real estate were

$13.4 billion and comprised 44.5% of the total loan portfolio at December 31,

2022. This was an increase of $4.4 billion, or 49.3%, over December 31, 2021.

? At December 31, 2022, acquired loans secured by non-owner occupied and consumer

real estate were $4.0 billion and comprised 13.2% of the total loan portfolio.

This was a decrease of $598.4 million, or 13.1%, over December 31, 2021.

Between both the non-acquired and acquired portfolios, 57.7% of loans were

non-owner occupied and consumer real estate loans.

Of the non-acquired real estate loans at December 31, 2022, $8.1 billion, or

o 26.8% of the loan portfolio were secured by non-owner occupied real estate.

   Loans secured by consumer real estate were $5.3 billion,


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or 17.7% of the total loan portfolio at December 31, 2022. This compared to

loans secured by non-owner occupied real estate of $5.6 billion, or 23.5% and

loans secured by consumer real estate of $3.4 billion, or 14.1% at December 31,

  2021.


   Of these acquired real estate loans, $2.8 billion, or 9.4% of the loan

portfolio were secured by non-owner occupied real estate at December 31, 2022.

o Loans secured by consumer real estate were $1.1 billion, or 3.8%. This compared

to acquired loans secured by non-owner occupied real estate of $3.1 billion, or

13.2% and loans secured by consumer real estate of $1.4 billion, or 6.0% at

December 31, 2021.

Included within loans secured by non-owner occupied real estate noted above are

construction and land development loans. Total construction and land

? development loans were $2.9 billion at December 31, 2022 compared to $2.0

billion at December 31, 2021. Construction and land development loans are more

   susceptible to a risk of loss during a downturn in the business cycle.

o Non-acquired construction and land development loans increased $766.3 million

in 2022 from $1.8 million at December 31, 2021 to $2.6 billion.

o Acquired construction and land development loans increased $64.8 million in

2022 from $240.1 million at December 31, 2021 to $304.9 million.

Total consumer real estate loans were comprised of $5.2 billion in consumer

owner occupied loans and $1.3 billion in home equity line loans at December 31,

? 2022. This compares to $3.6 billion in consumer owner occupied loans and $1.2

billion in home equity lines loans at December 31, 2021. During 2022, the

consumer real estate loan portfolio increased by $1.7 billion from December 31,

   2021.


   Non-acquired loans secured by consumer real estate were comprised of

$4.4 billion in consumer owner occupied loans and $958.2 million in home equity

loans at December 31, 2022. At December 31, 2021, we had $2.7 billion in

o consumer owner occupied loans and $710.3 million in home equity loans in the

non-acquired loan portfolio. The Company made the decision to hold more of 1-4

family mortgage production in its portfolio in 2022 rather than sell the loans

into the secondary market.

Acquired loans secured by consumer real estate comprised of $781.0 million in

consumer owner occupied loans and $355.0 million in home equity loans at

o December 31, 2022. At December 31, 2021, we had $977.3 million in consumer

owner occupied loans and $458.3 million in home equity loans in the acquired

loan portfolio.

Non-acquired and acquired commercial owner-occupied real estate loans were

? $3.7 billion, or 12.2% and $1.8 billion or 5.9%, respectively, of the total

loan portfolio at December 31, 2022 compared to $3.1 billion, or 13.0% and $1.9

billion or 7.8%, respectively, at December 31, 2021.

o Non-acquired commercial owner-occupied real estate loans increased $589.5

million through organic growth and renewals of acquired loans.

Acquired commercial owner-occupied real estate loans decreased $99.4 million

o due to principal payments, charge offs, foreclosures and renewals of acquired

loans that were moved to our non-acquired loan portfolio from December 31, 2021

compared to December 31, 2022.

Non-acquired and acquired commercial and industrial loans were $4.1 billion, or

? 13.6% and $1.2 billion or 4.0%, respectively, of the total loan portfolio at

December 31, 2022 compared to $2.9 billion, or 12.1% and $855.5 million or

3.6%, respectively, at December 31, 2021.

Non-acquired commercial and industrial loans increased $1.2 billion. The

o overall increase in non-acquired commercial and industrial loans included a

$223.3 million decline in PPP loans.

Acquired commercial and industrial loans increased $339.7 million from

o December 31, 2021 compared to December 31, 2022. The overall increase in

acquired commercial and industrial loans included a $11.2 million decline in

PPP loans.



Total loan interest income, excluding interest income on held for sale loans,
was $1.2 billion in 2022, an increase of $191.6 million, or 19.5%, over
$983.7 million in 2021. This increase was mainly due to a $5.0 billion increase
in the average balance of our non-acquired loan portfolio, offset by a $1.6
billion decrease in the average balance of our acquired loan portfolio. The
growth in the non-acquired loan portfolio average balance was due to normal
organic growth and renewals of acquired loans. The decline in the acquired loan
portfolio was due to paydowns

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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, even with the
$2.4 billion in loans acquired through the merger with Atlantic Capital on March
1, 2022. The effects on interest income from the overall increases in average
portfolio balances were enhanced by a 24 basis point increase in the yield on
the non-acquired portfolio and a 36 basis point increase in the yield on the
acquired portfolio. The yield on the non-acquired loan portfolio increased from
3.79% in 2021 to 4.03% in 2022 and the yield on the acquired loan portfolio
increased from 4.49% in 2021 to 4.85% in 2022. The increase in the yields on the
non-acquired loan portfolio and the acquired loan portfolio was due to the rise
in interest rates starting in March 2022.

The table below shows the contractual maturity of the non-acquired loan
portfolio at December 31, 2022.

Table 9-Maturity Distribution of Non-acquired Loans

December 31, 2022                                  1 Year          Maturity                Maturity                 Over
(Dollars in thousands)             Total          or Less        1 to 5 Years         5 to 15 Years               15 Years
Nonowner occupied real
estate                         $   8,083,369    $    597,190    $    3,189,894    $                 3,475,668   $    820,617
Consumer real estate               5,339,199          51,796           141,821                        926,131      4,219,451
Commercial owner occupied
real estate                        3,691,601         134,464           925,826                      2,504,274        127,037
Commercial and industrial          4,118,312         534,909         1,863,665                      1,047,877        671,861
Other income producing
property                             448,150          35,449           233,615                        106,444         72,642
Consumer                           1,103,646         120,757           440,368                        346,550        195,971
Other loans                           20,762          20,762                 -                              -              -
Total nonacquired loans       $  22,805,039    $  1,495,327    $    6,795,189    $                 8,406,944   $  6,107,579

Table 10-Non-Acquired Loans Due After One Year – Fixed or Floating


December 31, 2022
(Dollars in thousands)                    Fixed Rate      Variable Rate
Nonowner occupied real estate           $  3,052,053    $     4,434,126
Consumer real estate                        2,122,261          3,165,142

Commercial owner occupied real estate 2,390,318 1,166,819
Commercial and industrial

                   2,317,942          1,265,461
Other income producing property               273,094            139,607
Consumer                                      963,026             19,863
Total nonacquired loans                 $ 11,118,694    $    10,191,018

The table below shows the contractual maturity of the acquired non-purchased
credit deteriorated loan portfolio at December 31, 2022.


Table 11-Maturity Distribution of Acquired Non-purchased Credit Deteriorated
Loans

December 31, 2022                                                     1 Year          Maturity          Maturity         Over
(Dollars in thousands)                          Total                 or

Less 1 to 5 Years 5 to 15 Years 15 Years
Nonowner occupied real estate $

                 2,250,428    $

222,126 $ 1,065,299 $ 854,775 $ 108,228
Consumer real estate

                                     902,271         29,594           143,950            263,453     465,274
Commercial owner occupied real
estate                                                 1,332,942         78,461           409,727            718,684     126,070
Commercial and industrial                              1,128,280        123,860           448,454            378,418     177,548
Other income producing property                          195,265         19,571            61,354             74,913      39,427
Consumer                                                 133,679         26,617            33,669             60,863      12,530
Other                                                        227            227                 -                  -           -
Total acquired - non-purchased
credit deteriorated loans            $                 5,943,092    $

500,456 $ 2,162,453 $ 2,351,106 $ 929,077

Table 12- Acquired Non-PCD Loans Due After One Year – Fixed or Floating


December 31, 2022
(Dollars in thousands)                                        Fixed Rate      Variable Rate
Nonowner occupied real estate                                $   694,113    $     1,334,189
Consumer real estate                                              257,855

614,822

Commercial owner occupied real estate                             517,158

737,323

Commercial and industrial                                         594,695

409,725

Other income producing property                                    58,539

117,155

Consumer                                                          100,123              6,939

Total acquired – non-purchased credit deteriorated loans $ 2,222,483

 $     3,220,153


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The table below shows the contractual maturity of the acquired purchased credit
deteriorated loan portfolio at December 31, 2022.

Table 13-Maturity Distribution of Acquired Purchased Credit Deteriorated Loans

December 31, 2022                                               1 Year         Maturity          Maturity         Over
(Dollars in thousands)                             Total        or Less      1 to 5 Years      5 to 15 Years    15 Years
Nonowner occupied real estate                  $   599,522    $  59,407    $      171,399    $       321,059   $  47,657
Consumer real estate                                233,740       11,329            28,392             51,102     142,917
Commercial owner occupied real estate               435,650       45,139           147,070            208,395      35,046
Commercial and industrial                            66,891       20,905            26,096             15,216       4,674
Other income producing property                      52,827        8,733             8,818             25,696       9,580
Consumer                                             41,101          894             8,128             31,231         848
Total acquired  purchased credit
deteriorated loans (PCD)                        $ 1,429,731    $ 146,407

$ 389,903 $ 652,699 $ 240,722

Table 14- Acquired PCD Loans Due After One Year – Fixed or Floating


December 31, 2022
(Dollars in thousands)                                         Fixed Rate      Variable Rate
Nonowner occupied real estate                                $    111,094    $       429,021
Consumer real estate                                                98,185

124,226

Commercial owner occupied real estate                              182,899

207,612

Commercial and industrial                                           33,637             12,349
Other income producing property                                     12,828             31,266
Consumer                                                            39,687                520

Total acquired purchased credit deteriorated loans (PCD) $ 478,330

$ 804,994

Troubled Debt Restructurings (“TDRs”)


We designate expected credit losses over the contractual term of a loan. When
determining the contractual term, the Company considers expected prepayments but
is precluded from considering expected extensions, renewals, or modifications,
unless the Company reasonably expects it will execute a TDR with a borrower. In
the event of a reasonably-expected TDR, the Company factors the
reasonably-expected TDR into the current expected credit losses estimate. For
consumer loans, the point at which a TDR is reasonably expected is when the
Company approves the borrower's application for a modification (i.e., the
borrower qualifies for the TDR) or when the Credit Administration department
approves loan concessions on substandard loans. For commercial loans, the point
at which a TDR is reasonably expected is when the Company approves the loan for
modification or when the Credit Administration department approves loan
concessions on substandard loans. The Company uses a discounted cash flow
methodology for a TDR to calculate the effect of the concession provided to the
borrower within the ACL.

A restructuring that results in only a delay in payments that is insignificant
is not considered an economic concession. In accordance with the Coronavirus
Aid, Relief, and Economic Security Act, also known as the CARES Act, the Company
implemented loan modification programs in response to the COVID-19 pandemic in
order to provide borrowers with flexibility with respect to repayment terms. The
Company's payment relief assistance includes forbearance, deferrals, extension
and re-aging programs, along with certain other modification strategies. The
Company elected the accounting policy in the CARES Act to not apply TDR
accounting to loans modified for borrowers impacted by the COVID-19 pandemic if
the concession met the criteria as defined under the CARES Act. At December 31,
2022 and 2021, total TDRs were $21.4 million and $12.5 million, respectively, of
which $13.5 million were accruing restructured loans at December 31, 2022,
compared to $11.2 million at December 31, 2021. We do not have significant
commitments to lend additional funds to these borrowers whose loans have been
modified.

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The level of risk elements in the loan portfolio, OREO and other nonperforming
assets for the past two years is shown below:

Table 15-Nonperforming Assets

                                                                  December 31,
(Dollars in thousands)                                          2022         2021
Non-acquired:
Nonaccrual loans                                              $  40,517    $ 18,201

Accruing loans past due 90 days or more                           2,358

  4,612
Restructured loans                                                4,154         499
Total nonperforming loans                                        47,029      23,312

Other real estate owned ("OREO") (1) (2)                            141

252

Other nonperforming assets (3)                                      104

338

Total OREO and other nonperforming assets excluding
acquired assets                                                     245

590

Total nonperforming assets excluding acquired assets             47,274

23,902

Acquired:

Nonaccrual loans (4)                                             59,554

56,718

Accruing loans past due 90 days or more                           1,992

251

Total acquired nonperforming loans                               61,546

56,969

Acquired OREO and other nonperforming assets:
Acquired OREO (1) (5)                                               882

2,484

Other acquired nonperforming assets (3)                              40

391

Total acquired OREO and other nonperforming assets                  922

2,875

Total acquired nonperforming assets                              62,468

59,844

Total nonperforming assets                                    $ 109,742    $ 83,746
Excluding acquired assets:
Total nonperforming assets as a percentage of total loans
and repossessed assets (6)                                         0.21 %      0.15 %
Total nonperforming assets as a percentage of total assets
(7)                                                                0.11 %      0.06 %
Nonperforming loans as a percentage of period end loans
(6)                                                                0.21 %      0.15 %
Including acquired assets:
Total nonperforming assets as a percentage of total loans
and repossessed assets (6)                                         0.36 %      0.35 %
Total nonperforming assets as a percentage of total assets
(7)                                                                0.25 %      0.20 %
Nonperforming loans as a percentage of period end loans
(6)                                                                0.36 %

0.34 %

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

property no longer intended for bank use.

Excludes non-acquired bank premises held for sale of $14.3 million and $1.0

(2) million as of December 31, 2022 and 2021, respectively, that is now

separately disclosed on the balance sheet.

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

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

Excludes acquired bank premises held for sale of $3.4 million and $8.6

(5) million as of December 31, 2022 and 2021, respectively, that is now

separately disclosed on the balance sheet.

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

(7) For purposes of this calculation, total assets include all assets (both

acquired and non-acquired).



Total non-acquired nonperforming loans were $47.0 million, or 0.21% of total
non-acquired loans, an increase of approximately $23.7 million, or 101.7%, from
December 31, 2021. The increase in nonperforming loans was driven primarily by
an increase in commercial nonaccrual loans of $19.4 million, an increase in
restructured nonaccrual loans of $3.7 million, an increase in consumer
nonaccrual loans of $2.9 million, offset by a decrease in accruing loans past
due 90 days or more of $2.3 million. The increase in commercial nonaccrual loans
at December 31, 2022 was primarily due to three commercial owner occupied loans
totaling $16.0 million and two commercial and industrial loans totaling $2.5
million. Acquired nonperforming loans were $61.5 million, or 0.83% of total
acquired loans, an increase of $4.6 million, or 8.0%, from December 31, 2021.
The increase in acquired nonperforming loans was mainly driven by an increase in
commercial nonaccrual loans of $5.8 million, an increase in accruing loans past
due 90 days or more of $1.7 million, offset by a decrease in consumer nonaccrual
loans of $3.0 million.

The top ten nonaccrual loans at December 31, 2022 totaled $38.1 million and
consisted of one loan located in South Carolina, one in North Carolina, six in
Georgia, and two in Florida. These loans comprise 31.6% of total nonaccrual
loans at December 31, 2022, with the majority being real estate collateral
dependent. We currently hold a specific reserve against two of these ten loans,
totaling $2.4 million. The remaining eight loans do not carry a specific reserve
due to carrying balances being below current collateral values or the loans

are
SBA guaranteed.

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At December 31, 2022, non-acquired OREO decreased by $111,000 from the balance
at December 31, 2021 to $141,000. At December 31, 2022, non-acquired OREO
consisted of three properties with an average value of $47,000, a decrease of
$205,000 in the average value from December 31, 2021 when we had one property.
In the fourth quarter of 2022, we transferred one property with a value of
$83,000 to non-acquired OREO, and we sold no properties during the quarter. At
December 31, 2022, one of the non-acquired OREO properties was located in the
Hillsborough (Fort Myers, Fla) region and two of the properties were located in
the Beaufort (SC) region.

At December 31, 2022, acquired OREO decreased by $1.6 million from the balance
at December 31, 2021 to $0.9 million. At December 31, 2022, acquired OREO
consisted of three properties with an average value of $294,000, an increase of
$68,000 from December 31, 2021 when we had 11 properties. In the fourth quarter
of 2022, we did not transfer new properties into acquired OREO, however, we sold
seven properties with a basis of $1.2 million during the quarter, resulting in a
net loss of $85,000 on the properties sold.

Our general policy is to obtain updated OREO valuations at least annually. OREO
valuations include appraisals or broker opinions, (See Other Real Estate Owned
("OREO") under Critical Accounting Policies and Estimates in Item 7-Management's
Discussion and Analysis of Financial Condition and Results of Operations for
further discussion on our OREO policies.)

Potential Problem Loans


Potential problem loans, which are not included in nonperforming loans, related
to non-acquired loans were approximately $15.8 million, or 0.07% of total
non-acquired loans outstanding at December 31, 2022, compared to $6.9 million,
or 0.04% of total non-acquired loans outstanding at December 31, 2021. Potential
problem loans related to acquired loans totaled $23.1 million, or 0.31%, of
total acquired loans at December 31, 2022 compared to $19.3 million, or 0.24% of
total acquired loans outstanding, at December 31, 2021. All potential problem
loans represent loans where information about possible credit problems of the
borrowers may result in the borrower's inability to comply with present
repayment terms.

Allowance for Credit Losses (“ACL”)

As stated previously, the ACL reflects management's estimate of losses that will
result from the inability of our borrowers to make required loan payments. The
Company established the incremental increase in the ACL at adoption through
equity and subsequent adjustments through a provision for credit losses charged
to earnings. The Company records loans charged off against the ACL and
subsequent recoveries, if any, increase the ACL when they are recognized.

Management uses systematic methodologies to determine its ACL for loans held for
investment and certain off-balance-sheet credit exposures. The ACL is a
valuation account that is deducted from the amortized cost basis to present the
net amount expected to be collected on the loan portfolio. 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. The Company's ACL recorded in 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. The Company's ACL is calculated using
collectively evaluated and individually evaluated loans.

The allowance for credit losses is measured on a collective pool basis when
similar risk characteristics exist. Loans with similar risk characteristics are
grouped into homogenous segments, or pools, for analysis. The Discounted Cash
Flow ("DCF") method is used for each loan in a pool, and the results are
aggregated at the pool level. A periodic tendency to default and absolute loss
given default are applied to a projective model of the loan's cash flow while
considering prepayment and principal curtailment effects. The analysis produces
expected cash flows for each instrument in the pool by pairing loan-level term
information (e.g., maturity date, payment amount, interest rate, etc.) with
top-down pool assumptions (e.g., default rates and prepayment speeds). The
Company has identified the following portfolio segments: Owner-Occupied
Commercial Real Estate, Non Owner-Occupied Commercial Real Estate, Multifamily,
Municipal, Commercial and Industrial, Commercial Construction and Land
Development, Residential Construction, Residential Senior Mortgage, Residential
Junior Mortgage, Revolving Mortgage, and Consumer and Other.

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In determining the proper level of the ACL, management has determined that the
loss experience of the Bank provides the best basis for its assessment of
expected credit losses. The Company therefore used its own historical credit
loss experience by each loan segment over an economic cycle, while excluding
loss experience from certain acquired institutions (i.e., failed banks). For
most of the segment models for collectively evaluated loans, the Company
incorporated two or more macroeconomic drivers using a statistical regression
modeling methodology.

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, 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 a four-quarter forecast and a
four-quarter reversion period.

It is widely acknowledged that the chances of recession are still high.
Accordingly, management continues to use a blended forecast scenario of the
baseline and more severe scenario, depending on the circumstances and economic
outlook. As of December 31, 2022, management selected a baseline weighting of
75% and decreased the more severe scenario to 25% from using a baseline
weighting of 60% and the more severe scenario of 40% at the end of the third
quarter of 2022. The increase of the baseline weighting reflects increasing
recognition of more downside risks in the economic forecast from persistent
levels of inflation and rising interest rates, geopolitical tension and the
Russian invasion of Ukraine, and global supply chain, energy and commodity
issues. The more severe scenario increased in severity from the prior quarter
and was viewed as less likely by management. While employment figures still
showed resilience and provision related to actual loan losses remains at very
low levels, the downward shifts in forecasted commercial real estate price
index, national house price index and GDP increased expected loss rates for
Commercial and Residential Real Estate as well as C&I loans. The resulting
provision was approximately $47.1 million during the fourth quarter of 2022,
including a provision for unfunded commitments of $14.2 million during the
quarter. During 2022, the Company recorded $81.6 million in provision for credit
losses, including a provision of $36.7 million for unfunded commitments.

Included in its systematic methodology to determine its ACL, management
considers the need to qualitatively adjust expected credit losses for
information not already captured in the loss estimation process. These
qualitative adjustments either increase or decrease the quantitative model
estimation (i.e., formulaic model results). Each period the Company considers
qualitative factors that are relevant within the qualitative framework that
includes the following: (1) lending policy; (2) economic conditions not captured
in models; (3) volume and mix of loan portfolio; (4) past due trends; (5)
concentration risk; (6) external factors; and (7) model limitations. At December
31, 2022, we included $9.2 million in qualitative adjustments, which was
comprised of model limitations pertaining to the PCD loan portfolio acquired
through the Atlantic Capital merger of $1.6 million, potential impact of rising
rates on certain C&I credits of $3.3 million, and implementation of a new
reserve framework for loan policy exceptions of $4.3 million. Of the total $9.2
million in qualitative adjustments made in the fourth quarter of 2022, $1.3
million was related to unfunded commitments.

When a loan no longer shares similar risk characteristics with its segment, the
asset is assessed to determine whether it should be included in another pool or
should be individually evaluated. The Company's threshold for individually
evaluated loans includes all non-accrual loans with a net book balance in excess
of $1.0 million. management will monitor the credit environment and make
adjustments to this threshold in the future if warranted. Based on the threshold
above, consumer financial assets will generally remain in pools unless they meet
the dollar threshold. The expected credit losses on individually evaluated loans
will be estimated based on discounted cash flow analysis unless the loan meets
the criteria for use of the fair value of collateral, either by virtue of an
expected foreclosure or through meeting the definition of collateral-dependent.
Financial assets that have been individually

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evaluated can be returned to a pool for purposes of estimating the expected
credit loss insofar as their credit profile improves and the repayment terms
were not considered to be unique to the asset.


Management measures expected credit losses over the contractual term of a loan.
When determining the contractual term, the Company considers expected
prepayments but is precluded from considering expected extensions, renewals, or
modifications, unless the Company reasonably expects it will execute a troubled
debt restructuring ("TDR") with a borrower. In the event of a reasonably
expected TDR, the Company factors the reasonably-expected TDR into the current
expected credit losses estimate. For consumer loans, the point at which a TDR is
reasonably expected is when the Company approves the borrower's application for
a modification (i.e., the borrower qualifies for the TDR) or when the Credit
Administration department approves loan concessions on substandard loans. For
commercial loans, the point at which a TDR is reasonably expected is when the
Company approves the loan for modification or when the Credit Administration
department approves loan concessions on substandard loans. The Company uses a
discounted cash flow methodology for a TDR to calculate the effect of the
concession provided to the borrower within the ACL. The Company has not chosen
to early adopt the retirement of TDR guidance, which was adopted effective
January 1, 2023.

A restructuring that results in only a delay in payments that is insignificant
is not considered an economic concession. In accordance with the CARES Act, the
Company implemented loan modification programs in response to the COVID-19
pandemic in order to provide borrowers with flexibility with respect to
repayment terms. The Company's payment relief assistance includes forbearance,
deferrals, extension and re-aging programs, along with certain other
modification strategies. The Company elected the accounting policy in the CARES
Act to not apply TDR accounting to loans modified for borrowers impacted by the
COVID-19 pandemic if the concession met the criteria as defined under the CARES
Act.

For purchased credit-deteriorated, otherwise referred to herein as PCD, assets
are defined as acquired individual financial assets (or acquired groups of
financial assets with similar risk characteristics) that, as of the date of
acquisition, have experienced a more-than-insignificant deterioration in credit
quality since origination, as determined by the Company's assessment. The
Company records acquired PCD loans by adding the expected credit losses (i.e.,
allowance for credit losses) to the purchase price of the financial assets
rather than recording through the provision for credit losses in the income
statement. The expected credit loss, as of the acquisition day, of a PCD loan is
added to the allowance for credit losses. The non-credit discount or premium is
the difference between the unpaid principal balance and the amortized cost basis
as of the acquisition date. Subsequent to the acquisition date, the change in
the ACL on PCD loans is recognized through the provision for credit losses. The
non-credit discount or premium is accreted or amortized, respectively, into
interest income over the remaining life of the PCD loan on a level-yield basis.
In accordance with the transition requirements within the standard, the
Company's acquired credit-impaired loans (i.e., ACI or Purchased Credit
Impaired) were treated as PCD loans. As a result of the merger with Atlantic
Capital, the Company identified approximately $137.9 million of loans as PCD and
recorded an allowance for credit losses of $13.8 million on acquisition date for
PCD loans.

Atlantic Capital was acquired and merged with and into the Bank on March 1,
2022, requiring that a closing date ACL be prepared for Atlantic Capital on a
standalone basis and that the acquired portfolio be included in the Bank's first
quarter ACL. Atlantic Capital's loans represented approximately 8% of the total
Bank's portfolio at March 31, 2022. Given the relative size and complexity of
the acquired portfolio, similarities of the loan characteristics, and similar
loss history to the existing portfolio, reserve calculations were performed
using the Bank's existing CECL model, loan segmentation, and forecast weighting
as the first quarter end reserve. The acquisition date ACL totaled $27.5
million, consisting of a non-PCD pooled reserve of $13.7 million, PCD pooled
reserve of $5.7 million, and PCD individually evaluated reserve of $8.1 million.
It represented about 8% of the combined Bank's ACL reserve at March 31, 2022.
The acquisition date reserve for unfunded commitments totaled $3.4 million, or
11% of the combined Bank's total at March 31, 2022.

The Company follows its nonaccrual policy by reversing contractual interest
income in the income statement when the Company places a loan on nonaccrual
status. Therefore, management excludes the accrued interest receivable balance
from the amortized cost basis in measuring expected credit losses on the
portfolio and does not record an allowance for credit losses on accrued interest
receivable. As of December 31, 2022 and 2021, the accrued interest receivable
for loans recorded in Other Assets were $105.4 million and $70.6 million,
respectively.

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. The expected losses


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associated with these exposures within the unfunded portion of the expected
credit loss will be recorded as a liability on the balance sheet. Management has
determined that a majority of the Company's off-balance-sheet credit exposures
are not unconditionally cancellable. Management completes funding studies based
on historical data to estimate the percentage of unfunded loan commitments that
will ultimately be funded to calculate the reserve for unfunded commitments.
Management applies this funding rate, along with the loss factor rate determined
for each pooled loan segment, to unfunded loan commitments, excluding
unconditionally cancellable exposures and letters of credit, to arrive at the
reserve for unfunded loan commitments. As of December 31, 2022 and 2021, the
liabilities recorded for expected credit losses on unfunded commitments were
$67.2 million and $30.5 million, respectively. The current adjustment to the ACL
for unfunded commitments is recognized through the Provision (Recovery) for
Credit Losses in the Consolidated Statements of Income. The Company did not have
an allowance for credit losses or record a provision for credit losses on
investment securities or other financials asset during 2022.

As of December 31, 2022, the balance of the ACL was $356.4 million, or 1.18%, of
total loans. The ACL increased $32.0 million from the balance of $324.4 million
recorded at September 30, 2022. This increase during the fourth quarter of 2022
was the result of $32.9 million provision for credit losses and $0.9 million in
net charge-offs. For the year ended December 31, 2022, the ACL increased $54.6
million from the balance of $301.8 million at December 31, 2021. The increase in
ACL of $54.6 million was due a provision for credit losses of $45.2 million,
$13.7 million due to the initial allowance for PCD loans acquired in the
Atlantic Capital acquisition, along with net charge-offs of $4.3 million in
2022. For both the three and twelve months ended December 31, 2022, the Company
recorded provision for credit losses due to loan growth and current forecasts
applied to our modeling to adequately capture growing economic recessionary
risks. As of December 31, 2021, the balance of the ACL was $301.8 million or
1.26% of total loans. For the year ended December 31, 2021, the ACL decreased
$155.5 million from the balance of $457.3 million. The decrease in ACL of $155.5
million was due to a release of the allowance for credit losses of $152.4
million along with net charge-offs of $3.1 million in 2021. For 2021, the
Company had releases of allowance for credit losses resulting from improvements
in the economic forecasts that drive our ACL model as the economy improved
during 2021.

At December 31, 2022, the Company had a reserve on unfunded commitments of $67.2
million, which was recorded as a liability on the Consolidated Balance Sheet,
compared to $30.5 million at December 31, 2021. During the fourth quarter of
2022, the Company recorded a provision for credit losses on unfunded commitments
of $14.2 million. The year-to-date provision of $36.7 million recorded in 2022
includes the initial provision for credit losses for unfunded commitments
acquired from Atlantic Capital, which the Company recorded during the first
quarter of 2022. The Company recorded a release of $12.9 million related to
unfunded commitments during 2021. The provision for credit losses for unfunded
commitments is based on the growth in unfunded loan commitments, production mix,
and current forecast scenarios applied to our modeling to adequately capture
growing economic recessionary risks. This amount was recorded in Provision
(Recovery) for Credit Losses on the Consolidated Statements of Income.

The ACL provides 3.28 times coverage of nonperforming loans at December 31,
2022. Net charge offs to total average loans during the year ended December 31,
2022 were 0.02%, compared to 0.01% during the year ended December 31, 2021. We
continued to show solid and stable asset quality numbers and ratios as of
December 31, 2022. The following table provides the allocation, by segment, for
expected credit losses. Because PPP loans are government guaranteed and
management implemented additional reviews and procedures to help mitigate
potential losses, management does not expect to recognize credit losses on this
loan portfolio and as a result, did not record an ACL for PPP loans within the
C&I loan segment presented in the table below.

Table 16-Allocation of the Allowance by Segment

                                            December 31, 2022          December 31, 2021
(Dollars in thousands)                      Amount         %*          Amount         %*
Residential Mortgage Senior               $    72,188       18.8 %   $    47,036       17.4 %
Residential Mortgage Junior                       405        0.0 %           611        0.1 %
Revolving Mortgage                             14,886        4.6 %        13,325        5.2 %
Residential Construction                        8,974        2.9 %         4,997        2.7 %
Other Construction and Development             45,410        6.5 %        37,593        5.8 %
Consumer                                       22,767        4.2 %        23,149        3.8 %
Multifamily                                     3,684        2.4 %         4,921        1.9 %
Municipal                                         849        2.4 %           565        2.7 %
Owner Occupied Commercial Real
Estate                                         58,083       18.1 %        61,794       20.9 %
Non-Owner Occupied Commercial Real
Estate                                         78,485       24.5 %        79,649       26.5 %
Commercial and Industrial                      50,713       15.7 %        28,167       13.0 %
Total                                     $   356,444      100.0 %   $   301,807      100.0 %

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


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The following table presents a summary of net charge off ratios by loan segment,
for the year ended December 31, 2022 and 2021:

Table 17-Disaggregated Net Recovery (Charge Off) Ratio by Segment

                                                                            Year Ended
                                                December 31, 2022                               December 31, 2021
                                                                         Net                                             Net
                                                                      Recovery                                        Recovery
                                                                       (Charge                                         (Charge
                                   Net Recovery                         Off)       Net Recovery                         Off)
(Dollars in thousands)             (Charge Off)    Average Balance      Ratio      (Charge Off)    Average Balance      Ratio
Residential Mortgage Senior         $     1,036   $       4,792,864     0.02 %      $     1,343   $       4,139,341     0.03 %
Residential Mortgage Junior                 212              13,835     1.53 %              146              21,539     0.68 %
Revolving Mortgage                        3,536           1,294,044     0.27 %            1,254           1,293,012     0.10 %
Residential Construction                   (13)             756,730        - %               31             580,194     0.01 %
Other Construction and
Development                               1,100           1,669,834     0.07 %            1,774           1,364,535     0.13 %
Consumer                                (7,788)           1,151,578   (0.68) %          (6,734)             885,770   (0.76) %
Multifamily                                   -             588,305        - %                3             385,430        - %
Municipal                                     -             685,538        - %                -             628,443        - %
Owner Occupied Commercial Real
Estate                                    (649)           5,330,711   (0.01) %          (1,082)           4,869,458     0.02 %
Non-Owner Occupied Commercial
Real Estate                                 213           6,998,540        - %              207           5,940,184        - %
Commercial and Industrial               (1,920)           4,174,155   (0.05) %             (41)           4,010,606        - %
Total                               $   (4,273)   $      27,456,134   (0.02)        $   (3,099)   $      24,118,512   (0.01)

The following table presents a summary of the changes in the ACL, for the years
ended December 31, 2022 and 2021:


                                                                                   Year Ended December 31,
                                                  2022                                       2021                                      2020
                                   Non-PCD          PCD                      Non-PCD          PCD                       Non-PCD          PCD
(Dollars in thousands)              Loans          Loans        Total         Loans          Loans         Total         Loans          Loans        Total
Allowance for credit losses at
January 1                        $    225,227    $   76,580   $  301,807   $    315,470    $  141,839   $   457,309   $     56,927    $        -   $   56,927
Adjustment for implementation
of CECL                                     -             -            -              -             -             -         51,030         3,408       54,438
ACL - PCD loans for ACBI
merger                                      -        13,758       13,758              -             -             -              -       149,404      149,404
Loans charged-off                    (17,332)       (6,114)     (23,446)       (14,391)       (2,508)      (16,899)        (9,714)       (4,888)     (14,602)
Recoveries of loans previously
charged off                            12,140         7,033       19,173

7,778 6,022 13,800 6,333 5,444 11,777
Net (charge-offs) recoveries (5,192)

           919      (4,273)        (6,613)         3,514       (3,099)        (3,381)           556

(2,825)

Initial provision for credit
losses - ACBI                          13,697             -       13,697              -             -             -              -             -            -
(Recovery) provision for
credit losses                          75,874      (44,419)       31,455       (83,630)      (68,773)     (152,403)        210,894      (11,529)      199,365
Balance at end of period         $    309,606    $   46,838   $  356,444   $    225,227    $   76,580   $   301,807   $    315,470    $  141,839   $  457,309

Total loans, net of unearned
income:
At period end                    $ 30,177,862                              $ 23,928,166                               $ 24,664,134
Average                            27,456,134                                24,118,512                                 19,371,856
Net charge-offs as a
percentage of average loans
(annualized)                             0.02 %                                    0.01 %                                     0.01 %
Allowance for credit losses as
a percentage of period end
loans                                    1.18 %                                    1.26 %                                     1.85 %
Allowance for credit losses as
a percentage of period end
non-performing loans ("NPLs")          328.29 %                                  375.94 %                                   428.04 %


*   Net charge-offs at December 31, 2022 and 2021 include automated overdraft
protection ("AOP") and insufficient fund ("NSF") principal net charge-offs of
$6.5 million and $4.6 million, respectively, that are included in the consumer
classification above.

** Average loans, net of unearned income does not include loans held for sale.3

Deposits

We rely on deposits by our customers as the primary source of funds for the
continued growth of our loan and investment securities portfolios. Customer
deposits are categorized as either noninterest-bearing deposits or
interest-bearing deposits. Noninterest-bearing deposits (or demand deposits) are
transaction accounts that provide us with "interest-free" sources of funds.
Interest-bearing deposits include savings deposit, interest-bearing transaction
accounts, certificates of deposits, and other time deposits. Interest-bearing
transaction accounts include HSA, IOLTA, and Market Rate checking accounts.

During 2022, overall deposits increased $1.3 billion, or 3.7%, to $36.4 billion
from December 31, 2021. The increase was mainly due to the deposits assumed from
the merger with Atlantic Capital in March 2022. The acquisition date deposits
assumed from Atlantic Capital totaled $3.0 billion and were approximately $2.5
billion at December 31, 2022. Excluding the deposits assumed in the Atlantic
Capital acquisition, our deposits have declined $1.2 billion in 2022 as the
funds in the market from federal government stimulus programs have declined

along with the effects from

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rising interest rates in the second half of 2022, which has increased
competition and alternatives for deposits. The changes in our deposits since
December 31, 2021 included an increase in noninterest-bearing transaction
account deposits of $1.7 billion and saving deposits of $113.8 million. These
increases were offset by a decline in interest-bearing demand deposits
(including money market accounts) of $97.7 million and time deposits of $390.1
million. During 2022, we continued our focus on increasing core deposits
(excluding certificates of deposits and other time deposits), which are normally
lower cost funds compared to certificate of deposit balances.

The following table presents total deposits for the two years at December 31:

Table 22-Total Deposits

                                                              December 31,
(Dollars in thousands)                                    2022            2021
Noninterest-bearing deposits                          $ 13,168,656    $ 11,498,840
Savings deposits                                         3,464,351       3,350,547
Interestbearing demand deposits                        17,297,630

17,395,367

Total savings and interestbearing demand deposits      20,761,981      20,745,914
Certificates of deposit                                  2,413,963       2,803,987
Other time deposits                                          6,023           6,088
Total time deposits                                      2,419,986       2,810,075
Total deposits                                        $ 36,350,623    $ 35,054,829

The following are key highlights regarding overall changes in total deposits:

Total deposits increased $1.3 billion, or 3.7%, for the year ended December 31,

2022, compared to 2021 mainly due to the deposits assumed from the merger with

? Atlantic Capital in March 2022. The acquisition date deposits assumed from

Atlantic Capital totaled $3.0 billion and were approximately $2.5 billion at

December 31, 2022.

Noninterest-bearing deposits (demand deposits) increased by $1.7 billion, or

o 14.5%, for the year ended December 31, 2022, when compared with December 31,

2021.

o Money market (Market Rate Checking) and other interest-bearing demand deposits

decreased $97.7 million, or 0.6%, for the year ended December 31, 2022

o Savings deposits increased $113.8 million, or 3.4%, when compared with

December 31, 2021.

At December 31, 2022, the ratio of savings, interest-bearing demand deposits,

o and time deposits to total deposits was 63.8%, a decrease of 3.4%, compared

with the ratio of 67.2% at the end of 2021.

The following are key highlights regarding overall growth in average total
deposits:

? Total deposits averaged $37.2 billion in 2022, an increase of $4.2 billion, or

12.7%, from 2021.

o Average interest-bearing deposits increased by $1.7 billion, or 7.9%, to $23.7

billion in 2022 compared to 2021.

o Average noninterest-bearing demand deposits increased by $2.5 billion, or

22.3%, to $13.5 billion in 2022 compared to 2021.

The following table provides a maturity distribution of certificates of deposit
of $250,000 or more for the next twelve months as of December 31:


Table 23-Maturity Distribution of Certificates of Deposits of $250 Thousand or
More

                                        December 31,
(Dollars in thousands)               2022         2021       % Change
Within three months                $ 115,528    $ 179,524      (35.6) %

After three through six months 118,511 127,205 (6.8) %
After six through twelve months 168,785 150,641 12.0 %
After twelve months

                   84,361      145,795      (42.1) %
                                   $ 487,185    $ 603,165      (19.2) %


At December 31, 2022 and 2021, the Company estimates that is has approximately
$14.1 billion and $12.4 billion, respectively, in uninsured deposits including
related interest accrued and unpaid. Since it is not reasonably practicable to
provide a precise measure of uninsured deposits, the amounts above are estimates
and are based on the

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same methodologies and assumptions used for the bank’s regulatory reporting
requirements by the FDIC for the Call Report.

The following table provides a maturity distribution of uninsured time deposits
for the next twelve months as of December 31:

Table 24-Maturity Distribution of Uninsured Deposits


                                        December 31,
(Dollars in thousands)               2022         2021       % Change
Within three months                $  57,302    $  86,479      (33.7) %
After three through six months        71,261       67,204         6.0 %
After six through twelve months       91,785       74,892        22.6 %
After twelve months                   42,361       79,795      (46.9) %
                                   $ 262,709    $ 308,370      (14.8) %


Short-Term Borrowed Funds

Our short-term borrowed funds consist of federal funds purchased and securities
sold under repurchase agreements, FRB borrowings on a secured line of credit,
short-term FHLB Advances and the U.S. Bank line of credit. Note 10-Federal Funds
Purchased and Securities Sold Under Agreements to Repurchase in our audited
financial statements provides a profile of these funds at each year-end, the
average amounts outstanding during each period, the maximum amounts outstanding
at any month-end, and the weighted average interest rates on year-end and
average balances in each category. Federal funds purchased and securities sold
under agreements to repurchase most typically have maturities within one to
three days from the transaction date. Certain of these borrowings have no
defined maturity date. Note 11-Other Borrowings in our audited financial
statements provide provides a profile of short-term FHLB advances, FRB
borrowings and the U.S. Bank line of credit at each year-end, the average amount
outstanding during each period and the weighted average interest rates on
year-end and average balances. Short-term FHLB advances has a maturity of less
than one year and the FRB borrowings and U.S. Bank line of credit has a daily
maturity.

Long-Term Borrowed Funds

Our long-term borrowed funds consist of trust preferred junior subordinated debt
and corporate subordinated debt. Note 11-Other Borrowings in our audited
financial statements provides a profile of these funds at each year-end, the
balance at year end, the interest rate at year end and the weighted average
interest rate for long-term borrowings. Each issuance of trust preferred junior
subordinated debt has a maturity of 30 years, but we can call the debt at any
time without penalty.

Capital and Dividends

Our ongoing capital requirements have been met primarily through retained
earnings, less the payment of cash dividends. As of December 31, 2022,
shareholders' equity was $5.1 billion, an increase of $272.0 million, or 5.7%,
compared to the balance at December 31, 2021. The change from year-end 2021 was
mainly attributable to net income of $496.0 million and stock, net of unvested
equity awards, issued pursuant to the acquisition of Atlantic Capital of $657.8
million, less dividends paid on common shares of $146.5 million, common stock
repurchased under our stock repurchase plan of $110.2 million and a decline in
the AOCI attributable to a decrease in the market value of securities available
for sale of $655.2 million.

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The following shows the changes in shareholders’ equity during 2022:

Table 25-Changes in Shareholders’ Equity


Total shareholders' equity at December 31, 2021                      $

4,802,940

Net income

496,049

Dividends paid on common shares ($1.48 per share)

(146,486)

Dividends paid on restricted stock units

(178)

Net decrease in market value of securities available for sale,
net of deferred taxes

(655,212)

Net decrease in market value of post retirement plan, net of
deferred taxes

(730)

Stock options exercised

1,585

Stock issued pursuant to restricted stock units

     1
Employee stock purchases                                                     2,858
Equity based compensation                                                   35,638
Common stock repurchased pursuant to stock repurchase plan

(110,204)

Common stock repurchased - equity plans

(9,126)

Stock issued pursuant to the acquisition of Atlantic Capital

659,772

Net fair value of unvested equity awards assumed in the Atlantic
Capital acquisition

(1,980)

Total shareholders' equity at December 31, 2022                      $

5,074,927



Our equity-to-assets ratio increased to 11.6% at December 31, 2022 from 11.5% at
December 31, 2021. The increase from December 31, 2021 was due to the percentage
increase in equity of 5.7% being higher than the percentage increase in total
assets of 5.0%. The higher percentage growth in capital was mainly due to the
Company's net income of $496.0 million and stock, net of unvested equity awards,
issued pursuant to the acquisition of Atlantic Capital of $657.8 million. The
increase in assets in 2022 was mainly due to the assets acquired in the merger
with Atlantic Capital and from the growth in investments and loans resulting
from the growth in deposits of $1.3 billion.

In January 2021, the Board of Directors of the Company approved the 2021 Stock
Repurchase Plan, which authorized the Company to repurchase 3,500,000 common
shares. During 2021 and through December 31, 2022, we repurchased 3,129,979
shares, at an average price of $81.97 per share, excluding cost of commissions,
for a total of $256.6 million. Of this amount, we repurchased 1,312,038 shares,
at an average price of $83.99 per share (excluding cost of commissions) for a
total of $110.2 million during 2022 under the 2021 Stock Repurchase Plan.

On June 7, 2022, the Company received the Federal Reserve Board's supervisory
nonobjection on the 2022 Stock Repurchase Program. The 2022 Stock Repurchase
Program authorizes the Company to repurchase up to 3.75 million shares, or up to
approximately five percent, of the Company's outstanding shares of common stock
as of March 31, 2022. Our Board of Directors approved the program after
considering, among other things, our liquidity needs and capital resources as
well as the estimated current value of our net assets. The aggregate number of
shares of common stocks authorized to be repurchased totals 4.12 million shares,
which includes 370,021 shares remaining from the Company's 2021 Stock Repurchase
Plan. 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.

We are subject to regulations with respect to certain risk-based capital ratios.
These risk-based capital ratios measure the relationship of capital to a
combination of balance sheet and off-balance sheet risks. The values of both
balance sheet and off-balance sheet items are adjusted based on the rules to
reflect categorical credit risk. In addition to the risk-based capital ratios,
the regulatory agencies have also established a leverage ratio for assessing
capital adequacy. The leverage ratio is equal to Tier 1 capital divided by total
consolidated on-balance sheet assets (minus amounts deducted from Tier 1
capital). The leverage ratio does not involve assigning risk weights to assets.

Specifically, we are required to maintain the following minimum capital ratios:

? a CET1, risk-based capital ratio of 4.5%;

? a Tier 1 risk-based capital ratio of 6%;

? a total risk-based capital ratio of 8%; and

? a leverage ratio of 4%.



Under the current capital rules, Tier 1 capital includes two components: CET1
capital and additional Tier 1 capital. The highest form of capital, CET1
capital, consists solely of common stock (plus related surplus), retained
earnings, accumulated other comprehensive income, otherwise referred to as AOCI,
and limited amounts of minority

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interests that are in the form of common stock. Additional Tier 1 capital is
primarily comprised of noncumulative perpetual preferred stock and Tier 1
minority interests. Tier 2 capital generally includes the allowance for loan
losses up to 1.25% of risk-weighted assets, qualifying preferred stock,
subordinated debt, trust preferred securities and qualifying tier 2 minority
interests, less any deductions in Tier 2 instruments of an unconsolidated
financial institution. AOCI is presumptively included in CET1 capital and often
would operate to reduce this category of capital. When the current capital rules
were first implemented, the Bank exercised its one-time opportunity at the end
of the first quarter of 2015 for covered banking organizations to opt out of
much of this treatment of AOCI, allowing us to retain our pre-existing treatment
for AOCI.

In order to avoid restrictions on capital distributions or discretionary bonus
payments to executives, a banking organization must maintain a "capital
conservation buffer" on top of its minimum risk-based capital requirements. This
buffer must consist solely of Tier 1 Common Equity, but the buffer applies to
all three risk-based measurements (CET1, Tier 1 capital and total capital),
resulting in the following effective minimum capital plus capital conservation
buffer ratios: (i) a CET1 capital ratio of 7.0%, (ii) a Tier 1 risk-based
capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%.

The Bank is also subject to the regulatory framework for prompt corrective
action, which identifies five capital categories for insured depository
institutions (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized) and is based on
specified thresholds for each of the three risk-based regulatory capital ratios
(CET1, Tier 1 capital and total capital) and for the leverage ratio.

The federal banking agencies revised their regulatory capital rules to (i)
address the implementation of CECL? (ii) provide an optional three-year phase-in
period for the adoption date adverse regulatory capital effects that banking
organizations are expected to experience upon adopting CECL? and (iii) require
the use of CECL in stress tests beginning with the 2020 capital planning and
stress testing cycle for certain banking organizations that are subject to
stress testing. CECL became effective for us on January 1, 2020 and the Company
applied the provisions of the standard using the modified retrospective method
as a cumulative-effect adjustment to retained earnings. Related to the
implementation of ASU 2016-13, we recorded additional allowance for credit
losses for loans of $54.4 million, deferred tax assets of $12.6 million, an
additional reserve for unfunded commitments of $6.4 million and an adjustment to
retained earnings of $44.8 million. Instead of recognizing the effects on
regulatory capital from ASU 2016-13 at adoption, the Company initially elected
the option for recognizing the adoption date effects on the Company's regulatory
capital calculations over a three-year phase-in.

In 2020, in response to the COVID-19 pandemic, the federal banking agencies
issued a final rule for additional transitional relief to regulatory capital
related to the impact of the adoption of CECL. The final rule provides banking
organizations that adopt CECL in the 2020 calendar year with the option to delay
for two years the estimated impact of CECL on regulatory capital, followed by
the aforementioned three-year transition period to phase out the aggregate
amount of benefit during the initial two-year delay for a total five-year
transition. The estimated impact of CECL on regulatory capital (modified CECL
transitional amount) is calculated as the sum of the adoption date impact on
retained earnings upon adoption of CECL (CECL transitional amount) and the
calculated change in the ACL relative to the adoption date ACL upon adoption of
CECL multiplied by a scaling factor of 25%. The scaling factor is used to
approximate the difference in the ACL under CECL relative to the incurred loss
methodology. The Company chose the five-year transition method and is deferring
the recognition of the effects from the adoption date and the CECL difference
for the first two years of application. The modified CECL transitional amount
was calculated each quarter for the first two years of the five-year transition.
The amount of the modified CECL transition amount was fixed as of December 31,
2021, and that amount is subject to the three-year phase out, which began in the
first quarter of 2022.

Table 26-Capital Adequacy Ratios

The following table presents our consolidated capital ratios under the
applicable capital rules:


                                                December 31,
(In percent)                               2022     2021     2020
Common equity Tier 1 risk-based capital    10.96 %  11.76 %  11.77 %
Tier 1 riskbased capital                  10.96 %  11.76 %  11.77 %
Total riskbased capital                   12.97 %  13.57 %  14.24 %
Tier 1 leverage                             8.72 %   8.08 %   8.27 %

The Company’s and Bank’s Common equity Tier 1 risk-based capital, Tier 1
risk-based capital and total risk-based capital ratios decreased compared to
December 31, 2021. These ratios decreased due to the additional risk-

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weighted assets acquired through the acquisition of Atlantic Capital in the
first quarter of 2022, which on average, had a higher risk weighting, the
reduction in cash and cash equivalents during the year, which are lower risk
weighted assets, and due to the organic growth in loans during 2022, which have
a higher risk weighting. The effects on our ratios from the increase in
risk-weighted assets were partially offset by an increase in Tier 1 and total
risk-based capital due to net income recognized in 2022, the addition to the net
equity of $657.8 million issued for the Atlantic Capital acquisition and the
$75.0 million in subordinated debentures assumed from Atlantic Capital that
qualifies as total risk-based capital. These increases in capital were partially
offset by the $119.3 million of stock repurchases completed during 2022,
including shares withheld for taxes pertaining to the vesting of equity awards,
along with the dividend paid to shareholders of $146.5 million and the
redemption of $13.0 million of subordinated debentures on June 30, 2022. The
Tier 1 leverage ratios for both the Company and Bank increased compared to
December 31, 2021, as the percentage increase in Tier 1 capital was greater than
the percentage increase in average assets during 2022 due mainly to net income
and equity issued in the Atlantic Capital acquisition. Our capital ratios are
currently well in excess of the minimum standards and continue to be in the
"well capitalized" regulatory classification.

The Company pays cash dividends to shareholders from its assets, which are
mainly provided by dividends from its banking subsidiary. However, certain
restrictions exist regarding the ability of its banking subsidiary to transfer
funds to the Company in the form of cash dividends, loans or advances. The
approval of the OCC is required if the total of all dividends declared by the
Bank in any calendar year exceeds the total of its net profits for that year
combined with its retained net profits for the preceding two years, less any
required transfers to surplus. The federal banking agencies have issued policy
statements which provide that bank holding companies and insured banks should
generally pay dividends only out of current earnings.

During 2022, the Bank paid dividends to SouthState totaling $220.0 million. The
Bank was not required to obtain approval of the OCC to pay these dividends. We
used these funds and excess cash to pay our dividend to shareholders of $146.5
million, repurchase shares of our common stock on the open market totaling
$110.2 million and redeem $13.0 million in subordinated debentures.

The following table provides the amount of dividends and payout ratios for the
years ended December 31:

Table 27-Dividends Paid to Common Shareholders


                                                 Year Ended December 31,
(Dollars in thousands)                        2022         2021

2020

Dividend payments to common shareholders $ 146,486 $ 135,201 $ 98,256
Dividend payout ratios

                          29.54 %      28.43 %     81.45 %


We retain earnings to have capital sufficient to grow our loan and investment
portfolios and to support certain acquisitions or other business expansion
opportunities. The dividend payout ratio is calculated by dividing dividends
paid during the year by net income for the year.

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 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.

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.

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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 by approximately $6.8 billion, or
approximately 42.1%, compared to the balance at December 31, 2021. The increase
in the non-acquired loan portfolio was due to organic growth and renewals of
acquired loans that are moved to our non-acquired loan portfolio. The acquired
loan portfolio decreased by $504.6 million, or 6.4%, from the balance at
December 31, 2021. This decrease was due to principal paydowns, charge-offs,
foreclosures, and renewals of acquired loans moved to the non-acquired loan
portfolio, offset by the addition of $2.4 billion in loans acquired from the
Atlantic Capital transaction on March 1, 2022

Our investment securities portfolio increased $1.0 billion, or approximately
14.2%, compared to the balance at December 31, 2021. The increase in investment
securities from December 31, 2021 was due to the Company making the decision to
increase the size of the portfolio with the excess funds from deposit growth in
the first half of 2022. The increase was a result of purchases of $2.5 billion,
along with $703.7 million in investment securities acquired in the Atlantic
Capital transaction. These increases were partially offset by maturities, calls,
sales and paydowns of investment securities totaling $1.3 billion. Net
amortization of premiums was $27.3 million in 2022. Total cash and cash
equivalents declined $5.4 billion in 2022 to $1.3 billion at December 31, 2022,
compared to $6.7 billion at December 31, 2021. This decline was due to the
Company using funds to fund loan growth and purchase securities in 2022, along
with the decline in deposits in the second half of 2022.

At December 31, 2022 and December 31, 2021, we had $150.0 million and $325.0
million of traditional, out-of-market brokered deposits. At December 31, 2022
and December 31, 2021, we had $637.0 million and $900.1 million, respectively,
of reciprocal brokered deposits. Total deposits were $36.4 billion at
December 31, 2022, an increase of $1.3 billion from $35.1 billion at
December 31, 2021. Our deposit growth since December 31, 2021 included an
increase in demand deposit accounts of $1.7 billion and an increase in savings
of $113.8 million, partially offset by a decline in certificates of deposit of
$390.1 million, a decrease in interest-bearing transaction accounts of $63.5
million and a decrease in money market accounts of $34.3 million. The increase
in deposits was mainly due to the deposits assumed from the merger with Atlantic
Capital in March 2022. The acquisition date deposits assumed from Atlantic
Capital totaled $3.0 billion and were approximately $2.5 billion at December 31,
2022. Excluding the deposits assumed in the Atlantic Capital acquisition, our
deposits have declined $1.2 billion in 2022 as the funds in the market from
federal government stimulus programs have declined, along with the effects from
rising interest rates in the second half of 2022 resulting from increased
competition and alternatives for deposits. Total short-term borrowings at
December 31, 2022 were $556.4 million consisting of $213.6 million in federal
funds purchased and $342.8 million in securities sold under agreements to
repurchase. Total long-term borrowings at December 31, 2022 were $392.3 million
and consisted of trust preferred securities and subordinated debentures, which
includes $78.5 million of subordinated debt assumed from Atlantic Capital on
March 1, 2022. 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.

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 necessary

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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 and/or the FHLB. At December 31, 2022, we had
a total FHLB credit facility of $4.2 billion with total outstanding FHLB letters
of credit consuming $2.1 million leaving $4.2 billion in availability on the
FHLB credit facility. At December 31, 2022, we had total federal funds credit
lines of $300.0 million with no outstanding advances. If we needed additional
liquidity, we would turn to short-term borrowings as an alternative immediate
funding source and would consider other appropriate actions such as promotions
to increase core deposits or the use of the brokered deposit markets. In
addition, at December 31, 2022, we had $782.0 million of credit available at the
Federal Reserve Bank's discount window, but had no outstanding advances as of
the end of 2022. We have a $100.0 million unsecured line of credit with U.S.
Bank National Association with no outstanding advances at December 31, 2022. We
believe that our liquidity position continues to be adequate and readily
available.

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. 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. 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.

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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 take into account 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 28-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 December 31,
2022, the Company did not have such agreements. For additional information on
these derivatives refer to Note 28-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. The
range of interest rate shocks will include upward and downward movements of
rates through 400 basis points in 100 basis point increments. 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.

Relative to prior modeling and disclosures, management revised its deposit beta
assumptions higher due to the rapid increase in interest rates and expected
further increases. Previous beta assumptions reflected sensitivities across full
interest rate cycles. The beta assumptions were revised during the second
quarter of 2022 to recognize that interest rates have risen while the Company's
cost of deposits have increased slightly. During the fourth quarter of 2022, the
federal funds target rate increased 125 basis points while the Company's total
deposit cost increased 13 basis points. The revised beta assumptions reflect the
acceleration of deposit cost increases associated with the expected increase in
short term rates after December 31, 2022. These beta assumptions, when combined
with the minimal increase in deposit costs since the federal funds rate began to
rise in March 2022, reflect management's estimates across the entire current
rising rate cycle

The following interest rate risk metrics are derived from analysis using the
Moody's Consensus Scenario published in January 2023 as the Base Case. The
consensus forecast projects an inverted yield curve through year 1. As of
December 31, 2022, the earnings simulations indicated that the year 1 impact of
an instantaneous 100 basis point

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increase / decrease in rates would result in an estimated 2.2% increase (up 100)
and 2.9% 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 December 31, 2022, the
percentage change in EVE due to a 100-basis point increase or decrease in
interest rates was 1.2% decrease and 1.1% decrease, respectively. The percentage
changes in EVE due to a 200-basis point increase or decrease in interest rates
were 2.8% decrease and 4.7% decrease, respectively. The interest rate shock
analysis results for EVE sensitivities are unusual as the benefits of repricing
assets are mitigated by increasing deposit costs, and 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 December 31, 2022.

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, except for PPP loans that are not assumed to be
replaced. Base Case assumes new and repricing volumes reference forward rates
derived from the Moody's Consensus rate forecast. Instantaneous, parallel, and
sustained interest rate shocks are applied to the Base Case scenario over a
one-year time horizon.

Table 28-Rate Shock Analysis – Net Interest Income and Economic Value of Equity

           Percentage Change in Net Interest Income over One Year

Up 100 basis points                                                      2.2%
Up 200 basis points                                                      4.2%
Down 100 basis points                                                  (2.9%)
Down 200 basis points                                                  (7.2%)


LIBOR Transition

In July 2017, the Financial Conduct Authority (FCA) in the United Kingdom, which
regulates LIBOR, announced that it intended to stop persuading or compelling
banks to submit rates for the calculation of LIBOR at the end of 2021. On March
5, 2021, the FCA confirmed that all LIBOR settings would either cease to be
provided by any administrator or no longer be representative immediately after
December 31, 2021 for the one-week and two-month US dollar settings and
immediately after June 30, 2023 for all remaining US dollar settings.

The Alternative Reference Rates Committee proposed Secured Overnight Financing
Rate ("SOFR") as its preferred rate as an alternative to LIBOR and proposed a
paced market transition plan to SOFR from LIBOR. Organizations are currently
working on industry-wide and company-specific transition plans related to
derivatives and cash markets exposed to LIBOR. As noted within Part I - Item 1A.
Risk Factors of the this Form 10-K for the year ended 2022, we hold instruments
that may be impacted by the discontinuance of LIBOR including floating rate
obligations, loans, deposits, derivatives and hedges, and other financial
instruments but is not able to currently predict the associated financial impact
of the transition to an alternative reference rate.

We have established a cross-functional LIBOR transition working group that has
(1) assessed the Company's current exposure to LIBOR indexed instruments and the
data, systems and processes that will be impacted; (2) established a detailed
implementation plan; and (3) developed a formal governance structure for the
transition. The Company has developed and continues to implement various
proactive steps to facilitate the transition on behalf of customers, which
include:

? The adoption and ongoing implementation of fallback provisions that provide for

the determination of replacement rates for LIBOR-linked financial products.

The adoption of new products linked to alternative reference rates, such as

? adjustable-rate mortgages, consistent with guidance provided by the U.S.

regulators, the Alternative Reference Rates Committee, and GSEs.

? The selection of SOFR indices as the replacement indices, and successful

completion of systems testing using the SOFR replacement indices.

The Company discontinued quoting LIBOR on September 30, 2021 and discontinued
originating new products linked to LIBOR on December 31, 2021.

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We intend to use the provisions of the Adjustable Interest Rate (LIBOR) Act
passed by Congress and signed in to law by the President in March 2022 for
certain contracts referencing LIBOR. The Act provides for the use of SOFR as the
replacement index with a spread adjustment when the remaining LIBOR indices are
discontinued. The Act applies when there is no contract provision addressing the
loss of LIBOR and may be used otherwise as well, provided the contract does not
provide for a specific replacement index. This aligns with the plan of action
currently under implementation by the Company. The final rule implementing the
Act was released on December 22, 2022.

The Company continues to evaluate its financial and operational infrastructure
in its effort to transition all financial and strategic processes, systems, and
models to reference rates other than LIBOR. The Company is in the process of
developing and implementing processes to educate client-facing associates and
coordinate communications with customers regarding the transition.

As of December 31, 2022, the Company had the following exposures to LIBOR:

Approximately $5.1 billion of total outstanding loans referencing LIBOR. Of

? this amount, $5.0 billion have maturities occurring after the LIBOR

discontinuation date of June 30, 2023.

Approximately $16.6 billion in interest rate swaps that are indexed to LIBOR

with a gross positive fair value of $61.1 million, inclusive of $824.3 million

of variation margin settlements, and a gross negative fair value of $884.8

million. However, the interest rate swaps associated with this program do not

? meet the strict hedge accounting requirements. Therefore, the transition to

LIBOR will have no hedge accounting impact as changes in the fair value of both

the customer swaps and the offsetting swaps are recognized directly in

earnings. Moreover, the exposure of both sides of these swaps is presented in

these figures. These exposures are intended to offset each other.

Trust preferred securities that reference LIBOR and had a total principal

? balance of $118.6 million. These securities have maturities ranging from

October 7, 2033 through March 14, 2037.

Asset Credit Risk and Concentrations


The quality of our interest-earning assets is maintained through our management
of certain concentrations of credit risk. We review each individual earning
asset including investment securities and loans for credit risk. To facilitate
this review, we have established credit and investment policies that include
credit limits, documentation, periodic examination, and follow-up. In addition,
we examine these portfolios for exposure to concentration in any one industry,
government agency, or geographic location.

Loan and Deposit Concentration


We have no material concentration of deposits from any single customer or group
of customers. We have no significant portion of our loans concentrated within a
single industry or group of related industries. Furthermore, we attempt to avoid
making loans that, in an aggregate amount, exceed 10% of total loans to a
multiple number of borrowers engaged in similar business activities. At
December 31, 2022 and 2021, there were no aggregated loan concentrations of this
type. We do not believe there are any material seasonal factors that would have
a material adverse effect on us. We do not have material foreign loans or
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.

                                       90

Table of Contents

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 $1.0 billion
at December 31, 2022. Based on this criteria, we had eight such credit
concentrations at December 31, 2022, including loans on hotels and motels of
$1.0 billion, loans to lessors of nonresidential buildings (except
mini-warehouses) of $5.7 billion, loans secured by owner occupied office
buildings (including medical office buildings) of $1.9 billion, loans secured by
owner occupied nonresidential buildings (excluding office buildings) of $1.7
billion, loans to lessors of residential buildings (investment properties and
multi-family) of $1.8 billion, loans secured by 1st mortgage 1-4 family owner
occupied residential property (including condos and home equity lines) of $5.4
billion, loans secured by jumbo (original loans greater than $548,250) 1st
mortgage 1-4 family owner occupied residential property of $2.3 billion and
loans secured by business assets including accounts receivable, inventory and
equipment of $2.1 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 December 31, 2022,
the Bank's CDL concentration ratio was 64.8% and its CRE concentration ratio was
249.0%. At December 31, 2021, the Bank's CDL concentration ratio was 55.2% and
its CRE concentration ratio was 238.5%. As of December 31, 2022 and 2021, 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.

Effect of Inflation and Changing Prices

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the measure of financial position and results of operations in terms of
historical dollars, without consideration of changes in the relative purchasing
power over time due to inflation. Unlike most other industries, the majority of
the assets and liabilities of a financial institution are monetary in nature. As
a result, interest rates generally have a more significant effect on a financial
institution's performance than does the effect of inflation. Interest rates do
not necessarily change in the same magnitude as the prices of goods and
services.

While the effect of inflation on banks is normally not as significant as is its
influence on those businesses which have large investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally corresponding increases in money supply, and banks will normally
experience above average growth in assets, loans and deposits. Also, general
increases in the prices of goods and services will result in increased operating
expenses. Inflation also affects our bank's customers and may result in an
indirect effect on our bank's business.

Contractual Obligations


The following table presents payment schedules for certain of our contractual
obligations as of December 31, 2022. Long-term debt obligations totaling
$392.3 million include trust preferred junior subordinated debt and corporate
subordinated debt. Operating and finance lease obligations of $136.6 million and
$2.7 million, respectively, pertain to banking facilities. Certain lease
agreements include payment of property taxes and insurance and contain various
renewal options. Additional information regarding leases is contained in Note 21
of the audited consolidated financial statements.

                                       91

  Table of Contents

Table 29-Obligations

                                                         Less Than      1 to 3      3 to 5     More Than
(Dollars in thousands)                       Total        1 Year        Years       Years       5 Years
Longterm debt obligations*                $ 392,275    $         -    $      -    $      -    $  392,275
Short-term debt obligations*                       -              -           -           -             -
Finance lease obligations                      2,729            490       1,022         987           230
Operating lease obligations                  136,593         16,280      28,455      25,307        66,551
Total                                      $ 531,597    $    16,770    $ 29,477    $ 26,294    $  459,056

* Represents principal maturities.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

See “Asset-Liability Management and Market Risk Sensitivity” on page 87 in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations for quantitative and qualitative disclosures about market risk.

Item 8. Financial Statements and Supplementary Data.


Index to Financials Statements

Page

Management’s Report on Internal Control Over Financial Reporting F-1

  Report of Independent Registered Public Accounting Firm   (FORVIS,      F-2
LLP (f/k/a Dixon Hughes Goodman LLP), Atlanta, Georgia, PCAOB Firm ID
No. 686)
SouthState Corporation Consolidated Financial Statements

Consolidated Balance Sheets at December 31, 2022 and December 31, F-5
2021

Consolidated Statements of Income for the Years Ended December 31, F-6
2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the Years F-7
Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Equity for the F-8
Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December F-9
31, 2022, 2021 and 2020

  Notes to Consolidated Financial Statements

F-10

link

SOUTHSTATE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

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