South State Corporation (NASDAQ:SSB) today released its unaudited results of operations and other financial information for the three-month and twelve-month period ended December 31, 2015. Annual (2015) highlights include the following:

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  • Net income available to the common shareholder improved by 33.8% to $99.5 million in 2015 from $74.4 million in 2014
    • Earnings per share (EPS) – diluted was $4.11 compared to $3.08 in 2014, an increase of 33.4%;
    • Operating earnings available to the common shareholders improved by 15.3% to $104.4 million;
    • Operating EPS – diluted was $4.31 compared to $3.75 in 2014, an increase of 14.9%; and
    • Increased dividend paid to common shareholders by $0.16 per share, or 19.5%, over 2014
  • Net loan growth (non-acquired loans exceeded acquired loan runoff) during 2015 totaled $288.9 million, or 5.0%
    • Non-acquired loan growth totaled $752.9 million or 21.7% growth; which
    • Outpaced acquired loan runoff of $464.0 million
  • Performance ratios during 2015 from 2014
    • Return on average assets was 1.21%, an increase from 0.95%
    • Operating return on average assets improved to 1.27% from 1.15%
    • Return on average tangible equity improved to 15.97% from 13.77%
    • Operating return on average tangible common equity improved to 16.72% from 16.56%
    • Efficiency ratio improved to 64.19% from 71.41%
  • Balance sheet and tangible book value during 2015
    • Investment securities increased by $200.8 million or 24.3% during 2015, and now comprise 12% of total assets, up from 10.6% of total assets at December 31, 2014
    • Goodwill increased by $20.7 million from the Bank of America branch acquisition
    • OREO decreased $12.2 million during 2015 to $30.6 million at December 31, 2015
    • Noninterest bearing deposits increased by $336.5 million, or 20.5%, and interest bearing deposits increased by $302.9 million, or 6.3%, primarily from the Bank of America branch acquisition
    • Shareholders’ equity increased $74.5 million, or 7.6%, to $1.059 billion, up from $984.9 million at December 31, 2014
    • Tangible equity to tangible assets declined to 8.24%, at December 31, 2015 from 8.28%, at December 31, 2014, due to the Bank of America branch acquisition
  • Asset quality improvement in 2015 from year end 2014
    • Nonperforming assets (NPAs) declined by 32.5%, or $25.8 million in 2015, to $53.7 million at December 31, 2015, from $79.6 million at December 31, 2014
    • NPAs to total assets improved to 0.63% from 1.02%
    • Net charge offs on non-acquired loans declined to 0.09%, or $3.4 million, in 2015, from 0.16%, or $4.9 million, in 2014
    • Coverage ratio of ALLL on non-acquired non-performing loans improved to 181.8% at December 31, 2015 from 121.1% at December 31, 2014

Quarterly Cash Dividend

The Board of Directors of South State Corporation has declared a quarterly cash dividend of $0.28 per share payable on its common stock. This per share amount is $0.02 per share, or 7.7% higher than the dividend paid in the immediately preceding quarter and is $0.05 per share, or 21.7%, higher than fourth quarter of 2014. The dividend will be payable on February 19, 2016 to shareholders of record as of February 12, 2016.

Branch Initiatives - Update

The consolidation (11) or sale (2) of 13 branches and ATM locations in 2015 during the second, third and fourth quarters is summarized below:

  • One-time costs expected to be $4.5 million; actual one-time costs totaled $3.3 million, including the gain recognized from two branches sold in October 2015
  • Cost savings announced totaled $4.5 million for 2016; achieved these savings
  • Consolidated eight of eleven locations during the second quarter
  • Consolidated three locations during the third quarter
  • Sold two branches in early October of 2015 for a gain of $632,000, net of the core deposit intangible amortization accelerated of $291,000 related to these locations.

The purchase and conversion of 13 former Bank of America branches and ATM locations was completed during the third quarter of 2015 (12 in South Carolina and 1 in Georgia). Below summarizes the results:

  • One-time costs expected to be $4.5 million; actual one-time costs totaled $3.6 million during third and fourth quarter of 2015
  • Acquired $438.3 million in total deposits; grown to $441.2 million at December 31, 2015
  • Acquired $3.1 million in loans (including overdrafts); grown to $12.3 million at December 31, 2015
  • Expecting mid-single digit accretion in 2016

The Company has announced the consolidation of 11 locations during the second and third quarters of 2016, and the impact is discussed below:

  • 9 locations will be consolidated and 2 will be converted to drive-thru only locations
  • Deposits total $331.0 million and anticipate 10% runoff
  • Four of the locations are former Bank of America locations and these customers will be transferred to other locations
  • Cost savings expect to total $3.0 million in 2017; however, resources will be deployed to support the continued growth of South State as we approach $10.0 billion in total assets
  • One-time costs expected to total $3.0 million

Fourth Quarter 2015 Financial Performance

  Three Months Ended   Year Ended
(Dollars in thousands, except per share data)

Dec. 31,

   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31, December 31,
INCOME STATEMENT 2015 2015 2015 2015 2014 2015 2014
Interest income
Loans, including fees (8) $ 77,462 $ 79,857 $ 79,407 $ 78,848 $ 79,893 $ 315,574 $ 319,882
Investment securities, federal funds sold and securities
purchased under agreements to resell   6,314     5,705     5,358     5,150     5,487     22,527     22,140  
Total interest income 83,776 85,562 84,765 83,998 85,380 338,101 342,022
Interest expense
Deposits 1,794 1,811 1,737 2,003 2,246 7,344 9,301
Federal funds purchased, securities sold under agreements
to repurchase, and other borrowings   550     736     751     946     1,583     2,984     6,361  
Total interest expense   2,344     2,547     2,488     2,949     3,829     10,328     15,662  
Net interest income 81,432 83,015 82,277 81,049 81,551 327,773 326,360
Provision for loan losses (1)   826     1,075     3,145     818     1,481     5,864     6,590  
Net interest income after provision for loan losses   80,606     81,940     79,132     80,231     80,070     321,909     319,770  
Noninterest income   29,197     29,771     30,082     26,505     25,299     115,555     94,696  
Pre-tax operating expense 70,264 70,103 69,292 70,485 70,077 280,144 279,098
Branch consolidation / acquisition expense 1,617 3,091 2,237 -- -- 6,945 --
Merger and branding related expense   --     --     --     --     4,599     --     23,940  
Total noninterest expense   71,881     73,194     71,529     70,485     74,676     287,089     303,038  
Income before provision for income taxes 37,922 38,517 37,685 36,251 30,693 150,375 111,428
Provision for income taxes   12,387     13,377     12,813     12,325     9,445     50,902     35,991  
Net income 25,535 25,140 24,872 23,926 21,248 99,473 75,437
Preferred stock dividends   --     --     --     --     --     --     1,073  
Net income available to common shareholders $ 25,535   $ 25,140   $ 24,872   $ 23,926   $ 21,248   $ 99,473   $ 74,364  
 
Operating Earnings (non-GAAP) (3)
Net income (GAAP) $ 25,535 $ 25,140 $ 24,872 $ 23,926 $ 21,248 $ 99,473 $ 75,437
Securities (gains) losses, net of tax -- -- -- -- -- -- 1
Other-than-temporary impairment, net of tax 329 -- -- -- -- 323 --
Merger and branding related expense, net of tax -- -- -- -- 3,184 -- 16,207
Branch consolidation / acquisition expense   1,089     2,017     1,476     --     --     4,595     --  
Net operating earnings (non-GAAP) 26,953 27,157 26,348 23,926 24,432 104,391 91,645
Preferred stock dividends   --     --     --     --     --     --     1,073  
Net operating earnings available to common shareholders (non-GAAP) $ 26,953   $ 27,157   $ 26,348   $ 23,926   $ 24,432   $ 104,391   $ 90,572  
 
Basic earnings per common share $ 1.06 $ 1.05 $ 1.04 $ 1.00 $ 0.89 $ 4.15 $ 3.11
Diluted earnings per common share $ 1.05 $ 1.04 $ 1.03 $ 0.99 $ 0.88 $ 4.11 $ 3.08
Operating earnings per common share - Basic (non-GAAP) (3) $ 1.12 $ 1.13 $ 1.10 $ 1.00 $ 1.02 $ 4.36 $ 3.79
Operating earnings per common share - Diluted (non-GAAP) (3) $ 1.11 $ 1.12 $ 1.09 $ 0.99 $ 1.01 $ 4.31 $ 3.75
Dividends per common share $ 0.26 $ 0.25 $ 0.24 $ 0.23 $ 0.22 $ 0.98 $ 0.82
Basic weighted-average common shares outstanding 23,986,795 23,984,417 23,980,602 23,943,443 23,911,515 23,965,738

23,897,051

Diluted weighted-average common shares outstanding 24,267,937 24,285,228 24,258,014 24,200,709 24,189,289 24,224,255

24,153,657

Effective tax rate 32.66 % 34.73 % 34.00 % 34.00 % 30.77 % 33.85 % 32.30 %

The Company reported consolidated net income available to common shareholders of $25.5 million, or $1.05 per diluted common share for the three-months ended December 31, 2015 up from $25.1 million, or $1.04 per diluted common share for the three-months ended September 30, 2015. The $395,000 increase was the result of the following: a decrease in interest income of $1.8 million (primarily from acquired loan interest income and offset by an increase in non-acquired interest income and securities income), a decline in the provision for loan losses of $249,000 (primarily in the non-acquired loan portfolio and the acquired credit impaired loan portfolio), a decrease in noninterest income of $574,000 (reduction in mortgage banking income and trust and investment services income partially offset by higher fees on deposit accounts and lower amortization of the FDIC indemnification asset), a decrease in noninterest expenses of $1.3 million (branch consolidation and acquisition expenses and a decrease in OREO and loan related expenses) and a decrease in the provision for income taxes of $990,000. During the quarter, our effective income tax rate decreased to 32.66%, resulting in an effective tax rate of 33.85% on a year-to-date basis compared to 32.30% in 2014, due primarily to higher pre-tax net income.

“The performance of the company in 2015 was strong by many measures,” said Robert R. Hill, Jr., CEO of South State Corporation. “The year was marked by improving financial performance, maintaining a liquid and well-capitalized balance sheet, and the addition of many of talented bankers to our growing team. Operating EPS grew 15.3% to $104.4 million to produce a return on assets of 1.27 % and return on tangible equity of 16.72%. A number of our businesses reported improved results. Among the highlights in 2015; assets under management in our wealth group rose to over $4 billion and mortgage banking income climbed 34%. These accomplishments caused tangible book value per share to rise by 9% to $27.88. Additionally, the Board of Directors approved an increase in the quarterly cash dividend rate to $0.28 per share, up 21.7% from a year ago. South State has made considerable improvement across many areas of the Company during the past two years. While there is still more we can do, the Company is well-positioned for future opportunities.”

Balance Sheet and Capital

Ending Balance
Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31,
BALANCE SHEET 2015 2015 2015 2015 2014
Assets
Cash and cash equivalents $ 695,794   $ 889,380   $ 593,382   $ 630,734   $ 417,869  
Investment securities:
Securities held to maturity 9,314 9,314 9,659 9,659 9,659
Securities available for sale, at fair value 1,009,541 885,798 841,661 808,396 806,766
Other investments   8,893     9,031     9,031     9,031     10,518  
Total investment securities   1,027,748     904,143     860,351     827,086     826,943  
Loans held for sale   41,649     48,985     73,055     87,342    

61,841

 
Loans:
Acquired credit impaired 733,870 768,606 823,981 866,504 919,402
Acquired non-credit impaired 1,049,538 1,107,440 1,171,672 1,247,349 1,327,999
Non-acquired 4,220,726 3,994,716 3,788,399 3,586,405 3,467,826
Less allowance for non-acquired loan losses (1)   (34,090 )   (35,116 )   (34,782 )   (33,538 )   (34,539 )
Loans, net   5,970,044     5,835,646     5,749,270     5,666,720     5,680,688  
FDIC receivable for loss share agreements 4,401 7,942 11,035 16,713 22,161
Other real estate owned ("OREO") 30,554 31,378 35,042 36,096 42,726
Premises and equipment, net 174,537 174,662 171,582 171,565 171,772
Bank owned life insurance 101,588 100,967 100,363 99,751 99,140
Deferred tax asset 37,827 40,090 45,911 40,629 42,692
Mortgage servicing rights 26,202 24,665 25,325 21,510 21,601
Core deposit and other intangibles 47,425 49,982 45,260 47,223 49,239
Goodwill 338,340 338,342 317,688 317,688 317,688
Other assets   61,239     53,694     56,720     58,525    

71,867

 
Total assets $ 8,557,348   $ 8,499,876   $ 8,084,984   $ 8,021,582   $ 7,826,227  
 
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 1,976,480 $ 1,927,309 $ 1,844,973 $ 1,757,302 $ 1,639,953
Interest-bearing   5,123,948     5,150,700     4,822,555     4,876,355     4,821,092  
Total deposits   7,100,428     7,078,009     6,667,528     6,633,657     6,461,045  
Federal funds purchased and securities
sold under agreements to repurchase 288,231 260,521 287,903 276,774 221,541
Other borrowings 55,158 55,107 55,055 55,003 101,210
Other liabilities   54,147     57,927     50,719     48,584     57,511  
Total liabilities   7,497,964     7,451,564     7,061,205     7,014,018     6,841,307  
 
Shareholders' equity:
Preferred stock - $.01 par value; authorized 10,000,000 shares -- -- -- -- --
Common stock - $2.50 par value; authorized 40,000,000 shares 60,407 60,529 60,494 60,392 60,377
Surplus 703,929 706,227 704,625 702,648 701,764
Retained earnings 298,919 279,681 260,591 241,526 223,156
Accumulated other comprehensive income (loss)   (3,871 )   1,875     (1,931 )   2,998     (377 )
Total shareholders' equity   1,059,384     1,048,312     1,023,779     1,007,564     984,920  
Total liabilities and shareholders' equity $ 8,557,348   $ 8,499,876   $ 8,084,984   $ 8,021,582   $ 7,826,227  
 
Common shares issued and outstanding 24,162,657 24,211,793 24,197,531 24,156,759 24,150,702

At December 31, 2015, the Company’s total assets were $8.6 billion, up from $8.5 billion at September 30, 2015 and up from $7.8 billion at December 31, 2014. During 2015, the Company experienced asset growth primarily in cash and cash equivalents of $277.9 million, in securities of $200.8 million and loans of $285.2 million, excluding the change in the allowance for loan losses and loans held for sale. Beginning in the second quarter of 2015 and throughout the remainder of year, the Company increased the size of the investment portfolio as a percentage of total assets, which equals 12.0% at December 31, 2015, up from 10.6% at December 31, 2014. Goodwill and core deposit intangibles increased $18.8 million during the year due to the branch acquisition from Bank of America. These increases were offset by declines in loans held for sale of $20.2 million, FDIC receivable of $17.8 million, OREO of $12.2 million and net deferred tax asset of $4.9 million. Liabilities increased due to total deposit growth of $639.4 million, primarily from the Bank of America branch acquisition. This increase was partially offset by decline in other borrowings of $46.1 million related to the redemption of trust preferred securities in January 2015 of $46.3 million.

The Company’s book value per common share increased to $43.84 per share at December 31, 2015, compared to $43.30 at September 30, 2015, and $40.78 at December 31, 2014. Capital increased by $11.1 million during the fourth quarter of 2015, due primarily to net income of $25.5 million, which was offset by the common dividend paid of $6.3 million. Accumulated other comprehensive income shifted to a net loss during the fourth quarter 2015, with the decrease in the unrealized gains in the AFS securities portfolio during the quarter of $4.7 million, net of tax, and increase in the net pension plan and post-retirement health plan liability of $1.1 million, net of tax. In addition, the Company repurchased 60,000 shares of its common stock for $4.3 million, or $71.15 per share, under the 2004 stock repurchase plan in December of 2015. There is no formal expiration date and there is an additional 87,000 shares available for repurchase under this plan. Tangible book value (“TBV”) per common share increased to $27.88 at December 31, 2015 compared $27.26 at September 30, 2015, and increased by $2.29 per share from $25.59 at December 31, 2014. The quarterly increase of $0.62 per share was the result of the increase in net income of $1.05 per share, reduced by the dividend paid of $0.26 per share, an increase related stock compensation of $0.08 per share, and a decrease in accumulated other comprehensive income during the quarter of $0.24 per share.

The total risk-based capital (RBC) ratio is estimated to be 13.3% flat from September 30, 2015, due primarily to the growth in capital during the quarter keeping pace with the growth in risk-weighted assets. Total RBC was also down from December 31, 2014 of 14.3%, due to the adoption of Basel III, redemption of $46.3 million of trust preferred securities and the impact of the Bank of America branch acquisition. Tier 1 leverage ratio is estimated to decrease to 9.2% from September 30, 2015 level of 9.3%. The Company’s capital position remains “well-capitalized” by all measures at December 31, 2015.

“During the year, we executed our plan which included increasing our investment securities portfolio on a relatively short-term basis, improving our efficiencies through process improvements and branch consolidations, and remained focused on asset quality,” said John C. Pollok, COO and CFO. “Our investment securities portfolio now exceeds $1.0 billion and comprises 12% of our total assets, our operating efficiency ratio was down to 62.6% for 2015, and our non-acquired nonaccrual loans are less than $19.0 million.”

Three Months Ended   Year Ended
Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31, December 31,

PERFORMANCE RATIOS

2015 2015 2015 2015 2014 2015   2014
Return on average assets (annualized) 1.19 % 1.20 % 1.24 % 1.23 % 1.07 % 1.21 % 0.95 %
Operating return on average assets (annualized) (non-GAAP) (3) 1.25 % 1.29 % 1.32 % 1.23 % 1.23 % 1.27 % 1.15 %
Operating return on average equity (annualized) (non-GAAP) (3) 10.10 % 10.39 % 10.36 % 9.73 % 9.93 % 10.15 % 9.47 %
Return on average tangible common equity (annualized) (non-GAAP) (7) 15.99 % 15.72 % 16.00 % 16.21 % 14.77 % 15.97 % 13.77 %
Operating return on average tangible common equity (annualized) (non-GAAP) (3) (7) 16.82 % 16.92 % 16.90 % 16.21 % 16.85 % 16.72 % 16.56 %
Efficiency ratio (tax equivalent) 64.17 % 64.39 % 63.19 % 65.05 % 69.34 % 64.19 % 71.41 %
Operating efficiency ratio (9) 62.72 % 61.67 % 61.22 % 65.05 % 65.07 % 62.64 % 65.77 %
Dividend payout ratio (2) 24.66 % 24.07 % 23.35 % 23.22 % 25.00 % 23.84 % 26.61 %
Book value per common share $ 43.84 $ 43.30 $ 42.31 $ 41.71 $ 40.78
Tangible common equity per common share (non-GAAP) (7) $ 27.88 $ 27.26 $ 27.31 $ 26.60 $ 25.59
 
CAPITAL RATIOS
Equity-to-assets 12.38 % 12.33 % 12.66 % 12.56 % 12.58 %
Tangible equity-to-tangible assets (non-GAAP) (7) 8.24 % 8.14 % 8.56 % 8.39 % 8.28 %
Tier 1 common equity (6) 11.8 % 11.8 % 12.1 % 12.2 %
Tier 1 leverage (6) 9.2 % 9.3 % 9.6 % 9.5 % 9.4 %
Tier 1 risk-based capital (6) 12.6 % 12.6 % 13.0 % 13.1 % 13.5 %
Total risk-based capital (6) 13.3 % 13.3 % 13.7 % 13.8 % 14.3 %
 
OTHER DATA
Number of branches 127 129 119 126 126
Number of employees (full-time equivalent basis) 2,058 2,083 2,028 2,051 2,081

Asset Quality

         
Ending Balance
Dec. 31,   Sep. 30, Jun. 30, Mar. 31, Dec. 31,
(Dollars in thousands) 2015 2015 2015 2015 2014
NONPERFORMING ASSETS:
Non-acquired
Non-acquired nonperforming loans $ 18,747 $ 23,871 $ 24,661 $ 27,574 $ 28,516
Non-acquired OREO and other nonperforming assets   8,783     5,980     5,862     6,500     7,947  
Total non-acquired nonperforming assets   27,530     29,851     30,523     34,074     36,463  

Acquired

Acquired nonperforming loans 3,817 4,130 5,274 7,380 7,646
Acquired OREO and other nonperforming assets   22,395     25,979     29,720     30,268     35,473  
Total acquired nonperforming assets   26,212     30,109     34,994     37,648     43,119  
Total nonperforming assets $ 53,742   $ 59,960   $ 65,517   $ 71,722   $ 79,582  
 
Three Months Ended Year Ended
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, December 31,
2015 2015 2015 2015 2014 2015 2014
ASSET QUALITY RATIOS:
Allowance for non-acquired loan losses as a
percentage of non-acquired loans (1) 0.81 % 0.88 % 0.92 % 0.94 % 1.00 % 0.81 % 1.00 %
Allowance for non-acquired loan losses as a
percentage of non-acquired nonperforming loans 181.84 % 147.11 % 141.04 % 121.63 % 121.12 % 181.84 % 121.12 %
Net charge-offs on non-acquired loans as a percentage of
average non-acquired loans (annualized) (1) 0.14 % 0.09 % 0.12 % -0.01 % 0.13 % 0.09 % 0.16 %
Net charge-offs on acquired non-credit impaired loans as a percentage
of average acquired non-credit impaired loans (annualized) (1) 0.08 % -0.05 % 0.18 % 0.56 % 0.14 % 0.20 % 0.06 %
Total nonperforming assets as a percentage
of total assets 0.63 % 0.71 % 0.81 % 0.89 % 1.02 %
Excluding Acquired Assets
NPLs as a percentage of period end non-acquired loans (1) 0.44 % 0.60 % 0.65 % 0.77 % 0.82 %
Total nonperforming assets as a percentage of
total non-acquired loans and repossessed assets (1) (4) 0.65 % 0.75 % 0.80 % 0.95 % 1.05 %
Total nonperforming assets as a percentage
of total assets (5) 0.32 % 0.35 % 0.38 % 0.42 % 0.47 %

During the fourth quarter of 2015, overall asset quality improved as NPAs declined by $6.2 million, or 10.4% to $53.7 million, and represented 0.63% of total assets. Compared to December 31, 2014, NPAs have declined by $25.8 million, or 32.5%, from $79.6 million and represented 1.02% of total assets. Non-acquired NPAs, excluding acquired loans and acquired other real estate owned (OREO), declined by $2.3 million, or 7.8%, to $27.5 million, from the level at September 30, 2015. Non-acquired nonperforming loans decreased by $5.1 million, or 21.5%, and non-acquired OREO and other assets repossessed increased by $2.8 million, or 46.9%. Compared to December 31, 2014, non-acquired NPAs declined by $8.9 million, or 24.5%. Non-acquired NPAs as a percentage of total non-acquired loans and repossessed assets declined to 0.65% compared to 0.75% at September 30, 2015 and 1.05% at December 31, 2014.

At December 31, 2015, the Company reported $3.8 million in nonperforming loans related to “acquired non-credit impaired loans”. This was a decline of $313,000 from September 30, 2015. Additionally, acquired OREO and other assets owned declined by $3.6 million to $22.4 million from September 30, 2015 and by $13.1 million from December 31, 2014. Total acquired NPAs have declined $16.9 million, or 39.2%, since December 31, 2014.

At December 31, 2015, the allowance for non-acquired loan losses was $34.1 million or 0.81% of non-acquired period-end loans. The current allowance for loan losses provides 1.82 times coverage of period-end non-acquired nonperforming loans, up from 1.47 times at September 30, 2015 and up from 1.21 times December 31, 2014. Net charge-offs within the non-acquired portfolio were $1.4 million, or 0.14% annualized, in the fourth quarter of 2015 compared to $875,000 for the third quarter 2015 or 0.09% annualized. Fourth quarter 2014 net charge-offs totaled $1.1 million, or 0.14% annualized. During the fourth quarter, the allowance for loan losses was increased by $400,000 compared to an increase of $1.2 million in the third quarter of 2015 through the provision for loan losses. The increase was primarily related to the general reserve.

Net charge offs (recoveries) related to “acquired non-credit impaired loans” were $213,000, or 0.08% annualized, during the fourth quarter of 2015, compared to ($132,000), or (0.05%) annualized, in the third quarter of 2015. The Company recorded a provision for loan losses, accordingly, equal to the net charge offs (recoveries) during the quarter. In the fourth quarter 2014, net charge offs totaled $490,000, or 0.14% annualized.

Total OREO decreased by $824,000 during the fourth quarter of 2015 to $30.6 million compared to the third quarter of 2015. The slight decline was primarily the result of the disposition of 48 properties, netted against the additions during the quarter. OREO was $42.7 million at December 31, 2014. Overall, OREO and loan related costs declined by $872,000 to $1.8 million in the fourth quarter of 2015 compared to the third quarter 2015, due to less asset write downs and lower “cost to carry” of these properties (assets). On a year-to-date basis, OREO and other loan related cost have declined by $2.2 million compared to 2014, as the OREO balance has declined by $12.2 million and nonperforming loan balance has declined $13.6 million since December 31, 2014.

Net Interest Income and Margin

  Three Months Ended
December 31, 2015   September 30, 2015   December 31, 2014
(Dollars in thousands) Average Income/   Yield/ Average Income/   Yield/ Average Income/   Yield/
YIELD ANALYSIS Balance Expense   Rate Balance Expense   Rate Balance Expense   Rate
Interest-Earning Assets:      
Federal funds sold, reverse repo, and time deposits $ 675,385 $ 755 0.44 % $ 638,760 $ 487 0.30 % 381,476 $ 463 0.48 %

 

Investment securities (taxable) 808,239 4,520 2.22 % 724,306 4,106 2.25 % 675,414 3,898 2.29 %

 

Investment securities (tax-exempt) 135,499 1,039 3.04 % 138,560 1,112 3.18 % 144,211 1,126 3.10 %

 

Loans held for sale 40,376 340 3.34 % 57,435 560 3.87 % 47,622 636 5.30 %
Loans   5,904,749   77,122 5.18 %   5,806,211   79,297 5.42 %   5,681,286   79,257 5.53 %
Total interest-earning assets 7,564,248 83,776 4.39 % 7,365,272 85,562 4.61 % 6,930,009 85,380 4.89 %
Noninterest-earning assets   981,809   959,335   961,900
Total Assets $ 8,546,057 $ 8,324,607 $ 7,891,909
 
Interest-Bearing Liabilities:
Transaction and money market accounts $ 3,259,885 $ 666 0.08 % $ 3,118,508 $ 683 0.09 % $ 2,911,247 $ 765 0.10 %
Savings deposits 728,854 113 0.06 % 705,499 111 0.06 % 658,664 119 0.07 %
Certificates and other time deposits 1,127,401 1,015 0.36 % 1,147,770 1,017 0.35 % 1,268,408 1,360 0.43 %
Federal funds purchased and repurchase agreements 283,535 99 0.14 % 296,469 95 0.13 % 238,842 80 0.13 %
Other borrowings   55,131   451 3.25 %   55,081   641 4.62 %   101,167   1,503 5.89 %
Total interest-bearing liabilities 5,454,806 2,344 0.17 % 5,323,327 2,547 0.19 % 5,178,328 3,827 0.29 %
Noninterest-bearing liabilities 2,032,698 1,963,827 1,737,185
Shareholders' equity   1,058,553   1,037,453   976,396
Total Non-IBL and shareholders' equity   3,091,251   3,001,280   2,713,581
Total liabilities and shareholders' equity $ 8,546,057 $ 8,324,607 $ 7,891,909
Net interest income and margin (NON-TAX EQUIV.) $ 81,432 4.27 % $ 83,015 4.47 % $ 81,553 4.67 %
Net interest margin (TAX EQUIVALENT) 4.32 % 4.52 % 4.72 %

Non-taxable equivalent net interest income was $81.4 million for the fourth quarter of 2015, a $1.6 million decrease from the third quarter of 2015, resulting primarily from the following:

1. A $199.0 million increase in the average balance of non-acquired loans which resulted in an increase in non-acquired loan interest income of approximately $1.5 million; with the yield decreasing to 3.91% during the fourth quarter from 3.96% in the third quarter;

2. A $80.9 million increase in the average balance of investment securities which resulted in an increase of $340,000 in interest income; offset by

3. A $100.5 million decrease in the average balance of acquired loans from the third quarter of 2015, coupled with a 34 basis point decline in the yield resulted in a decline in acquired loan interest income of $3.7 million. The yield on acquired loans for the fourth quarter of 2015 equaled 8.02% down from 8.36% in the third quarter of 2015. This yield decline resulted from the cash flows of the acquired credit impaired loan portfolio extending due to renewals of these performing loans and the extension of the weighted average life. In addition, during the fourth quarter of 2015 recast, there was additional credit release within the acquired credit impaired loan portfolios which totaled $16.9 million.

4. Interest expense decreased by $203,000 from the third quarter of 2015. This decrease was the result of $20.6 million in trust preferred securities moving to a floating rate of 1.93% in late third quarter from a fixed rate of 5.92%.

Tax-equivalent net interest margin decreased 20 basis points from the third quarter of 2015 and was down 40 basis points from the yield in the fourth quarter of 2014. The Company’s average yield on interest-earning assets decreased 22 basis points while the average rate on interest-bearing liabilities declined from the third quarter of 2015 by 2 basis points to 17 basis points and down from 29 basis points at December 31, 2014. During the fourth quarter of 2015, the Company’s average total assets increased to $8.5 billion from $8.3 billion at September 30, 2015 and from $7.9 billion at December 31, 2014. Average earning assets increased to $7.6 billion up from $7.4 billion at September 30, 2015. Average interest-bearing liabilities increased to $5.5 billion for fourth quarter of 2015 from $5.3 billion at September 30, 2015. Average non-interest bearing demand deposits increased by $67.5 million during the fourth quarter of 2015, and by $296.2 million from December 31, 2014. All of these increases were primarily related to the branch acquisition from Bank of America during the third quarter of 2015. Including the impact of noninterest bearing deposits, the Company’s cost of funds decreased to 13 basis points in the fourth quarter 2015 compared to 14 basis points in the third quarter of 2015.

Noninterest Income and Expense

Three Months Ended   Year Ended
Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31, December 31,
(Dollars in thousands) 2015 2015 2015 2015 2014 2015   2014
Noninterest income:
Fees on deposit accounts $ 21,076 $ 19,212 $ 17,699 $ 16,492 $

17,214

$ 74,479 $ 69,291
Mortgage banking income 3,229 4,817 7,089 6,626 4,072 21,761 16,170
Trust and investment services income 4,643 5,489 5,051 4,934 4,499 20,117 18,344
Securities gains, net -- -- -- -- -- -- (2 )
Other-than-temporary impairment losses (489 ) -- -- -- -- (489 ) --
Amortization of FDIC indemnification asset (1,467 ) (1,871 ) (2,042 ) (3,207 ) (4,177 ) (8,587 ) (21,895 )
Recoveries of fully charged off acquired loans 877 879 965 255 1,633 2,976 6,176
Other   1,328     1,245     1,320     1,405    

2,058

    5,298     6,612  
Total noninterest income $ 29,197   $ 29,771   $ 30,082   $ 26,505   $ 25,299   $ 115,555   $ 94,696  
 
Noninterest expense:
Salaries and employee benefits $ 40,550 $ 40,013 $ 39,754 $ 40,987 $ 39,034 $ 161,304 $ 158,432
Net occupancy expense 5,427 5,395 5,046 5,237 5,701 21,105 22,459
Information services expense 4,734 4,736 4,382 3,958 3,724 17,810 15,844
Furniture and equipment expense 2,772 2,554 2,762 3,145 3,100 11,233 13,271
Bankcard expense 2,607 2,448 2,285 1,980 2,043 9,320 8,563
OREO expense and loan related 1,845 2,717 2,019 3,014 2,520 9,595 11,833
Business development and staff related 1,630 1,797 1,983 2,147 1,922 7,557 7,034
Amortization of intangibles 2,266 2,078 1,964 2,016 2,052 8,324 8,320
Professional fees 1,156 1,383 1,585 1,409 1,459 5,533 4,960
Supplies, printing and postage expense 1,528 1,377 1,402 1,612 2,074 5,919 6,937
FDIC assessment and other regulatory charges 1,029 1,248 1,253 1,184 1,321 4,714 5,432
Advertising and marketing 920 1,054 1,009 855 986 3,838 3,665
Other operating expenses 3,800 3,303 3,848 2,941 4,141 13,892 12,348
Branch consolidation / acquisition expense 1,617 3,091 2,237 -- -- 6,945 --
Merger and branding related expense   --     --     --     --     4,599     --     23,940  
Total noninterest expense $ 71,881   $ 73,194   $ 71,529   $ 70,485   $ 74,676   $ 287,089   $ 303,038  

Noninterest income was lower than the third quarter of 2015 by approximately $574,000 to $29.2 million. The decrease was the result of the following:

  • Lower mortgage banking income of $1.6 million, due primarily to lower volume and lower pricing of mortgages during the quarter;
  • Lower trust and investment services income of $846,000 due to receipt of one-time transfer fee and large annuity fees in third quarter; and
  • Other than temporary impairment of $489,000 related to an equity security; which were partially offset by
  • Lower amortization of the FDIC indemnification asset of $404,000;
  • Higher fees on deposit accounts totaling $1.9 million. This increase was the result of increased usage of debit / ATM cards with addition of branches acquired from Bank of America and implementation of certain increased service fees; and

Compared to the fourth quarter of 2014, noninterest income grew by $3.9 million due to a $2.7 million reduction in amortization of the FDIC indemnification asset primarily from the expiration of the CBT commercial loss sharing agreement with the FDIC and improved fees on deposit accounts totaling $3.9 million with more customers and the implementation of increases in certain services fees. These increases were partially offset by a decline in recoveries of acquired loans of $756,000 and lower mortgage banking income of $843,000, due to lower pricing and lower volume.

On a year-to-date basis, noninterest income was up $20.9 million in 2015 compared to 2014. This increase was attributable to the following:

  • Decline in the amortization of the FDIC indemnification asset of $13.3 million;
  • Increase in mortgage banking income of $5.6 million due to the overall favorable mortgage environment in the first half of 2015;
  • Increase in trust and investment services income of $1.8 million due to the continued growth of assets under management which now exceeds $4.0 billion;
  • Increase in fees on deposit accounts of $5.2 million primarily from bankcard services income usage and the additional customers from the branches acquired from Bank of America in the third quarter 2015; partially offset by
  • A decline in recoveries of acquired credit impaired loans of $3.2 million.

Noninterest expense was $71.9 million in the fourth quarter of 2015, a decrease of $1.3 million from $73.2 million in the third quarter of 2015. This decrease from the third quarter of 2015 was due to the $1.5 million decline in the expenses related to the branch consolidation project and the conversion of the 13 branches acquired from Bank of America; $872,000 decline in OREO and other loan related expenses; $227,000 decline in professional fees; and $219,000 decline in the FDIC assessment and other regulatory charges. These improvements were partially offset by a net increase in salaries and employee benefits of $537,000. This increase was primarily from the additional branches acquired from Bank of America.

Compared to the fourth quarter of 2014, noninterest expense improved by $2.8 million with the decline in one-time charges related to merger and conversion expense in 2014 and branch consolidations / acquisition in 2015 of $3.0 million. This decline was offset partially by $214,000 increase in amortization of intangibles from the Bank of America branch acquisition. All other expense categories offset one another.

For the year, noninterest expense was down $15.9 million compared to 2014 due primarily to reduced one-time expenses (merger / conversion of FFCH in 2014 vs. branch consolidation and branches acquired in 2015) of $17.0 million.

South State Corporation will hold a conference call today, January 22nd; at 11 a.m. Eastern Time during which management will review earnings and performance trends. Callers wishing to participate may call toll-free by dialing 877-506-9272. The number for international participants is 412-380-2004. The conference ID number is 10078213. Participants can also listen to the live audio webcast through the Investor Relations section of www.SouthStateBank.com. A replay will be available beginning January 22nd by 2:00 p.m. Eastern Time until 9:00 a.m. on February 5th, 2016. To listen to the replay, dial 877-344-7529 or 412-317-0088. The passcode is 10078213.

South State Corporation is the largest bank holding company headquartered in South Carolina. Founded over 80 years ago in 1933, the company’s primary subsidiary, South State Bank, serves the financial needs of its local communities in 24 South Carolina counties, 13 Georgia counties and 4 North Carolina counties. The bank also operates Minis & Co., Inc. and First Southeast 401K Fiduciaries, Inc., both registered investment advisors; and First Southeast Investor Services, Inc., a limited purpose broker-dealer. South State Corporation has assets of approximately $8.6 billion and its stock is traded under the symbol SSB on the NASDAQ Global Select Market. More information can be found at www.SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide additional useful information. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.

  Three Months Ended   Year Ended
(Dollars in thousands, except per share data) Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31, December 31,
RECONCILIATION OF NON-GAAP TO GAAP 2015 2015 2015 2015 2014 2015   2014
Operating Earnings (non-GAAP) (3)
Net operating earnings available to common shareholders (non-GAAP) $ 26,953 $ 27,157 $ 26,348 $ 23,926 $ 24,432 $ 104,391 $ 90,572
Securities (gains) losses, net of tax -- -- -- -- -- -- (1 )
Other-than-temporary impairment (OTTI), net of tax (329 ) -- -- -- -- (323 ) --
Branch consolidation/acquisition expense, net of tax (1,089 ) (2,017 ) (1,476 ) -- -- (4,595 ) --
Merger and branding related expense, net of tax   --     --     --     --     (3,184 )   --     (16,207 )
Net income available to common shareholders (GAAP) $ 25,535   $ 25,140   $ 24,872   $ 23,926   $ 21,248   $ 99,473   $ 74,364  
 
Operating earnings per common share - Basic (3)
Operating earnings per common share - Basic (non-GAAP) $ 1.12 $ 1.13 $ 1.10 $ 1.00 $ 1.02 $ 4.36 $ 3.79
Effect to adjust for other-than-temporary impairment (0.01 ) -- -- -- -- (0.01 ) --
Effect to adjust for branch consolidation/acquisition expenses (0.05 ) (0.08 ) (0.06 ) -- -- (0.20 ) --
Effect to adjust for merger and branding related expenses   --     --     --     --     (0.13 )   --     (0.68 )
Earnings per common share - Basic (GAAP) $ 1.06   $ 1.05   $ 1.04   $ 1.00   $ 0.89   $ 4.15   $ 3.11  
 
Operating earnings per common share - Diluted (3)
Operating earnings per common share - Diluted (non-GAAP) $ 1.11 $ 1.12 $ 1.09 $ 0.99 $ 1.01 $ 4.31 $ 3.75
Effect to adjust for other-than-temporary impairment (0.01 ) 0.00 0.00 -- -- (0.01 ) --
Effect to adjust for branch consolidation/acquisition expenses (0.05 ) (0.08 ) (0.06 ) -- -- (0.19 ) --
Effect to adjust for merger and branding related expenses   --     --     --     --     (0.13 )   --     (0.67 )
Earnings per common share - Diluted (GAAP) $ 1.05   $ 1.04   $ 1.03   $ 0.99   $ 0.88   $ 4.11   $ 3.08  
 
Operating Return of Average Assets (3)
Operating return on average assets (non-GAAP) 1.25 % 1.29 % 1.32 % 1.23 % 1.23 % 1.27 % 1.15 %
Effect to adjust for other-than-temporary impairment -0.02 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Effect to adjust for branch consolidation/acquisition expenses -0.04 % -0.09 % -0.08 % 0.00 % 0.00 % -0.06 % 0.00 %
Effect to adjust for merger and branding related expenses   0.00 %   0.00 %   0.00 %   0.00 %   -0.16 %   0.00 %   -0.20 %
Return on average assets (GAAP)   1.19 %   1.20 %   1.24 %   1.23 %   1.07 %   1.21 %   0.95 %
 
Operating Return of Average Equity (3)
Operating return on average equity (non-GAAP) 10.10 % 10.39 % 10.36 % 9.73 % 9.93 % 10.15 % 9.47 %
Effect to adjust for other-than-temporary impairment -0.12 % 0.00 % 0.00 % 0.00 % 0.00 % -0.03 % 0.00 %
Effect to adjust for branch consolidation/acquisition expenses -0.41 % -0.78 % -0.58 % 0.00 % 0.00 % -0.45 % 0.00 %
Effect to adjust for merger and branding related expenses   0.00 %   0.00 %   0.00 %   0.00 %   -1.30 %   0.00 %   -1.68 %
Return on average equity (GAAP)   9.57 %   9.61 %   9.78 %   9.73 %   8.63 %   9.67 %   7.79 %
 
Operating Return on Average Common Tangible Equity (3) (7)
Operating return on average common tangible equity (non-GAAP) 16.82 % 16.92 % 16.90 % 16.21 % 16.85 % 16.72 % 16.56 %
Effect to adjust for other-than-temporary impairment -0.12 % 0.00 % 0.00 % 0.00 % 0.00 % -0.03 % 0.00 %
Effect to adjust for branch consolidation/acquisition expenses -0.41 % -0.77 % -0.58 % 0.00 % 0.00 % -0.45 % 0.00 %
Effect to adjust for merger and branding related expenses 0.00 % 0.00 % 0.00 % 0.00 % -1.29 % 0.00 % -1.70 %
Effect to adjust for intangible assets   -6.72 %   -6.54 %   -6.54 %   -6.48 %   -6.93 %   -6.57 %   -7.06 %
Return on average common equity (GAAP)   9.57 %   9.61 %   9.78 %   9.73 %   8.63 %   9.67 %   7.80 %
 
Tangible Book Value Per Common Share (7)
Tangible book value per common share (non-GAAP) $ 27.88 $ 27.26 $ 27.31 $ 26.60 $ 25.59
Effect to adjust for intangible assets   15.96     16.04     15.00     15.11     15.19  
Book value per common share (GAAP) $ 43.84   $ 43.30   $ 42.31   $ 41.71   $ 40.78  
 
Tangible Equity-to-Tangible Assets (7)
Tangible equity-to-tangible assets (non-GAAP) 8.24 % 8.14 % 8.56 % 8.39 % 8.28 %
Effect to adjust for intangible assets   4.14 %   4.19 %   4.10 %   4.17 %   4.30 %
Equity-to-assets (GAAP)   12.38 %   12.33 %   12.66 %   12.56 %   12.58 %

Footnotes to tables:

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

(2) The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.

(3) Operating earnings, operating return on average assets, and operating return on average equity are non-GAAP measures and exclude the after-tax effect of gains on acquisitions, gains or losses on sales of securities, OTTI, and merger and branding related expense. Management believes that non-GAAP operating measures provide additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. Operating earnings and the related operating return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branding related expense of $4.6 million, for the quarter ended December 31, 2014; (b) branch consolidation expenses of $1.6 million, $3.1 million; and $2.2 million, respectively, for the quarters ended December 31, 2015, September 30, 2015, and June 30, 2015; and (c) OTTI of $489,000 for the quarter ended December 31, 2015.

(4) Repossessed assets include OREO and other nonperforming assets.

(5) Calculated by dividing total non-acquired NPAs by total assets.

(6) December 31, 2015 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed. All ratios are rounded down to one decimal point.

(7) The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. The sections titled "Reconciliation of Non-GAAP to GAAP" provide tables that reconcile non-GAAP measures to GAAP.

(8) Includes noncash loan interest income related to the discount on acquired performing loans of $1.8 million; $1.6 million; $1.6 million; $1.6 million; and $2.3 million; respectively during the five quarters above; and $6.5 million and $9.9 million for the years ended December 31, 2015, and 2014, respectively.

(9) Operating efficiency ratio is calculated by taking the noninterest expense excluding merger cost divided by net interest income and noninterest income excluding securities gains (losses).

Cautionary Statement Regarding 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 21E of the Securities Exchange Act of 1934. Forward looking statements generally include words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. The Company cautions readers that forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from anticipated results. Such risks and uncertainties, include, among others, the following possibilities: (1) the outcome of any legal proceedings instituted against the Company; (2) credit risks associated with an obligor’s failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any loan-related document; (3) interest risk involving the effect of a change in interest rates on the bank’s earnings, the market value of the bank's loan and securities portfolios, and the market value of the Company's equity; (4) liquidity risk affecting the bank’s ability to meet its obligations when they come due; (5) risks associated with an anticipated increase in the Company's investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities the Company desires to acquire are not available on terms acceptable to the Company; (6) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (7) transaction risk arising from problems with service or product delivery; (8) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (9) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, increased capital requirements (including, without limitation, the impact of the capital rules adopted to implement Basel III), Consumer Financial Protection Bureau rules and regulations, and potential changes in accounting principles relating to loan loss recognition; (10) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (11) reputation risk that adversely affects earnings or capital arising from negative public opinion; (12) terrorist activities risk that results in loss of consumer confidence and economic disruptions; (13) cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, subjects the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (14) economic downturn risk potentially resulting in deterioration in the credit markets, greater than expected non-interest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential negative economic developments resulting from federal spending cuts and/or one or more federal budget-related impasses or actions; (15) greater than expected noninterest expenses; (16) excessive loan losses; (17) failure to realize synergies and other financial benefits from, and to limit liabilities associated with, mergers and acquisitions within the expected time frame; (18) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with merger and acquisition integrations, and including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related-matters; (19) the risks of fluctuations in market prices for Company common stock that may or may not reflect economic condition or performance of the Company; (20) the payment of dividends on Company common stock is subject to regulatory supervision as well as the discretion of the board of directors of the Company, the Company's performance and other factors; and (21) other risks and uncertainties disclosed in the Company's most recent Annual Report on Form 10-K filed with the SEC or disclosed in documents filed or furnished by the Company with or to the SEC after the filing of such Annual report on Form 10-K, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward looking statements. The Company undertakes no obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise.