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Mergers and Acquisitions
12 Months Ended
Dec. 31, 2023
Mergers and Acquisitions  
Mergers and Acquisitions

Note 2—Mergers and Acquisitions

Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or “ACBI”)

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, which continues as the surviving bank. 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 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.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. The Company recognized goodwill on this acquisition of $342.0 million. The goodwill was calculated based on the fair values of the assets acquired and liabilities assumed as of the acquisition date.

During the years ended December 31, 2023 and 2022, the Company incurred approximately $2.4 million and $18.5 million, respectively, of acquisition costs related to this transaction. These acquisition costs are reported in Merger and Branch Consolidation Related Expenses on the Company’s Consolidated Statements of Net Income.

Initial

Subsequent

As Recorded

Fair Value

Fair Value

As Recorded by

(Dollars in thousands)

    

by Atlantic Capital

    

Adjustments

    

Adjustments

the Company

 

Assets

    

    

    

Cash and cash equivalents

$

250,134

$

24

(a)

$

$

250,158

Investment securities

717,332

(13,622)

(b)

703,710

Loans, net of allowance and mark

 

2,394,256

 

(18,964)

(c)

(5,614)

(c)

 

2,369,678

Premises and equipment

 

16,892

 

2,608

(d)

 

19,500

Intangible assets

22,572

(1,781)

(e)

20,791

Bank owned life insurance

74,613

74,613

Deferred tax asset

30,231

2,273

(f)

(1,025)

(f)

31,479

Other assets

 

45,274

 

(1,277)

(g)

7,557

(g)

 

51,554

Total assets

$

3,551,304

$

(30,739)

$

918

$

3,521,483

Liabilities

 

 

 

Deposits:

 

 

 

Noninterest-bearing

$

1,411,671

$

$

$

1,411,671

Interest-bearing

 

1,616,970

 

 

1,616,970

Total deposits

 

3,028,641

 

 

3,028,641

Federal funds purchased and securities sold under agreements to repurchase

50,000

50,000

Other borrowings

74,131

4,286

(h)

78,417

Other liabilities

 

50,711

 

(2,075)

(i)

 

48,636

Total liabilities

3,203,483

2,211

3,205,694

Net identifiable assets acquired over (under) liabilities assumed

347,821

(32,950)

918

315,789

Goodwill

 

 

342,939

(918)

 

342,021

Net assets acquired over liabilities assumed

$

347,821

$

309,989

$

$

657,810

Consideration:

SouthState Corporation common shares issued

7,330,803

Purchase price per share of the Company's common stock

$

90.00

Company common stock issued ($659,772) and cash exchanged for fractional shares ($19)

$

659,791

Stock option conversion

1,135

Restricted stock unit conversion

2,870

Restricted stock awards conversion (unvested awards)

(5,986)

Fair value of total consideration transferred

$

657,810

Explanation of fair value adjustments:

(a)— Represents an adjustment to record time deposits with financial institutions at fair value (premium).

(b)— Represents the reversal of Atlantic Capital 's existing fair value adjustments of $17.2 million and the adjustment to record securities at fair value (discount) totaling $30.9 million (includes reclassification of all securities held as HTM to AFS totaling $237.6 million).

(c)— Represents approximately 1.40%, or $34.0 million, net credit discount of the loan portfolio and 2.24% total net discount, or $54.3 million, including non-credit discount, based on a third-party valuation. Also, includes a reversal of Atlantic Capital's ending allowance for credit losses of $22.1 million and $7.6 million of existing Atlantic Capital’s deferred fees and costs.

(d)— Represents the preliminary fair value adjustments of $2.6 million on fixed assets and leased assets.

(e)— Represents approximately $17.5 million, or 0.63%, of CDI amount and $3.2 million for SBA servicing asset based on a third-party valuation. Atlantic Capital’s pre-merger goodwill and servicing asset of $19.9 million and $2.6 million, respectively, were written-off.

(f)— Represents deferred tax asset related to fair value adjustments with effective tax rate of 23.9%, which includes an adjustment from Atlantic Capital’s effective tax rate to the Company’s effective tax rate. The difference in effective tax rates relates to state income taxes.

(g)— Represents the fair value adjustment (decrease) for low-income housing investments of $1.1 million, write-off of prepaid assets of $233,000, adjustments to receivables of $154,000 and fair value adjustment for Small Business Investment Company (“SBIC”) investments of $7.4 million.

(h)— Represents the reversal of the existing Atlantic Capital’s issuance costs on subordinated debt of $0.9 million and recording the fair value adjustment (premium) of $3.4 million, based on a third-party valuation.

(i)— Represents the reversal of $2.8 million of unfunded commitment liability at purchase date and the fair value adjustment to increase lease liabilities associated with rental facilities totaling $1.4 million. Also includes the reversal of uncertain tax liability of $0.7 million.