Good morning, and welcome to the South State Corporation Quarterly Earnings Conference Call. Today's call is being recorded, and all participants will be in listen-only mode for the first part of the call. Later we will open the lines for questions with the research analyst community. I'll now turn the call over to Donna Pullen, South State Corporation's Senior Vice President.

Thank you for calling in today to the South State Corporation earnings conference call. Before we begin, I want to remind our listeners that our discussion contains some forward-looking statements regarding both our financial conditions and financial results. We have included slides for this call that outline our results and our general comments this morning. Let me first refer you to slide number two for cautions regarding forward-looking statements and discussion regarding the use of non-GAAP measures. I would now like to introduce Robert Hill, our Chief Executive Officer, who will begin our call.

Good morning. I'll begin our call today with a few highlights from our third quarter and then tell on our operating performance. I will then provide a few brief summary comments prior to concluding the call with a Q&A session with the research analyst community. We are pleased with the third quarter performance and operating earnings of a $1.12 per diluted share. The results reflect an emphasis on producing strong and sustainable financial performance, while also making investments that position the company for continued growth. Third quarter net income and EPS increased 30% compared to the same quarter last year. The board of directors has declared a quarterly cash dividend of $0.26 per share which is a $0.01 increase from last quarter and 18% increase from a year ago. The Bank of America branch acquisition was successfully completed in the quarter and we see this transaction as being accretive to our franchise and future financial results. Also this quarter, we completed the vast majority of our previously announced branch consolidation plan and have realized the majority of the associated cost saves. The quarter was highlighted by an operating return on average assets of 1.29% and operating return on tangible equity of 16.92%. Profitability, asset quality, capital adequacy and liquidity are all at strong levels. We continue to experience strong non-applied loan growth of $206 million or 22% annualized. While the acquired loan portfolio declined a $120 million, resulting in 6% net loan growth. We experienced double digit loan growth this quarter in many of our regions, added additional talent of bankers and we continue to see excellent opportunities to move business from the large national banks with which we compete. I'll now turn the call over to John Pollok to give you some more detail on our financial performance this quarter.

Thank you, Robert. I'd like to start by referring you to slide number six and giving you an update on the Bank of America branch acquisition that closed on August 21. We acquired $438 million in low cost deposits, $3.1 million in loans and $4.1 million in fixed assets for total consideration of $25 million. The earnings impact in the third quarter was minimal as the additional fee income more than offset the additional overhead expense. We also continue to expect this transaction to be mid-single accretive to operating EPS in 2016. As you can see on slide number seven, even though the margin declined 23 basis points, our net interest income increased to $83 million for the quarter. The decline is primarily the result of a significant increase in the average balance of short-term earning assets. Yields on the loan portfolio declined a 11 basis points linked quarter due to a decrease in the non-acquired loan yields and a change in the mix between non-acquired and acquired loans. The unit on the non-acquired loans decreased by 8 basis points and the average balance on the non-acquired portfolio this quarter represented 67% of the total loan portfolio compared to 64% last quarter. The acquired loan yield increased by 18 basis points linked quarter, but the average balance on this portfolio declined by $128 million. While we had net releases up $9 million this quarter, which shall push the acquired loan yield higher. We also had some transactions that elevated the yield higher than what we would expect going forward, which include higher than normal accretion as a result of some pay-offs. We're also beginning to see an increase in the weighted average life of certain loan pools in the credit impaired portfolio, as good payment performance is justifying some extensions in renewals. We expect this to result in lower acquired loan yields in the fourth quarter of 2015 and in 2016, absent future significant credit releases. On slide number eight, you can see our efficiency ratios declined from 71% a year ago to 64.4% this quarter. Our operating efficiency ratio which excludes one-time items totaled 61.7% for the quarter, slightly up from 61.2% linked quarter. Absent one-time items, non-interest expenses were up $800,000. The additional expenses from newly acquired branches were mostly offset by the branch consolidation efforts. The vast majority of the cost phase were achieved by the end of the third quarter and deposit run-off has been modest in the markets where these consolidations have occurred. Total non-interest income was flat linked quarter, as the increase in fees on deposit accounts of $1.5 million and the increase in trust and investment services income mostly offset the decline in mortgage banking income from the record setting second quarter. I will now turn it over to Robert for some summary comments.

Thank you, John. On slide number nine, you can see the strong improvements in operating earnings in the past several years and the nice pace we are on so far in 2015. Throughout the company, we are making considerable investments in people and systems to position South State for improved efficiency and growth. We operate in dynamic markets and we see meaningful prospects to grow banking relationships in those markets. While the focus remains on generating growth from within, we continue to see opportunities to enhance our franchise for acquisitions and we will explore those opportunities as well. That concludes our prepared remarks. And so I would ask the operate to open the call for questions.

Thank you. [Operator Instructions] Our first question is from Jennifer Demba of SunTrust.

Good morning.

Good morning, Jennifer.

Hi. I had a question on your acquired loans on yield first. Is there any way to quantify the impacts you talked about in terms of the higher pay down and the other items that in spite of the acquired loan yield this quarter?

Jennifer, this is John. Obviously that yield on the acquired book went up to $836 million and last quarter was $813 million, in the first quarter was $793 million and then if you look back the last year was in the mid 7. So, it just – as you get up to 836 obviously that’s getting way up there, so our view was a fair amount of credits paid out that had large credit marks on it. So, as you know Jennifer, we'll do another re-cash this quarter but my field is it obviously is going to go back down probably, maybe a little bit below 8. But we don’t know that, we do the re-cash again in this quarter but you can clearly see in our acquired credit impaired portfolio that there are some good credits in there. You obviously can't take them out of the pools and the last piece is, obviously those get extended out a little bit.

Do you have the dollar amount of those pay downs that occurred?

The dollar amount of the pay downs?

Yeah.

You're talking about the one-time events through the financial statement? From those marks, it was right around a $1 million.

All right. You also said in the release that the deposit run-off from [ph] BOA branch acquisition was a bit higher than it was estimated. Can you guys give us color on that?

Sure Jennifer, I'll start. We modeled 15% deposit run-off, the ending balance was about 24% run-off. If you look at the average balance of the deposits that came over, so if you kind of look at that last 30 day average, the run-off was about 20% but really what we were focused on is obviously the fee income side. So if you look at the number of accounts that we brought over, those were only down about 17%. And when I say about the accounts we talk – brought over, the main focus there is on the transaction side, the checking account side. And so our view is that we really didn’t erode much of the fee income at all. We won't know that till we get all the way through the fourth quarter, obviously we only had about 40 days with the BOA transaction in the quarter. So I think as we approach the end of the quarter we'll clearly have a much better feel of exactly where the fee income will be, but number of accounts is what we've been tracking to kind of make sure we understand where the fee income is.

And Jennifer, this is Robert, just a couple other comments. As the biggest drop in dollars was really just kind of in the money market and savings area, not really as much in the transaction account. And that so, because of that we really just don’t see much material change in kind of perform a EPS impact.

Okay, thanks for that color. One more question if I could on M&A interest. Robert, can you refresh us at this point about what kind of targets you're looking at in terms of size and geography, has that changed in recent months as you're getting closer to the $10 billion threshold?

Okay. Just overall on M&A is, as you know last year we just wanted a period to really focus on integration and execution preparing for the $10 billion hurdle, and obviously making sure that we executed our first federal transaction well, that went very well. And obviously those initiatives kind of carried over into this year, and now we announced to BOA acquisition. Executing that crisply was very important to us, it went extremely well. We were very, very pleased with how that was integrated into company and that the speed at which it was. So, I think the difference is not so much geographic or size, the difference today from an M&A standpoint is really that our debts are very clean and we're certainly very ready for – to take the next step when the time is right and we find the right partner. I'd say geographically in size wise, really priorities have not changed at all. We have a very defined strategic M&A plan that really has not moved, we're looking for banks in the Southeast, primarily the Carolinas and Georgia that are older, that are core funded, that fits culturally with our company and that continues to be our primary focus.

Thanks so much.

[Operator Instructions] The next question is Stephen Scouten at Sandler O'Neill.

Hey guys, good morning.

Good morning.

Good morning, Stephen.

I apologize I hopped on it couple of a minutes late, so hopefully I'm not being redundant anyway. But in terms of the excess liquidity you had on the balance sheet and the excess cash from the Bank of America branches, I was a little surprise to see that not more rapidly deployed securities in the quarter, is that something we could expect to see next quarter or what are your plans to kind of redeploying some of those funds?

Well Stephen, this is John. Obviously as we close the transaction and go back to August 21, the rates went down a fair amount. We're going to be patient as we invest that money. So, as you can imagine, even in our investment portfolio we had more calls and pay downs than we normally experience. So we actually bought a fair amount but that kind of churned out a little bit. But ultimately this money is going to be used to fund loan, so we're going to be patient, we're going to watch the yields, we don’t want to take a lot of duration risk in the portfolio. My hope is, we would make some more progress but I think the reality of it is we just kind of have to watch what rates are going to do, and if that means we need to stay shorter for a little bit longer that would be our plan.

Okay, yeah that makes lot of sense. And then just as it retains to kind of net loan growth as we look into 2016, I mean the pace of the pay downs on the acquired book I guess I mean obviously were slow as that book continues to get smaller I would think. What do you think you can achieve on that net basis, did you have kind of a range for your target?

Well, Stephen this is Robert. Overall we're still really good about the loan volume, the quality and the quantity that we're seeing. As I mentioned earlier, most of our regions all had double digit loan growth in the quarter. So we're really seeing great productivity. Now we're still going through kind of this period of remixing, pulling back some of the lines of business like the wholesale lines of business from the first federal acquisition and that’s driving us – driving that acquired portfolio to shrink, it's down 24% year-over-year. But if you look at the quarterly run rate a year ago, third quarter 2014 it dropped about a $138 million and Q3 2015 is down about a $119 million. And as you said, we're going to continue to see that to slow. So it were 6% net that number is obviously we feel like it continue to move up and I think we said in the prior calls with you guys that high single digit certainly feels like an achievable goal.

Okay, great. Well thanks guys, I appreciate it.

Our next question is from Jefferson Harralson at KBW.

I was trying to do the math on those first, so I got my place in the queue, so I apologize. But with – if you think about the combination in your efficiency ratio of the acquired loan yield come in a little bit, but you're going to have good growth some to offset that but it sounds like the major part of your expense initiatives are complete now. Does a net of all that gets you to a lot of efficiency ratios that you're getting kind of close to your 60% goal or it seems like that drop in your acquired yield might be digging off to back you up a little bit on your efficiency ratio goals?

Jefferson, this is Robert, I'll start. I think that what we meant to say that is that really we are at the conclusion that’s kind of the announced efficiency goals that we had rolled out the first part of this year. But what I would say by another means that we're finished. We still have significant room I think to move expenses down to hold areas flat, to not have a lot of growth. If you look year-over-year up basically our expenses are flat. If you look year-over-year our pre-tax – pre-provision operating earnings are up about 16%. So, we're looking at technology, we're looking at systems, we're looking at people, we're looking at branches and that’s an ongoing evaluation and that’s certainly not over. So we feel like there is plenty of room on the efficiency side for it to clearly hold steady in this low 60 range.

Jefferson, this is John. What I'd also add obviously we only have Bank of America branches in for 40 days. The fee income is obviously going to ramp up there. We're clearly looking at those efficiencies in those areas. We're in a number of new markets that we've never been in, in the state. So, obviously, we didn't really get any loans and the Bank of America transaction was very, very small. So I think you're going to start seeing some growth out of those markets that we haven't been in, so we feel like when you add that with what Robert said, we clearly got some things we still can do.

Yeah, so I think it's going to get help on both sides. It's going to get help on the revenue side and help on the expense side to hold it steady.

All right, great. Perfect. Thanks guys.

There are no further questions. So I'll now turn the call back over to John Pollok.

Thanks for everyone for your time today. We will be participating in the Sandler O'Neil Conference in Palm Beach, Florida on November 11, and we look forward to reporting to you again soon.